Stock market to see some bargain-hunting
By JAMES A. LOYOLA
While stock analysts pointed out that the market is ripe for cherry-picking, investor sentiment continued to be weighed down by worries about rising inflation and interest rates.
“The market has already declined for four consecutive weeks with a total loss of 8.54 percent. Thus, episodes of bargain hunting could be seen in next week’s trading,” said Philstocks Financial Senior Supervisor for Research Japhet Tantiangco.
He noted though that, “Still, the market could move with a bearish bias due to the lingering downside risks to the local economy.” “Investors are expected to look towards the upcoming June inflation data. An inflation print significantly faster than May’s 5.4 percent could lead to more selling pressures in the market,” Tantiangco said.
For its part, 2TradeAsia.com said “Chatter that inflation could reach 8 percent CPI is moving, although that will be contingent on the Russia-Ukraine tiff worsening by the second half. The recent minimum fare hike for public transport effective July 1 will however pack a punch in the August print.”
Abacus Securities Corporation pointed out that the Producers’ Price Index jumped 6.9 percent in May, indicating that more inflation is in the pipeline. It believes that “inflation may not peak until at least late this year.”
“Investors are also expected to watch out for the Peso which is already at the 55 per USD level. A further depreciation is also seen to weigh on the market,” added Tantiangco.
Aside from these, He said the market may also take cues from the upcoming labor market figures.
“Finally, worries over the global economy amid the monetary tightening of the Federal Reserve and rising commodity prices caused by the Russia – Ukraine war may continue to dampen sentiment,” he said.
According to 2TradeAsia.com, “Another round of rate hikes is baked into consensus: plus 75bps by the Fed, plus 50bps by the BSP. While both are expected to curb inflation, the latter will continue to pressure the peso due to the country’s import deficit.”
“While peso devaluation will impact equity values, better that than risk being behind the curve on policy, which remains a global concern as oil and food inflation (such as wheat shortage) continue to batter non-producing economies,” it noted.
The brokerage advised investors to “Snap-up bargains” in “safe” sectors that will offer growth despite lingering anxieties. It added that, “gradual accumulation could provide maximum value over the long-term—that is if short to medium-term gyrations can be stomached.”
Noting that revenge spending is just in its early stages as shown by the acceleration in consumer loans, Abacus said “The best way to capture robust household consumption is through mall play RLC and SM.”
It pointed out that, while revenge spending may also benefit consumer stocks, these may also be affected by higher input costs.
Aside from rising coal prices, Abacus is also recommending Semirara (SCC) because it will likely return to the PSEi’s basket of stocks in August due to the rise in its stock prices in recent months.
COL Financial also has a BUY rating for Semirara because its power generation business will continue to benefit from high WESM prices this year as a large part of its generation capacity remains uncontracted.
“We like SCC given that we believe that the company is set to post record-high earnings this year due to the increase in coal prices. Despite the 109 percent increase in SCC’s share price in the past 12 months, the stock is still cheap,” it added.
Abacus also cited SPNEC as the renewable energy stock to own after the firm bagged 70 percent of the capacity offered under the Energy Department’s Green Energy Auction Program.
It noted that, while these projects will not operate until 2025 to 2026, “the contract awards are crucial to securing financing and substantially reduces the execution risk for these projects.”
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