Stock Market Weekly: Queasy trading amid Israel-Hamas conflict and data releases 

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) ended flattish at 6,266.34 (+6.39 points; +0.10% week-on-week). The market saw thin trading volumes amid the geopolitical tensions in the Middle East. Moreover, this resulted in a surge in global oil prices (West Texas Intermediate crude: USD 87.69/barrel, Brent Crude: USD 90.89/barrel).

Investors also considered the higher-than-expected September 2023 US inflation print at 3.7% (consensus estimate: 3.6%), which has increased the possibility of a US Fed hike. On the local front, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. signaled the likelihood of a 25-basis-point rate hike in November 2023.

WHAT TO EXPECT THIS WEEK

This week, we expect the market to trade sideways with a downward bias as investors continue to monitor the developments in the Israel-Hamas conflict and anticipate key data releases. Investors are also in a wait-and-see mode ahead of the implementation of short selling on October 23, 2023. Furthermore, the Malayang Alyansa ng Bus Employees at Laborers’ (MANIBELA) nationwide transport strike on October 16, 2023, and mixed movements in gas prices (gasoline: +PHP 0.40-PHP 0.60/liter and diesel: -PHP 1.00-PHP 1.10/liter), could weigh further on market sentiment.

Resistance: 6,400/6,600

Support: 6,200/6,000

ANALYSIS

The PSEi ended the week flattish at 6,266.34 (+6.39 points; +0.10%). The benchmark index traded sideways below its key moving averages (100-day and 200-day), indicating that sentiment remains to be bearish.

If the PSEi pulls back, it can retrace towards the next support levels around 6,200 and 6,000. Otherwise, should the market rally, it can retest the next resistance levels at 6,400 to 6,600.

TRADING PLAN: Continue to buy in tranches around identified support areas (6,000, 5,700, 5,400, and 4,500) should the market revisit lower levels. Allocate some buying power to take advantage of offshoots in the market’s bearish stance.

STOCK CALLS FOR THE WEEK

Converge ICT Solutions, Inc.* / BUY | FMSEC TARGET PRICE: PHP 13.80

Despite an improvement in 1st half 2023 earnings last August 10, 2023, Converge ICT Solutions, Inc.’s (CNVRG) stock price decreased to its 52-week low at PHP 7.77 last August 31, 2023. This is amid high net foreign selling (PHP 144.7 million) on speculations of CNVRG’s removal from the PSEi.

Nevertheless, CNVRG appears to be on an uptrend recently, following its announcement of reaching more than 2 million residential subscribers as of end-September 2023. CNVRG is currently trading on an uptrend above key moving averages (100-day and 200-day).

This is after hitting its 52-week low at PHP 7.77 last August 31, 2023. We believe that the counter can retain its current uptrend once it breaks above the PHP 11.00 resistance, hence, accumulating at current levels is advisable. Set stop limit orders at PHP 10.50 and take profits at around PHP 13.00.

Citicore Energy REIT Corp.*/ BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 2.77

In our latest company update for Citicore Energy REIT Corp. (CREIT) entitled, “Elevating value from accretive asset infusions,” we maintained our BUY call on the stock with TP raised to PHP 2.77.

With CREIT’s recent acquisition of land parcels in Batangas and Pampanga, its leasable space doubled to 5.96 million square meters (sqm) from 1.65 million sqm in 2022. Since our initiation report last December 13, 2022, CREIT has rallied by as much as 18.9% with 12-month trailing dividends of 7.5% based on the October 9, 2023, trading price. The stock is currently consolidating between PHP 2.50 to PHP 2.58 range. For a more favorable risk-to-reward ratio, accumulating once CREIT pulls back to PHP 2.50 is advisable. Take profits around PHP 2.88. Set stop loss limit below PHP 2.30.

Shakey’s Pizza Ventures Inc. / BUY ON PULLBACKS | CONSENSUS TARGET PRICE: PHP 12.35

Shakey’s Pizza Ventures Inc. (PIZZA) raised PHP 2.69 billion in a private placement as Century Pacific Food, Inc.’s (CNPF) parent, Century Pacific Group, Inc. (CPG) and JE Holdings Inc. (JEH) bought out GIC Pte. Ltd.’s 16.8% stake worth PHP 283 million. In particular, CPG bought out PHP 185 million worth of shares, raising its ownership to 62%.

Meanwhile, JEH purchased PHP 98 million worth of shares, bringing its stake to 14.9%. Upon acquisition of additional stake in PIZZA, JEH Chairman Lance Gokongwei expressed his confidence in the company, strongly supporting the company’s expansion in the years to come, as he looks forward for PIZZA to build synergies within the Gokongwei Group.

PIZZA is currently trading in an uptrend, above key moving averages (200-day and 100-day). For a more favorable risk-to-reward ratio, we advise waiting for a pullback and accumulating on support levels. Accumulating once PIZZA pulls back to PHP 9.15 is advisable. Set stop limit orders at PHP 8.40 and take profits at around PHP 10.53.

KEY DATA RELEASES

1) Overseas Cash Remittances y-o-y for August 2023 on Monday, October 16, 2023 (estimates: 2.8%; July 2023: 2.6%)

2) US Retail Sales (ex-auto) month-on-month for September 2023 on Tuesday, October 17, 2023 (estimates: 0.2%; August 2023: 0.6%)

3) US Initial Jobless Claims as of October 14, 2023, on Thursday, October 19, 2023 (September 2023: USD 209k)

4) Overall Balance of Payments (BOP) for September 2023 on Thursday, October 19, 2023 (August 2023: USD 57 million)