Stocks seen to consolidate further this week

MANILA, Philippines — The main Philippine Stock Exchange index (PSEi) is expected to trade sideways this week, vacillating between the 6,100 and 6,400 levels.

Traders said the stock market would likely stay in consolidation mode as it continues to digest recent and upcoming economic developments, including the Bangko Sentral ng Pilipinas’ surprise off-cycle 75-basis-point rate hike last week.

Unicapital Securities said overall the rate hike is positive, as the sizable jump seeks to preempt further inflationary pressures as the global economy continues to remain challenged by supply disruptions.

“Further, the rate hike will partially offset and ease the depreciating peso,” it said.

Last week, the PSEi went down by 156.56 points or 2.6 percent after the previous week’s gains of 196.47 points or 3.2 percent.

Since the start of this year, the PSE already declined by a total of 13 percent from 7,122.63 at the end of 2021.

Economist Michael Ricafort of Rizal Commercial Banking Corp. sees immediate support at the 6,000-mark and immediate resistance at 6,300 to 6,500 levels.

He said local market sentiment recently has been weighed by the increase in new local COVID-19 cases to near five-month highs at more than 2,000 per day recently.

The PSEi is also moving in line with the US stock markets that hovered at one-week lows recently due to lingering market concerns over a possible US economic slowdown or even recession amid aggressive Federal Reserve rate hikes to bring down elevated US inflation, as well as the continued hawkish signals by US Fed officials.

At the same time, Ricafort noted some offsetting positive factors, such as global oil prices nearing three-month lows recently.

“This could support further rollback in local fuel prices, alongside the downward correction in other global commodity prices, as well as the recent easing in the benchmark 10-year US Treasury yield among one-month lows as the markets price in the risk of possible US economic recession amid more aggressive Fed monetary tightening in an effort to bring down elevated US inflation from the new 40-year high of 9.1 percent in June,” he said.