Stocks to take cues from politics, COVID cases

James A. Loyola

The local stock market is seen to be swayed by recent political developments this week although investors continue to be optimistic amid the reopening of the economy and the generally positive corporate results for the third quarter.

Online brokerage firm said the rebound in economic growth in the third quarter “further supports our outlook of the fourth quarter being tilted to the higher end of initial forecast.”


This is “especially if ‘revenge consumption’ manifests itself in December, on top of frontloaded spending ahead of the 2022 elections,” it added.

“Fourth quarter transport relaxations should provide great (tailwinds for cyclicals and hospitality, but we also underscore firms (mostly infra, power, and industrials) that are using the current low cost of capital environment to consolidate ahead of 2022, and thus have further value to unlock down the line,” said.

Philstocks Financial Senior Supervisor for Research Japhet Tantiangco said that, “So far, the improvements in our COVID-19 situation and the easing of social restrictions have helped in bringing the local market to its current level.”

“If the downtrend in our cases is sustained next week, then it may boost market sentiment,” he said.

Meanwhile, noted that, “The political climate should heat up dramatically over the next few weeks—as the candidate pool gets finalized, so will speculations over regulatory and business risks of the next 5 years.”

“Monitor supply pressure as the market attempt to find the next source of exuberance after a quarter of good-to-stellar earnings. Range trade,” it advised.

Tantiangco said that, “Next week, investors are also expected to watch out for the Bangko Sentral ng Pilipinas’ monetary policy meeting. While unchanged policy rates are already expected, investors are seen to watch out for the BSP’s expectations with respect to the country’s inflation moving forward.”

“Aside from these, investors may also watch out for our upcoming September OFW remittance and October balance of payments data,” he added.

BDO Chief Market Strategist Jonathan Ravelas said investors are now willing to take on more risk after investor confidence got a boost from the better-than-expected growth number for the third quarter.

“Last week’s close at 7,382.84 highlights strong upward momentum. Look for a try at the 7,500 levels. Failure to test the said levels could prompt some profit-taking and could signal a near-term peak could be in place at 7,475.75,” he added.

For stock picks, both Abacus Securities Corporation and COL Financial have BUY ratings for Puregold despite its lower growth rate in the third quarter.

“We are maintaining our BUY rating on PGOLD…as the company remains well-positioned to take advantage of the growth opportunities in the retail sector given its differentiated focus of middle-to-low income class consumers as well as the niche market of resellers,” COL said.

Abacus said “We remain overweight on the stock, primarily because of the company’s steady growth and undemanding valuations. We also like the fact that S&R now accounts for 37 percent of consolidated gross profit and this probably increases to over 40 percent at the operating level.”

Both brokerage firms also favor D&L Industries which recently announced that it is set to exceed pre-pandemic 2019 earnings this year.

“We like DNL since it is in prime position to capitalize on the recovery of the economy given its diversified portfolio of products catering to different consumer groups,” COL said.

It noted that, “The company is relatively resilient to rising input costs thanks to its large portfolio of high margin specialty products. DNL is also a beneficiary of the growing popularity of health, wellness, and sanitation trends brought about by the pandemic.”

“One of the few stocks that has outperformed expectations every quarter so far in 2021 is DNL. The company announced their third quarter 2021 and nine-month 2021 earnings yesterday, continuing its impressive streak,” Abacus said adding that it has upgraded its target price for the company.

The brokerage said the fourth quarter, “with relaxed quarantine measures, should continue to be a strong one for DNL as its main income contributor, food ingredients, would be on its way to recovery.”

“Its other segments in oleochemicals and plastics should also be able to sustain their performance that would carry on to the next year. In addition, management believes that the economy reopening and election season will only boost their topline for 2022,” it added.

DMCI Holdings’ record performance in the first nine months of 2021 also earned it a favorable rating from both COL and Abacus.

“In line with the increase in our net income forecast by SCC, we are increasing our earnings forecast by 13 percent to P17.2 billion,” said COL adding that, “We like DMC given that we believe that earnings have bottomed out in 2020.”

“DMC’s core net income tripled in the first nine months of 2021 and is already 83 percent of full year consensus. Management believes the current quarter will be better than the third quarter. This bodes well for DMC being able to maintain its dividend payout,” said Abacus.

Source: Manila Bulletin (