THE Philippine Stock Exchange index (PSEi) is expected to remain under pressure this week as elevated inflation, rising global bond yields and a weak peso weigh on sentiment, with investors also watching for signals regarding next week’s the Bangko Sentral ng Pilipinas (BSP) policy meeting.
The benchmark index ended last week at 5,700.99, up 1.61 percent week-on-week, recovering from five consecutive sessions of losses in the previous week. However, analysts cautioned that the rebound, driven partly by bargain hunting, may not signal a sustained recovery amid persistent economic and market headwinds.
Japhet Tantiangco, research manager at Philstocks Financial Inc., said the market remained vulnerable with investor confidence still weak and no clear positive catalyst emerging.
“While there are still a lot of bargain opportunities, given the present backdrop, the market is still bearishly biased,” he said.
Tantiangco cited September inflation, which accelerated to 7.2 percent from 6.1 percent in August, as a major concern for equities. Elevated oil prices, peso weakness and the anticipated effects of El Niño on agricultural supply could add to inflationary pressures, potentially prompting the BSP to raise policy rates further.
Higher interest rates could weigh on equities by increasing borrowing costs and making fixed-income investments more attractive relative to stocks.
Tantiangco also pointed to rising government bond yields, with 20-year and 25-year Treasury yields already above eight percent. Higher yields raise the return investors may demand from equities, potentially limiting appetite for stocks.
From a technical perspective, he identified 5,600 as a major support level and 5,800 as resistance for the PSEi. The index’s 10-day exponential moving average also remained a hurdle to a sustained recovery.
A break above the moving average could support further gains, Tantiangco said, while failure to overcome the resistance could lead the index to retest 5,600. A breach of that support could open the door to further declines.
Meanwhile, online brokerage 2TradeAsia.com said investors were weighing the risk of another BSP rate hike against concerns over economic growth, following September’s faster-than-expected inflation.
The online brokerage expects the Oct. 22 policy meeting to be a key market event, with the size of a potential rate increase a major question. While a 25-basis-point hike remains its base case, it said a 50-basis-point increase could no longer be dismissed.
2TradeAsia also flagged the peso’s weakness and rising US Treasury yields as risks to foreign fund flows. Higher US yields could draw funds away from emerging markets, putting additional pressure on the peso and potentially narrowing the BSP’s room to delay further monetary tightening.
Investors will also monitor US September consumer price index and producer price index data, as well as developments in oil prices and US-Iran relations, it said.
Meanwhile, the upcoming market debut of Mynt, the operator of GCash, is expected to test investor appetite for new listings following the postponement of the planned VITRO REIT listing to 2027, 2TradeAsia said.
It advised investors to remain selective, favoring large-cap companies with foreign investor interest, dollar-denominated earnings and pricing power. Banks could benefit from the interest rate environment, while consumer companies may face margin pressure from higher costs.
2TradeAsia also identified property stocks and real estate investment trusts as particularly exposed to rising yields, given the competition from higher-yielding government securities.
