Stocks turning bullish

The local stock market is turning bullish in light of last week’s rally although there may be some profit-taking this week while investors are wait for economic data such as remittances and the balance of payment.

“The local bourse sustained its upward momentum last week, getting past its 6,800 resistance and even its previous high of 6,814.14 touched last December 1, 2022,” said Philstocks Financial Research Manager Japhet Tantiangco.

He also noted that, “trading activity has been strengthening with net value turnover last week averaging P6.84 billion per day, higher than the prior week’s P5.31 billion.”

“Finally, its 50-day and 200-day exponential moving averages are about to form a Golden Cross which signals a possible uptrend in the medium to long term. Overall, chartwise, the local market is showing a bullish bias,” Tantiangco said.

Online brokerage said “The PSEi hitting 6,9004 is 22 percent higher than its October 2022 low—signaling its return to bull market territory... this technical momentum shift coincides with lightening of fundamental pressures, which should help tide over the next major resistances at 7,200 and, eventually, at 7,500.”

Tantiangco said that, while there may be some profit-taking this week, “the market may sustain its ground at the 6,800 support level supported by optimism towards the local economy’s outlook coupled with tempered expectations on the Federal Reserve and BSP’s monetary tightening following the slowdown in the US’ inflation.”

Next week, investors may also take cues from the upcoming OFW cash remittances and Balance of Payment position data.

According to, the lower US inflation rate reported last week “is expected to spur optimism across risk assets, particularly those that are cyclical-heavy or are sensitive to central bank movements, as this inflation improvement is substantial evidence supportive of at least rate hike pauses in the medium-to-long-term.”

“Our back of the envelope review supports opportunities in rate-sensitive assets in banks and real estate, and improving CPI should encourage spending re-allocation to tourism and gaming, which have yet to fully return to pre-Covid earnings per share levels.”

Meanwhile, speculative plays on the MSCI rebalancing next month may affect the prices of some stocks.

COL Financial Head of Research April Lee Tan said “There predictions that ACEN, Globe, and Meralco could be removed from the MSCI index in the next rebalancing scheduled for February. This could lead to a sell-off of the said stocks.”

Amid fears that Ayala Corporation will be removed from the index, Abacus Securities Corporation said “AC will definitely not be deleted and that weight of ACEN will probably increase” following the distribution of Ayala’s stake in ACEN to shareholders as a property dividend.

Meanwhile, COL said “We are optimistic on the banking sector in 2023 as we expect earnings to grow by 12.7 percent year-on-year on the back of continued loan growth and improvement in the banks’ net interest margins.”

The brokerage has a buy rating on BDO, BPI, China Bank, EastWest Bank, Metrobank, and PNB as it noted that, “all banks should benefit from the continued recovery of the economy and the rising interest rate environment,”

However, COL said “we prefer MBT on account of its strong and highly liquid balance sheet, substantial low-cost deposits, and high capital ratios. The bank’s high CET1 ratio gives it flexibility in giving dividends, while also supporting the bank’s growth objectives as the economy continues to recover from the pandemic.”

For property stocks, COL noted that residential sales are dampened by high interest rates while office leasing is weighed down by vacancies.

But, the lifting of almost all mobility restrictions late last year will continue to have a positive impact on the mall and retail segment of the property sector.

“We expect higher revenues from existing tenants and higher mall occupancy rates as retailers gain more confidence and look to take advantage of the robust consumer spending,” it said.

Thus, COL prefers companies with higher level of recurring income, over companies that have a higher level of real estate sales, given the downside risk on the property development segment.

“Based on the latest nine-month revenue breakdown of top developers, RLC has the least exposure on the property development business and biggest exposure on mall and offices combined, followed by SM Prime,” it noted.

However, COL said that, “Although we like both RLC and SMPH as defensive plays, we prefer RLC over SMPH given the former’s deep discount to NAV and significant upside to our fair value estimate.”

“Moreover, the recent weakness in RLC is largely related to the upcoming rebalancing of the PSE Composite Index in February wherein RLC is expected to be removed. We advise investors to take advantage of this and any further weakness following the announcement of the rebalancing,” COL said.