Ayala Land, Inc. (ALI) suddenly showed some signs of life earlier today when it beat the 8 count and closed at PHP 15.28. Not only did it barely ended just outside the resistance of a descending channel, it also attempted to break out from a small inverted head and shoulders pattern. In my colleague’s post about ALI the other day (kindly see it here), things were still somewhat bearish since it was still stuck well within the descending channel. as you can see from the chart above, ALI had been sliding on a downward slope since it peaked at PHP 18.70 back in September last year.
Today’s move places it in a better position since a break above the inverted head and shoulders’ neckline at around PHP 15.60 could send back on the bullish track. A temporary resistance could be met at PHP 16.00 but once this level gets cleared, ALI could then head towards PHP 17.00. On the flip side, a failure to do so could send it back down to its former low at PHP 13.70.
Fundamentally, the stock’s inclusion in the FTSE Asia-Pacific (ex-Japan) Index this coming March 21 could serve as its positive catalyst. You see, the different funds which track this index will then have to buy the shares of ALI as well upon its inclusion. And as basic economics tells us, the higher the demand, the higher the price goes. On the negative note, the threat of inflation in the Philippines which many economists believe will prompt the Bangko Sentral ng Pilipinas to raise its interest rate by at least 25 basis points in its upcoming monetary policy meeting this March 24 could weigh on ALI and on the property sector in general. For those who does not know, an interest rate hike effectively makes borrowing costs (i.e. housing loans) more expensive. The more expensive it gets, assuming all other things remain the same, the potential real property buyers will decrease also.