US’ inflation headache making PH investors uneasy

Investors will be monitoring the US inflation data that will be released on Wednesday apart from the remaining corporate earnings announcements covering the past year.

Last Friday, the benchmark Philippine Stock Exchange index (PSEi) ended lower at 6,589.88, following a weekly decline of 0.98 percent.

“The PSEi continued to correct lower for the second straight day, partly due to the overnight declines in the US stock markets,” Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said on Friday.

He said the US banking sector was also hit by contagion fears after the failure of US banks Silvergate and Silicon Valley Bank.

The PSEi closed the week just above the “minor” support level of 6,580. The next major support level was pegged at 6,410, Ricafort said.

Investors were bracing for the upcoming US inflation report after Jerome Powell, chair of the powerful US Federal Reserve, warned that interest rates may go higher for an extended period of time, which could also prompt the Bangko Sentral ng Pilipinas (BSP) to match the hikes.

The Philippine Statistics Authority earlier announced the country’s headline inflation in February heated up to 8.6 percent but came in slower than the previous month’s 8.7 percent and below the average estimate of about 8.9 percent.

Despite the lower monthly figure, observers warned that price pressures were increasing as core inflation accelerated to 7.8 percent from 7.4 percent in January.

“With core inflation still rising, the BSP may need to hike further in the coming months. Aside from inflation, the magnitude of the hike will depend on the upcoming data in the US,” according to Bank of the Philippine Islands (BPI).

“So far, markets are still expecting a 25-basis point hike in the March [Federal Open Market Committee] meeting, but an upward surprise could be bolstered by [the] upcoming US economic data and policy decision,” BPI added. INQ