Stock Market Weekly: Positive catalysts may perk up the market 

WHAT HAPPENED LAST WEEK

The Philippine Stock Exchange index (PSEi) experienced mixed performance last week, ending flattish (+0.61% week-on-week) to close at 6,098.04. The market struggled to find direction amid regional weakness, with increased volatility from geopolitical tensions and ongoing concerns over global trade policies.

Investors monitored US tariff threats on auto, semiconductor, and pharmaceutical imports. Moreover, the latest US Federal Reserve meeting minutes indicated that officials had cautioned against cutting interest rates, emphasizing the need for further progress on inflation before making any adjustments. Foreign investors were net sellers throughout the week, although selective bargain hunting managed to lift the market to positive territory by Friday’s close.

After market, the Bangko Sentral ng Pilipinas (BSP) announced a reduction in the reserve requirement ratio effective March 28, 2025.

WHAT TO EXPECT THIS WEEK

The market is set to trade higher as investors price in positive catalysts this week. Firstly, the BSP has reduced the reserve requirement ratio (RRR) by 200 bps for large banks (down to 5%) and by 150 bps for digital banks (down to 2.5%) effective March 28, 2025.

This is expected to inject approximately PHP 300 billion in loanable funds into the economy. Secondly, the Philippines’ removal from the Financial Action Task Force (FATF) gray list is likely to boost sentiment amid the improved country risk profile and by attracting fresh capital inflows.

Investors will also be closely monitoring full year 2024 earnings reports from index heavyweights as well as the release of US 4Q 2024 GDP q/q results, which is expected to be more tempered at 2.3% versus the prior quarter’s 3.1%, influencing market direction and trading volumes.

Trading activity is likely to pick up towards the end of the week, as the MSCI quarterly rebalancing changes will be made available as of the close of February 28, 2025 (effective March 3, 2025), in which the Philippines experienced a slight country down weight (-0.0132%). For the MSCI Philippine Standard Index, JG Summit Holdings, Inc. (JGS), and Universal Robina Corp. (URC) were migrated to the MSCI Philippines Small Cap Index, wherein Monde Nissin Corp (MONDE) was also added.

Resistance: 6,400 / 6,200

Support: 6,000 / 5,800

ANALYSIS

The PSEi edged up by 0.61% w/w to close at 6,098.04 (+36.70 points). The index remains below long-term key moving averages (MA) (50-day, 100-day, and 200-day), but has successfully caught up to the 20-day MA.

Immediate support is at 6,000, while the nearest resistance is at 6,200 and the next at 6,400. With the market eyeing a breakout past 6,200, accumulating on sustained strength above this level is advisable.

STOCK CALLS FOR THE WEEK

Apex Mining Co., Inc. | BUY | CONSENSUS TARGET PRICE: PHP 5.10

APX’s technicals look promising as it has formed a head-and-shoulders bottom pattern, suggesting a potential trend reversal. The price appears to have completed a period of accumulation at the bottom of a major downtrend, with a breakout through resistance signaling the start of a new uptrend.

With sentiment at its peak, accumulating APX at current levels is advisable. Take profits 15% above your average cost and set stop loss limits 8% below your average cost.

SM Prime Holdings, Inc. | BUY ON BREAKOUT | FMSEC TARGET PRICE: PHP 32.00

Since October 2024, SMPH has been moving in a steady downward channel after failing to breach the PHP 33.00 resistance area. At current levels, the stock remains in oversold territory and continues to trade below all key moving averages (MA).

While fundamentals remain intact, sentiment appears dampened by overall sector weakness. Hence, we recommend accumulating once the stock shows stronger upward momentum. Accumulating once SMPH breaks above the 20-day MA (PHP 24.00) is advisable. Take profits at PHP 27.60 and set stop loss limits at PHP 22.08.

SM Investments Corp. | BUY | FMSEC TARGET PRICE: PHP1,150.00

SM’s share price has been nearing its key support level at PHP 780. Moreover, SM remains below its 20-day, 50-day, 100-day, and 200-day moving averages (MAs). On momentum indicators, its MACD and RSI are below neutral levels reflecting bearish sentiment.

However, given the risk is skewed towards the upside, accumulating at current levels is advisable. Accumulating SM at current levels between PHP 780-790 is advisable. Set stop limit orders at PHP 717.50 and take profits at PHP 897.

KEY DATA RELEASES

1. EU Inflation Rate y/y for January 2025 on Monday, February 24, 2025 (estimates: 2.5%; previous: 2.4%)

2. US GDP Growth Rate q/q for 4Q 2024 on Thursday, February 27, 2025 (estimates: 2.3%; previous: 3.1%)

3. US Initial Jobless Claims as of February 22, 2025, on Thursday, February 27, 2025 (estimates: 225k; previous 219k)

4. PH Balance of Trade for January 2025 on Friday, February 28, 2025 (estimates: USD 4.4 billion; previous: USD-4.14 billion)

5. US Core PCE Price Index y/y for January 2025 on Friday, February 28, 2025 (estimates: 2.7%; previous: 2.8%).