Cautious trading seen amid tightening concerns

Trading could be volatile at the Philippine stock market this week amid concerns over possible monetary tightening after headline inflation quickened in September.

The Philippine Stock Exchange index (PSEi) went up by 81.35 points or 1.31% to close at 6,259.95 on Friday, while the broader all shares index added 30.52 points or 0.91% to end at 3,379.27.

Week on week, however, the PSEi dropped by 61.29 points or 0.97% from its close of 6,321.24 on Sept. 29.

For this week, the market is expected to be on a defensive mood following faster September inflation, AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

“This data may serve as a justification for the Bangko Sentral ng Pilipinas (BSP) to contemplate interest rate hikes, a move closely watched by market participants,” Mr. Vistan said.

Weak macroeconomic indicators could affect the profitability of companies, he added.

Headline inflation quickened to 6.1% in September from 5.3% in August, data released by the Philippine Statistics Authority last week showed.

This was slower than the 6.9% print in September 2022, but matched the high end of the central bank’s 5.3-6.1% forecast.

The September consumer price index (CPI) was also above the 5.4% median estimate in a BusinessWorld poll of 17 analysts and marked the 18^th consecutive month that inflation exceeded the 2-4% target for the year.

For the first nine months, the CPI averaged 6.6%, above the central bank’s 5.8% forecast for the year.

Following the data release, the BSP said it “stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures.”

The Monetary Board will hold its next policy meeting on Nov. 16.

“While Friday’s move leads us to think that the market may eke out further gains early [this] week, we remain cognizant of potential reactive moves following the release of the September US jobs report,” China Bank Securities Corp. Research Associate Lance U. Soledad said in an e-mail.

Nonfarm payrolls increased by 336,000 jobs last month, the US Labor department said on Friday, while data for August was revised higher to show 227,000 jobs were added instead of the previously reported 187,000, Reuters reported.

September’s job numbers were almost double the 170,000 forecast of economists polled by Reuters and shocked a market trying to understand how the US Federal Reserve will address a strong economy and its mission to lower rates to its 2% target.

“Notwithstanding, we think that potential gains, if any, could be limited ahead of the release of the US inflation reports later in the week,” Mr. Soledad added.

US producer price index data will be released on Oct. 11 and US CPI will come out on Oct. 12.

For this week, Mr. Soledad placed the PSEi’s support at 6,150 and resistance at 6,370-6,420. — SJT with Reuters