Fed pivot could change tide for battered PH stocks, say analysts

The local stock market could follow US equities higher on bets the influential US Federal Reserve would slow the pace of aggressive interest rate hikes after its next meeting on Nov. 2.

Major US indices rallied over 2 percent on Friday after the Wall Street Journal reported the Fed would consider smaller increases after likely raising rates by 75 basis points next month.

The benchmark Philippine Stock Exchange index (PSEi) ended last week higher by 1.33 percent to 5,983.56 despite a profit taking toward the weekend.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., characterized the latter week pullback as a “healthy downward correction/profit taking after rising for seven straight days.”

“Market sentiment was also supported after global crude oil prices eased to two-month lows recently and also near nine-month lows,” he explained.

The Philippine peso closed the week at P58.75 against the greenback after Finance Secretary Benjamin Diokno told Bloomberg News the government was prepared to defend the local currency to prevent it from breaching the P60 level.

For the PSEi, Ricafort pegged the next major support level at 5,880 while initial resistance was seen from 6,194 to 6,235.

For his part, Jonathan Ravelas, financial strategy consultant at e-Methods for Business Management Corp., said profit taking over the past two sessions “supports the view that the [recent] rally was a mere technical rebound.”

He said potential downside risk for the PSEi stood at the 5,500 level while a strong move above 6,850 would negate this trend.

—Miguel R. Camus INQ