PHILIPPINE stocks could trade sideways with a cautious bias this week as investors weigh developments in the Middle East and rising inflation pressures, analysts said.
The Philippine Stock Exchange index (PSEi) climbed 1.66 percent week-on-week to 6,098.21 on Friday, returning to the 6,000 level, as a two-week ceasefire between the United States and Iran eased oil prices and tempered inflation concerns.
Peace talks over the weekend, however, resulted in no deal, which will likely reignite concerns over a re-escalation of the conflict.
Online brokerage 2TradeAsia.com said the market had regained footing as lower fuel prices lifted sentiment, with gains led by mining and oil, and services sectors.
Despite the rebound, the firm warned that volatility was likely to persist as the ceasefire remained fragile and supply disruptions continued.
“Near-term projections suggest the fuel crisis may worsen before it improves,” it said, noting that shipping activity through the Strait of Hormuz remains limited.
The brokerage added that global risks could keep energy prices elevated, citing warnings from the International Monetary Fund that prolonged conflict-driven inflation may weigh on economic growth.
Locally, inflation concerns have intensified after March inflation reached 4.1 percent, breaching the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 4.0-percent target range.
This could constrain the central bank’s policy options and tilt it toward a more hawkish stance ahead of its next rate-setting meeting on April 23.
Philstocks Financial Inc. research manager Japhet Tantiangco, meanwhile, said the ceasefire boosted market sentiment, allowing the PSEi to extend gains and move back above the 6,000 level.
However, he noted that investor confidence remained sensitive to geopolitical developments.
“Progressing negotiations and signs that a deal would be reached is expected to lift the market further. If the situation regresses, however, the local market is expected to decline,” Tantiangco said.
The market remains undervalued, he noted, with the PSEi trading at a price-to-earnings ratio of 10.3 times, below its five-year average of 14.4 times.
NAZYLEN JOY MABANGLO
