THE Philippine stock market is likely to remain under pressure this week as investors await the US Federal Reserve’s policy decision, with surging oil prices and a peso that has fallen to record lows further reinforcing a bearish trend, analysts said.
Japhet Tantiangco, research manager at Philstocks Financial Inc., said the local market could maintain its bearish bias as macroeconomic concerns again take center stage.
“Given the factors at play and with no positive catalyst in sight, investors are advised to remain cautious,” Tantiangco said.
The benchmark Philippine Stock Exchange index (PSEi) ended last week at 6,061.81, down 0.47 percent from the previous week, as the renewed hostilities between the United States and Iran pushed oil prices above $100 per barrel and revived concerns over inflation and monetary policy.
Foreign investors also turned net sellers for the week, with outflows reaching P760.29 million, according to 2TradeAsia.com.
The brokerage said the immediate focus this week will be the Federal Open Market Committee meeting on Sept. 15-16, with markets watching whether the US central bank would signal a tighter policy stance.
2TradeAsia.com said a hawkish Fed could keep US yields elevated and further add pressure to emerging-market assets, while also limiting room for the Bangko Sentral ng Pilipinas (BSP) to ease monetary policy.
The brokerage noted that futures markets were pricing a roughly 55 percent to 60 percent probability of a US rate hike at the upcoming meeting. Even if the Fed keeps rates unchanged, however, hawkish guidance could still keep yields high and add pressure on the peso.
This comes as oil prices have again surged amid a widening US-Iran-Israel war, with Brent and West Texas Intermediate crude rising from the high $80s to above $100 per barrel. 2TradeAsia said attacks on tankers and Saudi energy facilities had contributed to the latest price spike.
For the Philippines, sustained oil prices above $100 per barrel could translate into another round of fuel price increases. 2TradeAsia estimated that pump prices could rise by another P2 to P5 per liter in each of two rounds over the coming weeks, with the impact likely to be reflected in the September and October inflation readings.
Philstocks’ Tantiangco said the combination of higher oil prices and a weaker peso could push September inflation above August’s 6.1 percent, further dragging on economic growth after gross domestic product (GDP) slowed in the first half.
The peso touched a new low of P62.565 against the US dollar last week as higher oil costs widened the current account gap and increased the country’s import bill.
Tantiangco said the peso could remain under pressure as economic concerns continue to weigh on confidence in the local currency.
At the same time, rising Treasury yields in the Philippines and the United States could make bonds more attractive relative to equities, potentially limiting demand for stocks, Tantiangco added.
On the technical side, Tantiangco said the PSEi is seen remaining on a downtrend after peaking at 6,488.35 on July 21. He identified support at 6,000 and resistance at 6,150, with the index trading below its 10-day, 50-day and 200-day exponential moving averages.
The declining moving average convergence divergence (MACD) and 14-day relative strength index also reinforce the market’s bearish bias, he said.
2TradeAsia likewise sees volatility around the 6,000 level and expects investors to stay on the sidelines until there is greater clarity on the Fed’s decision. The brokerage said trading could remain thin early in the week as funds wait for the policy outcome before taking stronger positions.
The online brokerage also expects some profit-taking ahead of the anticipated October listing of Mynt Inc., the parent of e-wallet platform GCash, whose proposed P92.3-billion initial public offering (IPO) has been cleared by the Securities and Exchange Commission (SEC).
