Stock Market Weekly: Market awaits inflation, unemployment data

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) closed at 6,165.35, falling by 52.51 points (down 0.84% week-on-week) as recession fears persisted and as the Philippine peso closed at 55.09 against the US dollar, a near 17-year low.

The local market traded higher at the start of the week along with most of its Asian peers amid bargain hunting, but fell subsequently. Investors factored in gloomy data releases including: 1) the lower consumer confidence data for June 2022 month-on-month for the US, South Korea, and Japan, 2) China’s June 2022 official Purchasing Managers’ Index (PMI), a measure of trends in manufacturing and services, and 3) Japan’s May 2022 industrial production, which came in lower than consensus estimates.

Lackluster market sentiment can be attributed to the lower S&P Global Philippine manufacturing PMI (53.8 in June 2022, 54.1 in May 2022) and the government’s decision to retain Alert Level 1 in the National Capital Region until July 15, 2022.

Top index performers were Universal Robina Corporation (URC), up 14.4%), Converge (CNVRG) up 13.2%), and AC Energy (ACEN) up 7.7%. Index laggards were Aboitiz Equity Ventures Inc. (AEV) down 5.8%, Megaworld Corporation (MEG) down 5.4%), and BDO Unibank Inc. (BDO) down 4.8%. The index breadth was negative, with 13 gainers versus 17 losers. The average daily turnover value was PHP 4.9 billion. Foreigners were net sellers by PHP 2.3 billion.

WHAT TO EXPECT THIS WEEK

The PSEi is expected to trade sideways with an upward bias as the market remains close to oversold levels and as investors observe the first few days of Ferdinand Marcos Jr.’s presidency. Investors will also be on the lookout for the country’s June 2022 inflation print (6.0% is the consensus estimate, while 5.7% – 6.5% is the estimate of the Bangko Sentral ng Pilipinas, or BSP). On the international front, the US will have a shortened trading week as markets close for the fourth of July holiday today.

STOCK PICKS FOR THE WEEK

Megawide Construction Corp. (MWIDE) — BUY

The recent dismissal of the criminal case against select MWIDE directors and officers should lift the overhang and give way for investors to shift focus on the company’s fundamentals. The Mactan-Cebu International Airport’s earnings should recover as the economy further reopens. The construction business should also benefit from looser quarantine measures. Accumulate MWIDE once the share price breaks above PHP 4.00. Set stop limit orders below PHP 3.75 to protect capital. Take profit at around PHP 5.00 / PHP 6.80.

Robinsons Land Corp. (RLC) — BUY

Valuations remain attractive as the stock is currently trading at 0.97x full year 2022 Forward Price-To-Book Value per Share, undemanding at one standard deviation below historical valuations. Accumulate once price breaks above PHP 20.50-PHP 20.90. Set stop limit orders below PHP 19.00 to protect capital. Take profit at around PHP 23.30 to PHP 24.00, and PHP 25 for long-term investors.

DITO CME Holdings Corp. (DITO) — LIGHTEN POSITION

DITO’s share price dropped out of a consolidation period, suggesting a continuation of the downtrend. The measured price target after DITO formed a diamond continuation pattern last April 2022 is PHP 2.90-PHP 3.30, according to Technical Insight, our automated chart pattern recognition program. Lighten position at around PHP 4.00 to PHP 4.10. The next support levels are at PHP 3.50 and PHP 3.00

PSEi TECHNICAL ANALYSIS

Resistance: 6,180 / 6,400

Support: 5,700

The 6,400 level proved to be a resistance last week after the PSEi failed to sustain its oversold rally. The market even dropped below its support level of 6,180 at the latter part of the week. That being said, the bears remain in control and a retest of 6,000 is in play.

TRADING PLAN

Continue setting stop limit orders. The next support level is at 5,700.

KEY DATA RELEASES

1) July 5, 2022, Tuesday: Philippine CPI year-on-year for June 2022 (6.0% consensus estimate, 5.4% in May 2022)

2) July 7, 2022, Thursday: Philippine unemployment rate for May 2022 (5.7% in April 2022)

3) July 8, 2022, Friday: US change in nonfarm payrolls for June 2022 (274,000 consensus estimate, 390,000 in May2022)