A lack of fresh leads is expected to keep the local stock market bearish this week, but bargain hunters may find opportunities as prices reach a seven-month low.
“The local market has turned more bearish last week as it extended its decline. At the same time, the market has broken below the 6,400 level which previously served as a support line. In its weekly chart, its 50-day and 200-day exponential moving averages are already about to form a death cross,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that, this week, “we still expect the cautious atmosphere to remain in the local bourse amid the lack of fresh leads. Investors are expected to wait for new catalysts."
Tantiangco pointed out that the market decline last week was due to the rise in local long term treasury yields and a continuation of their rise may pull the equities market lower while a drop in rates may lead to the opposite.
“Investors may also watch the movements of the local currency against the US Dollar, with an appreciation expected to help while a depreciation is seen to weigh on the bourse. We may also see episodes of bargain hunting given that the local market is still at attractive levels, fundamentally speaking,” he added.
Online brokerage 2TradeAsia.com said the “shaky global capital markets were gripped by politico-economic anxiety ahead of Pres. Trump's official inauguration to the White House this week; apart from uncertainties in trade, immigration, and taxation, the overall well-being of the US economy has been sending pain signals to the rest of the globe.”
It noted that the recent correction in local equities erased gains of the past one to two quarters, but also put earnings multiples at some of the most compelling level.
However, the brokerage firm said market risk embedded in current prices may have some staying power in the medium-term so it advises investors to stay selective, with the upcoming earnings season (end-January to mid-March) “potentially providing windows to spark slumbering animal spirits.”
For stock picks, Abacus Securities Corporation favors mid-cap issues Manila Water Company, D&L Industries, and The Keepers Holdings Inc. due to their positive outlook this year.
Manila Water will benefit from a rate hike while D&L will gain from a higher biodiesel blend and higher output from its new plant. The Keepers will boost earnings with the addition of a new beer brand and its foray into the Cebu market.
COL Financial favors BDO Unibank and Metrobank as the banking business is seen to get a boost from continued loan growth momentum despite declining net interest margins.
“We believe that both banks are well-positioned to capitalize on growth opportunities as the Philippine economy expands. BDO’s extensive branch network and strong ties to the SM group should provide a significant advantage in this regard," according to COL.
“BDO and MBT also have healthy and liquid balance sheets to support growth. MBT’s strong capital foundation also gives it flexibility in dividend distributions, and we note that it has one of the highest dividend yields in the sector,” the brokerage firm also explained.