Stock Market Weekly: Positive sentiment ahead of Christmas season

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) fell slightly by 0.93% week-on-week (w/w), closing at 6,897.54. The market faced selling pressures due to a drop in US tech shares early in the week, coupled with the effectivity of the MSCI Quarterly Index Review on August 30, 2024.

The review resulted in no changes to the composition of the MSCI Philippines Standard Index, although the country saw a slight downweight of 0.009%. For the MSCI Philippines Small Cap Index, DigiPlus Interactive Corp. (PLUS) was added, while Security Bank Corp. (SECB) was deleted. On a positive note, key international data releases, particularly the upward revision in US 2nd quarter 2024 GDP to 3% (from 2.8%), helped calm recession fears.

WHAT TO EXPECT THIS WEEK

This week, positive sentiment is anticipated to dominate, fueled by expectations of increased consumer spending as the “ber” months (months ending in “ber”) begin. The Philippine Retailers Association (PRA) noted that sales typically rise in September due to Filipinos’ tradition of gift-giving, along with retailers offering promotions and discounts.

Additionally, the Bangko Sentral ng Pilipinas (BSP) has projected August 2024 inflation to range between 3.2% and 4% (July: 4.4%), which is within the government’s 2% to 4% target range. However, local pump prices could dampen sentiment due to supply issues in the Middle East and a decline in Libya’s oil production caused by political unrest. Fuel price increases are projected as follows: gasoline by PHP 0.20 to PHP 0.45 per liter, diesel by PHP 0.00 to PHP 0.20 per liter, and kerosene by PHP 0.45 to PHP 0.55 per liter.

Resistance: 7,000 / 7,100

Support: 6,700 / 6,800

ANALYSIS

The PSEi slipped by 0.93% w/w to close at 6,897.54, snapping a three-week winning streak after failing to breach the 7,000 level. Despite the dip, the index remains above key moving averages (200-day, 100-day, and 50-day), with momentum indicators MACD and RSI lingering in the overbought territory.

A bearish tilt could see the PSEi retreat to immediate support levels at 6,800 and 6,700. However, if bullish sentiment prevails, the index may push beyond the 7,000 level and challenge the 7,100 resistance.

STOCK CALLS FOR THE WEEK

Union Bank of the Philippines, Inc. | LIGHTEN POSITIONS | CONSENSUS TARGET PRICE: PHP 47.56

The stock is currently in a pronounced downtrend, trading within a well-defined descending channel and below all major moving averages, indicating strong bearish momentum. The RSI at 40.52 suggests the stock is nearing oversold territory, which may lead to a short-term bounce. However, the overall trend remains downward. The next significant support level is at PHP 28.70, and unless a major catalyst emerges, the bearish trend is expected to persist.

Caution is advised for any long positions, and lightening up on the stock is recommended given its current trajectory. Reducing positions at current levels is advisable. If the stock continues its decline, the next support level is around PHP 28.00.

Robinsons Retail Holdings, Inc. | BUY | FMSEC TARGET PRICE: PHP 43.30

RRHI is exhibiting bullish momentum, having broken out above all key moving averages (20-day, 50-day, 100-day, and 200-day). This move is supported by increased trading volume, indicating growing investor interest. After trading within a range for most of the year, RRHI is now approaching resistance at PHP 38.00-39.00, which could signal a potential positive reversal if breached.

We view this level as a good buying opportunity and will watch closely to see if support at this area holds. Accumulating at current levels is advisable. Set stop limit orders below PHP 35.34 and take profits above PHP 43.70. For long-term investors, we have a fundamental target price of PHP 43.00 (+13.61% upside from recent close).

Jollibee Foods Corp. | BUY ON PULLBACKS | FMSEC TARGET PRICE: PHP 300.00

JFC’s bullish sentiment is further supported by a recent breakout from an inverse head-and-shoulders pattern, accompanied by strong trading volume. The stock’s upward momentum, bolstered by positive earnings and international strategic expansion plans, has pushed it above all key moving averages (20-day, 50-day, 100-day, and 200-day).

However, with the RSI indicating overbought conditions, a potential short-term consolidation may occur before further gains. We recommend taking advantage of downticks as they present a good buying opportunity. Accumulating JFC once it pulls back to PHP 245-250 is advisable. Set a stop-loss limit below 8% of the average cost and take profits above 15% of the average cost. For long-term investors, our fundamental target price is PHP 300 (+16.46% upside from the recent close).

KEY DATA RELEASES

1. US ISM Manufacturing for August 2024 on Tuesday, September 3, 2024 (estimates: 47.5; Aug 2024: 46.8)

2. US Initial Jobless Claims as of August 31, 2024, on Thursday, September 5, 2024 (previous: 231k)

3. US Change in Nonfarm Payrolls for August 2024 on Friday, September 6, 2024 (previous: 114k; estimates: 160k)

4. US Unemployment Rate as of August 2024 on Friday, September 6, 2024 (previous: 4.3%; estimates: 4.2%)

5. PH CPI y/y for August 2024 on Thursday, September 5, 2024 (estimates: 3.6%; previous: 4.4%)

6. PH Unemployment Rate as of July 2024 on Friday, September 6, 2024 (previous: 3.1%)