PSEi rally may stall as investors eye profit-taking, FDI, remittances data releases

While the local stock market managed to get out of its slump with a five-day rally last week, investors may be tempted to pocket some profits, especially in the first couple of days before taking cues from the release of foreign investments and dollar remittances data.

“The local market has exhibited upward momentum last week as it went on a five-day gaining streak. It was able to get past its 10-day and 50-day exponential moving averages which is taken as bullish signs. Trading activity also improved implying that the rally had conviction,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “This week, the local bourse could move sideways. Given the five-day rally, we may see some episodes of profit-taking which could cause the market to decline.

“Still, we expect optimism to remain driven by prospects on the Bangko Sentral ng Pilipinas’ (BSP) monetary policy easing following our latest inflation print, and our robust fourth-quarter/full-year 2024 corporate results. The peso’s appreciation, if it continues, is also expected to help.”

Tantiangco added that, “investors may also look towards our upcoming FDI (foreign direct investment) and OFW (overseas Filipino workers) cash remittance data for clues. A key downside risk to the market however is the uncertainties with respect to the US’ trade policies.”

Online stockbroker 2TradeAsia.com said, “The impact of lower-than-expected inflation expands into long-term fundamentals, but might have some significant near-term windfall, including potential early pivot from the BSP.”

“Recall that the recent RRR (reserve requirement ratio) cut and pro-growth comments imply that the BSP only needs data to resume policy rate cuts; should the February CPI (consumer price index) set a trend, models might have to readjust for a possible second-quarter cut.

“While we caution that one datapoint is not cause for celebration just yet, markets also have to acknowledge that liquidity events from rebalancing and deep foreign selling in the first quarter have significantly pushed sentiment to near maximum pessimism; positive catalysts tend to cause sharper reactions as they contrast to the prevailing negative sentiment, amplified by the amount of dry powder held in risk-off,” the brokerage said.

For stock picks, Abacus Securities Corporation has a BUY rating for SM Investments Corporation after noting that its food retail business has been posting strong growth while enjoying higher margins.

The firm’s retail business is also seen getting a boost from the expansion of its Alfamart network and as premiumization takes hold across the group.

Meanwhile, COL Financial has a BUY rating for Megaworld Corporation “given its robust residential revenues and steady improvements in its recurring businesses—office leasing, retail leasing, and hotels.

“Additional inventory, improvements in lease rates, and healthy occupancy levels have helped grow its rental revenues, while hotels have capitalized on increased travel and MICE (meetings, incentives, conferences, and exhibitions) activities.”

COL is also recommending Aboitiz Power Corporation “as we believe that its long-term earnings growth outlook has improved following the ramp up of its renewable energy capacity expansion initiative. Furthermore, valuation is also cheap.”