Power stocks expected to perform better
Companies that have a significant portfolio in the power sector may still enjoy a good run even if the local stock market is expected to experience further volatility because of external risks.
Odd Per Brekk, Director of the IMF’s Regional Office for Asia and the Pacific, said the Philippines is still enjoying the benefits of falling oil prices since the country is one of the biggest net oil importers in the region.
As such, of all the companies in the stock market, power companies are the ones who are benefiting the most from the lower global oil prices.
In its most recent market data, brokerage company DA Market Securities, Inc. highlighted two of the biggest companies in the country that have a huge portfolio in the energy industry.
DA Market specifically put a ‘buy’ recommendation on the shares of Ayala Corporation.
Through its subsidiary AC Energy Holdings, Inc., Ayala Corp. recently revealed its plan to invest in a solar power plant with up to 40 megawatt in capacity in Bais, Negros Oriental, marking its entry into solar development.
The subscription and shareholders’agreement with Bronzeoak Clean Energy, Inc. will develop, construct and operate a solar power farm. A special purpose vehicle Monte Solar Energy Inc. has been formed to undertake the project,” DA Market noted.
The brokerage firm also mentioned San Miguel Corp. in its latest market report.
“Energy unit SMC Global Power Holdings Corp. gets Regional Court to issue TRO [Temporary Restraining Order] vs. Power Sector Assets and Liabilities Management Corp. [PSALM] from terminating its independent power producer administration agreement with unit South Premiere Power Corp.,” DA Market said.
“The TRO also prohibited PSALM from treating SPPC as being in default and from performing any act to pursue collection of supposed unpaid generation payments and other payments,” it added.
Still, investors are advised to trade cautiously as the market may trade sideways on a downward bias in the next few days.
“Corrective pressures are expected to persist this week as various technical issues increase the bearishness on the PSEi’s [Philippine Stock Exchange index] short-term trend. Prices need to stage a bounce and overcome resistance at 7,110 to confirm its higher low pattern and set up for a reversal. Take note however that since our trend bias this week is bearish, the odds of prices moving lower during intraday is higher – and the lower the index goes, the harder it is to establish a support base,” Luis Limlingan, managing director of Regina Capital Development Corp., said in a text message.
F. Yap Securities, Inc. analyst Jason Escartin said the volatility will come from as far as United States ahead of another Federal Reserve meeting.
“Market players have been waiting for the US interest rate decision, a major move that could determine the fate of global markets. In the event of a liftoff, few big questions remain, such as the duration, the rate of the step-up and target rate. In the days leading up to the decision, we expect markets to move lower, marked by bouts of increasing volatility,” Escartin said.
Last week, local equities swung in volatile session, in the absence of strong leads ahead of the US Federal Reserve’s interest rate decision this week. PSEi particularly lost 140 points or 1.99 percent week on week, ending at 6,911.