PH shares to undergo stress test to prove grit, say analysts

The stock market may consolidate after a relatively strong week for the Philippine Stock Exchange index (PSEi).

The benchmark measure closed the previous week with a gain of 2.4 percent to 6,473.38.

The weekly close above the 6,400 resistance could set the stage for another surge, but analysts said they needed to see the PSEi break past a few more levels before a convincing reversal to the upside could be achieved.

Jonathan Ravelas, a veteran stock market analyst and financial strategy consultant at e-Methods for Business Management Corp., said that a key level for the PSEi stood at 6,850.

For Michael Ricafort, chief economist at Rizal Commercial Banking Corp., the next crucial levels for the PSEi was at 6,600 to 6,800.

Ravelas noted that downside risks remained given the threat of soaring inflation.

The Bangko Sentral ng Pilipinas (BSP) raised the benchmark interest rate by another 75 basis points last week to ease rising consumer prices.

However, inflation is expected to remain persistent, prompting further rate hikes by the central bank, according to Bank of the Philippine Islands (BPI).

“We continue to see price pressures that could prevent inflation from going back to the target of the BSP in the next nine months. With the absence of structural reforms in the agriculture industry, supply constraints will likely persist. The importation of food products may not provide enough relief since global prices of food are also high,” BPI said.

The central bank is expecting inflation to average 5.8 percent this year before slowing to 4.3 percent in 2023, still exceeding its target of 2-4 percent.

The peso would also continue to depreciate in the near-term due to rising imports, putting further pressure on inflation, it added. INQ