PHILIPPINE stocks are expected to move sideways this week as investors await fresh buying catalysts while weighing the impact of geopolitical tensions alongside lingering inflation risks and higher interest rates.
The benchmark Philippine Stock Exchange index (PSEi) ended little changed last week, edging up 1.18 points, or 0.02 percent, to 6,072.24 on Friday but down 1.03 percent week on week, as investors remained focused on developments in the Middle East, the Bangko Sentral ng Pilipinas' hawkish policy stance and prospects for global interest rates.
Online brokerage 2TradeAsia.com said market sentiment received a boost from expectations of a firmer US-Iran peace accord, which pulled crude oil prices back toward pre-conflict levels, improving the outlook for domestic consumption as local fuel prices eased.
But the brokerage noted that gains ahead could remain limited as several major listings — including the planned initial public offerings of Mynt and Vitro — would absorb liquidity from the secondary market.
It added that said higher interest rates were likely to keep valuations in check and prompt investors to favor defensive names over more rate-sensitive sectors.
"Anchor on defensive plays that capture immediate fuel cost relief. Spot for key opportunities where growth fundamentals are present, especially for PSEi basket inclusion," 2TradeAsia said, urging investors to keep an eye on window-dressing as the first half ends.
Philstocks Financial Inc. research manager Japhet Tantiangco said he expected the market continuing to move sideways after failing to breach the 6,150 resistance level.
"Failing to take 6,150, the local market gave up some ground last week, falling back near the 6,000-support line. The loss of momentum implies that investors are not yet fully confident with risky assets amid downside risks to the general economy," Tantiangco said.
He added that while easing oil prices had reduced some inflation concerns, uncertainties surrounding the US-Iran agreement, the threat of El Niño to food supply and expectations of further BSP policy tightening continue to cloud the market's outlook.
In the absence of fresh positive catalysts, he expects the PSEi to trade narrowly within the 6,000 to 6,150 range.
Meanwhile, Rizal Commercial Banking Corp. chief economist Michael Ricafort said declining crude oil prices could help reduce the country's import bill, thereby easing inflationary pressures and supporting economic growth.
However, he urged investors to continue monitoring developments in the US-Iran peace negotiations, global oil price movements and expectations for further US Federal Reserve policy tightening, which remain key drivers of sentiment.
NAZYLEN JOY MABANGLO
