Stock Market Outlook

Last week 

Share prices fell slightly last week as the local bourse tracked Wall Street’s performance following the release of US inflation data, which missed the consensus target.

The benchmark Philippine Stock Exchange index fell 57.23 points to close at 6,548.77 points. 

The main index was up on Monday, but went down for four straight sessions. 

Trading volume was lackluster for most of the week, except on Friday when buying activity surged to P14.9 billion. Average trading value for the week reached P6.81 billion, with foreign investors cornering 60 percent of the trades and were net buyers at P1.12 billion. 

Other sub-indices ended in the red with the exception of the Services index that gained 18.06 points to close at 1,695.09 points. 

The broader All Shares index lost 32.06 to 3,474.41, the Financials index dropped 15.79 to 1,590.84, the Industrial index plunged 343.74 to 9,485.15, the Holding Firms index was down 1.66 to 6,364.03, the Property index shed 16.93 to 2,918.01 and the Mining and Oil index declined 344.58 to 11,277.51. 

For the week, losers edged gainers 143 to 73 and 30 shares were unchanged. 

Top gainers were MRC Allied Inc., Forum Pacific Inc., Leisure and Resorts World Corp., Manila Bulletin Publishing Corp., Asiabest Group International Inc., Premiere Horizon Alliance Corp. and Oriental Petroleum and Minerals Corp. B. 

Top losers were Keppel Philippines Holdings Inc. A, Manila Broadcasting Co., AbaCore Capital Holdings Inc., Bogo-Medellin Milling Co. Inc., Monde Nissin Corp., Vulcan Industrial and Mining Corp. and Lodestar Investment Holdings Corp. 

This week 

Share prices may fall further this week as the US Federal Reserve is expected to raise its rates by another 75 basis points during its meeting on September 20 and 21. 

“The fixed income market is quickly pricing-in the inflation story and the protracted inflation up to 2023 can push the Fed hike benchmark rates above 4 percent,” broker 2TradeAsia said. 

“It is very likely that the BSP [Bangko Sentral ng Pilipinas] will mirror this hawkishness, albeit gentler, for fear of a hard landing. The materially higher yields in debt securities takes some shine away from equities especially at a time when some sectors, by their nature, will take some EPS [earnings per share] erosion from higher cost of debt.”

Meanwhile, Japhet Louis Tantiangco, Philstocks Financials Inc. research manager, said the market may see episodes of bargain hunting as it lies at attractive levels. 

“However, the general mood is still expected to be bearish as investors price in another possible 75 basis point rate hike by the Fed to combat their still elevated inflation,” said Tantiangco. 

“Investors are also expected to watch out for the BSP who may also act aggressively amid the demand side risks to our country’s inflation, and the weakening of our local currency which also poses upside risks to the rise of our general price level. A 75 basis point rate hike by the Fed which puts more depreciation pressure on the Peso may lead to a 50 basis point rate increase by the BSP.”

The local market’s support is seen at 6,400 points and resistance at 6,600 points. 

Stock picks

Given the uncertain macroeconomic backdrop, BDO Securities said investors should consider quality names in consumer, banks, property and conglomerates, or sectors which it expects to still benefit from positive reopening dynamics and offer healthy earnings growth at reasonable valuations. 

“Several of these names are also trading at deep discounts or below book value and are good value recovery plays, in our view,” the broker said. 

For the consumer sector, the broker said investors can look at Puregold Price Club Inc., Robinsons Retail Holdings Inc. and D&L Industries Inc. 

Puregold shares closed last week at P31.35 apiece, Robinsons Retail at P62 and D&L at P7.53. 

It also advised to place bets on Ayala Land Inc. and Megaworld Corp. for the property sector, while Alliance Global Group Inc., SM Investments Corp. and GT Capital Holding Inc. are strong bets among the conglomerates. 

Ayala Land closed Friday at P28.55, Megaworld at P2.28, AGI at P9.42, SMIC at P871 and GT Capital at P507 per share.