Stocks may rise with inflation data, peso in focus

Philippine stocks may rise in the coming days on continued bargain hunting following the market’s steep drop last week, with the peso and the release of May Philippine inflation data to be key trading drivers.

On Friday, the benchmark Philippine Stock Exchange index (PSEi) rose by 0.96% or 61.35 points to close at 6,433.10, while the broader all shares index gained by 1.11% or 38.30 points to end at 3,463.87.

Week on week, however, the PSEi fell by 2.82% or 186.79 points from its 6,619.89 close on May 24.

“Last week, we’ve seen bearish technical developments with the local market. The market fell in the first four days of its trading, breaching its 200-day exponential moving average. Also, it hit a new year-to-date low at 6,341.54. Its MACD (moving average convergence/divergence) line has crossed below the signal line, implying bearish momentum,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

For this week, the market could see more bargain hunting as the PSEi remains at an attractive level, Mr. Tantiangco said.

“However, its direction is still expected to depend on upcoming data. The local currency, which has been a concern last week, if it continues to weaken, poses downside risks to the bourse,” he said.

“Investors are also expected to watch out for the Philippines’ May inflation data. An inflation print faster than the preceding month’s 3.8%, especially one that breaches the upper end of the government’s 2-4% target, may also weigh on market sentiment. Investors may also watch out for our upcoming April labor market data for clues on the strength of our local economy,” Mr. Tantiangco said.

The Philippine Statistics Authority will release May inflation data on Wednesday (June 5), and the preliminary results of the April Labor Force Survey on Thursday (June 6).

A BusinessWorld poll of 16 analysts yielded a median estimate of 4% for May headline inflation, within the Bangko Sentral ng Pilipinas’ (BSP) 3.7-4.5% forecast for the month.

If realized, this would pick up from 3.8% in April but be slower than the 6.1% print in the same month a year earlier. This would also be at the high end of the central bank’s 2-4% annual target.

Mr. Tantiangco said the PSEi may continue to test the 6,400 support level this week.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s major support at 6,360 and major resistance at 6,560 to 6,610.

For its part, 2TradeAsia.com placed the PSEi’s immediate support at 6,200-6,300 and resistance at 6,600.

May inflation data could provide hints on the BSP’s future policy path, it said in a market note.

“Consensus at the beginning of the year was anticipating about two to four 25-basis-point rate cuts starting mid-year 2024. So far, these have been zero. Optimism has mostly evaporated and is being reflected in valuations,” the online brokerage added. — R.M.D. Ochave