Profit taking likely ahead of SONA, Fed meeting

PHILIPPINE SHARES may move sideways this week as profit taking is expected ahead of the US Federal Reserve’s monetary policy meeting and President Ferdinand R. Marcos, Jr.’s second State of the Nation Address (SONA).

The benchmark Philippine Stock Exchange index (PSEi) rose by 34.06 points or 0.51% to close at 6,647.56 on Friday, while the broader all shares index went up by 14.99 points or 0.42% to 3,530.90.

Week on week, the PSEi gained 22.77 points or 0.34% from its close of 6,624.79 on July 14.

“The local bourse jumped by 34.06 points to 6,647.56 [last Friday], fueled by the optimistic anticipation of favorable second-quarter earnings results. The narrow balance of payments (BoP) deficit in June further contributed to the positive sentiment,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

“Although the country’s BoP position remained in deficit in June, it showed improvement compared to the previous year,” Ms. Alviar added.

The country’s BoP deficit narrowed to USD 606 million in June from the $1.6-billion gap in the same month last year the Bangko Sentral ng Pilipinas reported last week.

Month on month, the BoP gap widened from the USD 439-million deficit in May.

For this week, investors may pocket their profits ahead of the Fed’s policy meeting on July 25-26, Unicapital Securities, Inc. Senior Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message.

“We see the index retesting resistance level at 6,700 given that the Fed is widely expected to signal that [this] week’s rate hike would be the final one in its tightening cycle, easing interest rate concerns,” Mr. Temporal said.

“[It] is the Federal Reserve’s policy rate announcement and interest outlook that we see as potentially having the most impact on our index. A signal from the Fed that its rate hike campaign is in the final phase, or a shift to less hawkishness, could trigger a long-awaited breakout rally,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet added in a Viber message.

The Fed paused its monetary tightening cycle in June after hiking its key rate by a cumulative 500 basis points to a range between 5% and 5.25%.

Mr. Marcos’ SONA on Monday may set the tone for the week as market participants await his economic agenda, Mr. Colet said.

For the week, online brokerage firm 2TradeAsia.com placed the PSEi’s immediate support at 6,500 and resistance at the 6,750-6,800, while Philstocks Financial’s Senior Research Analyst Japhet Louis O. Tantiangco put support and resistance at 6,600 and 6,800, respectively. — Adrian H. Halili