The release of the December 2024 inflation numbers will heavily influence the local stock market this week as trading volume normalizes with traders returning from the holidays.
“Eyes are going to be on the Philippines’ December inflation data as this will provide clues on the Bangko Sentral ng Pilipinas’ policy outlook,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that "an inflation print within the BSP’s [Bangko Sentral ng Pilipinas] 2.3 percent to 3.1 percent range forecast, especially one biased to the lower end, may give sentiment a boost next week."
Investors will also watch for the country's November 2024 labor force survey for clues about the local economy's strength.
Abacus Securities Corporation said, "Current consensus estimates on Bloomberg are at 2.6 percent, slightly higher than the 2.5 percent in November. Our own estimate at 2.5 percent is only slightly lower, but both are still within the BSP's inflation forecast range of 2.3 percent to 3.1 percent, although below the midpoint of 2.7 percent."
"We expect inflation to have remained benign during the month on account of the relatively stable prices of rice, which saw a 0.7 percent year-on-year increase for the well-milled variety, but a -0.2 percent contraction for the regular-milled, averaging at +0.3 percent,” it added.
Tantiangco said the Philippine peso's performance against the US dollar would also sway the market. "An appreciation of the peso may help lift the market while a depreciation is expected to lead to the opposite."
He said the local market has shown positive signs, bouncing from its support at 6,400 on Dec. 20, 2024, and rising five of the last six trading days. It also surpassed its 10-day exponential moving average, considered a dynamic resistance.
However, Tantiangco warned, "the market is still operating under a newly formed death cross which signals possible downtrend in the medium to long run. Thus, caution is still advised."
Online brokerage 2TradeAsia.com said, "cloudy with a chance of rain' has been thematic of the last few weeks of 2024; markets went into 2025 with umbrellas out and risk aversion at full mast."
"Take advantage of the current despondence by either range trading in the near-term or averaging down in the long-term; market pessimism can be profitable," it added.
While 2025 plays are set against a backdrop of macro-level uncertainties, 2TradeAsia.com noted excellent valuations at the corporate level.
"As such, many central themes this year are likely sector-locked or story-specific to preserve returns amidst macro swings. Defensives with resilient topline drivers and little inflationary and currency risk should garner attention; value plays in banking, consumer, and power are underscored given abundant upside risks, especially in best-case growth scenarios," it explained.
For stock picks, COL Financial is looking at the power sector, as demand will likely grow in 2025, driven by the country's economic growth, with GDP growth estimated at around 6.0 percent to 6.5 percent based on government forecasts.
"Based on this GDP growth projection, we estimate the country's power demand to grow by about five percent in 2025. In terms of supply, we forecast that the country's power capacity will remain ample to meet demand for most of the year," it said.
COL's top picks for 2025 are Aboitiz Power Corporation and Manila Electric Company. "Given our view of a balanced supply-demand power market in 2025, we favor power companies with high contracted capacity, such as AboitizPower, First Gen, and Meralco, as their earnings will be the most resilient in the sector," it said.