Stock Market Weekly: More sideways trading seen this week

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose 52.54pts (up 0.93% week-on-week) to close at 6,315.93. The PSEi started the week in red amid weaker Asian markets and after BDO Unibank and the Financials sector dragged the index. Stocks rallied from Tuesday to Thursday on the back of the Philippine peso’s strengthening and US Fed Chairman Jerome Powell’s signaling of less-hawkish-than-feared pace of US rate hikes. The Fed hiked rates by 75 basis points (bps) midweek, which was widely expected. On Friday, the PSEi trimmed some of its gains after the Department of Health (DOH) reported the country’s first monkey pox case.

Top index performers were Wilcon Depot (WLCON), up 20.2%), Aboitiz Equity Ventures (AEV), up 8.9%), and International Container Terminal Services (ICT), 6.3%). Index laggards were Converge (CNVRG), down 7.3%, Globe Telecom (GLO), down 5.8%, and Jollibee Foods Corp. (JFC), down 4.5%. The index breadth was positive with 17 gainers versus 13 losers. The average daily turnover value was PHP 4.1 billion. Foreigners were net buyers by PHP 545 million.

WHAT TO EXPECT THIS WEEK

The market is expected to trade sideways as investors remain on the sidelines and await the release of more second quarter 2022 earnings results, inflation print, and manufacturing purchasing managers’ index (PMI) for August 2022. The market is seen to be cautious with the uptick in Metro Manila’s COVID-19 positivity rate to 15%, while 14 other provinces had a “very high” positivity rate at above 20%, according to Octa Research. Moreover, the detection of the country’s first case of monkeypox heightened health concerns and may dampen market sentiment.

STOCK PICKS FOR THE WEEK

Manila Electric Company (MER) — BUY

MER recorded a consolidated core net income of PHP 13.1 billion, up 15% y-o-y, in line with consensus estimates on the back of strong energy sales and earnings from the power generation business in the first half of 2022. JG Summit Holdings, Inc. (JGS) offered 30 million shares of MER in a placement at PHP 344.00 per share, a 6% discount from yesterday’s closing price of PHP 366.00. Regarding the block sale, MER’s fundamentals remain intact, and the recent drop is an opportunity to buy. Those looking to enter their first position should accumulate on pullbacks at current levels until PHP 330.00. Set stop limit orders 5-7% below the average price. Take profit at around PHP 390.00/PHP 400.00

Security Bank Corp. (SECB) — BUY ON PULLBACKS

As mentioned in our report last July 8, 2022, Security Bank Corp. (SECB) will be taken out of the Philippine Stock Exchange Index (PSEi) effective August 8, 2022. Expect heavy selling Monday morning and on the close as active funds who track the index sell their SECB holdings within the day. Investors/bargain hunters can set buying levels near the recent low around PHP 86.00-PHP 87.00. After which, set stop limit orders at 5-7% below the average cost and take profit at least 12-15% above the average cost. Resistance levels are around PHP 100.00/PHP 112.00. For long-term investors, our target price for SECB is PHP 118.00.

Integrated Micro-Electronics, Inc. (IMI) — BUY ON BREAKOUT

IMI’s earnings performance will further recover amid the potential easing of supply chain constraints and the gradual recovery of its automotive and industrial segments, especially given the easing of COVID-19-related lockdowns in China. The U.S. Senate voted to advance a bill that would designate USD 52 billion in subsidies and offer an investment tax credit to encourage semiconductor companies to boost manufacturing in the US. The bill would ease the global semiconductor shortage that has been affecting IMI’s margins in the past 12 months. Accumulating IMI once it breaks above PHP 7.00/100-day MA is advisable. Set cut loss below PHP 6.60. Take profit at around PHP 8.00/PHP 9.00.

PSEi TECHNICAL ANALYSIS

Resistance: 6,400 / 50-day moving average price (MA)

Support: 5,700 / 6,180

The PSEi once again failed to break above 6,400 last week. The 50-day MA acted as another resistance. Should the market break above 6,400 and the 50-day MA, a retest of the 6,700 will be in play.

TRADING PLAN

Continue setting stop limit orders. Slowly accumulate once the PSEi breaks above the 50-day MA (currently at 6,411).

KEY DATA RELEASES

Monday, August 1, 2022
– Manufacturing PMI for PH (53.8 in June 2022)

Wednesday, August 3, 2022
– Corporate Earnings: SM Investments Corp. (SM)
– Corporate Earnings: Metro Pacific Investments Corp. (MPI)
– Corporate Earnings: Metropolitan Bank and Trust Company (MBT)

Thursday, August 4, 2022
– Philippines’ Consumer Price Index (CPI) year-on-year for July 2022 (consensus estimate: 6.1%, actual: 6.1% in June 2022)
– Corporate Earnings: PLDT, Inc. (TEL)
– Corporate Earnings: International Container Terminal Services, Inc. (ICT)
– Corporate Earnings: San Miguel Corp. (SMC)

Friday, Auguest 5, 2022
– Corporate Earnings: Ayala Land Inc. (ALI)