Stock Market Weekly: Relief may be in sight

WHAT HAPPENED LAST WEEK

Last week, the main index slipped by 0.88% week-on-week (WoW) to close at 6,296.20, as concerns over the potential GDP growth shortfall dampened sentiment. Trading turnover remained subdued, with foreign net selling and negative market breadth reflecting cautious sentiment amid global uncertainties and local economic headwinds.

On the global front, market optimism followed the inauguration of the new US President Donald Trump, particularly due to his initial statements advocating for less-than-expected tariffs on China to ease trade tensions. However, this did not resonate locally, as National Economic and Development Authority (NEDA) Secretary Balisacan cautioned that 4Q 2024 GDP growth might fall short of expectations, citing typhoon-induced agricultural damage and operational disruptions.

WHAT TO EXPECT THIS WEEK

This week, we anticipate some relief for the local bourse following three consecutive weeks of losses, as the market looks for direction amid lingering risk-off sentiment. Trump’s more amicable approach to China in terms of tariffs could help ease global trade tensions and bolster investor confidence, potentially shifting sentiment towards a risk-on stance.

Meanwhile, local investors may have already priced in the potential GDP miss, with full year 2024 growth expected at 5.8% (FY 2023: 5.5%), falling below the government’s target of 6.0% to 6.5%. Moreover, the Federal Open Market Committee’s (FOMC) anticipated decision to hold rates in its first policy meeting on January 30, 2025, could influence the direction locally.

Finally, trading activity is likely to pick up following the Philippine Stock Exchange’s (PSE) announcement of changes to the main index, with CBC and AREIT being added, while WLCON and NIKL are set to be excluded, effective February 3, 2025.

Resistance: 6,400 / 6,600

Support: 6,000 / 6,200

ANALYSIS

The Philippine Stock Exchange index (PSEi) slid below its 6,400 support, ending the week down 0.88% WoW at 6,296.20 (-55.92 points). It trades below key moving averages (20-day, 50-day, 100-day, and 200-day), reflecting sustained bearish sentiment. Momentum indicators show a mixed picture as the RSI indicator has recovered from oversold levels but remains below neutral, while MACD stays in bearish territory with no signs of a reversal. The index seems on track to retest its key support at 6,200 before any potential rebound. With the risk-reward skewed to the downside, accumulating near support is advisable.

STOCK CALLS FOR THE WEEK

Emperador Inc. (EMI) | BUY ON SUPPORT | FMSEC TARGET PRICE: PHP 16.20

EMI is consolidating between PHP 17.85 to PHP 18.20, currently trading above 20-day and 50-day moving averages (MAs) but below 100-day and 200-day MAs, signaling a short-term upward momentum of the stock, but the long-term trend remains bearish. The MACD indicator is slightly above the signal line, while the RSI rose from oversold territory, indicating a potential recovery of the stock. Accumulating EMI around the support level at PHP 17.85 is advisable. Take profits at PHP 20.53 and set stop-loss limits at PHP 16.42.

Universal Robina Corp. (URC) | LIGHTEN POSITIONS | FMSEC TARGET PRICE: PHP 128.00

URC slipped to its lowest stock price level since 2012, currently trending below all key moving averages (MAs) (20-day, 50-day, 100-day, and 200-day), indicating a bearish trend. The MACD is below the signal line, while the RSI is in the oversold zone suggesting a continuation of the downtrend. Lightening positions is advised.

Jollibee Foods Corp. (JFC) | BUY | CONSENSUS TARGET PRICE: PHP 330.00

JFC’s share price has been trending downwards after its failed breakout from its resistance level of PHP 279.80. JFC is currently trading below its 20-day, 50-day, 100-day, and 200-day moving averages (MAs), which is the reason for its pullback toward its key support level. On momentum indicators, its MACD and RSI are both below neutral levels, supporting its recent strong downward momentum.

Therefore, given its most recent close at PHP 242.60, it is possible for a reversal soon due to its recent close above the key support level. Accumulating JFC at current levels between PHP 245.00-PHP 252.00 is advisable. Set stop-limit orders at PHP 226 and take profits at PHP 285. For long-term investors, FirstMetroSec has a fundamental target price of PHP 330.00.

KEY DATA RELEASES

1. Philippine Gross Domestic Product (GDP) year-on-year (YoY) for full year 2024 on Thursday, January 30, 2025.

2. US FOMC Rate Decision on Thursday, January 30, 2025.

3. US GDP Annualized quarter-on-quarter for 4Q 2024 on Thursday, January 30, 2025.

4. PH Bank Lending YoY for December 2024 on Friday, January 31, 2025.

5. PH Money Supply M3 SRF YoY for December 2024 on Friday, January 31, 2025.

6. US Core PCE Price Index YoY for December 2024 on Friday, January 31, 2025.