THE Philippine stock market is expected to take cues from the Bangko Sentral ng Pilipinas’ (BSP) policy decision and the stock market debut of GCash operator Mynt Inc. this week, with investors weighing inflation risks, a weakening peso and elevated oil prices.
The Philippine Stock Exchange index (PSEi) closed at 5,782.70 on Friday, up 1.43 percent week-on-week, extending its gains for a second consecutive week as bargain-hunting lifted shares despite lingering external risks.
However, the market’s recovery remained vulnerable to a reversal as trading activity stayed subdued and foreign investors recorded net selling of P1.41 billion last week, according to online brokerage 2TradeAsia.com.
The research firm said the BSP’s Oct. 22 policy meeting would be a key driver of market sentiment, with a 25-basis-point interest rate hike increasingly expected following the 7.2 percent inflation in September.
2TradeAsia said it expected a 25-basis-point increase as the minimum adjustment needed to keep the interest rate differential with the United States from narrowing further.
Philstocks FInancial Inc. research manager Japhet Tantiangco also expects the central bank’s decision to weigh on equities, with a rate hike largely anticipated by investors.
“A rate hold would be deemed as a positive surprise while a rate hike more than 25 basis points would be deemed as a negative surprise for the market,” Tantiangco said.
He added that the PSEi could continue testing its 5,800 resistance level after failing to break through it last week. While technical indicators have improved, subdued turnover suggests the rally remains fragile.
The peso’s depreciation and elevated global oil prices are additional risks for the local market.
The peso breached the P63-per-dollar level for the first time last week, according to 2TradeAsia, while Brent crude remained above $100 per barrel amid security concerns around the Strait of Hormuz.
Tantiangco said further peso depreciation could weaken market sentiment, while a rebound in the currency could provide support to equities. Elevated oil prices, meanwhile, could push domestic fuel costs higher and add to inflationary pressures.
2TradeAsia also warned that higher energy costs and the effects of El Niño on food prices could keep inflation risks elevated in the coming months.
Investors will also monitor Mynt’s scheduled listing on Tuesday following its initial public offering at P6.60 per share.
2TradeAsia said a strong debut could provide a short-term boost to market sentiment but advised investors against chasing the stock ahead of the BSP’s policy announcement.
The online brokerage maintained a preference for dollar-earning companies and well-capitalized banks, and said it would consider adding equity exposure only after the PSEi records a strong close above 5,800.
NAZYLEN JOY MABANGLO
