Stock Market Weekly: Sideways with a slight upside bias

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) rose by 1.25% week-on-week (w/w) to close at 7,022.85 (+86.76 points). Despite some late profit-taking activities, the local bourse managed to end a volatile week in the green, finally closing above the elusive 7,000 level on the back of reinvigorated global risk-on sentiment and continued appreciation of the peso.

On the foreign front, consensus expectations of a 25-basis-point (bp) rate cut by the Fed rose to a 100% chance after US inflation came in within forecasts at 2.5%. Meanwhile, the European Central Bank’s (ECB) 25-bp rate cut to bring key rates to 3.5% also fueled bullish sentiment.

WHAT TO EXPECT THIS WEEK

This week, we expect the index to trade sideways with a slight upward bias amid a lack of catalysts to reverse the market’s bullish mood. With consensus forecasting a 100% chance of a 25-bp rate cut by the US Fed, investors will look more toward the Fed’s outlook on the long-term direction of interest rates and the US economy during the FOMC meeting on Thursday.

On the local front, another round of pump price rollbacks may further fuel gains with gasoline, diesel, and kerosene prices expected to decline by PHP 0.90 to PHP 1.20/liter, PHP 1.30 to PHP 1.60/liter, and PHP 1.50 to PHP 1.65/liter, respectively. However, persistent profit-taking activities, as seen in the prior weeks, may cap upside action.

Resistance: 7,140 / 7,300

Support: 7,000 / 6,800

ANALYSIS

The Philippine Stock Exchange Index (PSEi) increased by 1.25% over the week, closing at 7,022.85 (up 86.76 points). The index had a volatile week but ended positively, finally closing above the important 7,000 level — the first time it has done so since January 2023. The market generally remains optimistic, with the index trading above key indicators. However, there are signs, as indicated by the RSI technical indicator, that some investors are starting to sell, which could indicate a short-term weakening of the market. If the positive mood continues, the index might test the 7,140 level. However, if investor sentiment turns negative, the PSEi could fall back below 7,000.

STOCK CALLS FOR THE WEEK

Security Bank Corp. | TRAILING STOPS | CONSENSUS TARGET PRICE: PHP 91.30

Security Bank Corp. (SECB) stock price has increased by more than 30% after it was removed from the MSCI Philippines Small Cap Index on August 30, 2024. The stock’s rapid rise suggests it might soon experience a price drop as investors sell to lock in their profits. The stock has broken through a long-term downward trend and is now trading above important price levels, indicating strong performance. However, technical indicators suggest the stock might be overvalued at its current price. This situation often leads to investors selling their shares to take profits, which can cause the stock price to fall. For traders who bought the stock on August 30, 2024, it is recommended to use “trailing stops” to protect their gains. Investors looking to buy the stock might want to wait and see if the price drops to around PHP 70-72 before purchasing, as this price range might prove to be a level where the stock price stabilizes.

Citicore Renewable Energy Corp. | BUY | CONSENSUS TARGET PRICE: PHP 3.70

The Initial Public Offering (IPO) of Citicore Renewable Energy Corp. (CREC) took place on June 7, 2024, with an offer price of PHP 2.70 per share. Since then, the stock has rallied by as much as 22%, reaching PHP 3.30. Following a post-IPO consolidation, CREC has demonstrated a bullish trend, evidenced by the formation of an ascending triangle pattern. This pattern, characterized by a horizontal upper trend line and a rising lower trend line, suggests a potential continuation of the uptrend. Accumulating CREC at current levels is advisable. Take profits 15% above your average cost and set stop loss limits 8% below your average cost.

Puregold Price Club, Inc. | BUY ON PULLBACKS | CONSENSUS TARGET PRICE: PHP 38.99

The August 2024 inflation print, which eased to 3.3% y/y (Jul 2024: 4.4%; Aug 2023: 5.3%; estimates: 3.6%), near the lower end of the Bangko Sentral ng Pilipinas’ (BSP) monthly forecast range of 3.2% to 4.0%, reduces inflationary pressures on households with low to moderate incomes who happen to be PGOLD’s target market. Meanwhile, the Philippine peso’s two-week winning streak against the greenback (closed at PHP 56.566 on September 5, 2024) provides a favorable outlook for S&R’s margins, whose products are sourced 70% from abroad. Accumulating once PGOLD pulls back near its 20-day MA (PHP 27.15) to PHP 26.35 is advisable. Take profits 15% above your average cost and set stop loss limits 8% below your average cost.

KEY DATA RELEASES

1. PH Cash Remittances for July on Monday, September 16, 2024.
2. US Retail Sales for August on Tuesday, September 17, 2024 (previous: 1.0%; estimates: 0.3%).
3. US Fed Interest Rate Decision on Thursday, September 19, 2024 (previous: 5.50%; estimates: 5.25%).