Stock-Market Outlook

Last week

Share prices gained for the second straight week, with the main index closing at the 6,200-point level, but investors remained cautious especially after the government released the August inflation data.

The benchmark Philippine Stock Exchange index gained 41.88 points to close at 6,222.94 points.

The main index was up almost all week long, except on Thursday when it gave up 58.62 points.

“August inflation rose to 5.3 percent. While this is within the BSP’s [Bangko Sentral ng Pilipinas] range of 4.8 percent to 5.6 percent, the print being at the high end of the already revised range is concerning and speaks to the level of both push and pull issues in third quarter,” broker 2TradeAsia said.

“The silver lining is that excluding volatile food and fuel, core inflation eased to 6.1 percent from 6.7 percent in July, which shows that the other basket items are showing predictability relative to last year.”

Volume of trade was still anemic, except on Monday when it had some P11 billion worth of trades, but it was at P3.2 billion to P3.5 billion for the rest of the week.

Average for the week reached P4.83 billion, with foreign investors taking just more than a third of the trades. Foreigners were net sellers at P3.59 billion.

For the week, losers slightly edged gainers 109 to 102 and 29 shares were unchanged.

Top gainers for the week were Forum Pacific Inc., A Brown Co. Inc., Araneta Properties Inc.,  Monde Nissin Corp., LBC Express Holdings Inc., Atok-Big Wedge Co. Inc. and Pacifica Holdings Inc.

Top losers, meanwhile, were IPM Holdings Inc., Seafront Resources Corp., Metro Alliance Holdings and Equities Corp. A, Philippine Infradev Holdings Inc., Fruitas Holdings Inc., Solid Group Inc. and Grand Plaza Hotel Corp.

This week

Shares may continue to be range-bound this week as investors are still cautious due to the current macroeconomic conditions.

The main index could trade within the 6,150 to 6,350-point area, with investors taking a more cautious stance ahead of the release of August inflation data in the United States, according to Juan Paolo Colet, managing director at China Bank Capital Corp.

“A higher than expected rise in US consumer prices would be unwelcome news for the equities market as it would pile pressure on the Federal Reserve to raise interest rates and prolong a hawkish monetary policy,” he said.

“Traders will also anticipate the FTSE rebalancing, which takes effect on Friday, as that could influence the movement of certain local index heavyweights.”

Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financials Inc., said the sustainability of the market’s rise is in question as investors’ confidence is seen to remain tepid amid the recent negative economic developments and the lack of a positive catalyst.

“Investors are still expected to be on the lookout for a positive catalyst. Without such, the local market could move with a downward bias. Investors are expected to watch out for the US’ upcoming August inflation data as this may give clues on the Federal Reserve’s next policy move. Investors may also take cues from our upcoming June foreign direct investments and July overseas Filipino cash remittance data.”

The market’s support is seen at 6,150 points and resistance is seen at 6,400 points.

Stock picks

Philstocks has advised clients to go for listed firms in the property sector that have hotel and mall segments due to the recovery of the tourism sector.

“The hotel segment across various property companies rebounded notably due to the resurgence in tourism, after facing pandemic-related setbacks. In addition, we believe that the mall segment will also be fueled by the recovery of tourism in the country. We see this rebound to continue for the rest of the year for the hospitality sector,” it said.

“The high-interest rate environment may temper the growth of the property sector’s other segments like the residential and the office space.”

The residential sector’s momentum might taper off due to elevated mortgage rates, as high interest rates could discourage potential homebuyers. The overseas Filipino workers’ remittances might prioritize essentials given the persistently high inflation.

The office segment, meanwhile, could experience a deceleration in growth, as businesses may show reluctance to expand in a high-interest environment, it said.

It has recommended the purchase of the stock of SM Prime Holdings Inc. (SMPH), the target price of which is seen at P44.90.

SMPH shares closed Friday at P30 apiece.