Philippine stock market investors are expected to wait for the August inflation report which will be released on Friday, Sept. 5, while weighing concerns over United States (US) tariffs and the probability of a US Federal Reserve (Fed) rate cut later during the early part of the week.

“The local market is already on a three-week decline showing that bearish sentiment is currently in control. Confidence is tepid amid a mixed bag of second corporate results, new US tariff threats, and uncertainties over the local economy’s outlook,” said Philstocks Financial research manager Japhet Tantiangco.

He added though that, “On a positive note, the bourse was able to keep its support at 6,150. The local market remains undervalued fundamentals-wise. As of last week’s closing, the Philippine Stock Exchange index’s (PSEi) price-to-earnings ratio is at 10.8 times. This is below its five-year historical average of 17.3 times and the regional average of 17.7 times.”

“This week, the local market may bounce back on bargain hunting. The US’ Court of Appeals for the Federal Circuit’s ruling that most of President Donald Trump’s tariffs are illegal could give the market a boost next week.

“Investors are also expected to watch out for further catalysts. This week, investors may look forward to the upcoming S&P Global Philippines manufacturing purchasing managers’ index (PMI) and the August inflation rate for clues on the local economy,” Tantiangco noted. The August PMI report will be out on Monday, Sept. 1.

Online brokerage 2TradeAsia.com said that, “While the domestic inflation path appears benign for now, we continue to note that external risks remain at the forefront.”

“For instance, the impact of new US tariffs on several trade partners is starting to have more pronounced price effects through global supply chains, which could exacerbate unwelcome inflation volatility globally,” it added.

The brokerage also pointed out that, “The Fed remains a wildcard (September easing odds are close to 80 percent) but delayed action could widen PHP [Philippine peso]-USD [US dollar] spreads, which could in turn compress Philippine capital inflows.”

It advised investors to “Trade the rate-driven momentum carefully, weighting toward fundamentals amid tariff uncertainties. Note that medium-term models so far signal asymmetric upside in domestics over globals; in the long term, with lower costs to fund growth, we advocate selectively accumulating names geared for a 2026 capital expenditure (capex) revival.”

For stock picks, Abacus Securities Corp. is favoring SM Investments Corp. (SMIC) as the recent market downturn “is an opportunity to build up the stock in one’s portfolio.”

“We maintain our recommendation to stay overweight on SM as the stock approaches its cheapest valuation over the past 10 years,” it explained, citing that SM Prime Holdings Inc.’s (SM Prime) reclamation project may be a game changer in the coming years.

It also noted that concern over margin compression in SM’s banking units due to rate cuts should be offset by the boost in its property, retail, and minority investments.