Grinch lurking to spoil PSEi’s attempt at a strong end to 2023

Philippine stocks are poised to move higher after a modest recovery above 6,500 last week, but profit taking could spoil near-term rallies as investors weigh inflation risks in the run up to the new year.

The benchmark Philippine Stock Exchange Index (PSEi) gained 0.35 percent to 6,501 despite the lack of news drivers as buyers bet on interest rates coming down in 2024.

“The final three trading days of the year will see a mix of window dressing and bargain hunting with the index poised to end 2023 on a positive note,” said Juan Paolo Colet, managing director at investment bank China Bank Capital Corp.

“The local rally in stocks is still driven mainly by growing expectations of interest rate cuts next year even after the Bangko Sentral ng Pilipinas (BSP) has signaled that policy may need to remain tight for some time,” he added. The powerful US Federal Reserve had signaled at least three interest rate cuts for 2024, which could prompt the BSP to follow suit. Jonathan Ravelas, stock market veteran and senior adviser at Reyes Tacandong & Co., remained skeptical of the recent rally and said investors were “too optimistic” over the lowering of rates amid persistent price pressures.

He expected the PSEi to end the year closer to the 6,300 level as investors were “still worried about the impact of interest rates and inflation.”

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said bulls might target the 6,700 for the PSEi should they sustain current gains while immediate “minor” support level was pegged at 6,410 to 6,320. —Miguel R. Camus