The local stock barometer could go for a steady 8,000 level this week to avoid any deep pullbacks after an attempt at the bull.
Last week, the Philippine Stock Exchange index (PSEi) shed 73.27 points or 0.9 percent to close at 8,070.89.
A new intraday high of 8,213.72 was hit last week, briefly bringing the index to bull territory when the January inflation figure came in lower than expected at 4.4 percent, a 10-month low.
Jonathan Ravelas, chief strategist at BDO Unibank, said the PSEi had fallen for the first time in six weeks as investors grew anxious of the probability the United States and China won’t reach a trade deal.
“The week’s close at 8,070.89 highlights market vulnerability to sell-offs,” Ravelas said. “Look for another attempt of the 8,300 levels, as the market [hit] a new year-to-date and intraweek high at 8,213.72.”
“Failure for the market to stay above the 8,000 levels could signal more profit-taking activities back to 7,500 to 7,800 levels,” Ravelas said.
Ayala-led Bank of the Philippine Islands said in a research note the latest January inflation figure suggested that average inflation might finally return to the 2-4 percent target of the Bangko Sentral ng Pilipinas (BSP) by the second quarter of 2019—or even earlier—should oil prices remain below the $55-per barrel level.
“With inflation now in a downtrend, the economy has the opportunity to return to the sweet spot of low inflation and high growth just as election spending boosts overall demand. We note that growth during election years is usually faster compared to the growth in non-election years,” BPI said in a research note written by a team led by economist Jun Neri.
“Given that inflation has now settled below the BSP’s policy rate of 4.75 percent, the local equity market may see strong foreign inflows which may give support for the peso in the near term,” BPI said.
Nonetheless, BPI said the local currency might continue to weaken against the US dollar in the medium term as the country’s trade deficit would likely remain elevated, with additional depreciation pressure coming from global uncertainties.
Despite the PSEi ending in the red last week, the uptrend is still intact, said Christopher Mangun, head of research at Eagle Equities Inc.
“As a matter of fact, the pullback strengthens the rally as it keeps a cautionary sentiment and allows more investors to get back in. The key to the deal is its resilience in constantly closing above 8,000,” Mangun said.