Stock Market Weekly: Local bourse seen flattish amid absence of positive catalysts 

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) remained flat, gaining a measly 0.02% w/w to close at 6,619.29 (+1.20 points). The market started the week on a high note as global confidence improved following a strong weekly close of US markets and China’s stimulus program to revitalize the property sector.

However, optimism was short-lived after dollar-peso exchange rate broke above the 58 level due to Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr.’s remarks about two potential rate cuts this year. The BSP later said that it will be taking active measures to curb forex speculation if the need arises.

On the foreign front, investors also digested the US Federal Open Market Committee (FOMC) minutes, which detailed growing concerns of key Fed officials on inflation as recent data showed a lack of sufficient recovery.

WHAT TO EXPECT THIS WEEK

We expect the local bourse to trade sideways with a downward bias amid the absence of positive catalysts and as the results of the May 2024 MSCI Quarterly Index Review are implemented on Friday (31 May).

The Philippines will experience a slight country downweight (-0.027%). Aboitiz Equity Ventures, Inc. (AEV) will be deleted from the MSCI Phils Standard Index, while there will be no additions. For the MSCI Phils Small Cap Index, ACEN Corporation (ACEN) will be added, while SP New Energy Corporation (SPNEC) and Cebu Air, Inc. (CEB) will be deleted.

Investors will also consider the US core personal consumption expenditures (PCE) price index for April 2024, the Fed’s preferred measure for inflation, on Friday, which consensus expects to come in unchanged at 0.3% m/m.

Resistance: 6,700/6,800

Support: 6,500/6,400

ANALYSIS

The PSEi ended flat w/w to close at 6,619.89 (+1.20 points; +0.02%). The index rose early in the week and attempted to break above its resistance level at 6,700. After failing to break above the said resistance level, the market dropped, erasing almost all the early gains.

Currently, the index is hovering below the 50-day and 100-day MA with the 200-day MA acting as the next support level. If bulls continue to dominate, the PSEi could retest the next resistance levels around 6,700 to 6,800. Otherwise, if the bears dominate, the PSEi could retrace the next support levels around 6,500 and 6,400.

STOCK CALLS FOR THE WEEK

Aboitiz Equity Ventures, Inc. (AEV) | BUY ON PULLBACKS | CONSENSUS TARGET PRICE: PHP 22.50

AEV continued its downtrend, breaking below the key support level of PHP 45.5 and registering a new 52-week low at PHP 36.55. Currently, it hovers near oversold territory (with an RSI of ~38) and below all key moving averages (including the 50-day, 100-day, and 200-day).

Consequently, we recommend considering purchases during pullbacks as it faces further discount. Accumulating AEV on pullbacks prior to and on the rebalancing date (May 31) of the MSCI Index changes is advisable. Set stop limit orders at 8% below and take profits 15% above your average cost.

PLDT Inc. (TEL) | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 1430.00

TEL broke above its cup and handle reversal pattern to continue its uptrend and register a new 52-week high at PHP 1,472.0. It is currently consolidating above key moving averages (50-day, 100-day, and 200-day), while also hovering near overbought levels with the RSI at 65, signaling a strong bullish trend. Accumulating TEL on pullbacks near the breakout point at around PHP 1,400.0 is advisable. Take profits near PHP 1,615.0 and set stop loss limit orders at PHP 1288.0.

Universal Robina Corp. (URC) | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 145.00

Following its rebound, the recent crossing above the 20-day and 50-day moving averages (MA) and increased volume indicate a short-term bullish trend for URC. Concurrently, sustained foreign selling is beginning to reverse, hinting at a potential sentiment shift for the stock.

However, with the stock nearing overbought conditions, we think a pullback might ensue, which could provide an opportunity for investors to accumulate on better entry prices. Accumulating URC once it pulls back near its 20-day MA at PHP 103.00 to PHP 105.00 is advisable.

Set stop limit orders 8% below average price and take profits above 15% of entry price. For long-term investors, we have a fundamental target price of PHP 145.00 (+33.03% upside from the recent close).

KEY DATA RELEASES

1. PH PPI for April 2024 on Thursday, May 30, 2024 (estimates: -0.2%; March 2024: -1%)

2. US Initial Jobless Claims as of May 25, 2024, on Thursday, May 30, 2024 (estimates: 218k)

3. US Core PCE Price Index for April 2024 on Friday, May 31, 2024 (estimates: 0.3%; March 2024: 0.3%)