THE stock market is expected to remain under pressure this week and could again test key support levels as investors stay cautious amid elevated oil prices and the ongoing war in the Middle East.
The Philippine Stock Exchange index (PSEi) fell by 1.55 percent week on week, closing at 6,018.62 last Thursday as risk aversion persisted following an escalation in the conflict and a hawkish pause by the US Federal Reserve.
There was no trading on Friday as the country celebrated Eid al-Fitr.
Analysts said trading could remain subdued, with many investors opting to stay on the sidelines.
“The local market was brought lower last week as the conflict in the Middle East and its local economic consequences continue to stir worries amongst investors,” noted Japhet Tantiangco, research manager at Philstocks Financial Inc.
While valuations were said to have become more attractive, with the PSEi currently at around a 10.1 times price-to-earnings ratio, below the five-year average of 14.4, analysts warned that bargain levels may not be enough to trigger a sustained rebound.
Online brokerage 2TradeAsia.com said that global markets had turned volatile as geopolitical tensions evolved into a broader threat to the global energy complex, raising fears of a possible recession and prolonged inflation pressures.
A surge in oil prices, driven by supply concerns and attacks on key energy infrastructure, is expected to feed into higher transport and logistics costs, potentially pushing inflation beyond the Bangko Sentral ng Pilipinas’ target range.
For the Philippines, a net oil importer, the impact is seen to be more pronounced, with higher fuel costs and a weaker peso likely to weigh on both consumption and corporate margins.
Investors are expected to monitor developments in the Middle East, as well as government measures aimed at cushioning the impact of rising oil prices. Any signs of de-escalation are seen as a potential catalyst for a market rebound, while further escalation could drag equities lower.
On the technical front, the market was said to continue to exhibit bearish signals, trading below key moving averages. The potential formation of a “death cross” between the 50-day and 200-day moving averages may indicate a continuation of the downtrend.
Immediate support was seen at the 6,000 level, with a possible downside toward 5,800, while resistance was pegged at 6,150 in the near term.