Stock Market Weekly: Modest recovery probable

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) concluded the shortened trading week lower at 6,726.01 (-0.97% week-on-week, -65.7 points). The market took a breather from its four-week win streak as market participants digested mixed local and international developments, including: (i) the withdrawal of US President Joe Biden from the 2024 presidential race and the subsequent appointment of Kamala Harris as the Democratic Party’s candidate; (ii) President Ferdinand Marcos Jr.’s third State of the Nation Address (SONA), during which he mandated a total ban on Philippine Offshore Gaming Operators (POGOs) by year-end; and (iii) the onslaught of Super Typhoon Carina (international name: Typhoon Gaemi), which resulted in over PHP 250 million in crop damages and a suspension of stock market trading on Wednesday, August 24, 2024.

In other news, the US June 2024 Personal Consumption Expenditures (PCE) price index slightly exceeded expectations, registering a 0.2% m/m increase (estimates: 0.1%; previous: 0.1%), which will be pivotal for the Federal Open Market Committee (FOMC) interest rate decision this week.

WHAT TO EXPECT THIS WEEK

This week, we anticipate a slight rebound in the benchmark index, driven by the upcoming key data and earnings releases. Locally, market participants will focus on 1st quarter 2024 earnings reports led by financial heavyweights such as BDO Unibank and Metrobank, alongside key economic indicators like the PH Producer Price Index (PPI) and PH Purchasing Managers’ Index (PMI).

Investors will also be focusing on the US Federal Reserve’s interest rate decision on Thursday (August 1, 2024), which is expected to remain unchanged at 5.5%. Language from the upcoming Fed’s commentary may provide cues for the Bangko Sentral ng Pilipinas’ (BSP) monetary policy direction ahead of its next meeting on August 15, 2024.

Globally, the ongoing geopolitical unrest in the Middle East may weigh down sentiment as reports have emerged of Israeli strikes on southern Lebanon.

Resistance: 6,800 / 7,000

Support: 6,500 / 6,700

ANALYSIS

The PSEi pulled back by -0.97% w/w to close at 6,726.01 points. The benchmark index snapped its four-week winning streak as investors secured gains amid the shortened trading week.

Despite this, the market’s short-term uptrend remains intact as the local bourse is currently hovering above the 50-day, 100-day, and 200-day moving averages (MA). If risk-off sentiment continues, the market may revisit support levels around 6,700 to 6,500. Otherwise, if risk-on appetite resumes, the market may regain lost ground and retest the resistance levels around 6,800 and 7,000.

STOCK CALLS FOR THE WEEK

SM Prime Holdings, Inc. – LIGHTEN POSITIONS | FMSEC TARGET PRICE: PHP 36.00

SMPH rose by as much as ~22% after breaking out of its triple bottom base. It is currently trading above medium-term key moving averages (MA) (50-day and 100- day) but was recently rejected by the 200-day MA.

The counter currently benefits from strong momentum with the technical indicator RSI at near over-bought levels. Nevertheless, we suggest lightening positions, in light of recent eco-nomic developments. Amid the current uncertainty of the impact of the POGO exodus, lightening positions is advisable.

Ayala Land, Inc. – BUY | FMSEC TARGET PRICE: PHP 35.80

All indicators are upward for ALI as it broke above its consolidation range in the PHP 26.00 to PHP 29.00 area. After a period of sideways trading, ALI is currently trading above all its key moving averages (20-day, 50-day, 100-day, and 200-day) with sufficient volume as it filled the gap formed in early April.

At current levels, its previous resistance at PHP 29.00 is attempting to reverse as the counter turns bullish. We recommend accumulating once the support holds around this area.

Accumulating ALI once support holds around the PHP 29.00 range is advisable. Set stop limit orders at 8% below the average price and take profits above 15% of entry price.

Filinvest Land, Inc. – BUY | CONSENSUS TARGET PRICE: PHP 0.79

FLI is showing mixed momentum within its consolidation range of PHP 0.64 to PHP 0.69. Currently trading near the resistance, it is above the 20-day (PHP 0.67) and 50-day (PHP 0.679) moving averages (MAs), but still below the 100-day (PHP 0.687) and 200-day (PHP 0.654) MAs.

Volume is light to moderate, and the RSI of 57.04 suggests that the stock is approaching overbought territory. Given the recent news of POGO termination, it may be prudent to sell the stock as the potential negative impact on the market could prevent FLI from sustaining any upward movement. Lightening positions at current levels is advisable. Should the stock breakdown, the next support is at PHP 0.54.

KEY DATA RELEASES

1. PH PPI y/y for June 2024 on Tuesday, July 30, 2024 (previous: -0.8%)

2. US FOMC Rate Decision for July 31, 2024, on Thursday, August 1, 2024 (estimates: 5.5%; previous: 5.5%)

3. US Initial Jobless Claims as of July 27, 2024, on Thursday, August 1, 2024 (estimates: 239k; previous: 235k)

4. US Unemployment Rate for July 2024 on Friday, August 2, 2024 (estimates: 4.1%; previous: 4.1%).

PSEi Earnings Releases:

1. BDO Unibank, Inc. (BDO) on Monday, July 29, 2024

2. Manila Electric Co. (MER) on Monday, July 29, 2024

3. Wilcon Depot, Inc. (WLCON) on Wednesday, July 31, 2024

4. Semirara Mining and Power Corp. (SCC) on Friday, August 2, 2024

5. Universal Robina Corp. (URC) on Friday, August 2, 2024

6. Metropolitan Bank & Trust Co. (MBT) on Friday, August 2, 2024

7. Aboitiz Equity Ventures, Inc. (AEV) on Friday, August 2, 2024