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Stock Market Weekly: Investors keep an eye out for FTSE rebalancing
We are looking at a few catalysts that will influence the movement of the stock market this week: the FTSE rebalancing and the release of the Purchasing Managers’ Indices (PMIs) of the Philippines and the US.
By First Metro Securities Research
WHAT HAPPENED LAST WEEK
Last week, the Philippine Stock Exchange index (PSEi) fell by over 100 points to 6,217.56 ( down 1.8%, or by 114 points) following the Bangko Sentral ng Pilipinas’ (BSP) monetary policy rate setting and inflation expectations. The central bank has raised monetary policy rates by 25 basis points (bps) and revised its full-year inflation forecast to 5.0% for 2022 (from 4.6% previously) and 4.2% for 2023 (from 3.9% previously).
Furthermore, the sustained weakening of the peso exacerbated the market’s drop, sending the PSEi near the bear market territory last week. Nonetheless, losses were pared last Friday as the market bounced from oversold levels. The index breadth was negative, with 9 gainers versus 21 losers. The average daily turnover value was PHP 4.4 billion. Foreigners were net sellers by PHP 2.0 billion.
Jollibee (JFC), up 4.2%, was one of the index gainers after management said that it sees growth and expansion continuing this year following a strong start in the first quarter of 2022.
On the other hand, shares of Bank of the Philippine Islands (BPI) declined by 7.2% as the Philippine central bank’s less hawkish stance dragged the financials sector down last week.
WHAT TO EXPECT THIS WEEK
Given that the market remains at oversold levels, we see the market trading higher this week, especially amid possible quarter-end window dressing activities at the latter part of the week. However, the peso’s weakness, rising inflation pressures, and recession worries in the US will continue to influence sentiment and risk appetite. Moreover, investors will be on the lookout for the Financial Times Stock Exchange (FTSE) rebalancing today, June 27, as well as both the Philippine and US manufacturing PMIs (Purchasing Managers’ Indices) to be released on Friday.
STOCK PICKS FOR THE WEEK
Megaworld Corp. (MEG) – BUY
MEG has dropped by as much as 18% month-to-date, tracking the global market rout, amid fears of more aggressive rate hikes. Given the sharp drop, MEG has traded at extreme oversold levels on the daily chart, with its Relative Strength Index (RSI) at 18, the lowest since March 2020. Investors and aggressive bargain hunters can attempt to take advantage of the stock trading at oversold levels to ride the probable bounce. Note that MEG is still on a downtrend, so setting tight stops is recommended. Accumulating MEG at current levels is advisable. Set stop limit orders below PHP 2.10. Take profit at around PHP 2.50/PHP 2.60 .
Raslag Corp. (ASLAG) – BUY
After sliding by as much as 19% from its initial public offering (IPO) price two weeks after the listing date, ASLAG’s share price has rebounded by 26% week-to-date and is now trading above its IPO price of PHP 2.00. It expects revenues to grow significantly after its 18-megawatt peak (MWp) Raslag-3 solar plant begins full commercial operations. ASLAG added that it will start deploying the proceeds from its recent initial public offering to its next two solar power projects, with most of the funding allocated to the planned 35.159 MWp Raslag-4 solar plant in Magalang, Pampanga. Accumulating ASLAG once it breaks above PHP 2.10 is advisable. Set cut loss below PHP 1.98. Take profit at around PHP 2.30/PHP 2.40.
PSEi TECHNICAL ANALYSIS
Resistance: 6,400 / 6,800
Support: 6,180 / 5,700
The PSEi initially broke below the 6,180 support level last week but managed to quickly rebound after trading at oversold levels. PSEi’s RSI last week hit as low as 25, the lowest since January 2021. Nevertheless, the market is not out of the woods unless it breaks above its next resistance levels (6,400/6,800).
TRADING PLAN
Continue setting stop limit orders, especially if the market fails to go back above 6,400 in the coming weeks. The next support levels are at 6,180/5,700.
KEY DATA RELEASES
- FTSE rebalancing today, June 27, 2022
- Philippine manufacturing PMI for June 2022 on Friday, July 1, 2022 (actual May 2022: 54.1)
- US manufacturing PMI for June 22 on Friday, July 1, 2022 (Preliminary: 52.4)