THE Philippine stock market could trade sideways this week as investors continue to weigh elevated inflation, slowing economic growth, prospects of further monetary tightening and the ongoing war in the Middle East, analysts said.
The benchmark Philippine Stock Exchange index (PSEi) ended Friday at 5,960.97, rising 2.18 percent week-on-week on bargain hunting and optimism surrounding a possible US-Iran ceasefire, but remained below the key 6,000 resistance level.
Wendy Estacio-Cruz, research head at Unicapital Securities Inc., said sentiment was likely to remain fragile amid concerns over inflation, interest rates and slowing economic activity.
“We expect the PSEi to trade sideways to cautiously lower next week as investors remain focused on inflation risks, BSP policy expectations, slowing GDP growth, and global geopolitical developments,” she said.
Estacio-Cruz noted that higher-than-expected April inflation and renewed concerns over additional rate hikes could continue to weigh on risk appetite, along with the weak peso and elevated oil prices.
Still, she said bargain hunting could emerge if global markets stabilize.
Japhet Tantiangco, research manager at Philstocks Financial Inc., expects the market to move with a bearish bias as investors digest the country’s economic challenges.
Data released last week showed that inflation accelerated to 7.2 percent in April from just 4.1 percent a month earlier while the economy grew by a slower-than-expected 2.8 percent in the first quarter, raising stagflation concerns.
“With inflation expected to remain elevated in the immediate to medium term, household consumption and ultimately the general economy may continue to suffer,” Tantiangco said.
He added that Bangko Sentral ng Pilipinas signals that it was prepared to take further action against inflation could create additional growth challenges, while tempered government infrastructure spending may fail to provide enough support to the economy.
Tantiangco also said that investors were closely monitoring developments between the US and Iran as while a ceasefire remains in effect, hostilities and military exchanges continue.
“With this, global oil prices remain elevated with the Brent crude currently testing $100 per barrel,” he said.
Upcoming economic data releases could also factor in the PSEi’s direction this week, including February foreign direct investment data due today and overseas Filipino workers’ remittances for March out on Friday.
Online brokerage 2TradeAsia.com, meanwhile, said the local market remained constrained by “inert forces” as investors grappled with higher-for-longer interest rates and persistent growth concerns.
The brokerage advised investors to maintain a defensive posture and prioritize high-yield defensive stocks amid a steepening yield curve and elevated uncertainty.
Analysts also warned that rising treasury yields and continued peso weakness could pose further challenges to equities if sustained.
On the technical side, Tantiangco said the market’s inability to breach the 6,000 mark indicated strong resistance at that level while major support remained at 5,800. NAZYLEN JOY MABANGLO
