PHILIPPINE financial markets may see a relief rally ahead of the anticipated rate hike by the Bangko Sentral ng Pilipinas (BSP) at its policy meeting this week.

The benchmark Philippine Stock Exchange index (PSEi) fell by 61.45 points or 0.96% to close at 6,331.56 on Friday, while the broader all shares index declined by 40.29 points or 1.17% to 3,394.95.

Week on week, the PSEi dropped by 198.48 points from its close of 6,530.04 on June 3.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the PSEi dropped in the past week in line with declines in the US and global stock markets due to rising inflation.

“US stock markets declined amid concerns over more aggressive Fed rate hikes in an effort to clamp down elevated US inflation even if this would mean risk of economic slowdown or even recession, as part of the Fed’s efforts to bring down inflation eventually back to the target of 2%,” he added.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said shares may rally this week on bargain hunting, but gains are likely to be limited.

“Given the extent of the sell-off over the past two weeks, we may see a relief rally occur at some point in the coming week as bargain hunters pick up shares. This may become more broad-based as some underlying index issues have already begun their bounce. Potential upside, however, is likely to be modest as investors are likely to secure gains fairly quickly following the bounce,” Mr. Mercado said in an e-mail.

RCBC’s Mr. Ricafort said signals from central bank officials about the certainty of another rate hike this week show the economy is already strong enough to weather higher borrowing costs.

The Monetary Board is holding a policy meeting on Thursday, June 23. Incoming BSP chief and Monetary Board member Felipe M. Medalla last week said a rate increase this week is a “sure thing,” with hikes at subsequent meetings also possible.

Analysts in a BusinessWorld poll were divided on the magnitude of the BSP’s move on Thursday, with nine expecting another 25-basis-point (bp) increase and six betting on a 50-bp hike.

The BSP kicked off its tightening cycle at its May 19 meeting, hiking rates by 25 bps for the first time since 2018 to stem rising inflation.

“There is a chance of a local policy rate hike of 50 bps on the next rate-setting meeting on June 23 and more local policy rate hikes for the rest of the year, partly to maintain a comfortable interest rate differential with the US, to account for the comfortable interest rate differentials. [This] could lead to higher borrowing and financing costs for some listed companies, a drag on net income and valuations,” Mr. Ricafort added.

For the coming week, Mr. Ricafort placed the PSEi’s next support levels at 6,100 to 6,200 and immediate resistance at 6,550 to 6,600. — Luisa Maria Jacinta C. Jocson