PSE investors look to US after selldown

Investors will be on the lookout for US inflation data and for signs of bargain hunting after a multi-day selldown pushed the Philippine Stock Exchange index (PSEi) closer to its near-term support level.

The PSEi sank 1.38 percent to 6,379.03 last week amid a drastic drop in average daily volumes of P3.1 billion, down by half from the past week, data from the stock exchange showed.

“After the previous week’s market slide, the critical 6,300 to 6,350 area will again be in focus. Last time the index was near these levels, bargain hunters emerged, so as long as that support zone holds, we could see the PSEi maintain its range-bound pattern with resistance at 6,500,” Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., said in a note to investors over the weekend.

Colet said investors will also be monitoring US inflation data.

“Many traders remain on edge about the increasingly hawkish policy stance of the Federal Reserve, and this week’s inflation print could affect the outlook for further US rate hikes. This might also impact the [Bangko Sentral ng Pilipinas’] view on the appropriate timing of any domestic rate cut,” he said.

Too early to say

The market shrugged off government data last week showing that inflation had eased for a fifth consecutive month in June to 5.4 percent.

“It might be premature to conclude that the hiking cycle is over. One or two more rate hikes are still possible for the rest of the year depending on how the [foreign exchange] market will react in case the Fed hikes again,” Bank of the Philippine Islands said in a note to investors.

“It’s even more premature to expect rate cuts this year given the conditions abroad. With the Fed still keeping its hawkish stance, it might be difficult to cut rates while minimizing the impact on the currency. It should be noted that the country’s trade and current account deficit remains wide, which means there is a fundamental tendency for the Peso to depreciate,” the lender added. INQ