Hold your horses! PH investors told inflation yet to peak
Philippine stocks rallied hard after the United States posted a better-than-expected inflation reading in July and corporate earnings proved resilient in the second quarter.
The benchmark Philippine Stock Exchange index (PSEi) added 4.59 percent last week, closing Friday at 6,699.66.
For this week, investors would monitor the remaining earnings releases and the Bangko Sentral ng Pilipinas’ policy meeting on Aug. 18. Stock market veteran Jonathan Ravelas said investors should remain wary as inflation and interest rates have yet to peak.
He noted the second quarter performance of several companies were bolstered by election spending and the reopening of the economy.
The PSEi’s recent rally might be more of a “technical rebound” that could occur even during a bear market cycle, he said.
At the same time, the Philippine economy expanded at a slower-than-expected pace to 7.4 percent in the second quarter amid rising consumer prices.
“We could be in the early stages of a [bigger] market rebound, but we have dark clouds on the horizon,” Ravelas told the Inquirer.
“Investors should realize inflation hasn’t peaked yet and interest rates are still rising,” he added.
Thus, the stock market remained vulnerable to selloffs, he warned.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., also said gains at the PSEi were due to “still decent” growth in the second quarter.
Gains in the past week cut year-to-date losses at the PSEi to 5.9 percent.
Ricafort said the next resistance zones for the PSEi were from 6,800 to 6,900 while immediate support was pegged at 6,500 to 6,400.
