THE stock market is seen remaining under pressure this week with investor sentiment dampened by the sustained oil price surge and its accompanying inflationary risk as war continues to rage in the Middle East.
The Philippine Stock Exchange index (PSEi) fell 4.14 percent last week to close at 6,058.94 as surging oil prices and heightened geopolitical tensions triggered a broad-based selloff in equities.
Analysts said the market’s weakness could persist while uncertainties surrounding the ongoing conflict involving Iran, Israel and the United States linger.
“The bourse is expected to remain bearish while uncertainties over the US/Israel-Iran war continue,” said Japhet Tantiangco, research manager at Philstocks Financial Inc.
Despite last week’s decline, the market is currently trading at relatively attractive levels. As of Friday’s close, the PSEi’s price-to-earnings ratio stood at about 10.2 times, well below its historical average of 14.4 times and the regional average of 18.3 times.
Still, analysts said bargain valuations may not immediately translate into a strong rebound given the persistent global risks.
Online brokerage 2TradeAsia.com said risk-off sentiment remains dominant in global markets as investors assess the potential economic fallout from the conflict and the sharp rise in oil prices.
Crude prices surged toward the $120-per-barrel level last March 9 amid fears of supply disruptions as the Iran war intensified, raising concerns that higher energy costs could fuel inflation and delay potential monetary easing globally.
By Friday, however, crude prices had corrected nearer the $100-per barrel mark. Brent crude, the global oil benchmark, ended at $103.14 a barrel while West Texas Intermediate crude, the US benchmark, stood at $98.71, with both benchmarks having risen for four straight weeks.
For the Philippines, a net oil importer, the surge in fuel prices could push inflation higher in the coming months while adding pressure on the peso to further depreciate, analysts said.
2TradeAsia noted that headline inflation could test the upper end of the Bangko Sentral ng Pilipinas’ 2- to 4-percent target band if oil prices remain elevated.
Investors are also expected to closely watch global commodity prices and movements in the local currency, as further increases in oil prices or peso weakness could dampen market sentiment even more.
On the technical side, Tantiangco noted that the market has broken below its 200-day exponential moving average and the 6,150 level, signaling bearish momentum.
The PSEi is now seen trading within the 6,000 to 6,150 range in the near term, with immediate support around the 6,000 level and resistance seen at the 6,300 to 6,400 range.
