The local stock market is seen to remain bullish and try to breach the 7,500 level this week although there will continue to be bouts of profit-taking—making it more volatile.
While the Philippine Stock Exchange is already in a bull market, Philstocks Financial Research Manager Japhet Tantiangco said “we may see episodes of profit taking as the market is technically overbought as per its relative strength index.
However, he noted that, “the general direction of the bourse is still projected to be upwards. Optimism towards the dovish monetary policy stances both here and abroad are expected to help in sustaining the market’s movement.”
He added that, “Investors may also digest the BSP’s latest confidence surveys which showed that both consumers and businesses are optimistic towards the next quarter and next 12 months.”
This week, Tantiangco said “investors are also expected to look towards the upcoming S&P Global Philippines Manufacturing PMI and the September inflation data for further clues on the local economy.”
For its part, online brokerage 2TradeAsia.com said “The Fed's recent supersized cut just created space for more optimism to flow into markets-this is especially true for emerging markets that benefit from the risk premia compression, have solid consumption and manufacturing-dependent fundamentals, favorable forex, among others.”
It noted though that, “More volatile trading action is expected over the upcoming months as markets head into the last stretch of the year; the fourth quarter tends to have heightened activity as portfolio year-end adjustments coincide with sector and asset rotations that anticipate stories in the succeeding year.”
“Potential rotation towards growth is underscored, on top of usual seasonal plays and enjoyers of the liquidity bump,” 2TradeAsia.com advised adding that, “The additional liquidity from the reserve requirement ratio and policy rate cuts should help fuel the PSE's ambition to get past 7,500.”
“There is historical selling pressure around the benchmark's current trading range, but the yield curve steepening and 'dis-inverting' should support more consistent inflows as the appeal for bills and short-term income securities evaporate relative to riskier assets,” it added.
COL Financial said though that, “We don’t know how long the strong performance of the market will last given the added liquidity from aggressive central bank actions. However, investors can manage risk by keeping some cash and rotating to stocks that are trading at cheaper valuations.”
Meanwhile, for stock picks, COL has a BUY rating for Manila Electric Company after it upgraded the stock’s fair value after factoring in its higher 2024 net income forecast and the earnings contribution of SP New Energy Corporation.
On the other hand, Abacus Securities Corporation is recommending Puregold Price Club because it belives that the firm is able to outperform its peers again in the third quarter of 2024 and should see further improvements in volumes and share price performance.
The brokerage explained that, “The lower base in the second half of 2023 will make it easier for PGOLD to continue its growth momentum from the first half of 2024 with topline looking at a double digit increase for both third quarter and fourth quarter of 2024.