INVESTORS took profit in Manila Electric Co. (Meralco) last week after it was dragged by the stock market’s performance, which sank near the 6,000 level as soaring inflation and recession fears persisted.
Data from the Philippine Stock Exchange (PSE) showed a total of 1.497 million shares worth P548.141 million were traded from June 20 to 24.
Meralco shares went down by 2.2% week on week, finishing at P357 apiece on Friday from its P365 closing on June 17. For the year, the stock has gone up by 20%.
Regina Capital Development Corp. Head of Sales Luis A. Limlingan said via Viber message that Meralco’s strong performance for most of last week was due to its defensive nature and strong yield before succumbing to profit-taking on Friday as recession fears and inflationary pressures pushed the market to fall to its lowest level since the pandemic broke out.
“The stock underperformed this week due to the continued selling pressure on the PSEi (PSE index) being brought by local inflationary pressure and global recession fears,” Unicapital Securities, Inc. Equity Trader Cristopher Adrian T. San Pedro said in an e-mail.
Meralco’s decline last Friday was due to last-minute profit-taking from investors during the pre-close market session, he said.
The stock market had been sinking as investors stayed cautious ahead of the Bangko Sentral ng Pilipinas (BSP) decision on interest rates, along with recession fears as rising prices continued to dampen the market.
The PSEi dropped to 6,065.23 on Thursday, its lowest in nearly two years since the 6,019.26 finish on Oct. 19, 2020, before recovering to close at P6,217.56 on the last trading day of the week.
Meanwhile, the BSP announced its second consecutive rate hike by 25% last June 23 to address rising inflation.
The increase put the benchmark rate at 2.5%, as predicted by nine out of 16 analysts in a BusinessWorld poll.
The ongoing Russia-Ukraine conflict since late February sent oil and other commodity prices to multiyear highs due to supply constraints, affecting economies worldwide.
Analysts are monitoring closely the upcoming inflation data for their next move.
“I believe for as long as we have a hawkish BSP towards policy normalization, stock market volatility is here to stay,” Mr. San Pedro said.
“For Meralco to be considered one of the preferred strategic long-term investments, it is expected to remain a defensive stock in times of market volatility given its inelasticity of demand to rising consumer prices,” he added.
Mr. Limlingan said: “Market movement will likely be data-dependent as investors will take cues on any economic releases that will affect inflation, such as the price of commodities. It will also be the end of semester window dressing.”
Meralco’s first-quarter revenues went up by a fourth to P85.905 billion from P64.712 billion in the same period last year.
Its attributable net income likewise rose by 28.3% to P5.564 billion in the first three months of the year from P4.334 billion previously.
In a separate Viber message, Salisbury BKT Securities Corp. Equity Sales Trader John Paolo R. Dela Cruz gave his revenue forecast for Meralco, which he said would continue its upward trend to reach P96 billion for the second quarter, and P348.5 billion for full-year 2022.
He attributed his forecast for Meralco to rising prices of electricity around this time of the year due to seasonal factors.
Mr. Limlingan said that aside from the summer season, the election campaign period could have also contributed to Meralco’s growth in the second quarter.
“However, growth may have been affected with consumers trying to cut down a bit due to the accelerating inflationary pressures,” he said.
Mr. San Pedro projects Meralco to post “a conservative net income of P25 billion for 2022 which will depend primarily on power demand from relaxed mobility restrictions with key risks in changes in regulatory policies and other factors that could lead to economic recession.”
For the week, he gave his support and resistance levels at P352.20 and P374.80, respectively, noting that the stock remains to have a bullish outlook in the medium-term as long as it stays above P340.
Mr. Dela Cruz gave his support and resistance levels at P380-P390 and P360, respectively.
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Bernadette Therese M. Gadon
