Stock Market Weekly: Sideways trading, cautiousness welcome 2023
The exuberance of the holidays won’t necessarily spread to the market in its opening week as cautiousness remains as people continue to be worried about a recession and the spread of COVID outside China.
WHAT HAPPENED LAST WEEK
Last week, the Philippine Stock Exchange index (PSEi) marginally inched higher by 0.38% week-on-week to close at 6,566.39 (+25.36 points). The market saw thin trade volumes last week amid the shortened trading week and holiday festivities.
The index managed to edge higher in the first two trading days amid window dressing activities but closed flat on Thursday despite the broad sell-off in US markets. Investors also digested Bangko Sentral ng Pilipinas’ (BSP) headline inflation forecast of 7.8% to 8.6% for December 2022 due to higher electricity rates and elevated prices of agricultural goods.
Top index performers were Converge (CNVRG) (+13.4%), PLDT (TEL) (+5.4%), and Meralco (MER) (+4.1%), while index laggards were Megaworld (MEG) (-6.1%), Metrobank (MBT) (-4.1%), and SM Investments (SM) (-2.8%). The index breadth was neutral with 15 gainers versus 15 losers. The average daily turnover value was PHP 4.1 billion. Foreigners were net buyers by PHP 39.8 million.
WHAT TO EXPECT THIS WEEK
We expect the market to trade sideways in the opening week of 2023 as investors are likely to remain cautious with the ongoing fears of recession and the spread of COVID-19 cases outside of China. Investors will also be monitoring the following:
(i) developments on the ongoing Philippine airspace outage over the weekend which left thousands of passengers affected amid peak travel season, and
(ii) price hikes on oil products, with gasoline set to increase by PHP 2.9/liter, diesel by PHP 2.10/liter, and kerosene by PHP 3.05/liter today, January 3, 2023.
In addition, the results of key data points such as the Purchasing Managers Index (PMI) and inflation will likely influence the tone of the first trading week of the year.
STOCK CALLS FOR THE WEEK
Citicore Energy REIT Corp. (CREIT) — BUY
Its recent pullback to its support level of PHP 2.19 offers opportunity for aggressive short-term traders/ bargain hunters to take advantage of the stock to ride the probable bounce. On fundamentals, as mentioned in our company report, CREIT offers investors a niche exposure to the country’s growing renewable energy sector with a risk-to-reward profile similar to the REIT asset class.
Compared to listed peers, CREIT’s metrics are superior – with a weighted average lease expiry (WALE) of 20.8 years, 1:1 asset-to-tenant ratio, and 100% occupancy. Moreover, CREIT’s unique revenue model shields the company from any downside risks owing to potential operational losses from tenants’ solar power plants.
Hence, CREIT can provide guaranteed revenues and dividends to unitholders like bonds. Therefore, we view CREIT as a beneficiary of the central bank’s pivot and investors can lock-in higher yields at current prices. Accumulating CREIT at current levels is advisable. Set stop limit orders below PHP 2.08. Take profit at around PHP 2.50 to PHP 2.60.
Raslag Corp. (ASLAG) — SELL ON BREAKDOWN
RASLAG Corp.’s (ASLAG) share price hit all-time lows this month after trading to as low as PHP 1.56 last December 19, 2022. ASLAG’s share price fell below its trading range, suggesting that ASLAG is entering a new downtrend. The measured price target after ASLAG broke down is from PHP 1.40 to PHP 1.43. According to Technical Insight, our automated chart pattern recognition program, lightening positions once ASLAG breaks below PHP 1.60 is advisable. Next support levels are at PHP 1.40/PHP 1.20.
Now Corp. (NOW) — SELL ON BREAKDOWN
Now Corp.’s (NOW) share price has rallied by 59.2% last December on news that the company secured a grant funding from the United States Trade and Development Agency (USTDA) for technical assistance to advance critical digital infrastructure projects in the Philippines. After the sharp rise, it is now showing signs of peaking. While NOW is on a short-term uptrend, there is a high probability that the counter will pull back, especially given the overbought readings. Taking profit once NOW breaks below ~PHP 1.90 is advisable. Next support levels are at PHP 1.60/PHP 1.50.
PSEI TECHNICAL ANALYSIS
After the retest on the 100-day moving average price (MA) / 6,400 level, the PSEi quickly rebounded and is now settling above the 200-day MA / ~6,529. We believe that a break above 6,600 would propel the market to retest 6,800.
Look to accumulate once the market breaks above the 6,600 level. Set stop limit orders below 6,300.
KEY DATA RELEASES
Tuesday, January 3, 2023
– PH manufacturing PMI for December 2022 (November 2022: 52.7)
– US manufacturing PMI for December 2022 (consensus estimate is 46.2; actual for November 2022: 46.2)
Wednesday, January 4, 2023
– PH inflation for December 2022 (BSP estimate: 7.8%-8.6%; actual for November 2022: 8.0%)
Friday, January 6, 2023
– US jobs report for December 2022 (consensus estimate is 200,000; actual for November 2022: 263,000)