SHARE prices could face renewed pressure this week as a weakening peso and rising global oil prices threaten to revive inflation concerns following the Philippine Stock Exchange index’s (PSEi) recovery to above 6,000 last week.
The PSEi gained 2.25 percent week-on-week following Friday’s close of 6,090.60 as softer-than-expected August inflation and signals from the US Federal Reserve supported selective buying.
However, Philstocks Financial Inc. research manager Japhet Tantiangco said investor confidence remained weak with tepid value turnover reflecting cautious participation.
“The economic outlook remains challenged. The chart remains bearish,” he said, adding that the market could continue to move with a downward bias in the near term.
The market is also facing renewed external risks after the US-Iran war reignited, with military strikes from both sides pushing benchmark Brent crude prices above $90 per barrel.
Tantiangco said higher global oil prices, continued peso depreciation and agricultural supply threats from El Niño could drive commodity prices higher and put renewed pressure on inflation.
A continuation of peso declines and elevated Treasury yields could weigh further on equities, he said.
Online brokerage 2TradeAsia.com likewise warned that inflationary risks remained elevated despite headline inflation having eased to 6.1 percent in August from 6.2 percent a month earlier.
It said that price freezes may have contributed to artificial price stability, while crop damage and monsoon-related disruptions may not yet have been fully reflected in consumer prices.
Supply pressures could spill into inflation data in September and October as price controls expire, 2TradeAsia said.
The online brokerage also flagged continued peso-dollar volatility, noting that the market could face greater foreign exchange pressure ahead of the Federal Reserve’s policy meeting in mid-September.
It said investors should favor companies with solid foreign exchange hedging strategies and dollar earners to cushion the impact of peso weakness.
The market could also find some support from the mining sector as higher metal prices provide a sector-specific tailwind, 2TradeAsia said.
It recommended fundamentally sound mining stocks, including Lepanto Consolidated Corp. and Philex Mining Corp.
Investors were advised to remain selective and avoid chasing the “inflation is over” narrative as the sustainability of the disinflation trend would be tested further into the fourth quarter.
