Momentum expected to accelerate

Philippine stocks are seen to continue trading with an upward bias this week following a “dovish” tone from the US Federal Reserve chief.

Last week, the main-share Philippine Stock Exchange index added 0.38 percent to close on Thursday at 7,367.85. The markets were closed on Friday as the nation observed Bonifacio Day, a nonworking holiday.

BDO Unibank chief strategist Jonathan Ravelas said US Fed Chair Jerome Powell had fueled bets on risk assets after saying the central bank was “just below the broad range of estimates” for a neutral level of interest rates.

“The week’s close at 7,367.85 signals some room to test the 7,500 levels in the near-term,” Ravelas said.

“Momentum is slowly accelerating and supportive of a bounce. A break above 7,500 levels could extend the rally toward 7,800,” he added.

Papa Securities said Powell’s tone would shift market expectation from looking at three more interest rate hikes (one in December and two in 2019) to just two more (one in December and one in 2019).

“This should be positive for local equities as this will help temper the dilemma of a higher bond yield versus earnings yield,” Papa Securities said in a research note.

Luis Gerardo Limlingan, managing director at Regina Capital Development, said the slew of local and international data for the week would guide investors.

He pegged the resistance level at about 7,500 for the PSEi while support was at 7,200.

For the peso, Ravelas said the week’s close at 52.45 signaled that there was still some room to test the 52:$1 levels in the near-term.

“A break below the 52 [to $1] will open the door for more appreciation toward the 50 levels,” he said.

He expects the local currency to settle within 52.15 to 52.30:$1 in the near-term. —WITH A REPORT FROM MIGUEL R. CAMUS