Stock investors should focus on inflation hedges

With the spike in inflation rate hounding the psyche of investors, market analysts continued to recommend stocks that are hedges against inflation, defensives and those with sequel stories to unlock for the remainder of the year.

Online brokerage firm 2TradeAsia.com said the market’s movement might be limited to the 7,500 to 7,880 window for now until significant positive catalysts arise such as win-win arrangements in trade disputes and the approval of corporate income tax cut by Congress.

The firm noted though that, “markets are gradually transitioning from consumer- to investment-primed growth. As such, equities investors are encouraged to take on a broader view on inflation, as long as price increases are paralleled with improving jobs generation.”

“It should only be a matter of time before investors return to their senses by revisiting cheapened stocks, or until the dust clears,” 2TradeAsia.com said.

For Abacus Securities Corporation, investors should look at stocks of banks. “We reiterate our call to OW (overweight) bank especially in light of the drop in the financial index,” it said.

While the drop has been steep, Abacus noted that, this is “surprising considering that banks should benefit from rising interest rates brought about by the 6.4 percent inflation.”

Abacus said net interest margins of banks have been rising even in the first half “and this will only improve further moving forward.”

“Among the big three, our preference remains Metrobank on valuations but, overall, we like EastWest Bank with recovery in sight over the next few quarters.”

The firm is also taking a closer look at Manila Water Company following reports that regulators are finally recommending tariff adjustments for Metro Manila’s water concessionaires.

“The market started September with a setback down more than 3 percent, wiping out all the gains that we saw in August. However, based on market sentiment this is only temporary,” noted Eagle Equities, Inc. Head of Research Chis Mangun.

The index is barely hanging on to the 7,600-support level and Mangun said it may continue to trade sideways between 7,600 and 7,870 as it builds momentum to test 8,000 before the end of the month.

“Local investors have picked up the slack and is supporting this market despite the continued foreign outflow,” he assured.