Stock Market Weekly: We expect upward momentum to dominate

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) traded upwards by 2.43% week-on-week (w/w), closing at 7,428.30 (+176.00 points). This was driven by the Bangko Sentral ng Pilipinas’ (BSP) decision to cut reserve requirement ratios (RRR) for universal and commercial banks by 250 basis points (bps) from 9.5% to 7.0%.

The market also reacted positively to dovish language by BSP Governor Eli Remolona Jr., who hinted that the BSP is considering reducing rates by 25 bps at each of its next two meetings, potentially bringing policy rates down to 5.75% by year-end.

Overseas, the US 2nd quarter 2024 GDP data expanded by 3.0%, an acceleration from 1st quarter 2024’s 1.4%, according to the US Bureau of Economic Analysis’ (BEA) “third” estimate.

WHAT TO EXPECT THIS WEEK

This week, we anticipate the PSEi to maintain its upward momentum, supported by easing inflation, which is expected by consensus to be 2.5% in September. The BSP’s Business Expectations Survey (BES) signaled optimistic business sentiment for the next quarter, with the overall confidence index (CI) improving to 56.8% (from 43.7%). This optimism is backed by forecasts of elevated demand for specific goods, reduced interest rates, softening inflation, and a better economic environment.

Meanwhile, the BSP’s Consumer Expectations Survey (CES) indicated that consumer confidence for the 4th quarter of 2024 has turned positive at 0.7% (from -0.4%), driven by expectations of increased income, more job availability, salary raises, and more family members entering the workforce.

However, gains may be capped as geopolitical tensions in the Middle East have intensified following the assassination of Hassan Nasrallah, leader of the militant faction Hezbollah, during Israeli airstrikes on Beirut despite US calls for a ceasefire. This event has raised fears of war, as Hezbollah’s ally, Iran, has committed to retaliate.

Resistance: 7,450 / 7,550

Support: 7,100 / 7,300

ANALYSIS

The PSEi surged 2.43% w/w to close at 7,428.30 (+175.98 points). The index extended its rally to four straight weeks on high volume and robust net foreign buying. Moreover, the index remains extremely bullish, trading above key moving averages (200-day, 100-day, and 50-day), and with momentum indicators (MACD and RSI) at overbought zones. However, we suggest exercising caution at current levels as the local bourse hits the top end of its pandemic range.

STOCK CALLS FOR THE WEEK

Filinvest REIT Corp. | BUY ON BREAKOUT | CONSENSUS TARGET PRICE: PHP 4.00

Volume and interest in FILRT remain subdued, with the stock trading within the PHP 2.85 to PHP 3.28 range since September 2023. Momentum indicators, such as the MACD and RSI, are pointing downwards, reflecting a lack of strong movement. While the stock is in consolidation, a decisive breakout above or below these levels, supported by increased volume, could determine its next trend.

We recommend buying FILRT shares once it breaks above its range on strong volume and upon the announcement of yield-accretive asset injection plans, as this would likely drive interest and push the stock higher. We recommend accumulating once FILRT breaks out of its range at PHP 3.30 with strong volume. Take profits at PHP 3.80 and set stop loss limits below PHP 3.00.

Filinvest Land, Inc. | SELL | CONSENSUS TARGET PRICE: PHP 0.75

On the technical front, FLI reversed from its downtrend, surging by almost 30% to break above key resistances and moving averages (50-day, 100-day, and 200-day). The stock recently entered overbought levels on high volume, signaling increased volatility. Thus, we caution against accumulating the counter at current levels as it is prone to whipsaw.

We prefer to sell FLI on rallies near PHP 0.90 or at any value as the stock gets closer to the tender offer’s ex-date (yet to be announced). The latter is discounted to the tender offer price in view of the limited number of tendered shares.

PLDT, Inc. | BUY | CONSENSUS TARGET PRICE: PHP 1,696.23

TEL’s share price has been on a short-term downtrend since its ex-dividend date on August 22, 2024. On a multi-month view, TEL is still moving well within an upward channel, with the recent pullback finding support around PHP 1,440, aligning with the lower boundary of the channel.

The stock is above the 200-day MA, indicating a strong long-term trend, though it faces immediate resistance near the 50-day MA at PHP 1,505. Momentum-wise, MACD shows potential for a bullish crossover, while the neutral RSI at 51.14 suggests room for upward movement. If TEL holds above PHP 1,440, it presents a buying opportunity, with a break above PHP 1,505 signaling further bullish momentum within the channel.

Accumulating TEL at current levels is advisable. Take profits 15% above your average cost and set stop loss limits 8% below your average cost.

KEY DATA RELEASES

1. Philippine Money Supply M3 SRF year-on-year (y/y) on Monday, September 30, 2024 (previous: 7.2%)

2. PH Bank Lending y/y for August 2024 on Monday, September 30, 2024 (previous: 9.6%)

3. US ISM Manufacturing for September 2024 on Tuesday, October 1, 2024 (estimates: 47.6%; previous: 47.2%)

4. US Initial Jobless Claims as of September 28, 2024, on Thursday, October 3, 2024 (previous: 218k)

5. US ISM Services Index for September 2024 on Thursday, October 3, 2024 (estimates: 51.5; previous: 51.5)

6. PH Consumer Price Index (CPI) y/y for September 2024 on Friday, October 4, 2024 (estimates: 2.5%; previous: 3.3%)

7. US Change in Nonfarm Payrolls for September 2024 on October 4, 2024 (estimates: 140k; previous: 142k)

8. US Unemployment Rate as of September 2024, on October 4, 2024 (previous: 4.2%; estimates: 4.2%).