Stock Market Weekly: Is Christmas cheer coming soon?

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) rose by 1.39% week-on-week to close at 6,580.12 (+90.47 points). The market initially fell as investors evaluated the Development Budget Coordination Committee’s (DBCC) downward revision of their 2023 local GDP forecast to 6-7% from the 6.5-8.0% range, as well as their higher estimate of 2022’s inflation rate at 5.8% from 4.5-5.5%.

Nonetheless, the local bourse surged afterwards, despite the hotter-than-expected November 2022 local inflation print at 8.0% (consensus estimate: 7.8%; Bangko Sentral ng Pilipinas’s (BSP) forecast: 7.4% to 8.2%) and BSP’s wider balance of payments (BOP) deficit expectations for 2022 and 2023. The loosening of COVID-19 restrictions in China as well as the strengthening of the peso may have lifted investor sentiment.

Top index performers were Wilcon Depot Inc. (WLCON) (+5.3%), International Container Terminal Services Inc. (ICT) (+3.2%), and PLDT (TEL) (+1.8%), while index laggards were Monde Nissin (MONDE) (-11.5%), Globe Telecom (GLO) (-8.1%), and Aboitiz Equity Ventures (AEV) (-6.1%). The index breadth was negative with 7 gainers versus 22 losers. The average daily turnover value was PHP 5.3 billion. Foreigners were net sellers by PHP 1.5 billion.

WHAT TO EXPECT THIS WEEK

We expect the market to trade sideways with an upward bias as investors await multiple major data releases before the holidays. Investors will be keen on the interest rate decisions of the BSP and the US Fed, with each central bank expected to increase interest rates by 50 basis points (bps), lower than the 75-bp rate hike from their prior meetings.

STOCK PICKS FOR THE WEEK

Universal Robina Corp. (URC) — BUY

URC is on the verge of breaking above its seven-year downtrend line. Given how long the downtrend line has existed, a break above the downtrend line could propel the stock to a sharp rally, specifically towards PHP 170.00 and PHP 200.00. Regarding fundamentals, we retain our demand assumptions amid the high inflation environment, given URC’s diversified portfolio offerings (across ASEAN markets) and given that it is a downtrading beneficiary (catering to low-to-mid-income households). Margins should continue to recover as commodity prices continue to ease, price increases are likely to remain sticky, and the Philippine peso is likely to stabilize.

Post the Oceania divestment, URC enjoys an unlevered balance sheet with a net cash position of PHP 2.1 billion as of September 2022. This enables URC to be on the lookout for M&A opportunities, which have been a share price catalyst in the past. Accumulating once URC breaks above PHP 140.00 is advisable. Set stop limit orders below PHP 130.00. Take profit at around PHP 170.00/PHP 200.00. For long-term investors, our target price for URC is PHP 150.00 (+9.8% upside from recent close).

Century Pacific Food Inc. (CNPF) — BUY

CNPF formed a diamond bottom, a long-term bullish reversal pattern. The measured price target after CNPF broke out of its pattern is PHP 30.25 to PHP 31.00, according to Technical Insight, our automated chart pattern recognition program. Regarding fundamentals, we like CNPF due to the company’s: (i) diversified product portfolio that is well positioned to capture changing consumer preferences and weather macroeconomic headwinds; (ii) pricing power can partially cushion cost pressures; (iii) OEM export business that mitigates weak currency impact; and (iv) robust operating cash flows and strong balance sheet. Accumulating once CNPF breaks above PHP 25.00 is advisable. Set stop limit orders below PHP 23.50. Take profit at around PHP 28.00/PHP 30.00. For long-term investors, our target price for CNPF is PHP 29.00

Robinsons Land Corp. (RLC) — BUY

After a recent rally, RLC is looking to retest its immediate resistance level of PHP 17.00 and the 100-day MA at around PHP 17.03. RLC tracked the bullish price action of the PSEi amid the net foreign buying and the appreciation of the Philippine peso against the US Dollar. The stock is now trading above the 50-day moving average price. The MACD technical indicator also confirms the bullish momentum.

However, we are of the view that a clear bullish signal will be indicated by a break above the 100-day MA (~PHP 17.03) especially as it acted as strong support around August 2022. Accumulating once RLC breaks above the 100-day MA is advisable. Set stop limit orders below PHP 16.40 and take profits at around PHP 18.00/PHP 19.00.

PSEi TECHNICAL ANALYSIS

Resistance: 6,600

Support: 6,400

The market managed to rebound last week, with the 6,400-level acting as a support. The PSEi now must break above 6,600 in the next trading sessions for the short-term uptrend to remain intact.

TRADING PLAN

Look to accumulate at current levels. Set stop limit orders below 6,300.

KEY DATA RELEASES

Tuesday, December 13, 2022
– Philippine exports year-on-year (YoY) for October 2022 (consensus estimate is 5.5%, while the actual for September 2022 is 7.0%)
– Philippine imports YoY for October 2022 (consensus estimate is 15.3%, while the actual for September 2022 is 14.1%)
– US Consumer Price Index (CPI) YoY for November 2022 (consensus estimate is 7.3%, while actual for October 2022 is 7.7%)

Thursday, December 15, 2022
– US Federal Open Market Committee (FOMC) interest rate decision (consensus estimate: 50-bp rate increase)
– BSP interest rate decision (consensus estimate: 50-bp rate increase)

Friday, December 16, 2022
– US S&P Global preliminary manufacturing Purchasing Managers’ Index (PMI) for December 2022 (consensus estimate is 47.9, while actual for November 2022 is 47.7)

Saturday, December 17, 2022
– OF cash remittances YoY for October 2022 (actual for September 2022 is 3.8%)

Announcement: Today’s Weekly Market Blueprint (December 12, 2022) will be our last for the year. We would like to thank you, our dear clients and partners, and wish you the best of luck in 2023. We will resume publication on January 3, 2023 (Tuesday).