Stock Market Weekly: Expect the bourse to trade lower

WHAT HAPPENED LAST WEEK

Last week, the benchmark index rose by 0.64% w/w to close at 6,647.80 points. The index started lower due to a global equity slump sparked by the unwinding of yen carry trades and recession fears in the US.

Locally, sentiment was likewise dampened by higher-than-expected July inflation at 4.4% (June 2024: 3.7%; estimates: 4.1%). However, later in the week, market sentiment improved as recession fears were deemed exaggerated and as the Bank of Japan (BOJ) reassured markets about future rate hikes. The better-than-expected 2Q24 Philippine GDP of 6.3% (1Q24: 5.8%; estimates: 6.3%) may have also boosted confidence.

WHAT TO EXPECT THIS WEEK

This week, we expect a volatile market with a slight downward bias as investors await the Bangko Sentral ng Pilipinas (BSP) policy rate decision. We note a change in tone from BSP Governor Eli Remolona Jr., who said that a rate cut is “a little bit less likely” because of the higher-than-expected inflation in July.

However, the market still expects the BSP to cut policy rates by 25 bps in its August 15 meeting. We also expect increased trading activity as investors adjust their portfolios due to Philippine Stock Exchange (PSE) rebalancing (effective August 12, 2024) and the MSCI quarterly rebalancing announcement (August 13, 2024). Additionally, throughout the week, investors will consider several earnings reports and key economic data releases such as Philippine cash remittances and US inflation.

Resistance: 6,700 / 6,800

Support: 6,400

ANALYSIS

The PSEi rose by +0.64% w/w to close at 6,647.80 points. The benchmark index started the week in the red after forming a gap-down pattern. It plunged below key moving averages (200-day, 100-day, and 50-day) and briefly touched the 6,400 critical level, which proved to be a strong support.

The market bounced back mid-week and completely recovered the gains lost early in the week. The benchmark index continued its ascent, gaining for three consecutive days. The market is currently hovering around the 100-day MA and is poised to retest the next resistance levels. If the bulls dominate, the market may revisit the 6,700 and 6,800 resistance levels. Conversely, if the bears take control, the PSEi may pull back to its next support levels around the 200-day MA to 6,400.

STOCK CALLS FOR THE WEEK

Century Pacific Food, Inc. | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 37.50

CNPF has been consolidating in a wide range between PHP 36.0 and PHP 32.0 following a sizeable 50% run-up from its breakout in August 2023. Key moving averages (50-day, 100-day, and 200-day) have started to coil sideways, while momentum indicators MACD and RSI are hovering around neutral zones, indicating the onset of an extended consolidation phase.

Thus, we recommend accumulating at established support levels around the PHP 32.0 to PHP 31.0 area in preparation for the next leg-up. Accumulate CNPF once it reaches PHP 32.0. Take profits at around PHP 36.8 and set your stop loss limit below PHP 29.4.

Bank of the Philippine Islands | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 141.00

BPI is trading within a long-term upward channel, showing signs of consolidation in the immediate term. The 20-day MA (PHP 123.11) is a key resistance level, while support is seen at the 50-day MA (PHP 120.15) to PHP 115.00.

In terms of momentum indicators, the RSI at 43.08 indicates neutral to slightly bearish momentum, and the MACD showing a bearish crossover suggests weakening momentum. Accumulating BPI once it pulls back to PHP 115.00 is advisable. Set stop limit orders below PHP 107.00 and take profits around PHP 132.00. For long-term investors, we have a fundamental target price of PHP 141.00 (+20.31% upside from recent close).

Semirara Mining and Power Corp. | BUY ON PULLBACKS | CONSENSUS TARGET PRICE: PHP 37.05

SCC formed a gap-down pattern following its ex-dividend date on April 8, 2024, dropping to its year-to-date (YTD) low of PHP 28.75. After establishing support around this level, the stock bounced back and rallied by as much as 18.5%. Currently, SCC is consolidating between PHP 31.60 to PHP 34.00 and is hovering around PHP 31.60 to the 200-day MA, which acts as its immediate support level. Accumulate SCC around PHP 31.60 to the 200-day MA. Set stop loss limit orders below PHP 29.07 and take profits around PHP 36.34.

KEY DATA RELEASES

The key data releases this week are:

1. MSCI Quarterly Index Review on Tuesday, August 13, 2024

2. US consumer price index (CPI) y/y for July 2024 on Wednesday, August 14, 2024 (June 2024: 3.0%; estimates: 3.0%)

3. BSP interest rate decision on Thursday, August 15, 2024 (estimates: 25-bp cut)

4. Overseas Cash Remittances y/y for June 2024 on Thursday, August 15, 2024 (May 2024: 3.6%, estimates: 3.2%)

5. US Retail Sales (ex-auto) m/m for July 2024 on Thursday, August 15, 2024 (estimates: 0.1%; June 2024: 0.4%)

6. US Initial Jobless Claims as of August 10, 2024, on Thursday, August 15, 2024 (previous: 233k; estimates: 236k)