Stocks to decline ahead of local inflation data

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By Arra B. Francia, Reporter

LOCAL SHARES may edge lower this week as fears on how inflation would impact the market push investors to the sidelines.

The bellwether Philippine Stock Exchange index dipped 0.08% or 7.20 points to 8,458.57 last Friday. The industrial and financial sectors lifted the market, rising 3.3% and 1.8% week on week respectively, but was weighed down by a 2.7% decline in the mining and oil sub-index.

On a weekly basis, this is 0.11% lower than the market’s close of 8,467.56 previously. Trading for the week was also thinner as value turnover averaged at P8.8 billion, lower by 5%.

Foreign investors, meanwhile, remained in a net selling position, with net outflows recorded at P3.92 billion.

“Investors are still worried about the constant net-foreign outflow and what the effects of higher inflation are going to be on our market,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a report.

The Bangko Sentral ng Pilipinas (BSP) last week placed February’s inflation projection between 4-4.8%, the higher end of which is way above the government’s 2-4% target for the year. Last January, inflation posted a 4% increase, mainly due to the accelerated increase in the prices of food, non-alcoholic and alcoholic beverages, and tobacco.

The Department of Finance added that the Tax Reform for Acceleration and Inclusion Law — enacted last Jan. 1 — did not accelerate inflation for the month, save for the case of sugar-sweetened beverages.

“It may continue to trade lower as it is looking for strong support which it may find at the 8,100-8,150 level before it starts to recover,” Mr. Mangun said.

Online brokerage firm, meanwhile, said that rising inflation is a natural course for the country’s booming economy.

“Simply put, as economic growth accelerates, expect (inflation) to rise. As long as this growth is paralleled by improved employment, there should be no cause for alarm. Our monetary officials are also there to ensure no unreasonable occurrences disrupt the system’s fund flow, that could trigger runaway inflation,” said in a weekly market note.

With this, the company said it would be up to investors to look for higher returns.

A number of listed firms will be releasing their full-year 2017 results this week, including Global Ferronickel Holdings, Inc., D&L Industries, Inc., International Container Terminal Services, Inc., Del Monte Pacific Limited, PLDT, Inc., and Aboitiz Equity Ventures, Inc.

Eagle Equities’ Mr. Mangun, meanwhile, also noted the BSP’s move to lower the reserve ratio requirement for big banks that will see P50-P100 billion make its way into the economy, some of which may eventually end up in the stock market.

The analyst said the main index’s support could be from 8,420 to as low as 8,330, while it may test a resistance of 8,600 to 8,700.