THE MAIN INDEX will continue to test the 7,000 level ahead of the release of January inflation data this week, which could set the tone for the Bangko Sentral ng Pilipinas’ (BSP) policy move this month.

The benchmark Philippine Stock Exchange index (PSEi) went up by 41.19 points or 0.59% to close at 7,027.38 on Friday, while the broader all shares index added 21.68 points or 0.58% to end at 3,705.46.

Week on week, however, the PSEi went down by 24.78 points or 0.35% from 7,052.16 on Jan. 20.

“With the lack of a strong catalyst and the lingering economic concerns, the local market is having a hard time getting past its 7,000-7,100-resistance range,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The local bourse stationed within the 7,000 level, as bulls managed to recoup early week losses following a more comfortable US Federal Reserve rate hike. After falling by 311 points, the PSEi managed to slightly recover by 24 points to close at 7,027,” online brokerage 2TradeAsia.com said in a market note.

The US central bank last week raised its federal funds rate by 25 basis points (bps) to a 4.5% to 4.75% range, bringing total hikes since March 2022 to 450 bps.

For this week, Mr. Tantiangco and 2TradeAsia.com expect trading at the stock market to be driven by the January consumer price index (CPI) data, which will be released by the Philippine Statistics Authority on Feb. 7, Tuesday.

“The country’s CPI data may have a big impact on [this] week’s trading as inflation remains a key risk to the local economy’s growth outlook,” Mr. Tantiangco said.

“An inflation rate near the upper end of the BSP’s 7.5%-8.3% projection may pull the local bourse down, while a print biased to the lower end of the forecast may spur optimism,” he added.

2TradeAsia.com said the report will “be crucial in reading the tea leaves for BSP’s next rate move but will also reveal inflation drivers that may persist until the beginning of summer 2023 and may therefore push expectations of consumer confidence recovery later in the year.”

The online brokerage also expects the release of more fourth quarter financial reports to affect sentiment.

A poll of 15 economists conducted by BusinessWorld last week yielded a median estimate of 7.6% for January headline inflation, close to the lower end of the 7.5% to 8.3% forecast given by the BSP.

If realized, this will be slower than the 14-year high of 8.1% in December 2022 but faster than the 3% print seen in January 2022 and the central bank’s 2-4% target.

The BSP raised benchmark interest rates by 350 bps in 2022, bringing its key rate to 5.5%. It will hold its first policy meeting for the year on Feb. 16.

Mr. Tantiangco placed the PSEi’s support at its 10-day exponential moving average and resistance at 7,000 to 7,100, while 2TradeAsia.com put support at 6,800 to 6,900 and resistance at 7,200. — Justine Irish D. Tabile

RELATED ARTICLESMORE FROM AUTHOR