PHILIPPINE STOCKS may sustain their climb this week, supported by continued bargain hunting, but renewed tensions in the Middle East and the lack of fresh leads could keep investors cautious.
On Friday, the Philippine Stock Exchange index (PSEi) jumped by 1.01% or 62.83 points to close at 6,286.70, while the broader all shares index rose by 0.67% or 22.78 points to end at 3,393.34.
This was its best close in over four months or since it finished at 6,320.41 on March 6.
Week on week, the PSEi rose by 98.67 points from July 3’s finish of 6,188.03.
“Tamer June inflation (6.4% versus May’s 6.8%) buoyed sentiment, enabling the PSEi to finish 98 points up at 6,286. This was despite tempered global GDP (gross domestic product) outlook from the IMF (International Monetary Fund), and renewed geopolitical conflict in the Middle East,” F. Yap Securities said in a market note.
“The local market has shown positive momentum in the last two weeks, climbing a total of 3.53%. Support from foreign investors was also seen recently, with the last six trading days all posting net inflows with a total of P3.76 billion,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “However, trading remains thin with value turnover averaging P5.55 billion last week, implying that the rally is not backed by strong conviction.”
For this week, bargain hunting may continue to support the local bourse, although lingering downside risks and the lack of a clear catalyst could limit gains, he said.
“The situation in the Middle East remains a concern. As to whether the US and Iran will reach a deal despite strong points of contention from the latter’s nuclear program to the Strait of Hormuz remains uncertain… A re-escalation of tensions which could cause oil prices to rebound may weigh on the local market.”
This could add to domestic inflation pressures, he added. “Inflation still poses a threat. While the inflation rate is declining, it remains above the government’s 2%-4% target, implying the possibility of further tightening by the BSP (Bangko Sentral ng Pilipinas). Upside risks to inflation including global oil price volatility, El Niño, and inflation expectations also remain on the table.”
“June inflation delivered a welcome step in the right direction, but sticky core pressures and geopolitical oil risks mean the BSP tightening cycle is far from over. Oil prices staged a strong bounce last week (back towards $75-80 per barrel), which threaten the PSEi’s station above 6,200,” F. Yap Securities said.
Investors are also expected to focus on second-quarter corporate results, with average earnings per share projected to decline by 2%, it added.
Mr. Tantiangco sees the PSEi trading from 6,150 to 6,400 this week.
“Chart-wise, the market’s positive momentum is reflected by its position above its 10-day, 50-day, and 200-day exponential moving averages.” — Alexandria Grace C. Magno
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