PHILIPPINE shares are likely to remain volatile this week with caution expected to dominate sentiment amid a series of mostly negative catalysts, including elevated oil prices, a weaker peso, and the US Federal Reserve’s hawkish policy stance, as well as expectations of tighter market liquidity ahead of major initial public offerings (IPOs).
The benchmark Philippine Stock Exchange index (PSEi) ended last week at 5,855.91, down 3.4 percent week-on-week, as foreign selling widened and investors reacted to the Fed’s 25-basis-point rate hike and the latest FTSE index rebalancing.
Online brokerage 2TradeAsia.com said investors would likely continue focusing on inflation risks amid volatile global crude prices, persistent peso weakness, and the country’s high import bill. It also maintained its third-quarter strategy of advising investors to reduce exposure to oil-related sectors while adding banks, utilities, and infrastructure plays.
“Watch the oil, watch the peso, watch 6,000,” 2TradeAsia said, noting that the PSEi had broken below the 6,000 level amid foreign exchange pressures and the Fed’s hawkish signal.
The online brokerage said crude prices remain a key risk, with West Texas Intermediate rising from the low-$80s in August to around $93-$94 per barrel, while Brent has moved above $98 as the Middle East conflict disrupted global energy supply.
A sustained rise in oil prices could add to inflation pressures and further weigh on the peso, potentially keeping investors cautious on rate-sensitive and import-dependent companies.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said markets would also monitor developments in the US-Iran conflict and any progress toward an agreement involving the Strait of Hormuz, a key channel for global crude oil and liquefied natural gas shipments.
Locally, investors will watch for the government’s budget balance data due on Sept. 24, while the next major inflation release is scheduled on Oct. 6. Ricafort said that Philippine inflation is expected to pick up pace from the 6.1-percent rate recorded in August.
The peso will also remain a key factor to market sentiment after ending last week at P62.749 per dollar. Analysts said the currency’s weakness has raised concerns over the impact of higher import costs, particularly for fuel.
Meanwhile, liquidity could become a bigger concern as investors position for the country’s upcoming mega-listings, 2TradeAsia said.
The brokerage estimated that the roughly P24-billion Vitro REIT IPO and Mynt Inc.’s planned listing, which could raise as much as P92.32 billion, could draw substantial funds away from secondary-market trading in the coming weeks.
It also noted that elevated fixed-income yields could further encourage investors to favor bonds over equities, resulting in thinner trading volumes and more rotation among individual stocks.
Against this backdrop, 2TradeAsia recommended maintaining exposure to banks, utilities, and infrastructure plays while trimming oil-correlated sectors.
It also advised caution on small-cap shares ahead of the large IPOs, citing tighter liquidity conditions.