INVESTORS may pick up bargains in the coming days following the Philippine stock market’s recent decline, but worries over interest rates could continue to affect sentiment, with the US Federal Reserve’s policy decision also due this week.
The Philippine Stock Exchange index (PSEi) went down by 56.50 points or 0.93% to close at 5,961.99 on Friday, while the broader all shares index shed 19.55 points or 0.59% to end at 3,246.47.
Week on week, the PSEi dropped by 180.91 points or 2.95% from its close of 6,142.90 on Oct. 20.
“With already two consecutive weeks of decline, we may see bargain hunting [this] week. However, a strong rally may not yet be seen due to the downside risks that are still in play,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco in a Viber message.
“With the BSP (Bangko Sentral ng Pilipinas) now expecting inflation to take longer before falling within the 2-4% target, concerns that the high policy rates will be kept for a while, or possibly even raised further may weigh on market sentiment,” he said.
The BSP last week delivered an off-cycle 25-basis-point (bp) rate hike, as it warned inflation will remain above the 2-4% target until the middle of 2024.
The Monetary Board raised its target repurchase rate to 6.5%, the highest in 16 years, or since the 7.5% seen in May 2007. Rates on the overnight deposit and lending facilities were also raised by 25 bps to 6% (from 5.75%) and 7% (from 6.75%), respectively.
The BSP’s first policy move in seven months brought the cumulative rate increases since May 2022 to 450 bps.
“Investors are also expected to continue monitoring the developments on the US’ interest rates and the Israel-Hamas conflict. A rise in the US long-term Treasury yields and a worsening of the Israel-Hamas war may pull the market lower, while a decline in the yields and a de-escalation of the war is seen to boost sentiment,” Mr. Tantiangco added.
“We think that the market may test deeper support levels if it fails to bounce back to the critical 6,000 support level at the start of [this] week, especially as investors may continue to adopt a cautious stance given the upcoming Fed meeting,” China Bank Securities Corp. Research Associate Lance U. Soledad said in a Viber message.
Volume could be muted due to holidays this week, Mr. Soledad said.
For this week, online brokerage 2TradeAsia.com placed the PSEi’s support at 5,800-5,900 and resistance at 6,000-6,100.
“Chart-wise, of the market is able to get back above 6,000, it is expected to trade within the 6,000-6,150 range. If it fails to do so, however, the market is expected to trade within the 5,700-6,000 range,” Mr. Tantiangco said. — S.J. Talavera