January 31, 2023

Filipino Guardian

Sentinels of Filipino Free Press

Cautious trading ahead of Fed meetings, inflation

REUTERS/Eloisa Lopez

PHILIPPINE SHARES will be rangebound when trading resumes this week ahead of the October inflation data release and Federal Reserve Board meeting.

On Friday, the benchmark Philippine Stock Exchange (PSEi) index fell 77.15 points, or 1.23%, to 6,153.43, while the broader all-shares index fell 25.09 points, or 0.76%, to 3,257, 29 fell.

Still, the PSEi is up 169.87 points, or 2.84%, week-on-week from its closing level of 5,983.56 on October 21st.

Rastine Mackie D. Mercado, director of research at China Bank Securities Corp., said in an email that the PSEi fell on Friday on selling pressure as investors pocketed gains after the market’s four-day rally.

“The index has capped gains for four straight days through profit-taking. The index rose throughout the week as sentiment was boosted by a strong start to the third-quarter earnings season, a Fed official’s announcement that raised prospects of a slowing pace of future rate hikes and the peso’s strength against the greenback , received a boost,” Mr Mercado said in an email on Friday.

The Fed has hiked rates by 300 basis points (bps) since March and is expected to make a fourth straight hike of 75 bps at its Nov. 1-2 meeting before considering slower hikes through December.

Meanwhile, the peso closed at above a one-month high of 57.97p on Friday, up 25 centavos from its close of 58.22p on Thursday and up 78 centavos from its close of 58.75p per dollar on Oct. 21.

For this week, Mr Mercado said the Fed’s October meeting and the release of Philippine inflation data will boost sentiment.

The Bangkok Sentral ng Pilipinas on Monday gave an estimate of 7.1% to 7.9% for October headline inflation amid higher food prices and fares.

The Philippine Bureau of Statistics will release inflation data for October on November 4th.

Cristina S. Ulang, chief research officer at First Metro Investment Corp., said investors are awaiting the outcome of the Fed’s meeting.

“When the Fed signals a pivot to slower rate hikes, it gets cheered by the local market,” Ms Ulang said in an email on Friday. “A key risk is that the Fed surprises by more than 75 basis points, which may trigger further profit-taking.”

“The PSEi is likely to be rangebound in the coming week. Volatility may not resume until Wednesday as the market is absent for two days in light of the holiday,” said Marvin V. Fausto, president of COL Investment Management, Inc., in an email on Friday.

Local financial markets were closed on Monday and Tuesday for public holidays.

“The peso’s recent rebound should give local stocks a tailwind to become more buoyant as long as they remain at P58 levels or below,” he added.

First Metro Investment’s Ms. Ulang put the PSEi’s support and resistance at 5,700 and 6,300 respectively, while COL Investment Management’s Mr. Fausto put the support at 6,080 and the resistance at 6,200. — AEO Jose