Stocks to move sideways on steady May inflation

PHILIPPINE shares are expected to trade within a narrow range this week with an upward bias following the release of May inflation data, which showed that the average rise in prices was steady for a third straight month.

The Philippine Stock Exchange index (PSEi) went up by 4.47 points or 0.06% to close at 6,796.34 on Friday, while the broader all shares index increased by 4.57 points or 0.11% to 4,108.59.

Week on week, the benchmark index gained 121.83 points from its 6,674.51 finish on May 28.

“It’s been a sharp rally for the [last] this week that took off from a much oversold level, highlighting tactical opportunities for investors,” First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said in a Viber message on Friday.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort attributed the market’s gains last week to the progress on economic reform bills at the House of Representatives.

“Markets have already been pricing in developments/expectations related to the 2022 presidential elections (if this would create new excitement),” Mr. Ricafort said in an e-mail on Friday.

For this week, the analysts said the PSE index will move sideways due to May inflation data as ahead of the release of other economic reports, which, along with developments in the coronavirus disease 2019 (COVID-19) situation in the country, could dictate the pace of the economy’s reopening.

“[This] week, the PSEi will trade at a narrow range with an upward bias, propped by supportive inflation and dovish talk by the BSP (Bangko Sentral ng Pilipinas) governor,” FMIC’s Ms. Ulang said.

Inflation was steady for the third straight month at 4.5% in May, the Philippine Statistics Authority reported on Friday, matching market expectations.

The figure was within the 4-4.8% estimate by the BSP for that month and also matched the median estimate in a BusinessWorld poll.

Year to date, inflation was 4.4%, higher than the 2-4% target of the central bank and its revised forecast of 3.9% for the year. May was the fifth month in a row that inflation went beyond target.

“The BSP remains watchful over the evolving economic conditions and challenges brought about by the pandemic to ensure that the monetary policy stance remains consistent with its price and financial stability objectives,” BSP Governor Benjamin E. Diokno said in a statement on Friday.

Meanwhile, RCBC’s Mr. Ricafort said he expects the index to close between 6,300 to 6,900 this week ahead of the release of trade and unemployment data. Investors will also watch out for COVID-19 developments, particularly the trend in cases as well as the continued rollout of vaccines, he added.

“The expected increase in COVID-19 vaccine arrivals… could help further reduce new COVID-19 cases in a more meaningful manner, justify further reopening of the economy, including some hard-hit industries/sectors, thereby improve confidence by consumers and businesses, and provide greater support to the overall economic recovery prospects,” Mr. Ricafort said. — KCGV