Slower inflation gives PSEi room to rise

Although the elusive 7,000 level might remain just so for the local bourse this week, the market still has much room to climb on expectations that inflation in August has been slower than previously.

The benchmark Philippine Stock Exchange Index (PSEi) again failed to clinch the psychological resistance level due to a lack of catalysts jolting the market.

The Bangko Sentral ng Pilipinas’ (BSP) interest rate reduction by 25 basis points pushed the index to march toward 7,000 in the last two weeks, even touching that threshold a few times.Nevertheless, the bourse ended lower on Friday, down by 0.93 percent week-on-week to 6,897.54.

With all the policy rate cut excitement dying down, investors are now looking toward the latest inflation print that will be released on Thursday.

“The market could move with an upward bias on the back of expectations that the Philippines’ August inflation print … would be lower than July’s 4.4 percent,” said Japhet Tantiangco, research manager at Philstocks Financial Inc.

Peso and jobs

The BSP itself has said that lower fuel prices, a stronger peso and more affordable rice, meat and fish may have helped ease inflation in August.

According to the central bank, inflation last month may have settled in the range of 3.2 percent to 4 percent, thus justifying its decision to slash interest rates early.The BSP’s key rate currently stands at 6.25 percent, with experts predicting another 25-basis-point cut in the latter part of the year.

Tantiangco noted that investors would likewise look at the local currency’s movement against the US dollar, as well as the country’s July labor figures.

Philstocks sees the market’s major support at the 6,700 to 6,800 range. —MEG J. ADONIS INQ