Stock market investors are hoping for some positive cues from the US Federal Reserve this week although both sentiment and technical indicators point downward even though share prices are already at attractive levels.
Philstocks Financial Research Manager Japhet Tantiangco said “The local market is already on a three-week decline as bearish sentiment continues to linger driven by worries over the US’ planned protectionist policies, and the possibility of the Philippines not hitting its 2024 economic growth target.”
“Chartwise, the market is still having a difficult time getting past its 10-day exponential moving average. Meanwhile, in its weekly chart, its 50-day and 200-day EMA have already formed a death cross implying the possibility of a downtrend moving forward,” he added.
With the market at attractive levels, Tantiangco said “we may see some bargain hunting in this week’s trading. However, we do not expect a strong rally yet as investors continue to wait for catalysts.”
“For clues, investors are expected to watch out for our upcoming GDP [gross domestic product] data as well as the Federal Reserve’s first policy meeting for the year.
“A GDP growth that hits the government’s target may give the market a boost next week. However, a growth slower than 2023’s 5.6 percent may weigh on the bourse. Meanwhile, a Fed rate cut together with a dovish outlook for the US’ monetary policy may push the market higher,” he said.
2TradeAsia.com said “The 6,300-6,400 zone has always been a critical zone for the PSEi from a charting standpoint-twice it has recently bounced here (Dec. 2023 and June 2024), and were important breakthrough spaces during the downturns of fourth quarter 2022 and second half of 2023. Potential Fed decision next week might make or break this medium-term trendline.”
It noted that, “interest rate pressure and risk premia on top of pessimistic growth expectations are skewing market perspectives, but are likely to turn the corner once the economic cycle restarts.”
While the news cycle has been so far dominated by President Trump's policy shifts and the adjustments the rest of the world are partaking to minimize damage to output, 2TradeAsia.com said “We reiterate that emerging markets are likely to take a bigger hit from the US' deglobalization agenda, but from a zoomed-out perspective, locals should be more insulated from regional risks.”
It added that, the Philippines may even benefit from minor windfall such as China supply chain rerouting and better relative positioning versus more export-oriented neighbors.
“Turning energy inwards ahead of the earnings and midterm election season is the tactical pivot while waiting for the smoke to clear,” it advised.
For stock picks, Abacus Securities Corporation is upgrading The Keepers Holdings to a BUY due to its strong position to capitalize on the premiumization of consumer preferences.
It noted that the firm’s strong profit growth in 2024 will continue this year on the back of benign inflation and increased discretionary spending partly due to the coming elections while the Peso’s appreciation versus the Euro is also seen to boost the firm’s margins.
Abacus is also advising investors to buy Manila Water shares as the upcoming initial public offering of Maynilad Water Services will be priced at a steep premium to MWC.