PSEi to remain pressured – analysts

PSEi to remain pressured – analysts

THE stock market could face continued pressure this week as investors look for more clues as to the direction of interest rates, analysts said.

The benchmark Philippine Stock Exchange index fell by 2.07 percent week on week to 6.383.70 last Friday in the wake of the US Federal Reserve's keeping interest rates unchanged and penciling in just one cut this year.

The bourse was closed on Monday for the Eid al-Adha holiday, as were other Asian markets. Tokyo was down nearly 2 percent, while Shanghai also fell.

While bargain hunting could provide some lift, Philstocks Financial Inc. senior research analyst Japhet Tantiangco warned of a likely bear market.

"The market's 50-day exponential moving average has fallen below its 200-day counterpart, forming a death cross," he noted.

Unless there are positive developments with regard to interest rates, the PSEi's movement this week could mostly be sideways, Tantiangco said.

"Investors should prepare for potential fluctuations as market sentiment reacts to global and local economic cues," he added.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said "the PSEi could continue to face downward pressure, especially if net foreign selling persists."

Online brokerage 2TradeAsia.com saw the market's immediate support at 6,200–6,250, with resistance at 6,500, and added that there could be a reset of the PSEi's 3-year key support within 6,000-6,100.

Ricafort said that investors will also be looking forward to next week's Monetary Board policy meeting, which could provide a clearer picture as to when local interest rates would begin to be lowered.

In contrast to the Fed, the BSP has indicated that it could start easing as early as August given improvements in the inflation outlook. This, however, has put pressure on local financial markets, with the peso having fallen to 19-month lows.

"The BSP would likely match any Fed rate cuts later in 2024 and in 2025 to maintain healthy interest rate differentials," Ricafort said.

"Any local policy rate cut would also be a function of inflation likely to be within the BSP inflation target as made more possible with the reduction on rice import tariffs," he added.

The government earlier this month slashed already-reduced tariffs on rice to 15 percent from 35 percent in a bid to further control inflation, which is again threatening to breach target.

"The reduction in rice import tariffs and favorable global crude oil prices may support local inflation trends and potentially pave the way for local policy rate adjustments," Ricafort said.

Investors will also be looking at the latest overseas Filipino worker remittance data. The BSP on Monday reported that personal remittances had risen by 3.1 percent to $2.86 billion in April.

Due on Wednesday, meanwhile, is the country's overall balance of payments position as of May.