Cautious trading seen ahead of BSP, Fed reviews

PHILIPPINE SHARES are expected to trade sideways this week as investors remain cautious due to global financial sector worries and ahead of the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The bellwether Philippine Stock Exchange index (PSEi) went up by 64.81 points or 1.01% to end at 6,469.72 on Friday, while the broader all shares index added 20.45 points or 0.59% to close the session at 3,464.27.

Week on week, however, the PSEi dropped by 120.16 points or 1.82% from its close of 6,589.88 on March 10.

“On the last trading day of the week, the PSEi jumped, mirroring the gains of most markets, as banking fears waned in the region following the financial help received by First Republic Bank and Credit Suisse,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Asian markets extended a risk rally on Wall Street on Friday to end a tumultuous week that saw a brewing banking crisis send bond yields plunging while market participants sharply lowered expectations of future interest rate hikes in Western economies, Reuters reported.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan surged 1.6% on Friday, helping reverse earlier losses to be up 0.7% on the week. Japan’s Nikkei climbed 1.2%.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said trading could remain cautious as worries over the financial sector linger, with central banks here and in the US also set to meet in the coming days.

“The local market is expected to take cues from the monetary policy meetings of the Federal Reserve and the Bangko Sentral ng Pilipinas. While a 25-basis-point (bp) increase is already projected for each, investors are seen to be more interested in hints with respect to their policy direction,” Mr. Tantiangco said.

“Cues that would point to a still long monetary tightening path ahead may weigh on the local market, while hints of the monetary tightening ending soon may boost sentiment,” he added.

The Fed’s will meet to review policy on March 21-22.

The US central bank raised the fed funds rate by 25 bps to 4.5-4.75% last month, bringing cumulative increases since March 2022 to 450 bps.

Meanwhile, the BSP will hold its own policy meeting on March 23.

The Monetary Board last month hiked benchmark rates by 50 bps, bringing its policy rate to 6%. It has raised borrowing costs by 400 bps since May 2022.

For his part, AP Securities, Inc. Equity Research Analyst Carlos Angelo O. Temporal said local shares may climb as the improving sentiment seen at last week’s close could lift the market.

Mr. Tantiangco and Mr. Temporal placed the PSEi’s immediate support at 6,400 and resistance at 6,600, while online brokerage 2TradeAsia.com put support at 6,300 and resistance at 6,600. — A.E.O. Jose with Reuters