Stock Market Weekly: Waiting for interest rate decisions, data releases
We see sideways trading with an upward bias this week, especially with the anticipated influx of data that may influence trading.
![pse-aa-11](https://wealthinsights.metrobank.com.ph/app/uploads/2023/01/pse-aa-11.jpg)
WHAT HAPPENED LAST WEEK
Last week, the Philippine Stock Exchange index (PSEi) edged lower by 0.17% week-on-week (w-o-w) to close at 6,234.77 (-10.41 points) on a shortened trading week with tepid volumes. The market kicked off the week in the green, buoyed by the slower-than-expected November PH inflation print at 4.1% (consensus estimate: 4.3%; Bangko Sentral ng Pilipinas’ forecast: 4.0% to 4.8%) and despite the downgrade of Moody’s Investors Service for China’s sovereign bonds outlook to negative due to escalating debts.
On Thursday, the local bourse dropped by 1.13%, pulling down the main gauge w-o-w despite the drop in Philippine unemployment rate to 4.2% in October, the lowest since April 2005 and matching the level in November 2022. The weaker outlook on China’s economy led to a decline in Asian markets.
WHAT TO EXPECT THIS WEEK
This week, we expect the market to trade sideways with an upward bias as investors await multiple major data releases ahead of the yuletide season. We anticipate a spillover of positive sentiment following the US November jobs report and University of Michigan consumer survey data released last Friday which fueled optimism for a “soft landing” in the US.
Investors will also particularly be on the lookout for the interest rate decisions of both the BSP and the US Fed, with each central bank expected to keep policy rates steady in their respective meetings. Local fuel prices are also expected to drop by about PHP 1.40 to PHP 1.60 per liter of gasoline and PHP 1.80 to PHP 2.00 per liter of diesel.
Resistance: 6,400/6,600
Support: 6,200/6,000
ANALYSIS
The PSEi declined by -0.17% w-o-w after failing to break above the 100-day Moving Average (MA) resistance level. However, the PSEi will continue to hover above the 50-day MA, acting as its immediate support. If the PSEi pulls back further, it can retrace towards the next support levels around 6,200 and 6,000. Otherwise, if the PSEi resumes its rally, it can revisit the next resistance levels at 6,400 to 6,600.
STOCK CALLS FOR THE WEEK
Century Pacific Food Inc. BUY ON PULLBACKS | CONSENSUS TARGET PRICE: PHP 34.50
We continue to like Century Pacific Food Inc. (CNPF) as we see visible earnings growth drivers for CNPF, led by the ongoing decline in tuna prices and rosy prospects for the company’s new product launches in adjacent categories, such as meat alternatives and pet food. Since May 2023, the counter has sustained its uptrend and has since traded in an upward channel.
In terms of momentum indicators, the counter is already near overbought levels with the technical indicator RSI at around ~60. Hence, we believe that CNPF may retrace back to the lower trend line of its upward channel and the 100-day MA. For those planning to enter, accumulating once CNPF pulls back to its 200-day MA of PHP 28.05 is advisable. Set stop limit orders at 8% below average cost and take profits at 15% above average cost
ACEN Corp. BUY ON BREAKOUT | CONSENSUS TARGET PRICE: PHP 6.68
In conjunction with 28th Conference of Parties (COP28), ACEN Corp. (ACEN) announced its partnership with The Rockefeller Foundation’s Coal to Clean Credit Initiative (CCCI) and the Monetary Authority of Singapore (MAS) to pilot the use of transition credits to accelerate phasing out of ACEN’s 246 megawatt (MW) South Luzon Thermal Energy Corp. (SLTEC).
ACEN is currently trading near its multi-year low of PHP 4.55. Since forming the second peak of its double-top pattern, ACEN dropped by as much as 20%. ACEN is trading at near oversold conditions with its RSI at 33.6, hence, a potential rebound may ensue. Accumulate once it breaks above PHP 4.84. Set stop loss limits below PHP 4.45 and take profits around PHP 5.57
Manila Water Company Inc. BUY ON BREAKOUT | FMSEC TARGET PRICE: PHP 26.11
Cebu Manila Water Development Inc. (CMWD), a subsidiary of Manila Water Company Inc. (MWC), has terminated its contract for the supply of 35 million liters per day (MLD) of water to Metropolitan Cebu Water District (MCWD) effective December 1, 2023. MWC has been trading on a downward channel since its peak in early 2023.
Nevertheless, it has recently broken above its key moving averages (50-day and 100-day) and is currently poised to retest its 200-day MA. Accumulating once it breaks above 200-MA on strong volume is advisable. Set stop loss limits below 8% of average cost and take profits 15% above average cost
KEY DATA RELEASES
1) PH exports year-on-year (YoY) for October 2023 on Tuesday, December 12, 2023 (consensus estimate: -8.6%; September 2023: -6.3%)
2) PH imports YoY for October 2023 on Tuesday, December 12, 2023 (consensus estimates: -6.8%; September 2023: -14.7%)
3) US Consumer Price Index (CPI) YoY for November 2023 on Tuesday, December 12, 2023 (consensus estimates: 3.1%; October 2023: 3.2%)
4) US Federal Open Market Committee (FOMC) interest rate decision on Thursday, December 14, 2023 (consensus estimate: no change in rates)
5) BSP interest rate decision on Thursday, December 14, 2023 (consensus estimate: no change in rates)
6) US Initial Jobless Claims as of December 9, 2023, on Thursday, December 14, 2023 (prior: 220k)
7) US S&P Global preliminary manufacturing Purchasing Managers’ Index (PMI) for December 2023 on Friday, December 15, 2023 (consensus estimates: 49.3; November 2023: 49.4)
8) OF cash remittances YoY for October 2023 on Friday, December 15, 2023 (consensus estimates: 2.3%; September 2023: 2.6%).