The local stock market may start the week with some bargain-hunting, after the PSEi suffered its steepest weekly drop of the year last week, although investors will be positioning later in the week, ahead of the release of the August inflation numbers on Friday.

“Next week, we may see a technical bounce driven by bargain hunting. The medium-term outlook is still bearish, however, given the weakening economic outlook,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “At its closing last week, the local market stood at a price-to-earnings ratio of 10.6 times, below the last five years’ average of 14.4 times and the regional average of 16.2 times. This implies that the bourse is at bargain levels setting it up for a possible bounce in the short run.”

Sentiment-wise, Tantiangco said the weakness of the Peso may discourage foreign investors from getting into the Philippine equity market. Economy-wise, while a weak Peso may benefit exporters and OFWs, it is also expected to raise import costs which, in turn, is an upside risk to inflation.

He added that, technical charts are also showing the possibility of a brief rebound before another round of bearish moves, thus, “Taking all of these into consideration, investors are advised to remain cautious.”

For its part, online brokerage 2TradeAsia.com said the Bangko Sentral trimmed its 2026 average inflation forecast to 6.1 percent (from 6.4 percent), on softer recent data and lower oil, but lifted the 2027 number to 5.4 percent (from 4.5 percent), with a return toward the three percent target only expected in 2028.

“Working backward, hitting the 2026 full-year number implies August to December needs to average somewhere around five to 5.5 percent, which points to some easing from hereon. Given a fairly high year-ago base, the working estimate is around 6.2 percent,” it noted.

However, 2TradeAsia.com said that the risk is skewed to the upside in August, as the same weather disruption the BSP cited last Thursday hits food and transport right as harvest timing gets scrambled, so a print north of six percent would not surprise and keep the hawkish tilt intact into the fourth quarter.

Meanwhile, it noted that macro headwinds are compounding chart weakness; for instance, Moody's sharp GDP revision to three percent (down from four percent) pressures a broad mark down of earnings growth targets across the index.

Also, renewed interest in AI and semicon plays abroad are likely to keep foreign hands absent, so “a meaningful market bounce hinges on domestic institutional funds stepping in to absorb foreign supply, yet conviction remains thin without fundamental catalyst support.”

Heading into the final third of the year, with several stocks at historic lows, the brokerage said to “expect gradual positioning. Balance portfolio selection with defensives, and possibly select metals & commodities shares.”

For stock picks, RCBC Securities has a BUY rating for Maynilad Water Services, Inc. due to the firm’s robust operational execution and disciplined cost control.

It noted that Maynilad continues to execute its key operational initiatives to mitigate El Niño risks and lessen its reliance on Angat Dam.

“These proactive measures proved effective when Angat Dam reached a record low of 150.60meters on July 25, 2026, as Maynilad sustained continuous water service across its concession without initiating service interruptions, the brokerage said.