Stocks may move sideways before BSP meeting
PHILIPPINE SHARES are seen to move sideways this week due to rate hike fears ahead of the central bank’s policy review and the government’s retail Treasury bond (RTB) offer.
The 30-member Philippine Stock Exchange index (PSEi) sank by 162.26 points or 2.18% to end at 7,270.36 on Friday, while the broader all shares index also fell 52.61 points or 1.34% to finish at 3,872.13.
Week on week, the bellwether declined 185.99 points from its 7,456.35 finish on Feb. 4.
For the coming trading week, analysts said the market will monitor the Bangko Sentral ng Pilipinas’ (BSP) policy meeting for leads this week as well as the government’s RTB offer.
First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message over the weekend that lingering rate hike concerns following the release of US inflation data, which caused bets of aggressive tightening by the Federal Reserve in March, and ahead of the BSP’s review on Thursday could result in the PSEi continuing to trade within the 7,100 to 7,400 range.
Ms. Ulang added that the rate-setting auction for the five-year RTBs on Tuesday will also be a lead for the market.
“Worries over the hawkish outlook of the Federal Reserve’s policies this year may continue to weigh on sentiment. Adding to this is the ongoing tension between Russia and Ukraine and its consequences including the rise in global oil prices. These are seen to make it challenging for the market to do substantial rallies,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
US consumer prices rose solidly in January, leading to the biggest annual increase in inflation in 40 years, fueling financial markets’ speculation for a hefty 50 basis points interest rate hike from the Fed next month, Reuters reported.
In the 12 months through January, the consumer price index jumped 7.5%, the biggest year-on-year increase since February 1982. That followed a 7.0% advance in December and marked the fourth straight month of annual increases in excess of 6%.
Meanwhile, all 16 analysts in a BusinessWorld poll expect the BSP’s policy-setting Monetary Board to keep borrowing costs steady at its meeting this week to support economic recovery.
“The government’s decision on the alert level restrictions in the country for the second half of February is seen to play as an important factor in [this] week’s trading,” Mr. Tantiangco added.
“Last week, the local bourse fell back below the 7,300 level. [This] week, the market is expected to test the validity of the said breach. If the market is able to regain its ground at 7,300, then this will remain as its support while 7,500 will be its resistance,” he said.
Otherwise, the market could go back to its former trading range, with support at the 7,000 to 7,100 levels and resistance at 7,300, Mr. Tantiangco said.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the next important resistance is at the 7,400 to 7,500 levels. — MCL with Reuters
