Local shares seen to slip ahead of US inflation

LOCAL equities are expected to decline in December as investors are seen to pocket their gains from the market’s recent rally as investors await the release of US inflation data.

The Philippine Stock Exchange index (PSEi) closed at 6,780.78 on Nov. 29, the last trading day of November, up by 10.2% from its finish of 6,153.43 on Oct. 28.

In a Viber message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the US financial market lifted the local index for November.

“Largely triggered by gains in the US financial markets after the easing of the latest US inflation data,” he said, referring to the local stock market’s movement.

Separately, COL Investment Management, Inc. said via e-mail that the PSE index had shown “resilience” over the past two to three weeks.

“The backdrop of stronger peso, net foreign stock inflows, and potential peak US inflation have catalyzed the move,” it said.

The peso returned to the P56-per-dollar level in November after two months. The local unit closed on Nov. 29 at P56.56 per dollar, up by P1.41 from its P57.97 close on Oct. 28.

The US consumer price index (CPI) rose 0.4% in October. In the 12 months through October, the CPI increased 7.7%, slower than the 8.2% logged in September.

For December, China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said that local shares might drop as investors are expected to pocket profits from the market’s recent rally.

“We think the market is due for a pullback on profit taking following the sustained rally from end of third quarter. We note that a consolidation phase is part of a healthy longer-term uptrend, and provides investors with redeployment opportunities at more favorable risk-reward profiles,” Mr. Mercado said in an e-mail.

Mr. Mercado said that US November inflation data will continue to influence the local market for December.

“December inflation data will be much awaited. Any surprise above consensus expectation or an acceleration above 8% will be negative to market sentiment,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in an e-mail.

Ms. Ulang noted that US Federal Reserve’s (Fed) and Bangko Sentral ng Pilipinas’ (BSP) next policy move will drive market sentiment the month.

The US Fed raised borrowing costs by 75 basis points (bps) for a fourth consecutive time in November. So far, the Fed has hiked rates by 375 bps since March and is expected to deliver smaller increases on its next policy meeting set on Dec. 13-14.

The BSP has raised borrowing costs by 75 bps to 5%. The Monetary Board’s next policy meeting is on Dec. 15.

“The upcoming US CPI report with the US Fed’s interest rate decision the following day may provide some clues on the pace of the global monetary tightening going into 2023,” RCBC Securities, Inc. Head of Research Erwin Rommel C. Fuentes said in an e-mail.

Meanwhile, RCBC Securities’ Mr. Fuentes said that the PSEi might end at around 6,600 for the year, while he sees its support at 6,400 and resistance at 6,800.

COL Investment Management said that the local index is expected to range between 6,000 and 6,850 in December. — Ashley Erika O. Jose