WHAT HAPPENED LAST WEEK

Last week, the local bourse endured volatile sessions to inch up by only 0.09% week-on-week (w-o-w), closing at 6,919.59 (+6.38 points). The market started the week in negative territory, ahead of the effectiveness of the changes in the MSCI global indices as well as releases of major corporate earnings and economic data.

Investors digested weaker-than-expected US 4th quarter 2023 GDP at 3.2% (consensus: 3.3%) and US 4th quarter 2023 core PCE price index registering hotter at 2.1% (consensus: 2.0%). Gains came in at the latter part of the week as passive and active funds aligned their portfolios following a 0.002% Philippines country weight upgrade in the MSCI Emerging Market Index. The PSEi managed to break the 7,000 mark on Friday, only to close flattish w-o-w.

WHAT TO EXPECT THIS WEEK

This week, we expect the PSEi to trade sideways with a downward bias ahead of major economic data releases and the anticipated remarks from several US Fed officials. Investors will price in the February 2024 local inflation, which is expected to come in higher at 3.1% from January 2024’s 2.8%.

In addition, the Philippine unemployment rate in January and US unemployment rate in February will also be released this week, with consensus estimates of 3.2% (December: 3.1%) and 3.7% (January: 3.7%), respectively. A number of US Fed officials, including Chairman Jerome Powell, will also give guidance on the direction of interest rates and the US economy.

On the commodities front, market participants are pricing in rising oil prices, with Brent and West Texas Intermediate (WTI) hovering again at USD 84/barrel and USD 80/barrel, respectively. These are expected to result in mixed pump price movements, with diesel and kerosene rolling back by PHP 0.30/PHP 0.60 and PHP 0.30/PHP 0.50, respectively. Meanwhile, gasoline pump prices are seen to rise by PHP 0.20/PHP 0.45 per liter next week.

Resistance: 7,000/7,100

Support: 6,900/6,700

ANALYSIS

The Philippine Stock Exchange index (PSEi) ended the week flat at 6,919 (+6.38 points, +0.09%). The benchmark index started the volatile week in the red but recovered at the latter part of the week amid MSCI quarterly rebalancing, trading above the 7,000 resistance level.

However, the rally was not sustained as it was limited by role reversal around the 7,000 level. Nevertheless, the PSEi is still trading above key moving averages (50-day, 100-day, and 200-day) with the technical indicators RSI and MACD still trending upwards.

If the bulls continue to dominate, the PSEi could once again retest the next resistance levels around 7,000 and 7,100. Otherwise, if the bears take over, it can retrace next support levels at 6,900 to 6,700.

STOCK CALLS FOR THE WEEK

SM Investments Corp. | BUY | CONSENSUS TARGET PRICE: PHP 1,124.00

Based on full-year 2023 results, SM attributes its growth to the healthy spending patterns of Filipino consumers in both essential and discretionary purchases. In its 2023 earnings briefing, SM announced that it is continuously banking on the foreseen expansion of middle-class spending, as it opened 49 new stores in 2023.

SM formed an ascending triangle beginning December 2023. At current levels, it provides an opportunity to enter as it nears the peak of the chart pattern. In terms of price movement, it is currently hovering above all key moving averages (50-day, 100-day, 200-day) with indicators (RSI, MACD) trending upwards, signifying a bullish momentum for the stock. Accumulating SM at current levels is advisable. Set stop limit orders at 8% below average cost and take profits.

DigiPlus Interactive Corp. | BUY | NO CONSENSUS TARGET PRICE

In a memo released by Philippine Amusement and Gaming Corp. (PAGCOR) in September 2023, PAGCOR’s total share of gaming revenues for E-bingo, E-casino, and virtual sports will be reduced to 30% by January 2024.

Currently, PAGCOR receives 42.5% for E-bingo and 41.5% for E-casino games and virtual sports betting. The reduction in gaming fees will usher significant margin expansion. As it stands, franchise fees and taxes make up 57% of PLUS’s total costs. PLUS has broken out of its channeling flag pattern after getting out of its three-month pennant continuation pattern to post a new 52-week high at PHP 8.47.

The counter is currently above key moving averages (50-day, 100-day, and 200-day) with RSI still indicating upward momentum at 51. Thus, it is advisable to accumulate at current levels. Entering at current levels after breaking out of the flag pattern at PHP 8.05 is advisable. Set stop limit orders below PHP 7.40 and take profits at around PHP 9.25.

Filinvest REIT Corp. | TRAILING STOPS | CONSENSUS TARGET PRICE: PHP 3.88

As we have anticipated, FILRT’s share price rallied on the back of the prospect of a U Fed pivot which benefits yield-sensitive counters. Furthermore, FILRT’s 2024-2026 investment strategy provided optimism on its growth trajectory given its plan to improve its occupancy level while diversifying its tenant profile.

Nevertheless, FILRT’s 4th quarter 2023 dividend per unit was 5.6% lower than the previous quarter at PHP 0.071/share. This dividend cut signals a challenging financial situation for the company. Currently, FILRT is trading above the 50-day and 100-day moving averages. However, it has been hovering near overbought levels since January 2024.

With this, we expect price weakness to ensue going into the ex-dividend date on March 8, 2024. For traders with profitable positions, it is advisable to implement trailing stops.

KEY DATA RELEASES

1.) PH CPI y-o-y on Tuesday, March 5, 2024 (previous: 2.9%; estimates: 3.1%)

2.) US ISM Services PMI on Tuesday, March 5, 2024 (estimates: 52.9)

3.) US Job Openings in January 2024 on Wednesday, March 6, 2024 (estimates: 8.9m)

4.) PH Industrial Production y-o-y on Thursday, March 7, 2024 (estimates: 1.4%)

5.) US Initial Jobless Claims as of March 2, 2024 on Thursday, March 7, 2024 (estimates: 217k)

6.) PH Unemployment rate in January 2024 on Friday, March 8, 2024 (December: 3.1%; estimates: 3.2%)

7.) US Unemployment rate in February 2024 on Friday, March 8, 2024 (January: 3.7%: estimates: 3.7%)