Investors will be watching key resistance levels after the benchmark Philippine Stock Exchange index (PSEi) rallied in the first week of 2023 on bets over the reopening of China and slowing domestic inflation in the coming months.
The PSEi closed on Friday at 6,667.97, up 1.55 percent for the week.
Jonathan Ravelas, a veteran stock market analyst and financial strategy consultant at e-Methods for Business Management Corp., said recent gains could see the PSEi test the 6,800 level.
There was also a near-term downside risk to 6,500 should the market fail to sustain gains above 6,800, he noted.
On Jan. 5, the Philippine Statistics Authority said inflation in December rose to 8.1 percent, bringing the full-year average to 5.8 percent.
The Bangko Sentral ng Pilipinas (BSP) said the December print fell within the forecast range of 7.6 to 8.6 percent, supporting the view that inflation could begin “decelerating in the succeeding months.”
Bank of the Philippine Islands (BPI) said there was room for the BSP to further hike interest rates “in the first half of the year,” adding: “Recent indicators have shown that demand remains strong as consumers continue to engage in revenge spending, and there might be a need to temper this through rate hikes in order to guide inflation back to the preferred path.”
“Moreover, the hiking cycle of the Federal Reserve has not ended. The central bank will likely continue to hike in the next two quarters,” it added. The local policy rate is currently at 5.5 percent.
The lender noted the environment could shift in the second half should the US enter a recession, prompting the Fed to lower interest rates.
“In this scenario, the BSP policy rate might peak at around 6.5 percent in 2023. The BSP will likely deliver their own cuts following the Fed, but still maintaining the 100 to 200 [basis point] differential with US rates. The BSP policy rate could go down to 4.75 percent in the latter part of 2023 if this happens,” BPI noted.