After the end of the second quarter earnings season, local stock market investors will still be shifting through financial reports while also keeping an eye on the impact of the new Philippine Stock Exchange index composition.

“The market will be closely watching the upcoming PSEi rebalancing set for implementation this Monday,” said Regina Capital Development Corp. Managing Director Luis Limlingan.

He added that, “Investors are already positioning themselves, as the majority of companies have released their earnings and participants are now assessing their stance.”

Investors will also be waiting for the Federal Open Market Committee meeting later this week to hear Federal Reserve Chief Jerome Powell’s address, “where any deviation from the market's dovish script could trigger significant volatility,” said online brokerage 2TradeAsia.com.

“While the path of least resistance appears upward, prudence is warranted ahead of the speech, as any hawkish undertones could quickly unwind the current optimism,” it added.

Corporate results are tracking expectations, with notable outperformance in the banking and consumer sectors confirming underlying economic strength, but 2TradeAsia.com said this positive backdrop has not yet translated into broad equity market momentum.

“Instead, significant capital flows seem to be flowing partly to local bonds and alternatives and may be a manifestation of rational front-running of the BSP's anticipated easing cycle,” it noted.

The brokerage said “Local equities, meanwhile, remain in technical consolidation, characterized by selective trading and a lack of primary market activity to stimulate broader interest.

“The key forward-looking catalyst remains the BSP, at least in the short-medium term; a decisive shift to an accommodative policy stance is required to lower the cost of capital, boost earnings forecasts, and trigger a market re-rating.”

It added that, “Liquidity is evident-the impending easing cycle may be a significant potential catalyst for equities.”

For stock picks, Abacus Securities Corporation has a BUY rating for GT Capital Holdings as it noted that much of the company’s earnings growth is due to Toyota Motors Philippines, which is expected to continue outpacing the industry’s growth rate and even grow its market share in the hybrid cars segment.

COL Financial favors International Container Terminal Services Inc. after upgrading its fair value estimate due to the adjustments made from this year’s outperformance and the better long-term outlook supported by ongoing terminal acquisitions and expansions.