After two strong weeks, the local stock market shifted downward last week and is seen remaining bearish in the coming days due to growing tensions between the United States (US) and Iran. Investors are also expected to take cues from the country’s May inflation data, which will be released on Friday, June 5.

Aside from the Middle East war, Philstocks Financial Inc. research manager Japhet Tantiangco said investor sentiment is also being dampened by the weaker performance of listed companies in the first quarter due to the economic slowdown.

“This sets up weaker expectations for the second quarter, which is still dealing with the economic effects of the conflict in the Middle East. Moving forward, the local market is expected to continue taking cues from the developments between the US and Iran,” he noted.

While global oil prices have declined amid hopes that the US and Iran would eventually reach a peace deal, Tantiangco said the situation remains fragile and therefore needs close attention.

“Further progress in the US-Iran negotiations is expected to bring oil prices lower and give the equities market an upward boost. A deterioration in the situation, primarily via increase in exchange of military force, is expected to lead to the opposite however,” he added.

Meanwhile, the market is expected to look forward to the May inflation data, as this would give clues on the direction of the country’s household consumption—the economy’s main engine—and the Bangko Sentral ng Pilipinas’ (BSP) policy outlook.

“An inflation print which remains elevated, especially one which exceeds April’s 7.2 percent, is expected to weigh on the local bourse,” Tantiangco said, adding that “a further appreciation of the peso and a further decline in yields is expected to help the market.”

Online brokerage 2TradeAsia.com said, “Geopolitical volatility remains the dominant theme as the US-Iran conflict swings unpredictably between short-lived truces and renewed limited strikes, most recently in southern Iran. This pendulum-like pattern has made risk assessment exceptionally difficult, preventing markets from building sustained conviction.”

Adding to the complexity, incoming US Fed Chair Kevin Warsh will chair his first Federal Open Market Committee (FOMC) meeting on June 16. Although Warsh is viewed as dovish on rates for being aligned with US President Donald Trump, the brokerage said mounting “permacession” signals are compelling all central banks to lean toward tighter policy responses.

“The global pressure translates directly into a defense playbook for the BSP... the local central bank might be backed into a corner. Now, consensus is auguring a larger-than-usual 50-basis-point (bp) hike on June 18, or even an off-cycle move sooner, amid calls for stronger inflation response to preserve peso parity,” 2TradeAsia.com said.

For stock picks, COL Financial Group Inc. has a BUY rating for Cosco Capital Inc. after increasing its fair value estimate following the firm’s stronger-than-expected first-quarter results and higher forecasts for Puregold and its commercial real estate business.

“We like COSCO given its attractive upside potential, as we think the stock remains severely undervalued, with the market not valuing its other businesses apart from PGOLD, including its fast-growing liquor business,” said COL senior research analyst Denise Joaquin.

Meanwhile, Unicapital Securities Inc. research analyst Jeri R. Alfonso said they have a BUY rating for Jollibee Foods Corp. (JFC) “as the current market price still offers a 26-percent upside to our revised target price.”

She said they adjusted assumptions for revenues, contract services, and depreciation expenses after the firm implemented price increases across its product offerings aimed at supporting margin recovery.