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)

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.

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%)

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)

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)

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)

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%)

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)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) fell by 1.29% week-on-week to close at 6,606.00 (down 86.65 points). The market started the week in red as the US dollar appreciated vis-a-vis the Philippine peso and thin trade volumes were observed due to the US market remaining closed for Labor Day.

The local benchmark index posted gains on Tuesday as investors cheered the easing of the Consumer Price Index (CPI) for August 2022 at 6.3% (consensus estimate is 6.4%, while actual for July 2022 was 6.4%). The Philippine peso broke the PHP 57.0 per US dollar level midweek, which fueled inflation worries and prompted the Bangko Sentral ng Pilipinas (BSP) to deliver hawkish statements regarding the possibility of three 25-basis-point rate hikes for the rest of the year.

Losses were pared beginning Thursday amid the spillover of positive sentiment from Wall Street’s rebound and as the US dollar softened vs emerging market (EM) Asian currencies by the end of the week. Investors factored in the country’s unemployment rate falling to 5.2% in July 2022 (actual in June 2022 was 6%) and the country’s widening trade deficit for July 2022 to USD 5.93 billion (USD 5.87 billion in June 2022).

Top index performers were Universal Robina Corporation (URC) up 2.5%, Metro Pacific Investments Corporation (MPI) up 1.6%, and Metropolitan Bank & Trust Company (MBT) up 1.2%. Index laggards were AC Energy (ACEN) down 7.9%), JG Summit Holdings Inc. (JGS) down 7.5%), and Puregold Price Club Inc. (PGOLD) down 5.6%.

The index breadth was negative, with 9 gainers versus 20 losers. The average daily turnover value was PHP 4.4 billion. Foreigners were net buyers by PHP 1.2 billion.

WHAT TO EXPECT THIS WEEK

The benchmark index could inch higher this week following last week’s rally of global stocks and the anticipated fuel price rollbacks on Tuesday. Investors will also await the release of key US inflation data on Tuesday, a key indicator in the Fed’s next rate hike decision. Analysts are forecasting an 8% year-on-year growth in US CPI for August 2022, down from 8.5% in July 2022, yet still historically elevated.

STOCK PICKS FOR THE WEEK

Megawide Construction Corp. (MWIDE) — BUY

MWIDE and GMR Airports International BV (GAIBV) executed a share subscription and transfer agreement for Aboitiz InfraCapital (AIC) to acquire shares in GMR-Megawide Cebu Airport Corporation (GMCAC), the operator of Mactan-Cebu International Airport (MCIA). In our view, MWIDE was able to crystalize MCIA’s fair market value at more than triple of its cost base at PHP 15-billion transaction value (representing MWIDE’s 60% equity stake in MCIA). Notably, the transaction will unlock MWIDE’s resources to accelerate its infrastructure portfolio with the upfronted cash proceeds for capital recycling, and provide funds to de-lever and strengthen its balance sheet. Accumulating at current levels is advisable. Further accumulate on the break above PHP 5.70. Set stop limit orders below PHP 4.80.

MacroAsia Corp. (MAC) — BUY

MAC formed a flag, a short-term bullish continuation pattern. A bullish flag pattern occurs during a dynamic market rally, representing a brief pause as the market “catches its breath” before running off again in the same direction. The bullish price action was driven by the news that the company will provide operations and management services at the Sangley Airport. The measured price target after MAC broke out of its bullish flag is PHP 6.30 to PHP 6.50 (up 13.5%-17%), according to Technical Insight, our automated chart pattern recognition program, Accumulating at current levels is advisable. Set stop loss orders below PHP 5.10. Take profit at around PHP 6.30 to PHP 6.50.

Union Bank of the Philippines, Inc. (UBP) — BUY

UBP formed a triple bottom – a long-term bullish pattern. UBP broke above the said pattern due to the broader market rebound amid easing commodity prices. The measured price target after UBP broke out if its triple bottom pattern is PHP 95.00 to PHP 97.00 (higher by 9% – 11.5%), according to Technical Insight, our automated chart pattern recognition program. Looking at the fundamentals, UBP began accruing income from the Citi consumer portfolio since August 1, 2022. According to the company, key value drivers assumed in the transaction (such as customer growth and portfolio performance) are all trending ahead of expectations. UBP estimates pro-forma net interest margins (NIMs) at 5.5% (vs. 4.7% currently) given Citi’s NIMs at 13%. Consumer loans as a percentage of total loans are also expected to increase to 49% from 40% currently. Accumulating once UBP pulls back to PHP 86.00 to PHP 85.00 is advisable. Set stop limit orders below PHP 81.00 and take profits at around PHP 96.00 to PHP 97.00.

PSEi TECHNICAL ANALYSIS

Resistance: 6,900/7,200

Support: 6,400/6,600

The PSEi traded within a tight range of 6,550 to 6,700 and has managed to stay above its 100-day Moving Average (MA) last week. It is crucial for the market to stay above the 100-day MA for the ongoing bullish reversal to resume. It is worth taking note that the bullish momentum is slowing down with the moving average convergence divergence (MACD) line below the signal line. Setting trail stops at this technical structure is recommended.

TRADING PLAN

Slowly accumulate at current levels until the 100-day moving average (MA), which is currently at 6,548. Set tight stops below 6,400.

KEY DATA RELEASES

Tuesday, September 13, 2022
– US CPI year-on-year for August 2022 (consensus estimate was 8.1%, while actual CPI for July 2022 was 8.5%)

Thursday, September 15, 2022
– Overseas Filipino (OF) cash remittances year-on-year for July 2022 (consensus estimate is 2.7%, while the actual for June 2022 was 4.4%)

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) closed 0.89% lower week-on-week at 6,692.65 (down 59.85 points). The local market tracked the decline in global markets at the start of the week as investors considered US Fed Chair Powell’s speech and as funds complied with the changes in the MSCI indices.

Losses were pared mid-week as foreigners turned net buyers on Thursday, ending their net selling streak from the past seven trading sessions. Investors also weighed the uptick in the Philippines’ August 2022 Manufacturing Purchasing Managers’ Index (PMI) at 51.2 (July 2022: 50.8) and the announcement that Megawide (MWIDE) and GAIBV sold their shares in GMR-Megawide Cebu Airport Corporation (GMCAC), the developer and operator of the award-winning Mactan Cebu International Airport, to Aboitiz InfraCapital, Inc. (AIC).

Top index performers were Jollibee Foods Corp. (JFC) which was up 3.7%, GT Capital (GTCAP) up 3.2%, and Ayala Corp.) up 2.6%. Index laggards were AC Energy (ACEN) down 5.0%, Megawide (MEG) down 4.3%, and Converge (CNVRG) down 3.9%. The index breadth was negative with nine gainers versus 20 losers. The average daily turnover value was PHP 5.9 billion. Foreigners were net sellers by PHP 126.9 million.

WHAT TO EXPECT THIS WEEK

The market is expected to trade sideways as investors await local key data releases, including the August 2022 inflation print (consensus estimate is 6.4%, while BSP forecast is 5.9% to 6.7%, target range at 2% to 4%). Fuel price rollbacks are also expected this week as gasoline prices may fall by PHP 2.60 to PHP 2.90 per liter, diesel prices by PHP 1.60 to P1.90 per liter, and kerosene prices by PHP 1.80 to PHP 2.00 per liter.

STOCK PICKS FOR THE WEEK

AyalaLand Logistics Holdings Corp. (ALLHC) — BUY

ALLHC formed a head and shoulders bottom, an intermediate-term bullish pattern. According to Technical Insight, our automated chart pattern recognition program, the measured price target after ALLHC broke out if its head and shoulders bottom pattern is PHP 3.90 to PHP 4.00. Accumulating ALLHC on pullbacks until PHP 3.50 is advisable. Set stop limit orders below PHP 3.35 and take profits at around PHP 3.90 to PHP 4.00.

SSI Group, Inc. (SSI) — BUY

SSI should continue to benefit from easing mobility restrictions and the higher mall foot traffic. SSI is also well-positioned to capture the rebound in discretionary spending given its target market. As for price action, SSI is showing signs of bottoming out. The stock is also trading above its key moving averages (50-day, 100-day, and 200-day averages). However, price action will only be clearly bullish once the counter breaks above PHP 1.65 and its 2020 high of PHP 1.88. Accumulating SSI once it breaks above PHP 1.65 is advisable. Further accumulate once SSI trades above PHP 1.88. Set stop limit orders below PHP 1.50 and take profits at around PHP 2.00 to PHP 2.35.

Pilipinas Shell Petroleum Corp. (SHLPH) — BUY

SHLPH recently broke out of its short-term range, with a huge volume, from a five-month resistance. SHLPH’s recent breakout signals a possible upward move in the coming weeks. Currently, SHLPH is consolidating at the PHP 20.0/PHP 21.0 levels and trading above all its key moving averages (20-day, 50-day, 100-day, and 200-day MAs), with the 20-day MA serving as the immediate support. Should the counter manage to consolidate above the breakout area, another breakout attempt at PHP 24.0 is possible. Regarding fundamentals, SHLPH ended the first half of 2022 with a core net income of PHP 7.8 billion, more than triple its first half 2021 earnings at PHP 2.2 billion, enabling the company to resume its dividend payout program after three years from its last declaration, with ex-date scheduled August 22, 2022. Accumulating SHLPH at around PHP 20.0/ PHP 20.5 is recommended. Set cut loss below PHP 18.75 and begin taking profits at PHP 24.0/PHP 24.15.

PSEi TECHNICAL ANALYSIS

Resistance: 6,900/7,200

Support: 6,400/100-day moving average (6,566)

The PSEi pulled back anew last week after failing to break above its 200-day moving average (MA) a couple of weeks ago. On a positive note, the market was able to find support at its 100-day MA at around 6,566. It is crucial for the market to stay above the 100-day MA for the ongoing bullish reversal to resume.

TRADING PLAN

Slowly accumulate at current levels until the 100-day MA (currently at 6,566). Set tight stops below 6,400.

KEY DATA RELEASES

Tuesday, September 6, 2022
– Philippine Consumer Price Index (CPI) year-on-year for August 2022 (consensus estimate is 6.4%, while actual for July 2022 was 6.4%)

Thursday, September 8, 2022
– Philippine unemployment rate for July 2022 (actual for July 2022 was 6.0%)

Friday, September 9, 2022
– Philippine exports, year-on-year, for July 2022 (consensus estimate is 2.4%, while actual for June 2022 was 1.0%)
– Philippine imports, year-on-year, for July 2022 (consensus estimate is 24.3%, while actual for June 2022 was 26%)