Stock Market Weekly: Sideways to a slight downward bias

WHAT HAPPENED LAST WEEK

Last week, the Philippine stock market ended at 6,780.13, up 103.48 points (+1.55% w/w), after a mixed trading period shaped by local and global developments. Early gains were driven by opportunistic buying and optimism following dovish statements from the Bangko Sentral ng Pilipinas (BSP) keeping the possibility of rate cuts on the table, which lifted the market from oversold levels.

Investors also digested the conclusion of earnings season, which showed mostly stable corporate performance and aligned with market expectations. A strong midweek rally saw advances across all sectors, buoyed by heavyweights and renewed risk appetite.

However, momentum waned as profit-taking set in amid concerns over the peso’s depreciation to PHP 59.00 against the dollar, its lowest since Oct 2022, stoking inflation fears and damping sentiment. On the global front, geopolitical risks escalated with Russia launching missile strikes on Ukraine in retaliation for an earlier attack, further adding to market uncertainty.

WHAT TO EXPECT THIS WEEK

This week, the local bourse is expected to trade sideways with a slight downward bias due to the absence of fresh catalysts to shift sentiment. Trading activity is likely to pick up early in the week, as the MSCI semi-annual rebalancing changes will be made available as of the close of 25 Nov 2024 (effective 26 Nov 2024), where the Philippines experienced a slight country down-weight (-0.004%).

Market participants will mainly look to the US economy for direction, particularly the Federal Open Market Committee (FOMC) minutes and the US Core PCE Price Index for Oct 2024. These may offer insights into the long-term trajectory of policy rates. Meanwhile, foreign trading activity could be subdued towards the end of the week due to the US Thanksgiving holiday on 28 Nov 2024.

Resistance: 6,800 / 6,700

Support: 6,600 / 6,700

ANALYSIS

The PSEi snapped its 4-week losing streak, as it recovered from oversold conditions, rising by 1.55% w/w to close at 6,780.13 (+103.48). The local bourse retested the 7,000 levels before closing lower late in the week. It is currently establishing a bottom near key levels around the 200-MA with momentum indicators showing support for a short-term recovery.

STOCK CALLS FOR THE WEEK

AREIT Inc. | SELL | Consensus Target Price: PHP 32.00

With the changes to the MSCI Global Indices, AREIT is expected to see significant buying volume due to rebalancing activities. We recommend using this as an opportunity to take profits as upward pressure materializes. Set stop-limit orders 8% below and take profits 15% above your average cost. Long-term investors may continue to hold.

Robinsons Retail Holdings, Inc. | BUY | FMSec Target Price: PHP 43.00

RRHI is expected to experience heavy selling pressure due to MSCI-related portfolio adjustments. This creates a buying opportunity near its support area. Accumulating RRHI today is advisable. Set stop-limit orders 8% below and take profits 15% above your average cost.

Century Pacific Food, Inc. | TRAILING STOPS | FMSec Target Price: PHP 41.00

The stock faces resistance near PHP 42.00, close to the target price of PHP 41.00. Momentum indicators suggest further downside. Profit-taking and setting trailing stops to protect gains are recommended. For accumulation, consider re-entry near the 200-MA at PHP 36.50.

KEY DATA RELEASES

1. PH Budget Balance for Oct 2024 – Wed, 27 Nov 2024 (prev.: PHP -273.3bn)
2. US Core PCE Price Index y/y for Oct 2024 – Wed, 27 Nov 2024 (est.: 2.7%, prev.: 2.7%)
3. US Initial Jobless Claims (as of 23 Nov 2024) – Wed, 27 Nov 2024 (prev.: 213k)
4. PH Money Supply M3 SRF y/y for Oct 2024 – Fri, 29 Nov 2024 (prev.: 5.4%)
5. PH Bank Lending y/y for Oct 2024 – Fri, 29 Nov 2024 (prev.: 13.2%)