Stock Market

Stocks seen sideways ahead of Fed policy meet

Posted on June 13, 2017

PHILIPPINE EQUITIES are likely to take a pause this week as they maintain their footing after breaching the 8,000 level, ahead of catalysts that can propel their continued ascent.

Last Friday, the Philippine Stock Exchange index (PSEi) closed higher by 31.61 points or 0.39% at 7,990.24.

Last week saw the PSEi log fresh highs for this year as it rallied past the 8,000 mark. Last Wednesday, the index finished at its highest level for 2017 at 8,002.32.

“Despite unpredictability overseas, the local bourse has shown its resilience, resulting mainly from sound fundamentals,” said, the online arm of F. Yap Securities, Inc. on its outlook for the June 13-16 week.

“Having touched an intra-week high of 8,046, however, we may see gauges stabilizing for now, as investors heed for sequel catalysts that can propel the market to higher ground,” it added. The PSEi hit an intraday high of 8,046.63 last Thursday, which was also its best showing last week.

Luis A. Limlingan, business development head at Regina Capital Development Corp., expects the market to try to build its momentum this week as it establishes ground above 8,000.

He said the bellwether PSEi will take its cue from one key event -- the June 13-14 meeting of the Federal Open Market Committee.

Mr. Limlingan said a 25-basis point rise in interest rates is expected, with any pronouncements by the Federal Reserve on further hikes to be crucial.

On the local front, Summit Securities, Inc. President Harry G. Liu said he does not see anything exceptional happening this week except the continuation of the market’s sideways movement, which will likely continue until some good news or catalyst comes to perk up the market.

In its outlook for the shortened trading week, said the market’s “sideways pause” would be a “good launching paid for higher long-term returns, reflecting the administration’s thrust towards inclusive economic growth.”

“Immediate support is 7,900-7,950, resistance 8,050-8,070.”

While the market expects a Fed hike this week, said it could maintain the status quo due to “subdued economic data” on inflation and nonfarm payrolls.

The consumer price index and other US inflation barometers have flatlined or retreated from levels earlier this year, raising doubts about whether price growth could reach the Fed’s 2% goal.

“Geopolitical headlines might also take their toll, even as some economists are pricing in higher probability for the Fed to tighten. Part of the picture covers the latest loss of [UK Prime Minister Theresa] May’s majority in parliament, which could make Brexit transition difficult,” it said.

It said recent developments overseas would support increased funds flow as fund managers reassess second-half prospects. -- Victor V. Saulon with Reuters