Stock market investors will be watching out mainly for the US Federal Reserve’s next move this week as well as the local remittance figures to see if the PSEi deserves to continue trading above the 7,000 level.
“Last week, the local market was able to close above the crucial 7,000 level. However the trading activity backing the market’s breach of the said level was tepid implying that conviction was lukewarm,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, “this week, the market may continue to test the validity of its breach of the 7,000 level. Taking center stage would be the Federal Reserve’s policy decision and outlook.
“A policy rate cut by the Fed together with hints of further easing moving forward is expected to fuel optimism at the local front since this would give the Bangko Sentral ng Pilipinas more room to ease their policy too.”
“The local currency’s strengthening against the US Dollar, if it continues this week, is also expected to help the local bourse. Investors may also watch out for our upcoming OFW cash remittance data for clues on the local economy,” Tantiangco added.
Online brokerage firm 2TradeAsia.com said, ”After a disappointing jobs report last week, the US reported inflation hitting its lowest level since February 2021-all but affirming the need for the Fed to cut rates this week on the 18th.”
“Traders are apparently pricing in a 25bps initial rate cut, with a possibility of another 25bps cut in December (bull case is two more, the 'extra' coming in November),” it added.
2TradeAsia.com advises investors to “Accumulate while the index attempts to find a base around 7,000 and, with enough momentum, possibly start a trek towards its pre-pandemic home above the 7,500 zone.”
However, COL Financial said, “despite the positive implications of lower interest rates, we expect the market to go down first as the upcoming rate cut is largely anticipated.
“As such, active investors should take advantage of the market’s current strength to lock in gains and to wait for pullbacks before buying back stocks."
For stock picks, Abacus Securities Corporation said Bloomberry shares have declined to a level that is now worth accumulating after noting that the share price dropped because of start-up costs of its new Quezon City casino and not because of weak VIP volumes in the Parañaque branch.
The brokerage also likes Union Bank of the Philippines as it is set to start reaping gains from the acquisition of Citibank Philippines while Union Digital is seen to return to profitability soon.
Abacus is also looking favorably at Manila Water as it expects the utility’s earnings to grow in the next two to three years on the back of tariff hikes, completion of water supply projects and increased connections.
It noted that Manila Water is still an earnings recovery play as it is just getting back on track after its growth trend was interrupted by regulatory issues under the Durterte administration.