Stock-Market Outlook

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Last week

Share prices gained last week after the government announced that the May inflation print was still within its target range.

The benchmark Philippine Stock Exchange index gained 85.66 points to close at 6,518.76 points. 

The main index was up almost all-week long, except on Tuesday, when it gave up some 84.32 points. 

“However, trading has been tepid implying that many are still on the sidelines amid market uncertainties,” said Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financials Inc.

Average value of trade reached only P4.67 billion, despite the initial public offering of Citicore Renewable Energy Corp. 

Foreign investors, who took 47 percent of the trades, were net sellers at P2.09 billion. 

Other sub-indices ended mixed. The broader All Shares index was up 28.06 points to close at 3,491.93, the Financials index gained 81.57 to 2,006.42, the Industrial index shed 22.72 to 9,116.09, the Holding Firms index lost 93.39 to 5,661.14, the Property index rose 71.90 to 2,474.75, the Services index climbed 25.98 to 2,012.61 and the Mining and Oil index fell 54.76 to 9,186.38. 

For the week, losers edged gainers 118 to 99 and 35 shares were unchanged. 

Top gainers were Centro Escolar University, Manila Broadcasting Co., Philippine Realty and Holdings Corp., Liberty Flour Mills Inc., Easycall Communications Philippines Inc., National Reinsurance Corp. of the Philippines and Union Bank of the Philippines. 

Top losers, meanwhile, were LMG Corp., Keppel Philippines Holdings Inc. B, United Paragon Mining Corp., Roxas and Co. Inc., AgriNurture Inc., Anchor Land Holdings Inc. and Omico Corp.

This week

Share prices could move sideways this week as downside risks remain which is would make it challenging for the market to sustain its momentum.

“The end of El Niño is seen as a positive development for our inflation picture as pressures on our food supply and demand for electricity are expected to ease. This in turn is seen to help the market. 

However, the stronger than expected May jobs report in the United States which dents the hopes of a rate cut by the Fed soon may weigh on sentiment. Adding to this is the lingering weakness of the local currency,” Tantiangco said. 

Broker 2TradeAsia said key economic data releases and the US Fed policy meeting will be “front and center” this week. 

“The highly anticipated Fed meeting on 11th to 12th, plus inflation reports for May should drive activity in capital markets; flattish annual headline inflation with some easing in sequential month on month figures are keeping pessimists in the sidelines.”

Local inflation, meanwhile, remains stubborn following a slight uptick last May to 3.9 percent from April’s 3.8 percent. This brings year-to-date inflation to 3.5 percent, still within the Bangko Sentral ng Pilipinas’ (BSP) target of 2 to 4 percent. 

“A status quo stance is expected from the BSP on its June 27 monetary board meeting, despite officials reiterating that a local rate cut could precede a US Fed easing. Datapoints still suggest unlikely easing until well after third quarter, although we acknowledge that base effects when CPI surged during the second half of 2023 are likely to impact how inflation prints in the coming months.”

Immediate support for the main index is seen at 6,350 and resistance at 6,600.

Stock picks

Maybank Securities maintained its buy rating on Filinvest Reit Corp. (Filreit) despite its first-quarter results, which were behind estimates. 

“First-quarter distributable income of P304 million fell 12 percent year-on-year and lagged our forecast at 21.2 percent of our 2024 estimates. The miss was due to lower revenues as occupancy rates declined,” it said.  “While management is hopeful that leasing activity will start to turn around and gradually improve in coming quarters, we expect a delay in recovery this year as securing new tenants normally takes three to four months before rental income is booked.”

Filreit shares closed last week at P2.90 apiece. 

The broker also maintained its buy rating on SM Investments Corp. despite its first quarter earnings falling below its expectation and consensus estimates. 

“But SM continues to be a significant domestic consumption play with banks, malls and retail combined accounting for 93 percent of net income. We lower our 2024 income forecast by 14 percent and cut our target price  to P1,127 from P1,340. SM remains our top pick in the Philippine market as it owns the largest bank, retail and mall network in the country.” SMIC’s shares closed last week at P840 apiece.