SHARES are seen to move sideways following the rebalancing of the index and the rise in oil prices, as well as anticipation of the start of the campaign period for this year’s national elections.

The benchmark Philippine Stock Exchange index (PSEi) climbed 73.58 points or 0.99% to end at 7,456.35 on Friday, while the broader all shares index rose 27.74 points or 0.71% to finish at 3,933.94.

Week on week, the index gained 204.38 points from its 7,251.97 close on Jan. 28.

“Local equities surged as optimism returned on the back of easing of alert levels in the Metro, shrugging off the US Federal Reserve’s hawkish tone in the previous week,” online brokerage 2TradeAsia.com said in an e-mail sent over the weekend.

The US central bank earlier said it is likely to raise borrowing costs starting March to quell rising inflation. Markets expect the Fed to fire off at least three rate hikes this year.

This week, analysts said investors will react to the index rebalancing. Other drivers are the surge in oil prices as well as the start of the election campaign period.

“The news of a PSEi rebalancing, placing in Monde Nissin Corp. (MONDE) and Emperador, Inc. (EMP), while removing Bloomberry Resorts Corp. (BLOOM) and Robinsons Retail Holdings, Inc. (RRHI), may cause some turbulence from the beginning of next week to its end,” COL Financial Group, Inc. Chief Technical Analyst Juanis G. Barredo said in a Viber message on Friday.

On Friday, the PSE announced MONDE and EMP will be part of the PSEi effective Feb. 14 after the regulator’s review of the index and sectoral indices’ performances from the first to last trading days of 2021.

Mr. Barredo said the addition of two companies to the PSEi will drive index funds and investors to purchase shares in MONDE and EMP and sell BLOOM and RRHI.

Meanwhile, 2TradeAsia.com said oil prices could continue to cause volatility in the market.

Oil prices surged to seven-year high on Friday. Brent crude rose $2.16 or 2.4% to settle at $93.27 a barrel, Reuters reported.

“While in the grand scheme of things, crude’s sharp ascent may not factor into a surprise rate hike soon, it may still drive investor aversion against fuel and foreign exchange sensitive sectors and/or those that may not be able to fully pass on the higher fuel cost,” 2TradeAsia.com said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the start of the campaign period for the May national elections on Feb. 8 could also affect sentiment.

“This may start the acceleration of election-related spending around the country that could boost economic activities, more employment, and consumer spending, which accounts for about 75% of the economy,” he said.

2TradeAsia.com put the PSEi’s support at 7,300 and resistance at the 7,500-7,600 levels. — M.C. Lucenio with Reuters

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