PHILIPPINE STOCKS may struggle to maintain their momentum this week amid a lack of fresh drivers, with renewed hostilities in the Middle East making markets volatile again and dragging investor sentiment.
On Friday, the Philippine Stock Exchange index (PSEi) jumped by 1.24% or 78.96 points to close at 6,404.11, while the broader all shares index rose by 0.88% or 30.36 points to end at 3,444.07.
This was its best close in more than four months or since it finished at 6,445.38 on March 3, which was also the last time it ended above the 6,400 line.
Week on week, the PSEi surged by 117.41 points from July 10’s finish of 6,286.70.
“Cooler US June inflation attracted buying activity in the local bourse, lifting the PSEi 138 points to 6,404. This supported expectations for the Federal Reserve to adopt a status quo on interest rates that might ripple to other central banks’ decisions in the region,” F. Yap Securities, Inc. said in a market note.
“Waning concerns over the Federal Reserve’s policy outlook following signs that price pressures in the US are easing is so far helping in keeping the market’s positive momentum. However, trading remains anemic, implying that confidence remains weak,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.
For this week, the renewed conflict between the United States and Iran remains the biggest downside risk for the local bourse, Mr. Tantiangco said.
Potential oil supply disruptions due to the two countries’ battle for control over the Strait of Hormuz have pushed Brent crude back above $80 per barrel, which threatens the Philippines’ inflation outlook, he said, as local fuel prices are already expected to increase this week.
“Spot and forward benchmarks are already pricing in the re-escalation of hostilities in the Middle East, with crude trending back toward $80 per barrel following the US maritime blockade on Iranian ports. Domestically, local retail pump prices are already trading two to four standard deviations above their two-month rolling average, pointing to accelerated headline CPI (consumer price index) by September,” F. Yap Securities said.
Mr. Tantiangco added that the market’s latest rally has been mainly driven by bargain hunting, which could lose steam this week.
“For this to be sustained, however, strong catalysts must be seen moving forward. Without such, and with the headwinds at play, we may see a pullback for the local bourse [this] week. For a possible impetus, the market is expected to look towards second quarter corporate results.”
He noted that the market’s trend has been bullish as the PSEi was able to finish the week above the 6,400 resistance.
“Moving forward, this line could get retested. If the market is able to hold ground above the said line, its next resistance is seen at 6,550. The market’s 50-day and 200-day exponential moving averages are about to form a golden cross,” he said. — Alexandria Grace C. Magno
