INVESTORS could trade cautiously this week as they digest the country’s weaker-than-expected economic growth and its impact on a Bangko Sentral ng Pilipinas (BSP) policy meeting near the end of the month.
The benchmark Philippine Stock Exchange index (PSEi) ended last week at 6,290.35, up 0.86 percent from the previous week and snapping a two-week losing streak, but Philstocks Financial Inc. research manager Japhet Tantiangco said sentiment remained cautious following the latest growth data and developments in the Middle East war.
“Recent macroeconomic data are giving mixed clues,” Tantiangco said, noting that both headline and core inflation slowed while employment also improved.
“However, our Q2 GDP (gross domestic product) data has posted slower expansion implying that the local economy continues to lose growth momentum,” he added.
Growth was just 2.3 percent in the second quarter, slowing from 2.8 percent and bringing first-half growth to 2.6 percent — well below the government’s downwardly revised 3.5- to 4.5-percent target for the year.
Online brokerage 2TradeAsia.com, which had expected a slowdown to 2.5 percent, said the final result was largely driven by a 14-percent decline in fixed investment and a 32-percent drop in public construction. Household consumption also grew by just 2.8 percent.
With first-half growth at 2.6 percent, 2TradeAsia said the country would need to expand by 4.4 percent in the second half to reach the low end of the government’s full-year growth goal.
The brokerage said it would update its outlook as it factors in capital expenditure guidance from listed companies. It said a downside revision could not be ruled out if public construction spending does not visibly restart in the third quarter.
Inflation, meanwhile, also remains a concern for monetary policy and 2TradeAsia said the consumer price growth backdrop could support another BSP rate hike this month, although weaker economic growth could result in a shorter tightening cycle.
Tantiangco said the latest inflation figures were still elevated despite the slowdown and would remain important for the market’s outlook.
Meanwhile, investors are expected to monitor developments between the United States and Iran, particularly those involving the Strait of Hormuz.
Tantiangco said conflicting statements from the two sides regarding negotiations and passage through the strait had fueled another rally in global oil prices.
“If the situation between the two worsens, it is expected to weigh on the local bourse,” he said.
2TradeAsia likewise identified volatile crude oil and foreign exchange movements as key risks for the market, noting that Brent crude has remained above pre-conflict levels.
On the domestic front, Tantiangco said the peso had improved against the US dollar but remained weak while local Treasury yields eased but were still elevated.
“If both continue in their current direction, then it may give the market a boost,” he said.
The market will also have a relatively light domestic economic calendar, with investors expected to focus on corporate earnings and company briefings.
Among those scheduled to hold analyst briefings this week are Ayala Land Inc., SM Prime Holdings Inc., SM Investments Corp., Ayala Corp., PLDT Inc., Puregold Price Club Inc. and GT Capital Holdings Inc., according to 2TradeAsia.
