Downward trades seen as investors remain cautious

MANILA, Philippines — A limited upside is seen on the stock market this week, with investors expected to stay on the sidelines with no clear positive catalysts in sight.

The Philippine Stock Exchange index (PSEi) capped off the month of April at 5,833.64 last Thursday, 1.85 percent lower week-on-week.

2TradeAsia.com, the online arm of F. Yap Securities Inc., said the local bourse succumbed to heavy selling pressure last week as heightened risk aversion, compounded by the peso’s historic low, dragged the PSEi down.

“This combination of geopolitical energy risks, stickier global inflation, a firmer dollar and domestic margin pressures create a challenging environment for sustaining aggressive risk positioning in Philippine equities,” the online brokerage said.

“The war premium has provided relative support to energy, mining and certain defensive sectors, yet broader uncertainty weighs on sentiment across all markets and all asset classes,” it said.

This week, Philstocks Financial research manager Japhet Tantiangco said the local market is still expected to move with a downward bias as it continues to deal with lingering concerns from elevated global oil prices to rising inflation and interest rate expectations.

He said adding to the worries is the weakening of the peso to record lows and the inflationary risks it brings.

According to Tantiangco, inflation expectations remain high due to the upside risks brought by the effects of the blocked Strait of Hormuz and the weakening peso.

“This strengthens the case for more policy tightening by the BSP in their upcoming meetings,” he said.

“With its current level, the local market is deemed to be at a bargain. However, investors are still advised to remain cautious. With the downside risks at play, the market may continue to decline,” Tantiangco said.

Tantiangco said key economic data investors would watch out for this week include the April inflation (May 5), labor force survey (May 6) and gross domestic product data (May 7).

Immediate support is seen at 5,800, while resistance is at 6,000 to 6,050.