Stock investors await May inflation report for direction

The fate of the Philippine Stock Exchange index (PSEi), which has clawed back its way to the 6,500 level after US debt ceiling concerns eased, lies on the hand of the inflation report set to be released this week, according to market analysts.

“Locally, investors will now turn their focus on Philippine May inflation data scheduled for release on June 6. A favorable inflation print, especially one that is below expectations, could encourage a recovery in the PSE,” China Bank Capital Corp. managing director Juan Paolo Colet said.

The Bangko Sentral ng Pilipinas (BSP) projected that inflation in May might be within 5.8 percent to 6.6 percent, with 6.2 percent as the midpoint. Should this be realized, the inflation rate would have decelerated for the fourth month in a row.

The Philippine Statistics Authority previously reported that inflation in April reached 6.6 percent, higher than the 4.9 percent in the same month last year but lower than the 6.6 percent in March.

“Investors will also weigh the outlook for US interest rates in view of mixed signals on whether the Federal Reserve will skip a policy rate hike this month,” Colet explained.

In the Philippines, Sun Life Investment Management and Trust Corp. president Mike Enriquez recently shared that key policy rates were likely to be kept the same for the rest of the year amid a forecast that inflation would slow down.

Sun Life Investment expects average inflation for the year of 5 percent, lower than the BSP projection of 5.5 percent.

While commodity prices have been stabilizing, Enriquez said that El Niño—which can adversely affect agriculture output — poses a risk. But he said that early importation of rice, grains and livestock could cushion the impact.

Colet sees PSEI trading within the 6,400 to 6,600 territory this week after heavy foreign outflows in the past trading days.

On Friday, PSEi broke a three-day losing streak and ended the trading with a 1.27-percent gain.

“The lifting of the US debt limit for two years removes a major overhang on equity markets and gives a temporary shot of optimism,” Colet explained. INQ