The Philippine stock market is seen to try to sustain its strong bounce last week as investors continue to cheer the United States (US) Federal Reserve’s latest policy move and outlook.

“Despite last week’s climb, the local market is still undervalued with a price-to-earnings ratio of 10.8 times as of Friday’s closing. This is below its five-year historical average of 17.3 times and the regional average of 18.2 times. As of the moment, the PSEi still has the lowest PE ratio among peers,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “This week, the local market may try to extend its gains supported by hopes of more Fed rate cuts within the year. This is as the said hopes may drive Wall Street higher and local bond yields lower, both of which are positive for the local market.

“Fed rate cut expectations also raise hopes for more policy easing by the BSP. A downside risk for the local market, however, is the weak position of the local currency.”

Investors are also expected to watch out for further catalysts, although there are no economic data due for release by the Philippine government this week.

In the US, major economic data to be announced include S&P’s services and manufacturing indices, new home sales, initial jobless claims, third estimate for gross domestic product, and Personal Consumption Expenditures (PCE) Price Index.

“The Federal Reserve's move to cut rates by 25 basis points sets a dovish tone for the remainder of the year, with FOMC dot plots signaling an additional 50 basis points of easing across the November and December meetings, assuming core PCE inflation holds steady,” said online brokerage 2TradeAsia.com.

It added that, “We note that the US Treasury yield curve, once a harbinger of gloom with its inversion late last year, has unfurled to the positive, and may be a quiet nod to fading recession fears.

“This should provide a tailwind to global risk assets as lower rates and a steeper curve tend to lift valuations; this should also give opportunity for cyclicals and emerging markets a chance to shine, especially in the context of a weaker greenback.”

With the Bangko Sentral expected to follow the Fed's lead by implementing two 25-basis-point rate cuts in October and December, the lower financing costs are likely to fuel corporate earnings.

The brokerage said higher earnings and stronger GDP growth cadence into 2026 should push the PSEi to re-rate above its current 11 times forward PE band.

For stock picks, First Metro Securities has reinstated coverage of Megawide Construction Corporation with a BUY rating, as the firm’s earnings are expected to triple by 2027 due to improving financial leverage.

It also projects Megawide to register low double-digit revenue growth from the anticipated increase in its order book while reducing debt after the Citicore Group pays back ₱9.4 billion for advances.

Meanwhile, Unicapital Securities Research Analyst Peter Louise D. Garnace has a BUY rating for PLDT as it currently trades at a 2025 PE of seven times, a discount compared to its five-year average PE of eight times and peers’ average PE of nine times.

“We believe that this is unwarranted given the higher ROE (return on equity) of 28 percent (versus peers’ 21 percent) as well as hard-to-ignore dividend yield of nine percent in 2025 and in 2026,” he added.