Stocks may climb ahead of inflation, GDP data

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PSE BGC board

LOCAL EQUITIES are seen to firm up in the first trading day of 2019 as investors await the release of data on December inflation as well as the country’s economic growth.

The bellwether Philippine Stock Exchange index (PSEi) closed the previous year on a negative note, losing 0.22% to 7,466.02, for a total weekly loss of 0.18%. The market was down by 12.8% from its finish of 8,558.42 in 2017.

“We go into 2019 with a lot of optimism as investors are eager to see the market’s recovery become a reality… The next few weeks are going to be crucial for the PSE and although the main index has been trading sideways since the beginning of December, we may see a huge move soon based on the technical,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market note.

“Several economic numbers like December inflation and 4Q GDP (gross domestic product) are going to be announced in the following weeks which may help fuel the rally.”

The Philippine Statistics Authority will be releasing December inflation data on Friday, Jan. 4. Projections from the Bangko Sentral ng Pilipinas Department of Economic Research placed the figure within a range of 5.2-6%, which could be the country’s slowest since July.

Meanwhile, the government will also release fourth-quarter GDP growth data on Jan. 7, alongside the balance of trade report for November. Analysts from First Metro Investment Corp. and the University of Asia and the Pacific expect the economy to have grown by 6.6% in the fourth quarter.

“Economic fundamentals remain intact, even inflation has started to taper off with the continuous drop in oil prices. We may see more and more investors gain confidence and get back into this market. It may as well bring back foreign money which will be a big factor to the market’s rally,” Eagle Equities’ Mr. Mangun said.

In contrast to Mr. Mangun’s more optimistic view for the first week of January, online brokerage sees the market experiencing some volatility.

“Volatile sessions might greet the initial week of 2019, with attention set on the macro economic picture that would help stimulate growth. While there are challenges to hurdle, 2019’s financial resolution will revolve on return optimization by taking on calculated risks,” said in a weekly market note.

The online brokerage also added that the trade war between the United States and China remain in the minds of the investing public, as well as the implementation of the second round of excise taxes on fuel, petroleum, and their effects on electricity rates and water tariffs.

“Participants will also guard how legislators will progress in the sequel to the tax reform package (specifically balancing reduction in trade incentives vs. cut in corporate income tax).” placed the PSEi’s immediate support at 7,400, while resistance could be from 7,500 to 7,550. — Arra B. Francia