The Philippine stock market is expected to trade sideways this week amid ongoing inflation worries and geopolitical tensions in the Middle East. Analysts note that investors are weighing the implications of slowing economic growth and potential monetary tightening.
The benchmark Philippine Stock Exchange index (PSEi) closed at 5,960.97 on Friday, marking a 2.18 percent increase week-on-week due to bargain hunting and hopes for a ceasefire between the US and Iran. However, it remains below the crucial 6,000 resistance level.
Wendy Estacio-Cruz, head of research at Unicapital Securities Inc., indicated that market sentiment is likely to stay fragile. Investors are increasingly focused on inflation risks, expectations from the Bangko Sentral ng Pilipinas (BSP), and broader economic conditions.
We expect the PSEi to trade sideways to cautiously lower next week as investors remain focused on inflation risks, BSP policy expectations, slowing GDP growth, and global geopolitical developments.
Wendy Estacio-Cruz, Unicapital Securities Inc.
Estacio-Cruz also highlighted that April's inflation rate increased to 7.2 percent, up from 4.1 percent in March, raising concerns about stagflation and its impact on household consumption.
Japhet Tantiangco, research manager at Philstocks Financial Inc., echoed similar sentiments, predicting a bearish market trend as investors absorb the country's economic challenges.
With inflation expected to remain elevated in the immediate to medium term, household consumption and ultimately the general economy may continue to suffer.
Japhet Tantiangco, Philstocks Financial Inc.
The local market is also grappling with the effects of a weak peso and high oil prices, as Brent crude hovers around $100 per barrel. Investors are closely watching developments in the US-Iran situation, which could further impact market conditions.
Upcoming economic indicators, such as foreign direct investment data and remittances from overseas Filipino workers, may influence the PSEi's direction in the coming week.
Online brokerage 2TradeAsia.com noted that the market is constrained by persistent growth concerns and advised investors to adopt a defensive strategy, focusing on high-yield defensive stocks.
Analysts warn that sustained high treasury yields and currency weakness could further challenge the stock market. Tantiangco pointed out that the PSEi's struggle to breach 6,000 indicates strong resistance, with major support at 5,800.