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Market Recap
Last week, the PSEi expanded by 0.81% week-on-week to close at 6,211.89 (+50.0 points). The market traded mostly in the red, but recovered on late buying amid better-than-expected data releases, a pullback from global oil prices, and a strengthening of the Philippine peso (P55.56).
In addition, as widely expected, the Bangko Sentral ng Pilipinas (BSP) held rates steady following an off-cycle hike last month. The BSP also lowered its inflation guidance for 2023, 2024, and 2025 to 6.1% (prev: 6.2%), 4.4% (prev: 4.7%), and 3.4% (prev: 3.5%), respectively.
On the global front, US inflation slowed down to 3.2% y-o-y, lower than the 3.3% consensus estimates prompting a further decline in US treasury yields. Meanwhile, MSCI announced the results of its Nov 2023 Index Review where the Philippines has a slight country downweight (-0.005%) and no additions/deletions for both MSCI PH Standard and Small Cap indices.
PSE Market Outlook this week
This week, we expect the PSEi to trade upwards, carrying positive sentiment from last week’s volley of data releases and as earnings season concludes. Investors are highly expecting last month’s off-cycle rate hike to be the last, and are now pricing in rate cuts as early as Mar 2024.
In addition, market participants are hopeful for a Santa Claus rally amid remittances inflows from OFWs and wage bonuses, resulting in seasonally increased spending. On the international front, we also expect markets to continue their momentum as expectations of a soft landing for the US become clearer after Oct 2023’s US inflation print. However, US Thanksgiving holiday on Friday 24 Nov 2023 may result in muted foreign trading activity towards the end of this week.
Stock Picks this week
1. Ayala Corp. (AC)
| Recommendation | Buy on breakout |
| 1-Year Target Price | PHP 882.56 |
Ayala Corp.’s (AC) core net income grew 42% year-on-year (y-o-y) to P31 billion in 9-month (9M) 2023, ahead of consensus estimates, driven by strong results from Bank of the Philippine Islands (BPI), Ayala Land, Inc. (ALI), and ACEN Corp (ACEN). AC’s year-to-date (YTD) core net income is already at par with its full year 2019 (pre-
pandemic) net income. AC currently trades above its key moving averages (20-day, 50-day, and 100-day). Since Aug 2023, AC has been consolidating sideways between the P600.0 to P646.0 range.
For a more favourable risk-to reward ratio, accumulating once the stock breaks above 200-day MA to P646.00 is recommended.
2. Aboitiz Power Corp. (AP)
| Recommendation | Buy on pullbacks |
| 1-Year Target Price | PHP 41.56 |
Aboitiz Power Corp. (AP) reported 9M 2023 net income of P26.7 billion (+37% y-o-y) and core net income of P26.7 billion (+45% y-o-y) — ahead of consensus estimates driven by fresh contributions from GNPower Dinginin Ltd. Co. (GNPD) and higher availability across AP’s portfolio. After hitting its year-to-date low at P29.40, AP rose by as much as 28% and has since consolidated between P34.30 to P37.50 range. Accumulating once AP pulls back to P34.30 is advisable.
Set stop limit orders below P31.56 and take profits around P39.45.
3. MREIT, Inc. (MREIT)
| Recommendation | Buy |
| 1-Year Target Price | PHP 16.50 |
MREIT, Inc. (MREIT) posted a distributable income of P2.1 billion (+13% y-o-y) in 9M 2023, in line with ours but ahead of consensus estimates, attributable to the income contribution of the four newly acquired Grade-A office towers worth P5.3 billion. In terms of price action, MREIT has established short-term support around P12.18/12.00. Currently, the stock is trading sideways between P12.18 to P12.83, hence, the range is currently at play.
For a more favourable risk-to reward ratio, it is advisable to accumulate MREIT at current levels. Set stop limit orders at 8% below average cost and take profits at 15% above average cost.
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Commentary: ACEN, CREC to benefit from trading of Renewable Energy Certificates (REC)