4th quarter earnings reports to dictate market direction

Local stocks are seen continuing to consolidate this week while awaiting a stream of fourth-quarter local corporate earnings.

Last week, the Philippine Stock Exchange index (PSEi) added 8.51 points or 0.12 percent to close at 7,235.21.

“Chartwise, the week’s close at 7,235.21 continues to suggest the market’s inability to sustain a rally above the 7,400 levels,” said BDO Unibank chief strategist Jonathan Ravelas. “Continue to see the market to remain range bound between the 7,000 –7,400 levels in the near term.”

Last week, the government reported that January inflation had come in at 2.7 percent against the 2.8 percent consensus.

During its monetary setting last Thursday, the Bangko Sentral ng Pilipinas kept its key overnight borrowing rate at 3 percent but revised higher its 2017 and 2018 inflation forecasts to 3.5 percent and 3.1 percent from 3.3 percent and 3 percent, respectively.

Ravelas said the upward revision recognized a rising inflation environment. “A rising inflation could mean higher interest rates are just around the corner,” he said.

At the stock market last week, Ravelas noted that local players had taken the recent test of the low at 7,196.75 as an opportunity to hunt for bargains, causing prices to recover toward the end of the trading week.

Meanwhile, Ravelas noted that the peso had weakened last week by 0.16 percent week-on-week to P49.86 to $1 after some US Federal Reserve officials offered arguments to raise rates in March. This caused the dollar to strengthen against other currencies, including the peso.