Stock Market Weekly: Market awaits US and Philippine GDP data 

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) declined by 2.10% week-on-week (w-o-w) to close at 6,503.54 (-139.64 points). Sentiment weakened amid lower expectations for a US Fed rate cut in March, which fell to a 65% probability from 80%.

This was as resilient US retail sales data further tempered the likelihood of an early rate cut. In addition, China reported that its 4th quarter 2023 GDP grew by 5.2% y-o-y, missing the consensus estimate of 5.3%.

WHAT TO EXPECT THIS WEEK

This week, we expect the market to continue trading sideways with a slight downward bias as investors await major data releases. The market is expecting a tempered US GDP growth for the 4th quarter of 2023 at 1.9% y-o-y, a deceleration from 3rd quarter 2023’s 4.9%.

On the local front, the Philippine Statistics Authority (PSA) is also expected to release the country’s 4th quarter 2023 GDP results between January 25 to 31, 2024. The consensus estimate is 5.5% for full year 2023, lower than the 6.0%-7.0% target of the government.

Fuel price hikes are also seen next week, with gasoline prices scheduled to increase by PHP 0.90 to PHP 1.10 per liter and diesel prices by PHP 0.70 to PHP 0.90 per liter on Tuesday, January 23. Moreover, Davao de Oro was placed under a state of calamity as heavy rains led to severe flooding and landslides.

Resistance: 6,600/6,700

Support: 6,200/6,400

ANALYSIS

The PSEi dropped by -2.10% w-o-w after failing to break above the 6,700 resistance. The benchmark index broke below the 6,600 support level but the market remains trading above key moving averages (50-day, 100-day, and 200-day MA). If the PSEi continues its descent, it can retrace the next support levels at 6,400 to 6,200. If the PSEi recovers, it can retest the next resistance levels 6,600 and 6,700.

STOCK CALLS FOR THE WEEK

RL Commercial REIT, Inc. | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 5.70

In our latest company report titled “Yields are attractive,” we reiterate our BUY call on RL Commercial REIT, Inc. (RCR), with our target price (TP) cut to PHP 5.70 amid the ongoing weakness in the Philippine office space. Our new TP implies a dividend yield of 7.0%/7.2% on FY24/FY25 payout.

In addition, looking at 3rd quarter 2023 occupancy rates, RCR fell to 94% from 1Q23’s 97%. However, we see the company’s resilient rental dynamics to offset pressure from recorded lower occupancy rates.

For those looking to accumulate, entering once the stock pulls back above its 100-day MA of ~PHP 4.92 on strong volume is advisable. Set stop limit orders below PHP 4.53 and take profits around PHP 5.66. For long term investors, we have a fundamental target price of PHP 5.70 (+17.28% upside from recent close).

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

CREC’s public listing will pave the way for the development of its pipeline of projects. CREC has committed to develop over 1GW of capacity annually or 5GW by 2027, of which 3.5 GWdc will come from the development of new projects in Batangas, Zambales, Pangasinan, and Quezon.

Meanwhile, around 1.5GWdc is expected to come from the brownfield expansion in Pampanga, Tarlac, Negros, Bulacan, and Bataan. This provides CREIT a path for potential asset infusion as it mirrors the rollout strategy of its sponsor.

Furthermore, as highlighted in our previous report titled “Elevating value from accretive asset infusions,” the recent pause in monetary policy by major central banks will be beneficial for CREIT as we expect upward pressure on bond yields to recede.

Trading at 7.5%/7.6% yield on FY23F/24F DPU, CREIT’s valuation is attractive, thus presenting an opportunity to enter the counter. Accumulate once CREIT pulls back around PHP 2.51. Set stop limit orders below PHP 2.31 and take profits around PHP 2.89. For long-term investors, we have a target price of PHP 2.77.

Filinvest Reit Corp. | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 3.45

Filinvest REIT Corp. (FILRT) has recently unveiled its three-year investment strategy for 2024-2026. Positioned to be the first sustainability-themed REIT, FILRT aims to continue to invest to increase the number of green-certified buildings under its portfolio.

FILRT’s strategic pivot in its tenant mix is in anticipation of the potential impact of artificial intelligence on the business process outsourcing (BPO) sector. Hence, FILRT has identified a mix of retail and hospitality assets to increase its overall occupancy while targeting to reduce office leasing from 90% down to 50% by 2026.

This shift in FILRT’s tenant profile will enable the company to increase its GLA to provide more stable returns. Accumulate once FILRT pulls back near its 100-day MA near PHP 3.00 on strong volume. Set stop limit orders below PHP 2.82 and take profits around PHP 3.45.

KEY DATA RELEASES

1.) US S&P Global preliminary manufacturing Purchasing Managers’ Index (PMI) for January 2024 on Wednesday, January 24 (estimates: 48.0; December 2023: 47.9)

2.) US GDP annualized q-o-q for 4th quarter 2023 on Thursday, January 25, 2024 (estimates: 1.9%; 3rd quarter 2023: 4.9%)

3.) US initial jobless claims as of January 20, 2024, on Thursday, January 25, 2024

4.) PH GDP YoY for full year 2023 between January 25 to 31, 2024 (estimates: 5.5%)

5.) PH exports YoY for December 2023 on Friday, January 26, 2024 (estimates: 4.2%; November 2023: -13.7%)

6.) PH imports YoY for December 2023 on Friday, January 26, 2024 (estimates: 2.2%; November 2023: 0.0%)