Tempered trading seen as investors keep their cash for upcoming DoubleDragon’s REIT IPO

The local stock barometer may start the week on an upbeat note but will likely remain shy of the 7,000 barrier as investors track the ongoing stream of fourth quarter local corporate earnings and the rollout of coronavirus vaccines.

Value turnover is still expected to be tempered by the P14.7-billion initial public offering of DoubleDragon’s real estate investment trust DDMP REIT, which will begin this week. The IPO, priced at P2.25 per share, will run from March 10 to 16.Highly anticipated IPOs tend to siphon off liquidity in the market as investors prepare cash to subscribe.

Last week, the main-share Philippine Stock Exchange index (PSEi) rose by 86.51 points or 1.3 percent to close on Friday at 6,881.37.

“The PSEi may open the week on the positive end following the 1.95 percent rally in the S&P 500 Index last Friday,” Ron Acoba, chief investment strategist at equities research provider Trade Edge, said.

“With elevated market rates, though, the index may nonetheless continue to trade in a choppy manner within the 6,700 to 7,000 range,” Acoba said.Jonathan Ravelas, strategist at BDO Unibank, said the index gained for the first time in four weeks last week as bargain-hunting emerged after the national government started its vaccination of medical front-liners. “However, the index remained below the 7,000 levels as inflation continues to gather pace following the February print,” Ravelas said.

Philippine consumer prices rose at a faster pace of 4.7 percent year-on-year in February from 4.2 percent in January. This marked the second consecutive month of overshooting the inflation-targeting Bangko Sentral ng Pilipinas’ 4 percent upper end inflation target. Ravelas said the week’s close at 6,881.37 showed that the index was having difficulty sustaining the rally toward 7,000 levels.

“Be on the lookout for a sustained break below the 6,700 levels as it could see a test toward the 6,500 levels,” Ravelas said.

But even while the inflation had surged past its target, the BSP is not expected to hike interest rates at a time when the economy is slowly recovering from last year’s record recession. “We expect BSP to remain sidelined for 2021 while inflation will likely remain elevated in the near term before gradually decelerating by the third quarter. The Philippine peso will likely move sideways as [BSP Governor Benjamin] Diokno suggests that a rate hike is not on the table for now,” ING Philippines economist Nicholas Mapa said.

HSBC, for its part, sees the BSP keeping its policy rate on hold at 2 percent this 2021 and begin tightening in 2022

“We believe any additional rate cuts at this juncture would continue to build unwanted inflationary pressures. We also forecast 75 basis points of rate hikes in 2022 [to 2.75 percent], as long periods of negative interest rates pose inflationary and financial stability risks,” HSBC said in a research note. INQ