PHILIPPINE SHARES may decline further this week on expectations of another aggressive rate hike from the US Federal Reserve due to soaring inflation in the world’s largest economy.

The benchmark Philippine Stock Exchange index (PSEi) went down by 52.87 points or 0.84% to close at 6,195.26 on Friday, while the broader all shares index declined by 21.27 points or 0.63% to 3,345.73.

Week on week, the PSEi sank by 166.56 points or 2.62% from its close of 6,361.82 on July 8.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said selling pressure remained strong last week amid US data and developments at home.

“Market weakness prevailed starting Wednesday as investors likely lightened their positions ahead of the US inflation data report. The June US inflation surprised to the downside at 9.1% and the BSP (Bangko Sentral ng Pilipinas) subsequently delivered a 75-basis-point (bp) off-cycle rate hike — its biggest rate hike on record — which resulted in the marked increase in selling pressure,” Mr. Mercado said in an e-mail.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said Philippine shares went down as the BSP’s surprise move could lead to higher financing costs for businesses and could cause a slowdown in economic activity.

“The PSEi [was] also lower, moving in line with the US stock markets that hovered among one-week lows recently amid lingering market concerns over a possible US economic slowdown or even recession amid aggressive Fed rate hikes to bring down elevated US inflation, as well as the continued hawkish signals by Fed officials,” Mr. Ricafort added.

US stocks closed sharply higher on Friday. The Dow Jones Industrial Average rose 658.09 points or 2.15% to 31,288.26; the S&P 500 gained 72.78 points or 1.92% to close at 3,863.16; and the Nasdaq Composite added 201.24 points or 1.79% to end at 11,452.42.

US consumer prices jumped 9.1% annually in June, the fastest in more than 40 years, data released on Wednesday showed. This fueled bets of an even bigger hike by the Fed at its July 27-28 review following the 75-bp increase made in June.

For this week, AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal said via Viber: “For the early part of [this] week, the local bourse may take a breather before continuing on its downtrend, taking cue from US market’s rebound last Friday which reflected abating expectations for a 100-bp Fed rate hike after policy makers remained firm on a possible 75-bp move this July.”

Mr. Ricafort said aside from the Fed, leads include local budget balance and external position data, as well as reports on US jobless claims and home sales. He placed the PSEi’s immediate support at psychological 6,000 mark and resistance at 6,300-6,500.

“The market was unable to adhere to the 6,300-6,500 range for [last] week, even breaching the 6,200-support level. This opens up the possibility of revisiting the 6,000 level as the index struggles to establish a strong support base,” Mr. Mercado added. — JIDT