Rate hikes, blue chips in focus
This week, stock market investors are advised to look for solid stocks that have fallen to bargain levels from the bloodbath at the bourse for most of last week.
While the market fell on jitters cause by inflation, online brokerage firm 2TradeAsia. com said “we maintain our view on the Philippines’ growth merits, more importantly, Filipinos’ survival instinct in the wake of economic, weather or social challenges.”
“Seize on the rout to position in stocks back by good fundamental value,” it advised.
Abacus Securities Corporation continues to look at banks which should be more profitable in an environment where interest rates are rising.
“We are frankly surprised why the sector remains weak despite expectations that net interest margins will improve due to rising interest rates… At some point, therefore, it should bounce… The question is which bank will lead the way upward,” the firm said.
It noted that Bank of the Philippine Islands is trading below the ten year average of its ratio while East West Bank is trading right at the bottom of its entire historical price to book value range.
“Investors playing for a bounce should probably stick to the big three (BDO, Metrobank and BPI) as they have the best liquidity,” said Abacus.
It added that, “based on our benchmarks, BPI is probably the best bet for a quick trade (buy as close to 178 as possible). On the other hand, given its depressed valuation, Metrobank probably has the least downside among the three. To be clear, however, our fundamental long-term bet is still EW.”
Meanwhile, COL Financial is recommending a BUY on PLDT “because of the continued growth of its xed line data business, and signs of turnaround of its mobile business.”
“We believe that concerns over the labor disputes are overblown given that the Court of Appeals has ruled in PLDT’s favor,” COL said adding that, PLDT is in a much better position to compete with a possible third telco given its huge capital spending the past few years and the much lower price of data currently, increasing the barrier to entry.
Stock market investors will be waiting for an expected rate hike by the Bangko Sentral ng Pilipinas as well as for cues from its US counterpart.
The US Federal Reserve will meet this week and investors will want to see the pace of rate hike by policy makers which could widen the greenback’s differential with peer currencies, said online brokerage firm 2TradeAsia.com.
At the local front, the BSP is set to meet on Thursday with the market widely expecting it to hike rates by another 50 basis points to help temper inflation.
Eagle Equities Head of Research Christopher Mangun said that, “based on the technicals and market sentiment, the index may trade sideways next week as investors sit on the sidelines waiting to see if the BSP will raise interest rates at the Monetary board meeting next Thursday.”
He explained that, “if they raise rates next week, we may see the market go up as this will come as a positive to investors that something is being done to curb higher inflation.”
Mangun added that, “another positive effect of an interest hike is it may encourage foreign funds to flow back in to the peso as our currency has performed better than what is expected.”