Stock Market Weekly: Simmering Middle East geopolitical tensions to weigh on local bourse 

WHAT HAPPENED LAST WEEK

Last week, the Philippine Stock Exchange index (PSEi) slipped by -1.28% week-on-week (w-o-w) to close at 6,659.39, amid the shortened trading week. The local bourse traded in the red for the whole week as the Bangko Sentral ng Pilipinas (BSP) extended its hawkish pause and raised its 2024 risk-adjusted inflation forecast to 4% from 3.9% previously.

Furthermore, investors considered the Philippine unemployment rate for February at 3.5% (January 2024: 4.5%). On the international front, the hotter-than-expected US core Consumer Price Index (CPI) for March, which accelerated by 0.4% m-o-m (February 0.3% m-o-m), further weighed down the market. In addition, the trilateral summit of US, Japan, and the Philippines discussing maritime security in the West Philippine Sea, amid increased aggression from China, did not help market sentiment.

WHAT TO EXPECT THIS WEEK

This week, we expect the market to trade with a downward bias as the heightened geopolitical tension in the Middle East is expected to weigh on the local bourse. Investors will continue to monitor the developments in the Middle East as conflict escalated over the weekend after Iran launched unprecedented drone attacks on Israel.

The market will also keep an eye on major economic data such as the Philippine’s overall balance of payments (BOP) and overseas cash remittances (estimates: 2.4%; January 2024: 2.7%). Moreover, local pump prices are expected to increase by as much as PHP 0.80 to PHP 1.00/liter of diesel and PHP 0.85 to PHP 1.00/liter of kerosene.

Resistance: 6,700/6,800

Support: 6,500/6,400

ANALYSIS

The PSEi retreated by -1.28% w-o-w to close at 6,659.39. The market broke below the 6,700 to 7,000 range as bullish momentum slowed. The PSEi is looking to retest its next support levels as the technical indicator RSI is hovering near-oversold levels at 35.40, with the MACD falling below zero and signal line.

A break below the next key support around 6,500 may signal a bearish reversal for the index. If this ensues, the market can retrace the next support levels at 6,500 to 6,400. If the bulls dominate, the PSEi could once again retest the next resistance levels around 6,700 and 6,800.

STOCK CALLS FOR THE WEEK

SM Prime Holdings, Inc. | BUY | FMSEC TARGET PRICE: PHP 35.40

The recent price downturn of SMPH can provides opportunistic accumulation targets at key long-term support levels. Currently, SMPH is trading below key moving averages (50-day, 100-day, and 200-day) and near oversold levels with RSI at ~38.

Observe if SMPH reacts to its 2022 low and support at PHP 29.75 for a potential bounce play. As such, it is advisable to accumulate on further pullbacks for a better risk-reward ratio. Accumulating once SMPH reaches long-term support levels at around PHP 29.75 is advisable. Set stop limit orders below PHP 27.30 and take profits at around PHP 34.20. For long-term investors, we have a fundamental target price of PHP 35.40 (+16.45% from the last closing price).

Universal Robina Corp. | STOP-LOSS | FMSEC Target Price: PHP 155.0

URC has formed a head and shoulders pattern since December 2023, which signaled an impending downward momentum that is currently in effect. Looking at momentum indicators, the stock is bearish in both the short- and long-term, as it is trading below all key moving averages.

Additionally, the signal line is poised to cross the MACD line, indicative of potential further retests of deeper support levels. Given these signals, we advise caution regarding URC in the near term and suggest waiting for signs of reversal before increasing exposure. Lightening positions at current levels is advisable. Should the downtrend continue, the next support level is at PHP 95.0.

Jollibee Foods Corp. | BUY | FMSEC Target Price: PHP 300.0

JFC broke below its support at PHP 254.0, declining by 16%. It is currently trading below key moving averages (50-day, 100-day, and 200-day) and touched oversold levels last week. The latest price volatility can provide attractive entry points as JFC approaches a long-term support at around PHP 225.0.

Thus, it is advisable to accumulate on further pullbacks. Accumulating on pullbacks near long-term support levels at around PHP 225 is advisable. Set stop limit orders below PHP 207.0 and take profits at around PHP 258.0. For long-term investors, FMSec has a fundamental target price of PHP 300 (+27.12% from the last closing price).

KEY DATA RELEASES

1.) Overseas Cash Remittances y-o-y for February 2024 on Monday, April 15, 2024 (estimates: 2.4%; Jan 2024: 2.7%)

2.) Overall Balance of Payments (BOP) for March 2024 on Monday, April 15, 2024 (February 2024: -USD 196 million)

3.) US Initial Jobless Claims as of April 6, 2024, on Thursday, April 18, 2024 (previous: 211k)