SHARES may move lower this week, with investors focusing on separate policy meetings by the United States Federal Reserve Open Market Committee (FOMC) and the local central bank as the two regulators discuss the effects of inflation on their respective markets.

The Philippine Stock Exchange index (PSEi) closed 0.58% higher at 8,238.15 last Friday, although falling by 1.6% or 134 points on a weekly basis, pulled down by holding firms and industrials which dipped 2% and 1.8% week on week, respectively.

Foreign investors recorded net sales of P6.56 billion last week, which Eagle Equities, Inc. Research Head Christopher John Mangun attributed to window dressing ahead of the holidays.

“We may continue to see the market take a loss, but I think we will see a reversal sometime in the second quarter,” Mr. Mangun said in a research note.

Should the main index continue moving downward, the market could officially record a correction, which is defined as 10% drop. The PSEi has fallen as much as 9.58% from its high of 9,058 last Jan. 29 to 8,190.01 on March 15.

This week, the focus will be on FOMC’s meeting on March 20-21, as well as the Bangko Sentral ng Pilipinas’ (BSP) meeting on March 22.

“It is a known fact that US firms have yet to adjust to the corporate income tax cut in their financial track, while local companies also adjust on the initial phase of the tax reform agenda,” online brokerage firm said in a weekly report.

The online brokerage noted that should the Fed cut their interest rates by 25 basis points, the focus will then revert to the dollar given the Trump administration’s support for a stronger currency.

“At home, the recent cut in reserve requirement has yet to be fully absorbed in the system and is likely to be offset by an expected kick in borrowing demand. While the market has seen upward adjustment in rates, significant spikes are not yet in the cards as rates have bottomed already,” said.

The BSP last month lowered the reserve requirement ratio for big banks to 19% from 20%, releasing some P90 billion in extra liquidity into the financial system.

More firms are set to release their 2017 earnings results this week. In the lineup for analysts’ briefings this week are Pilipinas Shell Petroleum Corp. on Monday, Cebu Landmasters, Inc. on Tuesday, and ABS-CBN Corp. on Friday.

Eagle Equities’ Mr. Mangun placed the index support at 8,792 to as low as 8,090, while resistance is from 8,360 to 8,465.

The S&P 500 and the Dow Industrials rose on Friday, boosted by strong industrial output numbers, though all three of Wall Street’s major indexes posted losses for the week.

The Dow Jones Industrial Average rose 72.85 points or 0.29% to 24,946.51; the S&P 500 gained 4.68 points or 0.17% to 2,752.01; and the Nasdaq Composite added 0.25 point to 7,481.99.

For the week, the Dow fell 1.57%; the S&P lost 1.04%; and the Nasdaq dropped 1.27%. — Arra B. Francia with Reuters