THE Philippine stock market is expected to decline this week ahead of the rebalancing of the Morgan Stanley Capital International’s (MSCI) world index and amid lingering concerns over the coronavirus disease 2019 (COVID-19) situation in the country.

The Philippine Stock Exchange index (PSEi) climbed by 1.61 points or 0.02% to close at 6,199.25 on Friday, while the all shares index went up by 2.42 points or 0.06% to end at 3,842.73. Week on week, the PSEi shed 70.11 points from its 6269.36 close on May 14.

“The index ended lower [last] week as investors chose to remain on the sidelines while assessing the recently released various economic reports both locally and abroad, to look for clues on how the economy and inflation levels will unfold in the coming quarters,” Timson Securities, Inc. Trader Darren Blaine T. Pangan said in a Viber message.

“Another thing that affected market sentiment [last] week was the entry of certain COVID-19 variants into the country,” Mr. Pangan added.

The government slashed its growth target for this year and the next, as the renewed spike in COVID-19 cases and strict lockdown curbs hobble the economy’s recovery.

In its 179th meeting on Tuesday, the Development Budget Coordination Committee downgraded its gross domestic product (GDP) growth target to 6-7% from 6.5-7.5% penciled in last December 2020.

Economic managers expect the economy to return to its pre-crisis level by next year. Next year’s GDP is expected to grow by 7-9%, lower than the previous target of 8-10%. The economy’s growth is seen to slow to 6-7% in 2023 and 2024.

The Bangko Sentral ng Pilipinas also lowered its inflation outlook this year to 3.9%, from a previous estimate of 4.2%. This will put inflation back within its 2-4% annual target range. On the other hand, the forecast for 2022 was raised to 3% from 2.8% previously.

Meanwhile, the Health department last week reported new COVID-19 cases of the B.1.617.2 variant first found in India, the B.1.1.7 variant first detected in the United Kingdom, and B.1.351 variant found in South Africa.

On the other hand, data from the US Labor department showed the consumer price index rose by 0.8% in April, quicker than the 0.6% in March and marking the fastest pace since June 2009, Reuters reported. The quicker inflation was attributed to the low supply amid the recovering demand as the economy recovers.

For this week, the MSCI rebalancing is expected to affect the local market.

“MSCI Global Indices rebalancing implementation [this] week could push the market lower, but mining and oil sector could prove resilient in light of surging global base and precious metal prices,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.

“[This] week, we’ll have to see if the PSEi holds at immediate support at 6,100, otherwise nearest resistance may be found at the 6,390 level,” Timson Securities’ Mr. Pangan said. — K.C.G. Valmonte with Reuters

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