Stocks could be subject to bargain hunting – Manila Bulletin
The local stock market could experience a bargain hunt this week due to last week’s sharp drop, but investor sentiment could continue to be dampened by expectations that inflation and interest rates will rise. again while the peso will continue to lose value.
“The local market has already been down for six consecutive weeks with total losses of 16.36%. At the end of September 2022, the market is trading at a price-earnings ratio of 15.08 times, below its average for Last 5 years of 20.58 times,” noted Japhet Tantiangco, director of research at Philstocks.
He added that “Given this, we could see some bargain hunting next week. However, we may not yet see a strong recovery as the market continues to grapple with economic concerns. This includes our rising national debt, rising yields both at home and in the United States, the weak peso, and recession fears overseas.
“Investors should also manage our September 2022 inflation data, which could come in faster than the previous month’s 6.3%. Other than that, investors should also watch the Philippines S&P Global Manufacturing PMI and labor force data for clues on the local economy,” Tantiangco said.
Online brokerage firm 2TradeAsia.com said: “The direction is clear; BSP’s own September inflation expectation range of 6.6% to 7.4% is interesting in that even if inflation bottoms out (6.6%), it will still be the monthly figure the highest of the year.
“What this also implies is another 50 basis point move (or probably stronger) in November and, or, December. Note that we called the peso hitting P60 for the dollar last July; there is a bias for more devaluation down the line as the dollar continues to soar given the UK’s recent emergency quantitative easing,” he added.
The brokerage noted that “PSEi trading at the 5,700 level is extremely reminiscent of the Covid-19 lockdown era (May to October 2020). At this level, the forward price/earnings ratio is around 12 to 13 times. »
“The broader market may continue to be weighed here based on how inflation moves over the next quarter, but on an asset basis there may be moves worth pursuing, particularly once third quarter results are released and the 2023 capital spending picture becomes more visible.”
Thus, 2TradeAsia.com advises that “While no sector is completely immune to a higher cost of debt or a squeeze on purchasing power, there are benefits to sticking to reliable games with little exposure to floating debt, forex volatility, and can take advantage of more historically volume-based consumer demand in the fourth quarter.
For stock picks, COL Financial gives Ayala Corporation a Buy rating after raising its net profit forecast for AC due to higher expected earnings from its telecommunications unit.
“For AC, our net profit forecast for 2023 is increased by 14% to 35.3 billion pesos… AC’s fair value is increased to 857 pesos,” COL said, noting that there is “a significant upside potential from the current market price of (P616.00).”
He added that AC’s market NAV is about 20% higher than AC’s current market price.
Meanwhile, Abacus Securities Corporation noted that the bear market has opened up rare buying opportunities for long-term investors and recommends ICTSI and SM Investments “which are trading around two standard deviations or more from their report. long-term price/benefit”.
He said SM is currently trading at its smallest premium to the PSE index in at least 10 years and is cheaper today than it was during the market’s Covid low ( 16.3 times on March 19, 2020).
“It all seems underserved given that SM is already operating ahead of pre-pandemic levels,” Abacus said.
In the case of ICTSI, Abacus said “the business has shown its ability to navigate through economic weakness during the pandemic. We are a buyer, but there may be opportunities for recovery at lower levels.”
The brokerage also favors Security Bank and Puregold. He noted that Security Bank is one of the few major stocks still trading cheaper today from its March 2020 low, while Puregold has fallen to an all-time low and its price-earnings ratio is lower than 30 months ago.
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