The benchmark Philippine Stock Exchange index (PSEi) is expected to continue its sideways movement as external inflation worries overcome domestic recovery prospects.
Investors were served a harsh reminder the previous week as the PSEi fell 2.5 percent to 7,270.36 after attempts to break out above 7,500 on the further weakening of the postholiday COVID-19 surge.
“While there are companies reporting good earnings, there are risks that cannot be disregarded like rising US interest rates, oil prices and inflation,” said BDO Unibank Inc. chief strategist Jonathan Ravelas.
US inflation last month surged to a 40-year high, heightening concerns the US Federal Reserve would take aggressive action to cool down the surging cost of goods.
The latest consumer price index reading in the United States showed inflation accelerated to a 7.5-percent annual rate last month, above 7 percent in December.
For Ravelas, the swift drop showed the PSEi was having difficulty sustaining a rally above 7,500.
“The week’s close at 7,270.36 highlights strong resistance exists at the 7,500 levels,” he said. “With the market’s failure to stay above the 7,500 levels, we are bound to consolidate anew within the 7,000-7,350 levels.”
He expected the PSEi to find “strong support” at 6,950-7,000 should the selldown continue this week. INQ