Stocks to rise on expectations of slower inflation

PHILIPPINE stocks may advance this week on expectations that headline inflation eased last month, but worries over the new coronavirus disease 2019 (COVID-19) will continue to affect sentiment.

The benchmark Philippine Stock Exchange index (PSEi) gained 22.65 points or 0.32% on Friday to close at 7,055.19, while the broader all shares index went up by 17.70 points or 0.46% to 3,790.20.

Week on week, the bellwether PSEi fell by 223.25 points from its 7,278.44 finish on Nov. 26.

“[Last] week, majority of the sell-off in equities was attributed to panic induced by the Omicron variant. However, towards the end, bargain hunters dominated as they picked up oversold issues,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The World Health Organization (WHO) on Friday told Asia-Pacific countries to boost their healthcare capacity and fully vaccinate their people to prepare for a surge in the COVID-19 cases as the Omicron variant spreads globally despite travel curbs, Reuters reported.

First detected in South Africa, the Omicron variant cases has reported in 38 countries, the WHO said. Since then, governments have tightened their border controls.

Worries over the new variant will continue to affect trading this week, Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.

“Market will continue to be volatile as the Omicron variant start to spread in other countries. Until definitive information on how this variant could be contained, it will continue to create uncertainties in the global communities,” Mr. Pangan said.

Inflation data to be released this week could help calm these fears, analysts said.

“Easing inflation for last month likely near 4% and hopes for a seasonally strong fourth quarter of 2021 may temper Omicron-related jitters, keeping the PSEi resilient,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber Message.

“A low inflation reading may induce some buying into the local bourse,” Regina Capital Development Corp.’s Mr. Limlingan added.

Headline inflation likely slowed in November due to base effects and slower increases in food costs and a decline in oil prices.

A BusinessWorld poll of 18 analysts yielded a median estimate of 4% for the November inflation, which is closer to the upper end of the 3.3% to 4.1% estimate given by the Bangko Sentral ng Pilipinas (BSP) for the month.

If realized, last month’s consumer price index will match the higher end of the 2-4% target of the BSP and be slower than the 4.6% in October and the 3.7% logged a year earlier.

The Philippine Statistics Authority will release November inflation data on Tuesday, Dec. 7.

Diversified Securities’ Mr. Pangan said the PSEi could range from 6,900 to 7,200 this week. — Marielle C. Lucenio with Reuters