RECENT interest rate hikes by US and Philippine central banks, along with the depreciating peso, are seen to weigh on local stocks next month, as investors await more economic catalysts.
So far in September, the Philippine Stock Exchange index (PSEi) has declined by 324.11 points or 4.9% to end at 6,259.54 on Sept. 23 from its end-August close.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the PSEi’s decline follows two straight monthly gains. In end-August, the PSEi gained by 4.2% month on month, while in July, it added 2.6%.
For October, Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce expects investors to wait on the sidelines ahead of upcoming inflation data that will give hints on central banks’ move on interest rates.
“Given the limited data available for 2023, timing will be key in the months ahead as inflation for September and October will feed the next round of rate hikes in November,” Mr. Arce said in a Viber message.
“Until then, the market may continue to feel some pressure and trading will likely remain range-bound,” he added.
Mr. Arce said: “A significant rally is not expected, though, amid the lack of positive catalysts, expectations of further policy rate hikes by the US Federal Reserve and the Philippine central bank, as well as the depreciation of the Philippine peso will continue to weigh on sentiment.”
Last week, the Fed raised its monetary policy rate by 75 basis points (bps) for a third time, while the Bangko Sentral ng Pilipinas raised benchmark rates by 50 bps for a second straight meeting.
Meanwhile, the local unit posted a record-low P58.50 versus the greenback on Friday from its P58.49 finish on Thursday.
Year to date, the peso has weakened by 14.7% or P7.49 from its P51-close in the previous year.
Regina Capital Development Corp. Head of Sales Luis A. Limlingan said that investors will be awaiting the speaking engagements of the Fed and the release of macroeconomic data.
“Towards the end of the week funds will also be rebalancing ahead of the quarter-end window dressing,” he added.
Among the economic data that will give hints on the current strength of the global economy are consumer confidence, personal consumption expenditures price index, and jobless claims, Mr. Limlingan said.
For next week, analysts expect the PSEi to stay volatile, mirroring the decline of the peso versus the US dollar, as central banks continue to tighten their monetary policies. They are also factoring in the damage brought by Typhoon Karding.
“Trading at the Philippine Stock Exchange is expected to stay volatile this week as risk-off sentiments among investors will likely prevail as stocks mirror the decline of the Philippine peso while central banks around the world continue aggressive monetary tightening to tame inflation,” Globalinks Securities’ Mr. Arce said.
However, Mr. Arce said that investors might take advantage of the market dip and hunt for bargains.
“Investors and traders may remain bullish and take full advantage of the dips as stocks are now relatively cheap,” Mr. Arce said.
Mr. Limlingan said: “For the shortened week, locally we will assess the damage brought by Typhoon Karding. Hopefully, this will be minimal.”
Mr. Arce placed the PSEi’s support between 6,000 and 6,200 levels, and its resistance at the 6,300-6,400 range. He noted that its breakdown below 6,000 would see traders targeting the 5,700 to 5,500 levels. — Justine Irish D. Tabile