THE local stock market could stay rangebound this week as investors weigh corporate earnings, foreign selling and the monetary policy outlook ahead of a Bangko Sentral ng Pilipinas’ (BSP) rate-setting meeting on Aug. 27.
The Philippine Stock Exchange index (PSEi) ended last week at 6,297.30, up 6.95 points, or 0.11 percent, from the previous week as gains in the financial sector helped lift the market despite continued foreign selling.
The benchmark index gained for a second consecutive week although the advance was modest, while trading participation strengthened.
Online brokerage 2TradeAsia.com said investors should maintain a defensive bias as the market continues to assess whether the BSP would keep its policy rate unchanged or raise further at its upcoming meeting.
“Margin discipline has been the main highlight across Q2 earnings season,” 2TradeAsia also said, noting that the earnings results so far point to an estimated eight percent to 12 percent full-year earnings growth for listed companies.
The brokerage, however, said the projected growth was likely to be sector-specific rather than broad-based and advised investors to remain selective.
Banks and core utilities have shown more resilient margins while consumer discretionary and property companies have faced margin pressure amid still-elevated inflation, 2TradeAsia noted.
The brokerage expects the BSP to maintain its current policy stance at the Aug. 27 meeting but with a hawkish tone, citing inflation and peso pressures.
“Investors should maintain a defensive bias and resist the urge to chase high-beta cyclicals on global rate-cut headlines that may not translate cleanly into BSP action,” 2TradeAsia said.
It recommended staying anchored on well-capitalized banks and high-yield utilities and conglomerates with strong dividend records, while selectively positioning in mining stocks amid the recent strength in metals.
Meanwhile, RCBC chief economist Michael Ricafort said the PSEi could continue to benefit from bargain-hunting and improved global market sentiment, although several risks remain.
While market sentiment is being supported by gains in US equities following generally subdued US inflation data, reducing expectations of near-term Federal Reserve rate hikes, foreign investors have remained net sellers.
Foreign selling last week reached $59.6 million, higher than the $15 million recorded in the previous week, Ricafort said.
The market also faces uncertainty over the direction of global interest rates and developments in the US-Iran war situation, which could influence crude oil prices and investor sentiment.
Investors are also expected to monitor upcoming domestic data, including June overseas Filipino remittances on Aug. 17 and July balance of payments figures on Aug. 19.
