Stock Market Weekly: Optimism may nudge market with an upward bias

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) slipped by 0.10% week-on-week and ended the week at 6,481.91 (-6.60 points). The market started on a bearish note amid holiday-thinned volumes, weighed down by lower Asian markets and cautious sentiment from global markets ahead of the US inflation for March 2023.

The market managed to bounce back at the latter part of the week, following improved sentiment from markets abroad, as investors speculated that interest rates have peaked after US jobless claims came in higher than expected, while inflation (actual: 5.0% year-on-year; consensus estimate: 5.2% y-o-y) and producer price index (actual: 2.7% y-o-y; consensus estimate: 3.0% y-o-y) were lower than expected.

Top index performers were BDO Unibank (BDO) (+6.3%), San Miguel Corporation (SMC) (+3.1%), and Metro Pacific Investments Inc. (MPI) (+2.7%), while index laggards were JG Summit (JGS) (-5.3%), DMCI Holdings Inc. (DMC) (-5.1%), and Ayala Land Inc. (ALI) (-4.3%). The index breadth was negative with 12 gainers versus 18 losers. The average daily turnover value was PHP 4.7 billion. Foreigners were net buyers by PHP 973.5 million.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias as the index managed to find a support at the 6,400 level last week. The market sentiment may also be lifted by the optimistic consumer sentiment for the next 12 months as the consumer confidence index (CI) marginally increased to 22.7% in the 1st quarter of 2023 from 21.7 percent in the 4th quarter of 2022.

The year-ahead positive outlook of consumers was supported by their expectations of more available jobs, stable prices of goods, higher income, additional sources of income, and effective implementation of government policies and programs to ease inflation on basic commodities and to help low-income households cope with higher prices of goods.

Additionally, a report by the Board of Investments (BoI) showed a 155% increase in approved investments for the 1st quarter to PHP 463.3 billion, with 68 approved projects, primarily in the renewable energy sector. Internationally, investors will be on the lookout as US earnings season will be in full swing next week, as results may affect global market sentiment.

STOCK CALLS FOR THE WEEK

Robinsons Land Corp. (RLC) — BUY ON BREAKOUT

The outlook for RLC’s main business segments remains positive. We expect operational conditions should continue to improve amid further reopening and backed by full reinstatement of mall rental rates beginning the 2nd half of 2022, supported by the faster-than-expected recovery of tenant sales now hitting above pre-pandemic levels.

As for the office segment, RLC’s steady office leasing segment remains to be supported by its quality tenants (mostly BPOs) with high occupancy rates at 92% as of end September 2022.
Furthermore, Bridgetowne is an underappreciated source of value for RLC. With 19 hectares of land bank valued at PHP 66.8 billion (more than half of RLC’s current market cap) yet to be developed, we see that Bridgetowne can provide RLC with a visible earnings runway over the next decade. Accumulating once RLC breaks above PHP 15.00 is advisable. Set stop limit orders below PHP 14.00 and take profits at around PHP 16.80/PHP 17.50, and PHP 25 for long-term investors.

Apex Mining Co., Inc. (APX) — BUY ON PULLBACKS

APX’s positive performance this year tracked the price of gold, which has rallied by as much as 11% year-to-date. Gold has outperformed this year due to risk aversion on concerns over the global recession.

Note that for the past three years (full year 2020-FY2022), revenues from gold have accounted for 94.4% of APX’s total topline. As for price action, APX is now trading at PHP 2.65, the highest since February 2017. However, the stock is currently trading at extremely overbought levels, with the Relative Strength Index (RSI), a measure of momentum in price action, at 76.

It is optimal to wait for the pullback before accumulating. Meanwhile, those who bought from our buying level can take some profits. Assuming the stock continues to rally, the next level where profit-taking can occur is around the 1.618 level at PHP 3.43. Those planning to enter for the first time can accumulate once APX pulls back to PHP 2.30/PHP 2.25. Set stop limit orders below PHP 2.11 and take profits at around PHP 2.65/PHP 2.80.

SP New Energy Corp. (SPNEC) — BUY ON PULLBACKS

Since March 2023, SP New Energy Corp.’s (SPNEC) share price has rallied by as much as 18.5% after Metro Pacific Investments Corp. (MPI) announced that it has entered into a definitive agreement to invest PHP 2 billion to acquire 1.6 billion common shares of SPNEC from its parent Solar Philippines Power Project Holdings, Inc. (SPPPHI).

In our previous report on SPNEC entitled “On its way back to the PHP 1.80 level”, we mentioned that the stock formed a megaphone bottom pattern, a long-term bullish pattern. The measured price target after SPNEC broke out of its megaphone bottom pattern is PHP 1.81– PHP 1.89, according to Technical Insight, our automated chart pattern recognition program.

Those who bought it since our previous report can continue to hold the stock. Those looking to enter can accumulate once SPNEC pulls back to PHP 1.65. Set stop limit orders below PHP 1.55 and take profits at around PHP 1.85-PHP 1.90.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600 / 6,800

Support: 6,400

The market continued to trade in a tight range last week, with the PSEi still below the 200-day moving average (MA). On a positive note, the 6,400 level proved to be a new support as the market managed to bounce from the said level.

Nevertheless, we think that once the PSEi breaks above 6,740/6,800, there will be a reversal of the market’s short-term downtrend.

TRADING PLAN

Gradually accumulate once the PSEi trades back above 6,800.

KEY DATA RELEASES

Monday, April 17, 2023
– Overseas Cash Remittances y-o-y for March 2023 (consensus estimate: 3.9% y-o-y; February 2023: 3.5% y-o-y)

Tuesday, April 18, 2023
– US Housing Starts for March 2023 (consensus estimate: 1,400k; previous: 1,450k)

Wednesday, April 19, 2023
– Overall Balance of Payments (BOP) Position and final GIR and NIR of the BSP for March 2023 (February 2023: USD 895 million);

Thursday, April 20, 2023
– US Initial Jobless Claims as of April 15, 2023 (consensus estimate: 238k; previous: 239k)

Friday, April 21, 2023
– US Preliminary S&P Global Manufacturing Purchasing Managers’ Index (PMI) (consensus estimate: 49.2)