STOCK market trading could remain choppy this week as investors await a Bangko Sentral ng Pilipinas’ (BSP) policy decision this Thursday while weighing persistent peso weakness, elevated Treasury yields and mixed corporate earnings.
The Philippine Stock Exchange index (PSEi) ended Thursday down 0.93 percent from the previous week, with services and holding firms leading the decline.
Trading remained subdued, with total participation falling 47 percent to P24.4 billion during the four-day trading week, while foreign selling eased to P2.36 billion from P3.66 billion a week earlier, online brokerage 2TradeAsia.com noted.
It expects the BSP to keep its benchmark interest rate unchanged on Aug. 27, with monetary authorities balancing inflation risks against the need to support economic growth.
“We expect BSP to hold its policy rate steady at 4.75 percent,” 2TradeAsia said, citing upward pressure on inflation from higher pump prices and weather-related disruptions to food supplies.
The peso’s recent weakness is also limiting the room for a rate cut, with the currency trading around P61.50 to P61.80 per dollar, it added.
Japhet Tantiangco, research manager at Philstocks Financial Inc., also said that the BSP faced a difficult policy decision given elevated inflation and slowing economic growth.
The peso, which recently hit a record intraday low, and elevated local Treasury yields could continue to weigh on equities, he added.
“The uncertainties in their (the BSP’s) policy direction may also weigh on the market,” Tantiangco continued.
Despite the headwinds, first-half earnings have generally shown resilience, he said, which could encourage investors to continue looking for opportunities.
2TradeAsia, on the other hand, said the first-half corporate reporting season showed a broad deceleration in earnings growth.
However, it noted that net-cash companies, renewable power firms and telecom platforms with fintech exposure continued to stand out and that power, telecommunications and real estate investment trusts (REITs) maintained their appeal through cash dividends.
2TradeAsia recommended rotating away from capital-intensive cyclical stocks and weather-exposed retail names toward cash-generative, high-dividend companies, particularly power utilities, telecommunications operators and top-tier REITs.
It also advised investors to keep an eye on selected mining stocks amid the rise in metal prices.
Additional pressure, meanwhile, could come from the economic effects of severe monsoon rains and flooding, which 2TradeAsia estimates could weigh on third-quarter activity.
Logistics disruptions and interruptions to agricultural distribution could temper rural spending and delay infrastructure disbursements, potentially prompting downward revisions to third-quarter gross domestic product growth estimates.
Cement, construction and discretionary retail companies face the clearest operational headwinds, while consumer staples, power distribution and telecommunications infrastructure are expected to be more resilient, it said.
