Stock Market Weekly Update: Volatility in the horizon

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) jumped 28.65 points or 0.43% higher week-on-week to close at 6,759.90.

There was a relief rally on Wednesday and Thursday, but the index fell on Friday as a result of spillover effects from a selloff in Wall Street and uncertainty about Philippine elections.

As expected, the US Federal Reserve also raised borrowing rates by 50 basis points (bps).

EXPECTATIONS FOR THE WEEK

The market is expected to be volatile as investors digest early unofficial election results and await the release of more corporate earnings results for the first quarter of 2022.

Investors will also be looking out for the release of the of US inflation print for April 2022, the Morgan Stanley Capital International (MSCI) semi-annual index review, and the first quarter 2022 GDP.

Another local consideration is the possibility of that the Bangko Sentral ng Pilipinas may raise its key policy rate in June 2022 if the Philippine economy grew by 6-7% in the first three months of 2022.

STOCK PICKS FOR THE WEEK

SM Investments Corp. (SM) — BUY

The stock is trading at a steep discount compared to historical valuations, with momentum from 4Q 2021 to spillover well into the next 12 to 18 months as the economy reopens. SM remains to be in an advantageous position to leverage on this reopening and the country’s overall macroeconomic fundamentals.

We recommend accumulating shares around PHP 840 to PHP 870 and to set a stop limit below PHP 815. Take profit at PHP 960 to PHP 1,000. For long term investors, it should be at the PHP 1,267 level.

Nickel Asia Corp. (NIKL) — BUY

The adoption of electric vehicles especially in Europe and the US continue to rise along with the growth in stainless steel production and the incentives and penalty programs imposed by the European and US governments. This bodes well for the company.

We recommend accumulating shares up to PHP 7.70 and setting a stop limit below PHP 7.24. Take profit at around PHP 8.50 to PHP 9.50.

Semirara Mining and Power Corp. (SCC) — BUY

The company is expected to sustain its earnings growth this year as coal sales volume and energy prices remain elevated due to the ongoing global supply disruptions and surge in demand.

Our recommendation is to accumulate shares at current prices until PHP 27.50 and set a cut loss limit below PHP 26.50. You can take profit at around PHP 31 to PHP 33.

PSEI TECHNICAL ANALYSIS

There is still that bearish momentum if you look at the Moving Average Convergence Divergence (MACD), a measure of bullishness or bearishness in the price trends of stocks. The PSEi rebounded last week but failed to stay above the 6,800 level. The volume on down days were higher than the volume on up days, indicating that the bears are still in control.

Resistance: 6,800 / 7,200
Support: 6,600 / 6,400

TRADING PLAN

It is advisable to continue setting stop orders to manage your risk. We see support levels at 6,600 and 6,400. Breakout traders can accumulate once market returns above 7,200.

KEY DATA RELEASES

Wednesday, March 11, 2022
– US Inflation for April 2022 (8.1% est., 8.5% in Mar2022)
– Corporate Earnings: ACEN Corp. (ACEN)
– Corporate Earnings: SM Investments Corp. (SM)
– Corporate Earnings: Robinsons Land Corp. (RLC)
– Corporate Earnings: Monde Nissin Corp. (MONDE)
– Corporate Earnings: LT Group, Inc. (LTG)

Thursday, March 12, 2022
– Philippine first quarter 2022 GDP (6.2% est., 7.8% in 4Q 2021)
– Corporate Earnings: Ayala Land, Inc. (ALI)

Friday, March 13, 2022
– Corporate Earnings: Ayala Corp. (AC)