PHILIPPINE STOCKS may continue their momentum this week on expectations of easing inflation, but investors may remain wary of the country’s development and macroeconomic risks.
On Friday, the Philippine Stock Exchange (PSEi) index jumped 1.01% or 62.31 points to close at 6,188.03, while the broad index of all shares rose 0.83% or 27.91 points to end at 3,370.94.
Week by week, the PSEi increased by 115.79 points from the end of June 26 at 6,072.24.
“The local market showed positive momentum as global oil prices fell while the Philippine economy received a high level of income from the World Bank. However, trading was light, indicating strong market confidence as there is still uncertainty,” Research Manager of Philstocks Financial, Inc. Japhet Louis O. Tantiangco said in a Viber message.
This week, the June inflation data of the Philippines that will be released on Tuesday (July 7) will be one of the main points of trade and negotiations between the US and Iran.
“Philstocks estimates that inflation will come in at 6.5%. If inflation shows a decline from 6.8% last month, we can see a positive reaction in the local currency,” said Mr. Tantiangco.
“Expectations of tamer consumer prices in June will support further purchases. June’s print below May (6.8%) should help the PSEi to continue its short-term push to 6,200-6,400,” said F. Yap Securities, Inc.
A BusinessWorld a poll of 18 analysts showed an average estimate of 6.6% inflation for June, slower than the 6.8% recorded in May but faster than the 1.4% in the same month last year. This is within the Bangko Sentral ng Pilipinas’ (BSP) forecast of 6%-7%.
If possible, June inflation will fall for the second month in a row and will be the slowest from the 4.1% recorded in March.
However, it will be the fourth month in a row that the consumer price index will breach the BSP’s 2%-4% target.
“The situation between the US and Iran seems to have eased so far. This has eased oil prices, somewhat giving us relief from our inflation outlook. However, no permanent resolution has been established between the two at the moment. Therefore, uncertainty remains,” said Mr. Tantiangco.
He said the recent rise in the market could fuel the hunt for assets, although investors are likely to remain cautious amid downside risks.
With the PSEi now above the 6,150 resistance and its 200-day moving average, these could be retested this week, he added. “If the market can hold at 6,150, this will be considered as its new support and the next resistance is seen at 6,400.”
“The views of the political risk premium will be clear, depending on how the Senate will deal with (Vice President Sara Z.) Duterte’s impeachment trial. Also, strong details are expected from the US-Iran peace agreement with Doha-mediated, as negotiations remain tight,” said F. Yap Securities. “The June inflation print and the BSP’s forward guidance on interest rates have a direct impact on consumer spending and investment.” – Alexandria Grace C. Magno
