PHILIPPINE SHARES may move cautiously this week as the market awaits the Bangko Sentral ng Pilipinas’ (BSP) review for clues on its policy direction as the conflict in the Middle East continues to weigh on domestic inflation expectations.
On Thursday, the Philippine Stock Exchange index (PSEi) rose by 1.3% or 80.12 points to close at 6,238.46, while the broader all shares index increased by 1.14% or 38.88 points to end at 3,435.23.
However, week on week, the PSEi decreased by 58.84 points from Aug. 14’s finish of 6,297.30.
Philippine financial markets were closed on Friday for the Ninoy Aquino Day holiday.
“Worries over the situation in the Middle East took center stage again last week as the US-Iran ceasefire ended without a deal nor an extension agreement. This caused the local bourse to pull back, even breaching the 6,150 support line intraweek. Trading was still tepid, reflective of poor confidence,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.
“With no end in sight, tensions between the US and Iran are expected to remain hanging above market sentiment, especially as global oil prices continue their climb, in turn setting up higher inflation expectations at home,” Mr. Tantiangco said.
This could be a key point of discussion at the BSP Monetary Board’s policy meeting on Thursday (Aug. 27), he said. “The BSP is seen to be at a critical juncture as they balance elevated inflation against slowing economic growth in their policy decision. The uncertainties in their policy direction may also weigh on the market.”
A BusinessWorld poll showed that 19 of 24 analysts expect the Monetary Board to raise the target reverse repurchase by 25 basis points (bps) for a third straight meeting this week as inflation stays elevated. The rest expect the BSP to hold fire amid lingering uncertainties, especially with economic growth weakening.
The BSP has raised benchmark rates by a cumulative 50 bps since April, bringing the policy rate to 4.75%.
Mr. Tantiangco added that could be “choppy” as the market continues to digest corporates’ mixed financial performance.
“Chart-wise, the local market continues to trade within the 6,150-6,400 range. However, the MACD (moving average convergence/divergence) line and the 14-day relative strength index are already moving downwards, implying loss of momentum.”
The market will also continue to monitor the peso and the bond market following last week’s volatile trading, he said.
“The market’s direction would still likely depend on developments over the long weekend, though we could see some early pressure after US Treasury yields rebounded as concerns over inflation and government debt persisted despite the Treasury’s expanded bond buyback plan,” COL Financial Group Research Analyst Denise Joaquin said in a Viber message. Markets will also be monitoring the Federal Reserve’s Jackson Hole Symposium for clues on US monetary policy, she said. — Alexandria Grace C. Magno