Equity investors take cues from Fed meeting – Manila Bulletin

The local stock market will take into account the results of the last meeting of the US Federal Reserve this week to see if it will temper its previous aggressive rate hikes.

Last week, the local stock market recorded a recovery of 1.39 percent. However, an extension of the rise is still expected to be challenged by lingering economic concerns, said Philstock’s Financial Research Manager Japhet Tantiangco.

He noted that upside risks to inflation are still seen from food and electricity prices. On the positive side, downside risks to inflation are seen as a result of the strengthening peso and declining global oil prices.

Aside from concerns about inflation, worries about an offshore recession amid the Federal Reserve’s monetary tightening could weigh on sentiment, Tantiangco said.

For its part, 2TradeAsia.com said that capital markets are expected to move along with the last Fed meeting for the year, as has been the case for all Fed meetings during the year.

Baseline expectations are for the Fed to deliver a slightly less aggressive 50 basis point hike to end four consecutive 75 basis point hikes…Movements in US Treasury yields plus stability in gold imply so far mixed feelings about the overall picture of interest rates in 2023, the brokerage said.

It noted that the Fed’s slight easing from 2022 does not mean the end of tightening, just that a more complex balancing act is needed to avoid a collapse in demand.

Next week, investors are also expected to look forward to the policy decision from Bangko Sentral ng Pilipinas with an expected hike in policy rates of 25 to 50 basis points, Tantiangco said.

He noted that investors are expected to pay attention to any indications regarding the outlook for the country’s inflation at the upcoming BSP policy meeting. Aside from this, investors can also take cues next week from our upcoming foreign direct investment and foreign trade data.

There should be some pockets of value that are expected to remain stable (if not flourish), particularly in sectors we’ve been tracking over the past few quarters, such as banking and commercial RE, and some alphas in gaming and industrials. With the PSEi trading at 13 times earnings, it could have some merit in gradually accumulating with asset quality leading the way in screening, according to 2TradeAsia.com.

For its stock selection, Abacus Securities Corporation favors Robinsons Retail Holdings Inc. as earnings continue to recover and even exceed pre-pandemic levels.

It looks like Q3 momentum will continue into Q4 with high footfall, with management reporting double-digit same-store sales growth for October and November in its Q3 2022 earnings call, it noted

Philstocks also recommends trading RRHI as the chart is showing bullish signals…We recommend getting into the stock as soon as it breaks out and holding a position above the immediate resistance (P60.25)

Of the food manufacturers, Abacus recommends a BUY for D&L Industries and said it is the best choice for the industry because, unlike the others, its revenue growth far exceeds that of inventories. This translates into more efficient working capital levels, lower financing costs and higher free cash flows.

Another thing that sets DNL apart from its peers is that it is a net exporter… Now the peso has been getting stronger lately, but it is likely to still fall over time, Abacus said, noting that once D&L’s new plant comes on stream, DNL’s growth should accelerate.

Abacus said the second choice in the sector Century Pacific Foods Inc. is because management said in the last briefing that Q4 profitability was better than Q3 and we like its small but fast-growing pet food line.