Stock Market Weekly: Cautiousness amid macroeconomic headwinds

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange (PSEi) dropped by 1.57% week-over-week to close at 6,511.93 (down 103.62 points). The local bourse traded mostly in the red as investors digested a slew of economic data releases.

The index was largely weighed down by the weaker-than-expected 1st quarter 2024 Philippine GDP, which grew by 5.7% year-over-year (4th quarter 2023: 5.5%; estimates: 5.9%), falling short of the government’s 6-7% full-year target for 2024. Household spending (approximately 70% of GDP) dragged down the overall GDP performance, marking the slowest post-pandemic growth at 4.6%.

Furthermore, April 2024 Philippine inflation saw an uptick at 3.8% (March 2024: 3.7%; estimates: 4.1%) amid higher food and transport costs. Meanwhile, the March 2024 unemployment rate came in higher at 3.9% (February 2024: 3.5%; March 2023: 4.7%).

WHAT TO EXPECT THIS WEEK

This week, we expect the PSEi to trade sideways with a slight downward bias as investors continue to stay cautious amid macroeconomic headwinds. The market will closely monitor the interest rate decision of the Bangko Sentral ng Pilipinas (BSP), which is expected to keep the benchmark rate steady at 6.50%.

Mid-week, the market will consider the March 2024 overseas cash remittances (estimates: 2.9%; February 2024: 3.0%) as well as the results of the MSCI quarterly rebalancing review. On the international front, the index may take its cue from key data releases such as the US inflation data and the producer price index (PPI), and their implications on policy rates.

Moreover, the six-month slump in US consumer sentiment, as inflation expectations and job market concerns picked up, may continue to drag sentiment and the risk appetite of investors.

Resistance: 6,700/6,800

Support: 6,500/6,400

ANALYSIS

The PSEi retreated by 1.57% week-over-week to close at 6,511.93. The market fell after failing to break above the 6,700 resistance level, forming a lower high. The index is currently retesting the 6,500 and 200-day support levels. If bears dominate, the PSEi could retrace next support levels around 6,500 and 6,400. If the bulls dominate, it can retest next resistance levels at 6,700 to 6,800.

STOCK CALLS FOR THE WEEK

Robinsons Land Corp. | BUY ON BREAKOUT | FMSEC TARGET PRICE: PHP 22.50

RLC formed a flag pattern in early February, reaching a peak at around PHP 17.0 before undergoing a sharp decline, bringing prices down to their present levels. The counter is currently trading in the oversold zone and below all key moving averages (20-day, 50-day, 100-day, and 200-day), establishing a support around ~PHP 15.0, an area which previously acted as its resistance.

Investors are currently grappling with indecision as the stock consolidates within the PHP 15.10/PHP 15.70 range. A breach above its 100-day MA at ~PHP 16.0 could indicate a reversal in the stock’s current bearish momentum. Therefore, we recommend accumulating positions on breakout, considering that our fundamental target price (TP) still provides significant upside potential (+40.63%) from the suggested entry point.

Jollibee Foods Corp. | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 300.00

JFC is currently trading below key moving averages (50-day, 100-day, and 200-day) and touched oversold levels. The latest price volatility can provide attractive entry points as JFC approaches long-term support at around PHP 225.0.

Thus, it is advisable to accumulate on further pullbacks. Accumulating on pullbacks near long-term support levels at around PHP 225 is advisable. Set stop limit orders below PHP 207.0 and take profits at around PHP 258.0. For long-term investors, FMSEC has a fundamental target price of PHP 300 (+27.12% from the last closing price).

Megawide Construction Corp. | BUY ON BREAKOUT | CONSENSUS TARGET PRICE: PHP 3.40

In terms of technical analysis, MWIDE declined by as much as 17% after reaching a year-to-date high of PHP 3.44 in January 2024. The stock has recently closed to its all-time low around PHP 2.85, reaching oversold conditions.

The stock bounced back and is currently poised to retest the next resistance level. Accumulate MWIDE once it breaks above PHP 3.00 on strong volume. Set stop loss limit below PHP 2.76 and take profits around PHP 3.45.

KEY DATA RELEASES

1. US PPI y/y for April on Tuesday, May 14, 2024 (March 2024: 2.2%; estimates: 2.1%)

2. Overseas Cash Remittances y/y for March 2024 on Wednesday, May 15, 2024 (estimates: 2.9%; April 2024: 3.0%)

3. US CPI y/y for April 2024 on Wednesday, May 15, 2024 (March 2024: 3.5%; estimates: 3.4%)

4. MSCI Quarterly Index Review on Wednesday, May 15, 2024

5. BSP interest rate decision on Thursday, May 16, 2024 (estimates: no change in rates)

6. US Initial Jobless Claims as of May 11, 2024, on Thursday, May 16, 2024 (previous: 231k)