Cautious, unnerved investors sway shares sideways

Stocks have generally moved sideways during the first half of the year due to underlying economic concerns locally and overseas, analysts said.

“Since hitting a low last March, the PSEi (Philippine Stock Exchange index) has been in a sideways movement within the 6,300 to 6,700 area during the first half of the year, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

He said the index’s movement reflected a generally cautious mood in the market and a lack of confidence to drive stocks upward.

“Market sentiment turned negative and net foreign outflows escalated after investors were unnerved by hawkish monetary policy and the risk of economic slowdown,” he said.

Carlos Angelo O. Temporal, Unicapital Securities, Inc. senior equity research analyst, said the stock market ended “tepid” during the semester as market participants remained on the sidelines.

“Considering that a lot of investors were in a wait-and-see mode regarding central bank rate hikes and inflation, trading activity ended much more tepid in the first half,” Mr. Temporal said in a Viber message.

During the last trading day of the first half, the PSEi declined by 43.42 points or 0.66% to 6,468.07 on June 30, while the broader all-shares index went down by 12.93 points or 0.37% to close at 3,452.96.

The US Federal Reserve left interest rates unchanged during its June 14 meeting at 5-5.25% but signaled that borrowing costs might still need to rise by as much as half-a-percentage point by year-end. 

The US central bank has increased borrowing costs by 500 basis points (bps) since March 2022.

The Bangko Sentral ng Pilipinas (BSP) likewise kept benchmark interest rates steady for the second straight meeting, with the key policy rate staying at 6.25%.

The BSP raised borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.

Mr. Temporal said first-quarter earnings and rising rates had bolstered market preference for banks over property companies.

“Banks notably performed well given the uplift in net interest margins and robust loan growths, while property companies saw some underlying weaknesses in their [first-quarter] performance,” he said.

He added that property companies were marred by elevated cancellations and few project launches, which were attributable to concerns over rising rates and elevated inflation.

Headline inflation slowed in May to 6.1% from 6.6% in April. This was the slowest rate seen in a year or since 5.4% in May.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said sustained efforts to promote economic growth and attract investments will be crucial in maintaining the market’s positive trajectory and fostering long-term investor confidence during the second half of the year.

“Investors remain cautiously optimistic, and the market’s performance in the second half of the year would depend on the continued progress in containing inflation and the pace of economic recovery both domestically and globally,” Mr. Arce said in a Viber message. — Adrian H. Halili