Investors on the defense as another critical PSEi level looms

Stock market investors will be keeping their eyes peeled for the next support zone as the benchmark Philippine Stock Exchange index (PSEi) ended another week in the red.

The PSEi tilted lower last week after US inflation came in hotter than expected and the Bangko Sentral ng Pilipinas (BSP) raised the key interest rate by another 50 basis points.

These pushed down the benchmark measure by 1.42 percent to 6,779.02, which was just above the 6,750 level that bulls would need to defend to prevent further downside.

“If it goes below 6,750, we might start to see the selloff accelerate,” Jonathan Ravelas, managing director at eManagement for Business and Marketing Services, told the Inquirer.

The sustained breakdown might see the PSEi moving back to lower support areas from 6,500 to 6,300.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said 6,830 to 6,890 were immediate resistance levels for the PSEi. His initial “important” support zones were from 6,410 to 6,272.

Continued interest rate hikes

Inflationary pressures continue to weigh on the Philippine economy as the BSP raised the full-year inflation outlook to 6.1 percent from the 4.5 percent estimate last December.

“Looking ahead, the BSP may continue to hike interest rates in the first half of the year considering the inflation outlook. Inflation in February may stay above 8.5 percent following the unexpected surge in January,” Bank of the Philippine Islands said after the latest BSP rate hike, adding:

“A lower inflation print is more likely in March or April if oil prices remain stable. Inflationary pressures from food may also start to subside in these months as the harvest season begins and as imports arrive.”

It said the recent strengthening of the peso may provide some buffer, but “the decline in inflation will be gradual amid the uncertainties affecting supply.”

—Miguel R. Camus INQ