Stock Market Weekly: Eventual rate hike pause, oil price rollbacks buoy investor sentiment
With the central bank hinting at a rate hike pause later this year and an oil price rollback, we may see the stock market rise this week. This, however, may be capped by continuing worries about the global banking system.
WHAT HAPPENED LAST WEEK
The Philippine Stock Exchange index (PSEi) surged by 2.05% (+132.45 points) week-on-week to 6,602.17, posting its first weekly gain after a seven-week losing streak.
The local bourse started the week in the red as investors remained cautious amid the troubled global banking sector ahead of the US Fed and Bangko Sentral ng Pilipinas (BSP) meetings.
The benchmark index rebounded on Tuesday and extended the rally midweek as market sentiment improved on easing worries after UBS rescued the embattled Credit Suisse. The market slightly declined on Thursday as the Fed and the BSP raised interest rates by 25 basis points (bps), as expected.
On Friday, the PSEi jumped back to the 6,600 level as the market digested the lower policy hike as well as the Fed’s signal for a rate hike pause to ease the recent turmoil in the financial markets.
Top index performers were Bank of the Philippine Islands (BPI) (+9.3%), Ayala Corporation (AC) (+9.2%), and AC Energy (ACEN) (+8.8%) while index laggards were DMCI Holdings Inc. (DMC) (-5.3%), Converge (CNVRG) (-2.3%), and Metro Pacific Investments Corporation (MPI) (-1.9%). The index breadth was positive with 20 gainers versus nine losers. The average daily turnover value was PHP 4.1 billion. Foreigners were net buyers by PHP 219.6 million.
WHAT TO EXPECT THIS WEEK
We expect the market to be buoyed by improved investor sentiment given: (i) the BSP hinted of a rate hike pause later this year; and (ii) the anticipated oil price rollback by as much as PHP 1.00-PHP 1.20/liter on diesel and PHP 0.60-PHP 0.75/liter on gasoline.
However, gains may be capped as the market continues to be wary of the global banking crisis amid the rise in Deutsche Bank’s credit-default swap insurance. Investors will continue to monitor the tail end of the earnings season and be on the lookout for market catalysts.
STOCK CALLS FOR THE WEEK
Philex Mining Corp. (PX) — BUY ON BREAKOUT
Year-to-date, Philex Mining Corp.’s (PX) share price rose by 8.9%, outperforming the PSE mining and oil sector, which is down by 1.2% in the same period. PX’s positive performance this year tracked the price of gold, which has rallied by 6.7% year-to-date (YTD).
Gold, which accounts for ~51.3% of PX’s total revenues, has outperformed this year, driven by risk aversion on concerns over the global banking sector. PX also tracked the outperformance of copper, which surged by 6.6% amid the Chinese economic reopening and short-term supply issues brought about by the protests in Peru, which accounts for 10% of the world’s copper supply.
Moving forward, copper prices are expected to be supported by the significant capital being invested in renewable energy. As for price action, PX broke above its 200-day moving average price (MA) for the first time since April 2022. Now, PX is looking to break above its resistance level of PHP 3.30, which could propel the stock to retest PHP 3.60/PHP 4.20. Accumulating once PX breaks above PHP 3.30 is advisable. Set cut loss below PHP 3.10. Take profit at around PHP 3.60/PHP 4.20.
Apex Mining Co., Inc. (APX) — BUY ON BREAKOUT
Year-to-date (YTD), Apex Mining Co, Inc.’s (APX) share price rose by 8.3%, outperforming the PSE mining and oil sector, which is down by 1.2% in the same period. APX’s positive performance this year tracked the price of gold, which has rallied by 6.7% YTD.
Gold, which accounts for ~94.4% of APX’s revenues, has outperformed this year, driven by risk aversion on concerns over the global banking sector. As for price action, APX managed to stay above its immediate support around the 100-day MA and PHP 1.80. We think that once APX breaks above PHP 2.10, it will create a higher low and the stock can resume its bullish trend and possibly retest its 52-week high of PHP 2.20 and 4-year high of PHP 2.32. Accumulating once APX breaks above PHP 2.10 is advisable. Set cut loss below PHP 1.95. Take profit at around PHP 2.35/PHP 2.45.
International Container Terminal Services, Inc. (ICT) — BUY ON BREAKOUT
International Container Terminal Services, Inc. (ICT) reported full-year 2022 core net earnings of USD 634.5 million (+43% y-o-y), above consensus expectations, due to higher operating income, net foreign exchange gains, and equity share in the net profit of joint ventures.
ICT is cautiously optimistic about its volume growth this year amid the economic headwinds. Management mentioned that volume growth in January 2023 was better than their expectations, while volume in February 2023 normalized.
ICT added that given the higher inflation, it will remain committed to its cost reduction initiatives as this will be the key to maintaining ICT’s EBITDA margin. As for price action, ICT is facing resistance at PHP 220.00. We believe that a break above PHP 220.00 will result in the stock resuming its bullish trend. Accumulating once ICT breaks above PHP 220.00 is advisable. Set stop limit orders below PHP 203.00. Take profit at around PHP 250.00 to PHP 260.00.
PSEi TECHNICAL ANALYSIS
Support: 6,600 / 6,400
The 6,400 level proved to be a strong support for the market after bouncing from that level last week. The PSEi managed to close above 6,600 and is back hovering atop its 200-day moving average price (MA). It is crucial for the market to stay above 6,600 and the 200-day MA for the rebound to be sustainable. The key level to watch next is 6,800. A break above 6,740/6,800 will result in the reversal of the market’s short-term downtrend.
Gradually accumulate once the PSEi trades back above 6,800.
KEY DATA RELEASES
Tuesday, March 28, 2023
– PH bank lending year-on-year for February 2023 (prior: 9.8%)
Wednesday, March 29, 2023
– Corporate Earnings: JG Summit Holdings, Inc. (JGS)
Thursday, March 30, 2023
– US GDP annualized quarter-on-quarter for 4Q 2022 (consensus estimate: 2.7%; 3Q 2022: 2.7%)
– US Core Personal Consumption Expenditure (PCE) q-o-q for 4Q 2022 (consensus estimate: 4.3%; 3Q 2022: 4.3%)
– Corporate Earnings: Monde Nissin Corp. (MONDE)
Friday, March 31, 2023
– PH Budget Balance for February 2023 (prior: PHP 45.7 billion)