Equities 3 MIN READ

Stock Market Weekly: Sideways trading as investors await inflation data

The consensus estimate for inflation in November is 7.8%, which is just a sliver higher than the inflation in October. For that reason, sideways trading with a downward bias will dominate the stock market this week.

December 5, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) ended 1.78% lower week-on-week to 6,489.65 (-117.29 points). The local bourse sustained its upward momentum early in the week despite the escalating protests in China. The market also inched higher due to the MSCI rebalancing-related trades last Tuesday, followed by the US Fed’s signal of slower rate hikes. On Friday, the index broke its six-day rally as investors booked profits from earlier gains.

Top index performers were International Container Terminal Services Inc. (ICT) (+4.9%), Semirara Mining and Power Corporation (SCC) (+4.8%), and Alliance Global Group Inc. (AGI) (+3.7%), while index laggards were Jollibee Foods Corporation (JFC) (-6.7%), Wilcon Depot Inc. (WLCON) (-5.8%), and Monde Nissin (MONDE) (-5.6%). The index breadth was negative with 11 gainers versus 19 losers. The average daily turnover value was PHP 10.8 billion. Foreigners were net sellers of PHP 2.4 billion.

WHAT TO EXPECT THIS WEEK

The market is expected to trade sideways with a downward bias as investors await local key data releases, including the November 2022 inflation rate, which consensus expects to be at 7.8%, while the Bangko Sentral ng Pilipinas (BSP) expects it to be around 7.4% to 8.2%. Fuel price rollbacks are also anticipated next week, as gasoline prices are expected to fall by PHP 1.80 to PHP 1.90 per liter, diesel prices by PHP 1.90 to PHP 2.00 per liter, and kerosene prices to decline by PHP 1.60 per liter.

STOCK PICKS FOR THE WEEK

Ayala Corp. (AC) — BUY ON BREAKOUT

The stock is now trading above its key moving average (MA) prices (50-day and 100-day) and is on its way to retesting the 200-day MA. The technical indicator MACD confirms the bullish momentum. Accumulating once AC breaks above the 200-day MA (~PHP 705.00) is advisable. Set stop limit orders below PHP 685.00 and take profits at around PHP 800.00/PHP 840.00.

AbaCore Capital Holdings, Inc. (ABA) — LIGHTEN POSITIONS

Looking at ABA’s recent price action, the recent drop in price resulted in price breaking below both the 50-day and 100-day MAs. The uptrend now is now clearly broken and those still holding should consider lightening their positions. As for the company’s recent ventures, last November 24, 2022, ABA’s subsidiary, Philippine Regional Investment Development Corp. (PRIDE), entered into a memorandum of agreement (MOA) with Highsource Prime Building Inc. to undertake various projects at ABA’s Montemaria Shrine, a tourist destination in Batangas.

Under the partnership, both companies agreed to organize a joint venture corporation to develop a four-star hotel, a land and water amusement park, residential and commercial community, as well as a “3D Glass Paradise.” Lightening positions at current levels is advisable. The next support levels are at PHP 2.00 and the 200-day MA (~PHP 1.68).

Security Bank Corp. (SECB) — BUY ON PULLBACKS

Given the recent pullback, investors and bargain hunters can set buying levels around PHP 92.00. After which, set stop limit orders at PHP 88.00 and set profit levels at around PHP 110.00/PHP 118.00.

PSEI TECHNICAL ANALYSIS

Resistance: 6,600

Support: 6,400

The PSEi has finally pulled back after trading at overbought levels for the first time since August 2022. The market must stay above 6,400 and break above 6,600 in the next trading sessions for the short-term uptrend to remain intact. The MACD continues to exhibit bullish momentum, with the MACD line hovering above the signal and zero lines.

TRADING PLAN

Look to accumulate at current levels. Set stop limit orders below 6,300.

KEY DATA RELEASES

Tuesday, December 6, 2022
– Philippine Consumer Price Index (CPI) year-on-year for November 2022 (consensus estimate is 7.8%, while the actual for October 2022 is 7.7%)

Wednesday, December 7, 2022
– Philippine unemployment rate for October 2022 (actual for September 2022 is 5.0%)

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Equities 4 MIN READ

Stock Market Weekly: Market pullback likely

With the market now trading at overbought levels, coupled with the rising COVID cases in China, investors are expecting a pullback this week.

November 28, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) edged higher by 2.58% week-on-week as it closed at 6,606.94 (+169.56 points). The market saw six straight days of net buy flows from foreigners on the back of positive catalysts, including the US Fed’s announcement of a slower pace of hikes as inflation begins to ease. Investors also considered the comments of Bangko Sentral ng Pilipinas Governor Felipe Medalla who ruled out jumbo or off-cycle rate hikes. The weaker US dollar and the peso appreciating to its highest level since September 2022 as it closed at P56.67 on Friday also added to last week’s positive sentiment.

Top index performers were Metropolitan Bank & Trust Company (MBT) (+8.7%), Converge (CNVRG) (+8.7%), and SM Investments Corporation (SM) (+5.9%), while index laggards were Meralco (MER) (-7.1%), JG Summit (JGS) (-2.0%), and San Miguel Corporation (SMC) (-1.2%). The index breadth was positive, with 20 gainers versus 9 losers. The average daily turnover value was PHP 5.5 billion. Foreigners were net buyers of PHP 2.3 billion.

WHAT TO EXPECT THIS WEEK

The PSEi is likely to pull back after six straight weeks of ascent, as it is now trading at overbought levels. The market may also worry about China, which reported a fourth straight daily record of 39,971 new COVID cases yesterday. Investors will also be closely monitoring the release of the US jobs report for November on Friday, December 2, 2022. The jobs data will be the last monthly employment report before the US Fed’s next meeting on December 13 and 14, 2022.

STOCK PICKS FOR THE WEEK

Manila Water Company, Inc. (MWC) — TAKE PROFIT ON BREAKDOWN

The stock is now bullish, trading above its key moving averages (50-day, 100-day, and 200-day). However, the stock is also currently trading near overbought levels with the Relative Strength Index (RSI) indicator at 82. Taking profit once MWC trades below its 9-day exponential moving average (EMA) (~ below PHP 19.16) is advisable. The next support levels are PHP 19.00/PHP 17.00.

LT Group, Inc. (LTG) — BUY ON BREAKOUT

After a recent rally, LTG is looking to retest its immediate resistance level of PHP 9.58. The recent rally was driven by the company disclosing that its Board of Directors approved the declaration of PHP 0.50 per outstanding common share in special cash dividends for shareholders on record as of December 6, 2022.

The ex-dividend date will be on December 1, 2022, and payment will be made on December 16, 2022. We are of the view that a clear bullish signal will be indicated by a break above its August 2022 high of PHP 9.58. Accumulating LTG once it breaks above PHP 9.58 is advisable. Set stop limit orders below PHP 9.20 and take profits at around PHP 10.10/PHP 11.00.

ACEN Corp. (ACEN) — TAKE PROFIT ON BREAKDOWN

ACEN’s share price is currently trading near overbought levels. As for company guidance, ACEN noted the Supreme Court’s decision declaring void the administered or regulated pricing, which exposed the company to approximately PHP 1 billion in losses, which are not yet reflected in its 9-month 2022 results. With this, the company expects to be impacted by approximately PHP 3.5 billion in losses for full year 2022.

ACEN plans to mitigate these losses by 2023. On a positive note, ACEN expects strong electricity spot prices in Australia, which will contribute to the bottom line. Aside from this, with the repricing of ACEN’s retail electricity supplier (RES) customer contracts, the company is projecting an improved margin. Taking profit once ACEN trades below its 9-day EMA (~ below PHP 6.95) is advisable. The next support levels are PHP 6.50/PHP 6.00.

PSEi TECHNICAL ANALYSIS

Resistance: 200-day MA (~6,600)

Support: 100-day MA (~6,350)

The PSEi has been up for six straight weeks and is now hovering near its 200-day moving average price for the first time since April 2022. The technical indicator Moving Average Convergence/Divergence (MACD) confirms the bullish momentum. Continue to observe the market, as it is now trading at overbought levels with the RSI at 70. Those looking to enter should wait for the likely pullback.

TRADING PLAN

Look to accumulate on the pullback around 6,450-6,500. Set stop limit orders below 6,300.

KEY DATA RELEASES

Tuesday, November 29, 2022
– Philippine bank lending year-on-year for October 2022 (previous: 12.9%)

Wednesday, November 30, 2022
– US GDP annualized quarter-on-quarter for 3Q 2022 (consensus estimate: 2.8%, actual for 2Q 2022: 2.6%)

Thursday, December 1, 2022
– US Personal Income and Spending for October 2022 (consensus estimate: 0.4%/8%; previous: 0.4%/0.6%)
– US Initial Jobless Claims as of November 26, 2022 (consensus estimate: 231,000, previous: 240,000)
– US S&P Global Manufacturing PMI for November 2022 (consensus estimate: 47.6, previous: 47.6)
– Philippine S&P Global Manufacturing PMI for November 2022 (consensus estimate: 47.6)

Friday, December 2, 2022
– US Change in Nonfarm Payrolls for November 2022 (consensus estimate: 200,000, previous: 261,000)

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Equities 4 MIN READ

Stock Market Weekly: Market expected to resume rally

With the central bank saying that it will adjust foreign exchange policies to restrain the peso’s volatility, we may see a rally this week.

November 21, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) ended 2.40% higher week-on-week at 6,437.38 (+150.61 points). The local bourse sustained its upward momentum early in the week following strong corporate earnings results, the surprise in GDP growth data, and the rise in September 2022 remittances sent home by overseas Filipinos.

The market took a breather mid-week ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, but soon extended its gains until Friday on foreign net inflows and the peso’s appreciation following the BSP’s widely expected 75-basis-point rate hike.

Top index performers were Converge (CNVRG) (+20.0%), AC Energy (ACEN) (+10.8%), and Ayala Land Inc. (ALI) (+10.4%), while index laggards were Globe Telecom (GLO) (-3.7%), BDO Unibank Inc. (BDO) (-3.4%), and SM Prime Holdings Inc. (SMPH) (-2.9%). The index breadth was positive, with 22 gainers versus 8 losers. The average daily turnover value was PHP 5.3 billion. Foreigners were net buyers of PHP 1.7 billion.

WHAT TO EXPECT THIS WEEK

We expect the market to continue last week’s rally on the BSP’s pronouncement to adjust foreign-exchange policies to curb speculation and further temper the volatility of the peso. However, gains may be capped by recent hawkish comments by the US Federal Reserve.

STOCK PICKS FOR THE WEEK

D&L Industries, Inc. (DNL) — BUY

DNL posted an 18% year-on-year (y-o-y) increase in 3Q 2022 earnings to PHP 910 million, bringing the 9-month 2022 net income to PHP 2.5 billion (+17% y-o-y), as DNL’s diversified businesses, the essential nature of the products it manufactures, and its ability to adjust its selling prices mitigated the impact of macroeconomic headwinds (volatile commodity prices, higher interest rates, and a weak peso) during the period.

The management is optimistic that full year 2022 earnings will exceed the record net income booked in 2018 (PHP 3.2 billion) given the near-term catalysts such as the anticipated holiday-induced spending and the lifting of mask requirements indoors. Moving forward, the completion of DNL’s Batangas plant in January 2023 is expected to support the company’s growing export business in the food and oleochemicals segment.

Accumulating DNL once it breaks above PHP 7.50 is advisable. Those more conservative can accumulate once DNL breaks above PHP 8.00. Set stop limit orders below 5%-7% of the average cost. Take profit at around PHP 8.80.

Shakey’s Pizza Ventures, Inc. (PIZZA) — BUY ON BREAKOUT

PIZZA posted a net income of PHP 454 million for the first nine months of 2022 (9 months of 2021: net loss of PHP 35 million), with 3Q 2022 net income standing at PHP 250 million (3Q 2021: net loss of PHP 49 million). PIZZA attributed its performance to the resurgence of dine-in sales owing to easing mobility restrictions, initiatives to expand off-premises takeout and delivery services, and the expansion of its store network.

Despite the elevated cost environment and its impact on consumer sentiment, PIZZA is optimistic that the holiday festivities will enable its top line to exceed pre-pandemic levels this year. It expects 2022 net income to end near 2019 levels (PHP 865 million). As for price action, the 200-day moving average (MA) has acted as a key resistance level since March 2022. A break above the 200-day MA will likely result in the counter retesting the PHP 8.10 level. Accumulating PIZZA once it breaks above PHP 8.10 is advisable. Set stop limit orders below PHP 7.65. Take profit at around PHP 9.00.

Vista Land & Lifescapes, Inc. (VLL) — SELL ON BREAKDOWN

The stock is currently in a downtrend, with share prices trading below its major moving averages (50-day, 100-day, and 200-day). On November 11, 2022, MSCI announced that it had removed VLL from the MSCI Philippines Small Cap Index, effective on the close of November 30, 2022.

We expect the stock to see foreign outflows as tracker funds that follow the MSCI index realign their portfolios in accordance with the recent adjustments. As for price action, VLL is trading below its major MAs, and other technical indicators show that the bearish momentum is still ongoing. Lighten your position once VLL breaks below PHP 1.50. The next support levels are at PHP 1.00 and PHP 0.67.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600

Support: ~6,325 (100-day moving average price)

The PSEi rallied anew and is now trading above the 100-day MA. The Moving Average Convergence Divergence (MACD) confirms the bullish momentum, with the MACD line trading above both the signal and zero lines. Continue to observe the market, as it is trading near overbought levels. Should the market sustain trading above the 100-day MA, the next resistance is 6,600.

TRADING PLAN

– Accumulate if the market stays above the 100-day MA this week.

KEY DATA RELEASES

Wednesday, November 23, 2022
– US preliminary manufacturing Purchasing Mangers’ Index (PMI) (consensus estimate is 50.0, while the actual for October 2022 is 50.4)

Friday, November 25, 2022
– Philippine Budget Balance for October 2022 (Actual for September 2022: -PHP 179 billion)

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Equities 2 MIN READ

Banks are in: Three reasons to be optimistic with the financial sector

Despite elevated inflation rates, the perils of escalating conflict arising from the Russia-Ukraine war, and fears of economic recession globally, the country’s banks are doing well.

November 17, 2022By Anthony O. Alcantara
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Recently, banks have reported huge gains in their profits for the first nine months of the year. According to the Bangko Sentral ng Pilipinas, the Philippine banking system’s net earnings have soared by 44% as of September.

And where do banks get these profits? For the most part, from trading gains and interest income.

Trading income—which comes from trading fixed income and currencies, among others—has more than doubled to PHP 17.09 billion from PHP 6.16 billion or by 178%. Net interest income, which refers to interest income minus expenses related to interest-bearing liabilities, has increased by 10% from PHP 491.88 billion to PHP 542.50 billion.

In addition, bad loans have also declined to its lowest level in 20 months.

Here’s why we are optimistic about the finance sector:

  1. Wider economic reopening. This means more people buying things such as gadgets, clothes, and food, and paying for services such as haircuts, massages, hotels. People and businesses are encouraged to take on loans.
  2. Higher income because of higher policy rates. When the central bank increases interest rates, banks’ margins initially expand.
  3. Surge in digital transactions. We believe people will never go back to traditional banking after having experienced the convenience and efficiency of digital transactions. For banks, this means reducing the cost to serve through digitalization.

To read more about what makes the finance sector attractive, you can read our report here.

If you are a client and not yet enrolled in Wealth Insights, you may seek assistance from your investment specialist or relationship manager.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.

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Equities 5 MIN READ

Stock Market Weekly: Market to absorb expected 75-bp rate hike

We can expect sideways trading with a slight downward bias this week as investors await more earnings and data releases as well as the central bank’s policy rate decision.

November 14, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose by 1.64% week-on-week to close at 6,286.77 (+101.24 points), lifted by net foreign buying, extending its streak to six trading days. During the week, investors factored in the slew of major local earnings and data releases as well as the results of the MSCI Semi-Annual Index Review.

The benchmark index initially rose on Monday, led by SM Prime Holdings, Inc. (SMPH) and International Container Terminal Services, Inc. (ICT) following their respective 3rd quarter 2022 earnings results but subsequently fell on Tuesday and Wednesday from investors’ profit-taking. On Thursday, the index fell despite the surprising 7.6% year-on-year 3rd quarter 2022 gross domestic product (GDP) growth which was much higher than the 6.0% consensus. On Friday, the PSEi rose 1.93%, lifting the local bourse amid the lower-than-expected October US inflation print which fueled speculation that the US Fed could begin to moderate its aggressive fight against inflation moving forward.

Top index performers were Puregold Price Club Inc. (PGOLD) (+9.1%), SM Prime Holdings Inc. (SMPH) (+8.4%), and Ayala Corp. (AC) (+7.8%), while index laggards were Semirara Mining and Power Corp. (SCC) (-10.1%), Metro Pacific Investments (MPI) (-7.4%), and PLDT (TEL) (-5.2%). The index breadth was positive with 19 gainers versus 11 losers. The average daily turnover value was PHP 4.6 billion. Foreigners were net buyers by PHP 2.1 billion.

WHAT TO EXPECT THIS WEEK

We expect the PSEi to trade sideways with a slight downward bias as investors await more earnings and key data releases, including the cash remittances report and the highly anticipated policy rate decision of the BSP, which is expected to match the US Fed’s rate hike of 75 basis points (bps). On the international front, investors look ahead to the G-20 Summit and continue to monitor key developments in crypto.

STOCK PICKS FOR THE WEEK

Aboitiz Power Corp. (AP) — BUY

AP’s core net income came in at PHP 18.3bn (+17% year-on-year) — ahead of consensus estimates. AP continues to expect earnings to remain strong for the rest of the year as the power demand and supply situation in the country is still tight, which could result in elevated wholesale electricity spot market (WESM) prices. AP also reiterated that the fuel pass through provision in its power contracts as well as coal hedging contracts should be able to mitigate the impact of rising coal prices. As for the price action, we believe that a break above PHP 33.20 will result in the stock retesting PHP 36.50. On the other hand, a break below PHP 27.50/PHP 27.00 will likely result in the counter slipping further towards PHP 28.50. Accumulating AP once it breaks above PHP 33.20 is advisable. Set stop limit orders below PHP 31.00 and take profits at around PHP 36.50.

Bloomberry Resorts Corp. (BLOOM) — BUY

BLOOM reported 3rd quarter 2022 net income of PHP 1.5 billion (3rd quarter 2021: net loss of PHP 1.1 billion), bringing earnings for the first nine months of 2022 to PHP 4.0 billion (1st half 2021: net loss of PHP 3.0 billion) – above consensus expectations – lifted by the VIP segment as quarantine measures continue to ease.

BLOOM’s earnings performance is expected to sustain its strong recovery as it continues to benefit from the policy that allows vaccinated foreigners to enter the Philippines as well as the reopening of borders across Asia.

Similarly, the Philippine government’s stance of not implementing lockdowns moving forward allows BLOOM to resume their activities to full capacity, which will further improve the company’s mass table and electronic gaming machine (EGM) volumes. Accumulating BLOOM once it breaks above PHP 7.20 is advisable. Set stop limit orders below PHP 6.80. Take profit at around PHP 8.00 to PHP 8.10.

PLDT, Inc. (TEL) — BUY

TEL reported a net income of PHP 27.6 billion for the first nine months of 2022 (+45% year-on-year). Excluding the impact of asset sales and Voyager Innovations, TEL’s core net income

reached PHP 25.4 billion (+10% year-on-year) – well ahead of consensus estimates. On consolidated service revenues, TEL logged PHP 141.9 billion (+4.5% year-on-year), driven by data and broadband, which grew by 9% to PHP 113.2 billion, contributing 80%.

Despite rising competition in both the mobile and fixed-line segments, we believe that TEL can mitigate the impact of the said risk to its earnings due to: (i) It is best positioned to capture the long-term structural fixed broadband opportunity with its ~48% market share, owing to its extensive nationwide fiber footprint (>839,000 km), international network capacity of 60 terabytes (Tbps), and swift rollout of over 6.72 million fiber ports as of June 2022; (ii) it is less reliant on mobile service revenues, which account for only 41% of the market as of June 2022. It has less to lose versus Globe Telecom (GLO); (iii) its increasing corporate data and data center revenue, with a total estimated capacity of 172 MW (rack capacity: estimated >13,600) by 2023, thereby mitigating potential pressure on earnings amid increased competition in its core telco operations; and (iv) it has a better balance sheet position after the tower sale, which enables TEL to pay down debt, and at the same time fund investment requirements to stave off competition.

Accumulating once TEL breaks above PHP 1,643.00 is advisable. Set stop loss orders below PHP 1,560.00. Take profit at around PHP 1,800.00 to PHP 1,900.00 (PHP 1,930 for long-term investors).

PSEI TECHNICAL ANALYSIS

Resistance: 6,300 / 6,400

Support: 5,700 / 6,000

The PSEi resumed its rally last week, briefly trading above the 100-day moving average (MA) price (~6,318). However, it failed to stay above the said level. This further validates the 100-day MA as the market’s resistance, which the PSEi must break to resume the ongoing rally.

TRADING PLAN

Those looking to accumulate are suggested to buy once the market breaks back above the 100-day MA.

KEY DATA RELEASES

Monday, November 14, 2022
– Corporate Earnings: Globe Telecom (GLO), GT Capital (GTCAP), San Miguel Corporation (SMC)

Tuesday, November 15, 2022
– Corporate Earnings: Ayala Corporation (AC)

Wednesday, November 16, 2022
– Corporate Earnings: Alliance Global Group Inc. (AGI)

Thursday, November 17, 2022
– BSP interest rate decision; consensus estimate is a hike of 75 bps
– Overseas Filipino (OF) cash remittances year-on-year for September 2022 (consensus estimate is 3.5%; actual for August 2022: 4.3%)

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Equities 4 MIN READ

Stock Market Weekly: Downward bias expected amid sideways trading

Investors are waiting for several catalysts before making their moves this week—more earnings results, Philippines’ GDP and unemployment numbers, and the US inflation print.

November 7, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) ended 0.52% higher week-on-week to 6,185.53 (+32.10 points). The market started the shortened trading week in the green but fell soon after expectations of a US Fed pivot were met with a 75-basis-point hike.

Ahead of the US Fed’s announcement, the Bangko Sentral ng Pilipinas (BSP) has indicated a hike in policy rates to match the Fed in the next policy meeting on November 17, 2022. The Fed’s interest rate hike was followed by the news of higher-than-expected October 2022 inflation print in the Philippines at 7.7% year-on-year (September 2022: 6.9%, October 2021: 4.0%, consensus estimate: 7.2).

Despite the Fed’s interest rate hike and higher local inflation rate, the local bourse rose on last-minute bargain hunting due to outstanding third quarter earnings for most PSEi constituents and the positive sentiment on China’s reopening. Meanwhile, the peso marginally gained against the dollar, closing at PHP 58.55 last Friday versus last week’s PHP 58.80.

Top index performers were LT Group Inc. (LTG) (+5.3%), Universal Robina Corporation (URC) (+3.8%), and San Miguel Corporation (SMC) (+2.9%). Index laggards were Ayala Corporation (AC) (-6.2%), Converge (CNVRG) (-2.4%), and Semirara Mining and Power Corporation (SCC) (-2.3%). The index breadth was positive with 18 gainers versus 12 losers. The average daily turnover value was PHP 4.5 billion. Foreigners were net buyers by PHP 771.9 million.

WHAT TO EXPECT THIS WEEK

We expect the PSEi to trade sideways with a downward bias as investors await more earnings results and market catalysts, including the Philippines’ Gross Domestic Product (GDP) and unemployment rate releases. On the international front, investors will be closely monitoring the upcoming US Consumer Price Index (CPI) report on Thursday, which is projected to come in slightly lower at 8.0% and is considered a key factor in determining the central bank’s next course of action.

STOCK PICKS FOR THE WEEK

Manila Electric Company (MER) — BUY

MER recorded a 9-month 2022 consolidated core net income of PHP 19.6 billion (+9% y-o-y)—ahead of consensus estimates—on the back of sustained growth in energy sales and higher earnings of the power generation segment in the Philippines and in Singapore.

MER’s energy sales for the period is in line with its target sales volume growth of within 5 to 6% this year. The outperformance of the commercial sector is also consistent with our view given that the retail, restaurants, education, and public transport segments are expected to pick up. As for the refund ordered by the Energy Regulatory Commission, the management said it did not result in a significant decline in the company’s bottom line this year as MER had fully provisioned for the bulk of the amount to be refunded. Accumulating once MER breaks above PHP 320.00 is advisable. Set stop limit orders below PHP 300.00. Take profit at around PHP 360.00/ PHP 380.00.

Cemex Holdings Philippines, Inc. (CHP) — LIGHTEN POSITION

CHP reported a net loss of PHP 552 million (9M21: net income of PHP 94 million) in 3Q 2022 amid foreign exchange losses. Excluding this, 3Q 2022 core net income reached PHP 262 million (-39.8% y-o-y) due to weak private construction demand and higher input costs. This brought 9M 2022 core net income to PHP 737 million (44% y-o-y), below consensus estimates. In the next quarter, we expect CHP’s margins to remain under pressure amid rising power and fuel input costs. CHP’s volume growth should remain muted as construction activity will be

affected by the inclement weather. Lightening positions once CHP breaks below PHP 0.62 is advisable. The next support level is at PHP 0.58.

AgriNurture, Inc. (ANI) — BUY ON BREAKOUT

ANI formed a pennant, a short-term bullish continuation pattern. The price seems to be resuming a sharp rally after taking a brief pause. The measured target price is PHP 8.60 – PHP 8.90, according to Technical Insight, our automated chart pattern recognition program. Accumulating once ANI breaks above PHP 7.05 is advisable. Set stop loss orders below PHP 6.50. Take profit at around PHP 8.00 to PHP 8.60.

PSEI TECHNICAL ANALYSIS

Resistance: 6,300 / 6,400

Support: 5,700 / 6,000

The PSEi opened strong at the early part of the trading week but was not able to sustain the rally and has since stayed below the current 6,250 resistance level. Once the PSEi breaks above 6,200/6,300, we can expect the market to test 6,800 next.

TRADING PLAN

Those looking to accumulate are suggested to buy once the market breaks back up above 6,200/6,300.

KEY DATA RELEASES

Monday, November 7, 2022
– Corporate Earnings: International Container Terminal Services Inc. (ICT)

Tuesday, November 8, 2022
– Philippine unemployment rate for September 2022 (August: 5.3%)
– Corporate Earnings: Ayala Land Inc. (ALI), AC Energy (ACEN)

Wednesday, November 9, 2022
– Corporate Earnings: Monde Nissin Corporation (MONDE), Metro Pacific Investments Corp. (MPI), Robinsons Land Corporation (RLC), SM Investments Corporation (SM)

Thursday, November 10, 2022
– Philippine GDP year-on-year for 3Q 2022 (consensus estimate: 6.0%; 2Q 2022: 7.4%)
– Corporate Earnings: Converge (CNVRG), JG Summit (JGS), San Miguel Corporation (SMC)

Friday, November 11, 2022
– US Consumer Price Index (CPI) year-on-year for October 2022 on Friday, November 10, 2022 (consensus estimate: 8.0%; September 2022: 8.2%)
– Corporate Earnings: LT Group Inc. (LTG)

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Equities 5 MIN READ

Stock Market Weekly: Market may rebound

The US Federal Reserve hinted that it may adopt a less aggressive policy stance in December. That, along with the BSP’s vow to keep the peso below PHP 60 per dollar and the release of corporate earnings, may lead to a rebound this week.

October 24, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose by 1.33% week-on-week to close at 5,983.56 (up 78.81 points). The market traded in green until midweek as it tracked higher US and Asian markets. Investors also cheered President Ferdinand Marcos Jr.’s statement that the government is ready to defend the peso in the coming months and that inflation is still his administration’s priority. However, the market witnessed heavy sell flows beginning Thursday as multi-year high US Treasury yields weighed on sentiment and trimmed down some of the gains in the previous days.

Top index performers were Ayala Land Inc. (ALI) +10.4%, Alliance Global Group Inc. (AGI) +9.3%, and Ayala Corp. (AC) +8.4%. Index laggards were Robinsons Land Corp. (RLC) -9.5%, Aboitiz Equity Ventures Inc. (AEV) -3.6%, and Monde Nissin (MONDE) -3.5%. The index breadth was positive with 18 gainers versus 12 losers. The average daily turnover value was PHP 4.1 billion. Foreigners were net buyers by PHP 71 million.

WHAT TO EXPECT THIS WEEK

We expect the market to recover some of its losses amid signals from Fed officials that the US central bank may be poised to adopt a less aggressive policy stance in December 2022, and Finance Secretary Benjamin Diokno’s vow to keep the peso from breaching PHP 60 per dollar. Investors will also be closely monitoring the beginning of third quarter 2022 corporate earnings results for signs of sustained recovery.

STOCK PICKS FOR THE WEEK

Wilcon Depot, Inc. (WLCON) — BUY

WLCON’s topline appears to be stronger in the third quarter of 2022 due to: (i) home improvement purchases are planned and frontloaded in anticipation of potential price increases, (ii) availability of supply allowing the company to capture customers from competitors, (iii) reopening is still in play for the segment. Margins are also set to expand as WLCON stands to benefit from the margin windfall, thanks to its high inventory cover as previously purchased items (sourced at lower cost) are sold at higher selling prices. Downtrading behavior also benefits the company as customers shift toward in-house brands which have higher margins. Accumulating WLCON at or near PHP 26.95 is advisable. Set cut loss below PHP 25.50. Take profit at around PHP 32.00/PHP 33.50.

Semirara Mining and Power Corp. (SCC) — TAKE PROFIT

The Board of Directors of Semirara Mining and Power Corp. (SCC) approved the declaration of PHP 3.50 per outstanding common share in special cash dividends, double last year’s PHP 1.75 per share, for shareholders on record as of October 31, 2022. The ex-dividend date will be on October 26, 2022, while payment will be made on November 15, 2022.

SCC’s dividend payout this year translates to a cash dividend yield of 12.34% based on its October 14, 2022, closing price of PHP 40.50. We expect SCC’s share price to fall to as much as its share price prior to the disclosure of the special dividends (PHP 39.75 – PHP 40.50), on or shortly after the dividend ex-date, October 26, 2022.

The possible pullback on the dividend ex-date provides short-term traders and long–term investors an opportunity to take profit and look for companies with more value and higher upside. As for company guidance, SCC has a less optimistic view of the second half of 2022 in view of market volatility and unfavorable weather conditions. Coal shipments are also expected to normalize as China shifts to cheaper Russian coal.

Taking profit at the ex-dividend date (October 26, 2022) is advisable. The next support levels are PHP 36.00/ PHP 32.60. Those who are more aggressive can wait for a break below the 100-day moving average (MA) before taking profits.

Araneta Properties, Inc. (ARA) — SELL ON BREAKDOWN

Araneta Properties, Inc. (ARA) formed another bearish pattern, a top triangle-top wedge, showing signs of reversal as it has broken downward after a period of uncertainty or consolidation. The measured target price after ARA broke down is from PHP 0.65 to PHP 0.75, according to Technical Insight, our automated chart pattern recognition program. Lightening positions at current levels is advisable. Next support levels are at PHP 1.10/ PHP 1.00.

PSEI TECHNICAL ANALYSIS

Resistance: 6,000

Support: 5,400 / 5,700

The PSEi surged in the early part of last week. The rally, however, quickly faded and the market closed the week back below 6,000, further strengthening/validating the resistance level. Until the PSEi has sustained trading above the 6,000 level, expect the next set of rallies to be short-lived.

TRADING PLAN

Continue setting stop limit orders. The next support level is at 5,700.

KEY DATA RELEASES

Monday, October 24, 2022
– US S&P Preliminary Global Manufacturing Purchasing Mangers’ Index (PMI) for October 2022 (consensus estimate is 51.0, while the actual for September 2022 is 52.0)

Tuesday, October 25, 2022
– Corporate Earnings: Wilcon Depot Inc. (WLCON)

Wednesday, October 26, 2022
– Philippine Budget Balance for September 2022 (previously it was -PHP 72.0 billion)

Thursday, October 27, 2022
– US GDP annualized quarter-on-quarter for 3Q2022 (consensus estimate is 2.3%, while actual is -0.6% previously)
– US Initial Jobless Claims for October 2022 (previous: 214,000)

Friday, October 28, 2022
– Philippine Bank Lending year-on-year for September 2022 (previous: 11.8%)
– Corporate Earnings: Meralco (MER)

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Equities 5 MIN READ

Stock Market Weekly: Sideways trading with downward bias

Investors are expecting possible market catalysts this week, including the local fuel price increases, overseas Filipino remittances data, and corporate earnings releases in the US.

October 17, 2022By First Metro Securities Research
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The PSEi is expected to trade sideways with a slight downward bias as investors await market catalysts including the Aug 2022 overseas Filipino remittances report as well as China’s 3Q 2022 Gross Domestic Product (GDP) release. Local fuel prices are also expected to increase by about PHP 2.70 to PHP 3.00 per liter of diesel, PHP 0.80 to PHP 1.10 per liter of gasoline, and PHP 2.70 to PHP 3.00 per liter of kerosene. At the same time, further volatility can be expected as investors take their cue from the US 2Q 2022 corporate earnings releases this week.

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) closed 0.46 percent lower week-on-week to 5,904.75 (down 27.44 points) on below-average volumes and persistent fears of a global recession. After declining 1.68 percent on Monday, the benchmark index managed to post marginal gains from Tuesday to Friday despite the widening of the country’s trade deficit and the hotter-than-expected US inflation print. Investors also weighed BSP Governor Felipe Medalla’s comment about a possible rate hike of 50 basis points (bps) to 75 bps in their next meeting.

Top index performers were BDO Unibank (BDO) up 6.8 percent, Robinsons Land Corporation (RLC) up 5.0 percent, and Pure Gold Price Club Inc. (PGOLD) up 4.1 percent. Index laggards were Monde Nissin (MONDE) down 8.2 percent, JG Summit Holdings Inc. (JGS) down 6.5 percent), and PLDT (TEL) down 5.3 percent. The index breadth was negative, with 12 gainers versus 18 losers. The average daily turnover value was PHP 3.3 billion. Foreigners were net sellers by PHP 310.9 million.

WHAT TO EXPECT THIS WEEK

The PSEi is expected to trade sideways with a slight downward bias as investors await market catalysts including the Aug 2022 overseas Filipino remittances report as well as China’s 3Q 2022 Gross Domestic Product (GDP) release. Local fuel prices are also expected to increase by about PHP 2.70 to PHP 3.00 per liter of diesel, PHP 0.80 to PHP 1.10 per liter of gasoline, and PHP 2.70 to PHP 3.00 per liter of kerosene. At the same time, further volatility can be expected as investors take their cue from the US 2Q 2022 corporate earnings releases this week.

STOCK PICKS FOR THE WEEK

DMCI Holdings, Inc. (DMC) — BUY

Year-to-date, DMC’s share price is up by as much as 26 percent and is currently holding its uptrend despite challenging market conditions. Regarding fundamentals, D.M. Consunji Inc. (DMCI), the construction and infrastructure arm of DMC, partnered with Japanese tunnel contractor Nishimatsu Construction Co. Ltd., and bagged its first subway project valued at PHP 21.21 billion. DMCI’s first subway project should boost its order book and further improve its contribution to DMC’s earnings from its current 6-percent share. As of 1H22, DMCI had an order book of PHP 43.7 billion, largely comprised by its joint venture projects and has historically contributed 8 percent to DMC’s earnings pre-pandemic. Accumulating DMC at the nearest support area at PHP 9.6/PHP 9.7 is advisable. Set cut loss below PHP 9.2 and begin taking profits at PHP 11.0/PHP 11.5.

Eagle Cement Corp. (EAGLE) — SELL ON BREAKDOWN

San Miguel Corp. (SMC) announced the approval of its board of directors of the acquisition of 88.5-percent interest in EAGLE. The approved acquisition price for the share purchase agreement is at PHP 22.02/share. SMC will undertake a mandatory tender offer for the minority-owned shares of EAGLE once the Philippine Competition Commission approves the acquisition.

It is worth taking note that if more than 90 percent of EAGLE is tendered then a possible delisting may occur. Once the tender offer is completed and the SMC group acquires more than 90 percent of the total outstanding capital stock of EAGLE, the latter said that it will seek the approval of its shareholders to apply for the voluntary delisting of its shares.

Current holders may begin taking profits to avoid possible volatility ahead of the likely tender offer. We advise to begin taking profits. The next support levels are at PHP 18.50/PHP 16.00. Those more aggressive can take profits on the break below PHP 18.50.

Cemex Holdings Philippines, Inc. (CHP) — SELL ON BREAKDOWN

CHP formed a top triangle-top wedge in its daily chart, an intermediate-term bearish continuation pattern. The measured price target after CHP broke down is from PHP 0.45 to PHP 0.50 according to Technical Insight, our automated chart pattern recognition program. Lightening positions once CHP breaks below P0.62 is advisable. The next support level is at PHP 0.58.

PSEI TECHNICAL ANALYSIS

Resistance: 6,000

Support: 5,400 / 5,700

The market dropped last week, failing to sustain its rebound from the previous week. This makes the probability of the downtrend to resume unless the PSEi breaks and stays above 6,000. A break below 5,700 would likely result in the retest of 5,400.

TRADING PLAN

Continue setting stop limit orders. The next support level is at 5,700.

KEY DATA RELEASES

Monday, October 17, 2022
– Overseas Filipino cash remittances Year-on-Year for August 2022 (consensus estimate is at 3.0 percent; actual for July 2022 is 2.3 percent)

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Equities 2 MIN READ

Stock Market Weekly: Trading this week with a downward bias

With the oil price hikes and the effects of the agricultural damage from Super Typhoon Karding, trading will likely have a downward bias this week. The grim mood in the US may also weigh on the local bourse.

October 11, 2022By First Metro Securities Research
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WHAT HAPPENED LAST WEEK

After a volatile week, the Philippine Stock Exchange index (PSEi) rose by 3.33% week-on-week to close at 5,932.9 (up 191.83 points). The market traded higher at the beginning of the week as investors picked up bargains amid oversold conditions.

The benchmark index sustained the relief rally on Tuesday due to improved manufacturing activity while ending flat on Wednesday amid a higher inflation print in September. After the three-day climb, the market pulled back on profit-taking and the OPEC+ decision to cut oil output by up to 2 million barrels per day ahead of winter season, fanning inflationary fears and a recession.

The local bourse ended the week in the red ahead of the jobs report by the US, mirroring weaker Asian peers.

WHAT TO EXPECT THIS WEEK

This week, we expect investors to trade with a downward bias given the following: 1) the anticipated oil price hike by as much as PHP 5.80 – PHP 6.20/liter on diesel and PHP 1.00 – PHP 1.40/liter on gasoline, and 2) recession concerns amid a continued surge in inflation as food prices are expected to remain elevated due to the agricultural damage from Super Typhoon Karding (Noru).

On the international front, the stronger-than-expected September labor report in the US bolstered the potential for another aggressive interest rate hike to address inflation, exacerbating fears of recession next year.

In addition, investors will be closely monitoring the upcoming September 2022 US Consumer Price Index (CPI), which is expected to decline slightly below August 2022’s 8.3%.

STOCK PICKS FOR THE WEEK

* Ayala Corp. (AC) — BUY

* Wilcon Depot, Inc. (WLCON) — BUY

* Marcventures Holdings, Inc. (MARC) — SELL ON BREAKDOWN

PSEi TECHNICAL ANALYSIS

Resistance: 5,700

Support: 5,400

After dropping for four straight weeks, the PSEi has finally ended in the green. However, the market failed to stay above 6,000, indicating that the previous support is now the resistance. If the PSEi fails to break above 6,000 this week, the market will likely resume its downtrend and will be poised to retest 5,700.

Continue setting stop limit orders especially if the PSEi fails to break above 6,000 this week. The next support level is at 5,700.

KEY DATA RELEASES

1) Philippine exports year-on-year for August 22 on October 11, 2022, Tuesday (consensus estimate is 4.6%; actual for July 2022 is -4.2%)

2) Philippine imports year-on-year for August 2022 on October 11, 2022, Tuesday (consensus estimate is 20.8%; actual for July 2022 is 21.5%)

3) Overseas Filipino (OF) cash remittances year-on-year for August 2022 on October 14, 2022, Friday (consensus estimate is 3.2%; actual for July 2022 is 2.3%)

4) US CPI year-on-year for September 2022 on October 14, 2022, Friday (consensus estimate is 8.1%; actual for August 2022 is 8.3%)

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Equities 4 MIN READ

Stock Market Weekly: Expecting another 50-bp interest rate hike

Investors will be watching where the central bank will lead our benchmark interest rates this week. The opposing effects of fare hikes and oil price rollbacks deserve some attention, too.

September 19, 2022By First MetroSecurities Research
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WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange (PSEi) fell by 0.87% week-on-week to close at 6,548.77 (down 57.23 points). The market initially rose on Monday as investors anticipated a relatively slower August 2022 US inflation print at 8.1% versus July 2022’s 8.5% year-on-year. However, sentiment was quick to turn, and the benchmark index posted losses for the rest of the week due to some profit taking and as the coupon rate rose to 6.75% for the Bureau of the Treasury’s auction of PHP 35 billion worth of 10-year bonds. Investors also considered the higher-than-expected August 2022 US inflation print at 8.3% and the further weakening of the peso against the greenback, closing at another record-low at PHP 57.43 on Friday.

Top index performers were PLDT (TEL) which was up 5.8%, Globe Telecom (GLO) up 3.0%, and Ayala Land Inc. (ALI) up 2.7%. Index laggards were Monde Nissin Corporation (MONDE) down 13.8%, Puregold Price Club Inc. (PGOLD) down 6.8%, and Universal Robina Corporation (URC) down 5.6%. The index breadth was negative with 12 gainers versus 18 losers. The average daily turnover value was PHP 6.8 billion. Foreigners were net buyers by PHP 1.1 billion.

WHAT TO EXPECT THIS WEEK

We expect the PSEi to trade sideways as investors will be closely monitoring the BSP US Fed’s interest rate decisions on Thursday. The BSP is expected to hike rates by 50 basis points (bps) while the US Fed is expected to hike by 75 bps. Moreover, investors will digest the opposing impact of fare hikes and oil price rollbacks on inflation trends. On one hand, the Land Transportation Franchising and Regulatory Board (LTFRB) approved the provisional fare increase across public transportation for jeepneys, buses, taxis, and transport network vehicle services (TNVS). On the other, fuel price rollbacks of about PHP 4.0 – PHP 4.3 per liter of diesel, PHP 0.0 – PHP 0.3 per liter of gasoline, and PHP 4.4 – PHP 4.6 per liter of kerosene are also expted this week.

STOCK PICKS FOR THE WEEK

Ayala Land, Inc. (ALI) — BUY

ALI has managed to sustain its rebound and is now consolidating within the PHP 27.70 to PHP 30.00 range. We think that a break above PHP 30.00 will result in the stock retesting PHP 32.00/PHP 34.00. On the other hand, a break below PHP 27.50/ PHP 27.00 will likely result in the price slipping further towards PHP 26.00/PHP 25.00. While trading the current range is a good strategy, the volatile market environment suggests accumulating the stock once ALI breaks above its resistance level, which is the optimal way to trade the stock. Accumulating once ALI breaks above PHP 30.00 advisable. Set stop limit orders below PHP 28.00 and take profit at around PHP 34.00.

Max’s Group, Inc. (MAXS) — BUY

MAXS formed a pennant, a short-term bullish continuation pattern driven by better-than-expected second quarter 2022 and first half 2022 earnings. The price seems to be resuming a sharp rally after taking a brief pause. The measured price target after MAXS broke out of its bullish pennant is PHP 6.60 to PHP 6.80 according to Technical Insight, our automated chart pattern recognition program. As for fundamentals, earnings performance will likely be sustained as the economy continues to reopen and as spending picks up in the fourth quarter of 2022 during the holiday season. Accumulating once MAXS breaks above PHP 5.82 (200-day moving average price) is advisable. Set stop loss orders below PHP 5.45. Take profit at around PHP 6.60 to PHP 6.80.

San Miguel Food and Beverages, Inc. (FB) — BUY

FB’s share price was sold down by 8.9% last Friday amid the effectivity of the FTSE rebalancing, wherein the company was deleted from the large caps index. The recent sell-off resulted in FB trading near its support/recent low of PHP 42.50. Traders can take advantage of the stock trading near its support given the favorable risk to reward trade. Short-term traders can accumulate at current prices and set cut loss below 5% to 7% of average cost.

PSEi TECHNICAL ANALYSIS

Resistance: 6,900/7,200

Support: 6,400/100-day moving average (now at 6,528.13)

It was the same story last week as the PSEi once again failed to sustain its positive start and sellers quickly came in for the rest of the week. We would like to reiterate that it is crucial for the market to stay above its 100-day moving average price for the ongoing bullish reversal to resume. It is important to take note that the bullish momentum is slowing down – the Moving Average Convergence Divergence (MACD) line is below the signal line. Setting trail stops at this technical structure is recommended.

TRADING PLAN

Slowly accumulate at current levels until the 100-day MA (currently at 6,528). Set tight stops below 6,400.

KEY DATA RELEASES

Thursday, September 22, 2022
– BSP interest rate decision (estimate is 50 bps)
– US FOMC interest rate decision (estimate is 75 bps)

Friday, September 23, 2022
– US S&P global preliminary manufacturing PMI (estimate is 51.3, while August 2022 figure is 51.5)

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