By James A. Loyola
While the local stock market is seen to remain volatile, it may get a boost from the central bank’s initial phase implementation of its Reserve Requirement Ratio (RRR) cut on May 31 as well as month’s end window-dressing.
“Each percentage point cut frees up around P95 billion in extra funds for lending. Infra-related plays are seen to benefit from this move, with most likely to fine-tune project rollout timelines and flexing their funding options,” said online brokerage firm 2TradeAsia.com.
It noted that, “the only thing that could slow construction efforts would be the seasonal rainy season in the third quarter which is likely to be reversed in the fourth quarter.”
“Expect another volatile week to prevail, with attention glued to US-China trade talks and other local headlines. Funds flow would also gyrate given the month-end portfolio closing, as well as implementation of MSCI’s rebalancing,” said 2TradeAsia.
It advised investors to “go for stocks with solid earnings stories supported by good upside potentials.”
Top online broker COL Financial recommends investors buy global liquor firm Emperador because “valuation is very attractive since it is trading at just 15.5 times 2019 earnings, a discount to the consumer average of around 21 times.”
The firm said it also favors Emperador’s parent company Alliance Global Group Inc. despite the underperformance of its gaming and leisure unit, “given that AGI’s share are priced at a 44.3 percent discount to our net asset value (NAV) estimate of P25.72 and 44.4 percent discount to its market price-based NAV of P25.77.
Meanwhile, COL is also recommending a buy on Ayala Corporation after it bought back more of its shares from Mitsubishi because this “alleviates some concerns that AC shares will continue to have an overhang based on speculation that Mitsubishi will continue to trim down its holding in AC.”
“The move of AC to buyback the shares from Mitsubishi is also signaling effect that the company thinks their shares are cheap,” said COL.
BDO Chief Market Strategist Jonathan Ravelas said last week’s close at P7,747.09 “signals that the market is having difficulty sustaining itself above the 7,800-7,850 levels. There is still some room for further decline towards the 7,000-7,300 levels in the near-term.”