By Revin Mikhael D. Ochave, Reporter

DESPITE August’s historical reputation as the weakest month for the stock market, some analysts are bullish, driven by anticipated rate cuts and strong second-quarter profit projections.

“Historically speaking, August is the worst month for the stock market. The stock market posted negative month-on-month returns for the month of August in 13 out of the past 20 years. This is typically a broad-based decline, meaning almost all the sectors are affected,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia told BusinessWorld in a Viber message.

“However, we’re a bit more optimistic this year, with rate cuts on the horizon and good earnings outlook for the second-quarter reports due to come out in early August,” he added.

Ghost Month, which typically falls in August, originates from an ancient Chinese belief that the gates of hell open, allowing ghosts to return to the living world.

This year, Ghost Month, the seventh month in the Chinese lunar calendar, runs from Aug. 4 to Sept. 2.

In light of this, Mr. Garcia advised investors to consider any market declines in August as a ‘buying opportunity.”

“Historically speaking, in 13 out of the past 20 years, stock market returns from September to December has been positive,” he said.

Finance Secretary Ralph G. Recto said last week that the Philippines is on track for a rate cut this year, as inflation slowed to 3.7% in June. The Bangko Sentral ng Pilipinas (BSP) has kept interest rates steady at 6.5% in its last six meetings.

BSP Governor Eli M. Remolona, Jr. has indicated that a rate cut is likely at the Monetary Board’s August 15 meeting.

Rastine Mackie D. Mercado, research director at China Bank Securities Corp., noted that since 1998, August has typically shown weak month-on-month price performance, with both average and median returns just under 2%, and over 65% of Augusts recording month-on-month losses.

“It’s also worthy to note that around 65% of Julys over the same period also posted positive month-on-month returns, which may offer some insight that August may be a month which typically sees profit taking,” he added.

Despite this, Mr. Mercado said it is better to focus on the catalysts that will drive the market in the near term.

“Given that the month-to-date return for July is at around 4.7%, we think that this coming August may be a month where we’ll see profit-taking. If the index stages a consolidation, then we think that a successful test of the 6,550 support could present some redeployment opportunities,” he noted.

“With respect to specific sector performance, we think that the upcoming earnings season will be a key driver in price action,” he added.

For the rest of the year, Mr. Mercado said the prospect of a rate cut will drive the local equity market.

“However, the key to sustaining the uptrend would be an expansion in earnings expectations,” he added.

Mark V. Santarina, Senior Trader at Globalinks Securities and Stocks, Inc., is also optimistic about the market’s outlook for September, aligning with the anticipated rate cuts.

“August presents a good opportunity to accumulate blue-chip stocks as the PSEi is likely to trade sideways,” he said in a Viber message.

Meanwhile, Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp., said in a separate Viber message that the market slowdown in August coincides with bad weather and the vacation season in Northern Hemisphere countries such as the United States.

“Any slowdown in trading, economic, business activities is not only due to Ghost Month, but it is also a factor,” he said.

The Philippine Stock Exchange (PSE) will host a three-day Investor Day program for publicly listed companies (PLCs) to discuss their first-half financial performance and projects.

The market operator will host the PSE STAR: Investor Day from Aug. 14 to 16, which will be attended by 14 PLCs. These companies will present their short- to mid-term strategies and other corporate developments.

“The return to a three-day schedule speaks of the keen interest of stakeholders involved in this program. PLCs want to share company updates to a wider audience so they join PSE STAR,” PSE President and Chief Executive Officer Ramon S. Monzon said in an e-mailed statement over the weekend.

“Fund managers, equities analysts, and investors, on the other hand, get the latest information and appreciate that they can ask questions directly to the heads of the companies,” he added.

The PLCs participating in the three-day event are ACEN Corp., AREIT, Inc., BDO Unibank, Inc., Cebu Landmasters, Inc., DigiPlus Interactive Corp., D.M. Wenceslao & Associates, Inc., East West Banking Corp., and Global Ferronickel Holdings, Inc. Other companies joining the program include GT Capital Holdings, Inc., MacroAsia Corp., Megawide Construction Corp., Philippine Business Bank, PLDT Inc., and Semirara Mining and Power Corp.

PSE STAR is co-hosted by Bloomberg LP, with partners Fund Managers Association of the Philippines and the Trust Officers Association of the Philippines.

The PSE STAR portal provides additional information on companies through the Spotlight write-up that contains details on the PLCs. The portal also has recorded briefings of PLCs that participated in previous editions of PSE STAR. Bloomberg analysts will also discuss their outlook on the economy and select sectors. — Revin Mikhael D. Ochave

JOLLIBEE Foods Corp. (JFC) said it will review its planned issuance of preferred shares, citing the faster-than-expected growth of the company’s domestic business.

“The idea for the preferred shares issuance was for the growth in the Philippines. What we’ve seen recently is our growth in the Philippines is faster than our planned growth,” JFC Chief Financial Officer Richard Shin said during a virtual briefing last week.

“We don’t know how much we really need in terms of preferred shares because our (Philippine) business is actually growing much faster. We’re going to reevaluate and we’re going to consider if we need to do the preferred shares offering,” he added.

In March, JFC’s board approved a plan to offer and issue five million preferred shares with an oversubscription option of up to three million preferred shares at P1,000 apiece, with an estimated total value of up to P8 billion.

This planned issuance will be the second tranche of JFC’s 20 million preferred shares shelf registration approved by the SEC in September 2021.

According to Mr. Shin, the move is also influenced by the local central bank’s expected interest rate cut.

“We’re taking a look at this again, understanding that the rates haven’t come down yet. That’s important because you lock into a fixed rate, whether it’s a coupon or whether it’s interest, at the time of a potential rate cut, that’s probably not the right way,” he said.

“We’re looking at other instruments that are more variable to take advantage of lower interest rates that we know are coming. We are looking at this holistically. We are looking at all the options at the moment,” he added.

Previously, the fast-food giant said a portion of the offering’s net proceeds would be used to refinance financial obligations including the company’s callable Series A preferred shares due October this year and for other general business purposes.

“JFC is undertaking this funding transaction to maintain strong capital structure, robust leverage position, and optimize liquidity by managing maturities of financial obligations,” the company said.

JFC has earmarked P20-23 billion as its capital expenditure budget to fund the company’s plan of opening 700 to 750 new stores this year.

The company’s shares were last traded on July 26, ending at P228 apiece. — Revin Mikhael D. Ochave