STOCKS are expected to move sideways with a downward bias this week due to expectations of more interest rate hikes from the Bangko Sentral ng Pilipinas (BSP) amid elevated inflation.

The benchmark Philippine Stock Exchange index (PSEi) declined by 36.89 points or 0.54% to close at 6,779.02 on Friday, while the broader all shares index dropped 17.39 points or 0.47% to end at 3,621.69.

Week on week, the PSEi lost 97.77 points or 1.42% from its close of 6,876.79 on Feb. 10.

“Stocks tumbled after the BSP painted a gloomy first-quarter outlook for monetary policy. The spike in January inflation prompted the BSP to raise their 2023 inflation projection to 6.1%,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

The BSP’s policy-setting Monetary Board on Thursday raised benchmark interest rates by 50 basis points (bps) for a second straight meeting, and signaled more tightening to tame inflation.

The central bank increased its policy rate to 6%, the highest in nearly 16 years or since May 2007 when it stood at 7.5%.

The BSP has now hiked borrowing costs by 400 bps since May 2022.

The central bank raised its average inflation forecast for 2023 to 6.1% from 4.5% previously. This is beyond the BSP’s 2-4% target range.

It also hiked its 2024 inflation projection to 3.1% from 2.8% previously.

BSP Governor Felipe M. Medalla said after the meeting that it was difficult to rule out a third or maybe a fourth increase this year, with a 25-bp or 50-bp hike at their next meeting on March 23 almost guaranteed.

For this week, Mr. Vistan said the BSP’s hawkish outlook could affect market sentiment.

“The BSP hinted that there is still work to be done as the local benchmark rate is among those that are negative in real terms. The market is expected to remain weak this week as the PSEi broke some key support levels,” he said.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco also said the PSEi may trade with a downward bias after the BSP signaled more rate hikes to come.

“[Overall], the market is still seen to move with a downward bias amid resurfacing worries over aggressively hawkish monetary policy outlooks of the BSP and Federal Reserve,” Mr. Tantiangco said in a Viber message.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail that the movement of offshore markets over the weekend could affect the PSEi on Monday.

“In case we see a sustained sell-off, then we are likely to track lower. Nevertheless, we think that there remain opportunities for bargain-hunting considering that we’ve already seen four weeks of decline,” Mr. Mercado said.

Mr. Vistan placed the PSEi’s support at 6,509 and resistance at 6,800, while online brokerage put support at 6,600-6,650 and resistance at 6,850 and Mr. Mercado pegged support at 6,600-6,640 and resistance at 6,950-7,000. — Ashley Erika O. Jose