Weak trading seen

MANILA, Philippines–Local stocks are seen on a wait-and-see mode this week as all eyes are trained on the Bangko Sentral ng Pilipinas’ monetary setting on Thursday.

During last week’s four days of trading, the main-share Philippine Stock Exchange index (PSEi) gained a modest 22.33 points, or 0.33 percent, week on week to close at 6,784.95 on Friday.

“The market is consolidating,” said Joseph Roxas, president of Eagle Equities Inc., noting that the index had been finding it challenging to stay above the 6,800 mark.

Local stockbrokerage AB Capital Securities said the index traded in a tight band as investors stayed on the sidelines during the four-day trading week last week due to lack of domestic market-moving catalyst and in anticipation of the upcoming decision of the central bank on interest-rate resetting.

“This is an important lead as the economy’s growth slowed down in the first quarter, while consumer prices accelerated to the upper band of the BSP’s target, leading (BSP) Governor Amando Tetangco Jr. to give remarks about narrowed scope for unchanged policy rates,” AB Capital Securities said.

If the BSP would pursue an interest rate increase on Thursday as many had been anticipating, AB Capital Securities said there might be a “ripple” effect on businesses and investors.

The BSP has kept its overnight borrowing and lending rates at record lows of 3.5 percent and 5.5 percent, respectively, since October 2012, but recently increased banks’ reserve requirement by two percentage points.

On a technical perspective, AB Capital Securities said the index was tightly in between its six-month upward trend channel support and one-month downward trend channel resistance and sitting on top of its 35-day short-term moving average as the MACD (moving average convergence-divergence) indicator nears the zero-line. It said this would make this week’s interest rate hike decision “critical” to the market’s direction in the coming days.

Meanwhile, AB Capital Securities said other noteworthy economic data to be expected this week would include overseas Filipino worker remittances and US inflation and Federal Open Market Committee (FOMC) economic projections.

“We advise investors to remain cautious and wait for the rate hike decision before positioning strongly in the market,” it said.–Doris C. Dumlao