Stock Market Weekly: Investors await key data releases

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) dropped by 1.61% (107.51 points) week-on-week to close at 6,578.15, snapping its three-week winning streak. The market started the week in the red as investors took some profits ahead of the local GDP data and MSCI rebalancing.

Subsequently, the local bourse managed to bounce back in the middle of the week due to the slower April 2023 US inflation at 4.9% year-on-year (consensus estimate: 5.0%) and the better-than-expected Philippine 1st quarter 2023 GDP of 6.4% (consensus estimate: 6.2%).

On Friday, the benchmark index traded lower as investors digested the results of the MSCI semi-annual rebalancing, where the Philippines got a slight downweight and Monde Nissin Corp. (MONDE) will be deleted from the MSCI index effective June 1, 2023.

Top index performers were Ayala Corp. (AC) (+3.6%), Universal Robina Corp. (URC) (+3.5%), and LT Group Inc. (LTG) (+1.2%), while index laggards were MONDE (-16.2%), Ayala Land Inc. (ALI) (-6.2%), and Wilcon Depot Inc. (WLCON) (-5.3%). The index breadth was negative with five gainers versus 23 losers. The average daily turnover value was PHP 4.7 billion. Foreigners were net sellers by PHP 691 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias as investors closely monitor the tail end of the earnings season and await key data releases. The market will be on the lookout for cash remittances reports and the highly anticipated policy rate decision of the Bangko Sentral ng Pilipinas (BSP) which is expected to pause its rate hike.

Meanwhile, local fuel prices are forecasted to rise by as much as PHP 1.30 – PHP 1.50/liter on diesel and PHP 0.30 – PHP 0.50/liter on gasoline.

PSEI TECHNICAL ANALYSIS AND TRADNG PLAN

Resistance: 6,800

Support: 6,600 / 6,400

The bears were in control last week as the PSEi dropped below the 6,600 level. It is also worth noting that the index’s 100-day moving average price (~6,683) acted as a resistance level, with the market failing to break back above the said level. We think that only once the PSEi breaks above 6,740/6,800 will there be a reversal of the market’s short-term downtrend.

We suggest to gradually accumulate the First Metro Exchange Traded Fund (FMETF) or other index trackers once the PSEi trades back above 6,800.

STOCK CALLS FOR THE WEEK

PLDT, Inc. (TEL) — BUY ON BREAKOUT

TEL reported a 1st quarter 2023 net income of PHP 9.02 billion (-1.0% y-o-y). However, TEL’s core income reached PHP 8.64 billion (+5.0% y-o-y), excluding the impact of asset sales and Voyager Innovations, which is ahead of consensus and our estimates.

Despite the initial rally, TEL’s share price is still on a clear downtrend, trading below its key 50-, 100-, and 200-day moving averages (MAs). Meanwhile, technical indicator MACD confirms the bearish momentum. That said, we think that TEL must break above its 100-day MA (~P1,342) for a reversal to take place. Accumulating once TEL breaks above its 100-day MA is advisable. Set stop limit orders at 8% below average cost and take profits at 15% above average cost. For long-term investors, our fundamental target price for TEL is PHP 1,470.00

Cebu Air, Inc. (CEB) — BUY ON BREAKOUT

CEB posted a core income of PHP 1.3 billion (vs a net loss of PHP 5.1 billion in the 1st quarter of 2022), above consensus estimates. Revenues grew to PHP 20.9 billion (vs. PHP 6.7 billion in the 1st quarter of 2022), driven by higher passenger volume and average fares.

In the 2nd quarter of 2023, CEB expects to exceed its pre-pandemic capacity, supported by an optimistic outlook in the tourism industry as well as the strengthening of its Clark and Cebu hubs. Also, CEB expects to reach 2019 international capacity levels in the 2nd quarter of 2023, while domestic operations will continue to grow with additional flight frequencies to various destinations.

As for price action, CEB is showing signs of bullish recovery with the current share price hovering above its key 50-, 100-, and 200-day moving averages (MA). Meanwhile, the technical indicator MACD confirms the bullish momentum. We believe that a rally will occur once CEB breaks above PHP 44.00. Accumulating once CEB breaks above PHP 44.00 is advisable. Set stop limit orders below PHP 40.5. Take profit at around PHP 50.7.

DMCI Holdings, Inc. (DMC) — BUY ON BREAKOUT

DMC posted a 32% y-o-y decline in its 1st quarter 2023 consolidated net income to PHP 7.6 billion – in line with consensus estimates. The decline was attributed to lower commodity shipments, easing coal prices, reduced construction projects, fewer real estate accounts, and higher real estate sales cancellations.

For the remainder of 2023, DMC has a mixed outlook. For Semirara Mining and Power Corp. (SCC), while coal demand in China is picking up, the company expects the power segment to do relatively better amid high uncontracted capacity and elevated spot prices. As for the real estate business, DMC is seeing lesser cancellations as demand slowly returns and as its new product formats drive growth for the segment.

For the water business, the company expects growth to be sustained by the tariff adjustment and the economic reopening. However, these positives are dampened by challenging macroeconomic conditions, slowing global growth, and operating headwinds. Accumulating once DMC breaks above the 200-day MA (~PHP 10.53) is advisable. Set stop limit orders at 8% below average cost and take profits at 15% above average cost.

KEY DATA RELEASES

Monday, May 15, 2023
– Overseas Cash Remittances y-o-y for March 2023 (consensus estimate: 3.4%; actual for February 2023: 2.4%)
– Corporate Earnings: MONDE, San Miguel Corp. (SMC)

Tuesday, May 16, 2023
– US retail sales (ex auto) MoM for April 2023 (consensus estimate: 0.4%; actual for March 2023: -0.8%)
– Corporate Earnings: GT Capital (GTCAP), Alliance Global Group Inc. (AGI)

Thursday, May 18, 2023
– BSP interest rate decision (consensus estimate: no change in rates)
– US Initial Jobless Claims as of May 13, 2023
– US Existing Home Sales for April 2023 (consensus estimate: 4.28 million; actual for March 2023: 4.44 million).