Stock Market Weekly: Keeping the positive momentum

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) surged 3.0%, closing at 6,847.37 (+199.57 points), driven by corporate earnings releases, positive overseas economic data, and a 25-basis-point (bp) cut in key interest rates by the Bangko Sentral ng Pilipinas (BSP) to 6.25%.

Markets cheered better-than-expected US economic data for July 2024 — Producers’ Price Index (PPI) at 2.2%, Consumers’ Price Index (CPI) at 2.9%, and retail sales growth at 1.0% — which eased recession concerns. Additionally, the BSP cut key interest rates to support the local economy, citing that risk-adjusted inflation has tilted to the downside for this year and next year.

Finally, investors digested the results of the MSCI Quarterly Index Review for August 2024, which saw the Philippines receive a slight country downweight (-0.009%). There will be no changes to the MSCI Philippines Standard Index. Meanwhile, DigiPlus Interactive Corp. (PLUS) was added to the MSCI Philippines Small Cap Index, replacing Security Bank Corp. (SECB). These changes will be implemented as of the close of August 30, 2024 (effective September 2, 2024).

WHAT TO EXPECT THIS WEEK

This week, we expect the local bourse to follow through on last week’s positive momentum. Investors will focus on the US FOMC minutes and several Fed speeches early in the week. Chairman Jerome Powell is set to headline the Jackson Hole Symposium, where various central bank leaders from around the globe will discuss current global financial trends and affairs.

On the commodity front, forecasted fuel price increases this week may dampen investor sentiment, with gasoline, diesel, and kerosene prices expected to rise by PHP 0.65 to PHP 0.90/liter, PHP 0.95 to PHP 1.10/liter, and PHP 0.95 to PHP 1.00/liter, respectively.

Resistance: 7,000 / 7,100

Support: 6,700 / 6,800

ANALYSIS

The PSEi rose by +3.00% w/w to close at 6,847.37 points. The benchmark index continued its ascent, breaching the 6,700 and 6,800 resistance levels. The market is currently hovering above key moving averages (200-day, 100-day, and 50-day), with the MACD crossing the signal line, indicating a possible continuation of the uptrend.

If the bulls continue to dominate, the market may revisit the 7,000 and 7,100 resistance levels. Conversely, if the bears take control, the PSEi may pull back to its immediate support levels around 6,800 and 6,700.

STOCK CALLS FOR THE WEEK

SM Investments Corp. | BUY | FMSEC Target Price: PHP 1,030.00

SM has been range-trading between the PHP 800.0-PHP 1,000.0 region since 2018 alongside key moving averages (50-day, 100-day, and 200-day). Additionally, momentum indicators have also swung from oversold to overbought levels contingent on overall market sentiment.

As the market turns bullish, we see SM following suit and trending to the upside. Accumulating SM at current levels is advisable. Set your stop loss 8% below your average. Take profits when the counter hits 15% above your average cost.

ACEN Corp. | BUY | Consensus Target Price: PHP 6.30

ACEN has recently exhibited a strong bullish trend, with its price rising above key moving averages (20-day, 50-day, 100-day, and 200-day) and reaching a new 52-week high at PHP 5.90. However, with the stock nearing overbought conditions and momentum slowing as indicated by the RSI and MACD, a short-term consolidation or pullback may be likely.

While the uptrend could continue with a break above recent highs, traders should monitor support levels for potential entry points. Investors might consider waiting for a pullback to PHP 5.50 levels before initiating a long position to capitalize on higher upside potential. Accumulating ACEN once it pulls back to PHP 5.50 is advisable. Set stop-limit orders below PHP 5.10 and take profits above PHP 6.33.

AREIT, Inc. | TRAILING STOPS | FMSEC Target Price: PHP 32.2

AREIT is currently trading on an uptrend, hovering above 50-day, 100-day, and 200-day key moving averages (MA). However, AREIT is nearing overbought conditions, hence, a pullback is imminent. At current levels, it is advisable to secure gains or implement trailing stops. Implementing trailing stops is advisable. The next support level is at PHP 38.00.

KEY DATA RELEASES

1. FOMC minutes on Thursday, August 22, 2024

2. US Initial Jobless Claims as of August 17, 2024, on Thursday, August 22, 2024 (previous: 227k; estimate: 240k)

3. US Durable Goods Orders m/m for July on Friday, August 23, 2024 (previous: -6.6%; estimate: -0.3%)