Market to stay cautious before BSP policy review

PHILIPPINE SHARES are expected to move sideways in the coming days as investors continue to digest key data released last week and remain cautious ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting.

On Friday, the Philippine Stock Exchange index (PSEi) dropped by 0.46% or 30.53 points to end at 6,511.93, while the broader all shares index fell by 0.12% or 4.42 points to close at 3,477.13.

Week on week, the PSEi went down by 1.57% or 103.62 points from its 6,615.55 close on May 3.

“Higher April consumer price index (CPI) and weaker first-quarter gross domestic product (GDP) growth weighed on sentiment ahead of the Bangko Sentral ng Pilipinas’ Monetary Board meeting,” online brokerage firm 2TradeAsia.com said in a note.

Headline inflation rose to 3.8% year on year in April from 3.7% in March. Still, this was slower than the 6.6% print in the same month a year ago.

This was within the BSP’s 3.5-4.3% forecast for April CPI and marked the fifth straight month that inflation settled within the central bank’s 2-4% annual target range.

For the first four months, headline inflation averaged 3.4%, still below the BSP’s 3.8% full-year forecast.

Meanwhile, the Philippine economy expanded by 5.7% in the first quarter, faster than the 5.5% growth logged in October-December 2023. However, this was slower than the 6.4% GDP growth seen in the first quarter of 2023.

This also fell short of the government’s 6-7% full-year GDP growth target.

“[This] week, we may see some episodes of bargain hunting given that the market is trading at attractive levels. Investors are still expected to maintain caution, however, while waiting for the Bangko Sentral ng Pilipinas policy meeting,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Investors are expected to wait for cues from the BSP regarding their policy outlook in light of the latest macroeconomic data wherein inflation and GDP growth both came in below expectations. Investors are also expected to continue digesting first-quarter corporate results,” Mr. Tantiangco said.

A BusinessWorld poll of 19 analysts conducted last week showed 17 analysts expect the Monetary Board to maintain its policy rate at 6.5% for a fifth straight review on Thursday.

The BSP raised borrowing costs by 450 basis points from May 2022 to October 2023.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s immediate major support at 6,360 and immediate major resistance ay 6,800-6,820 for this week.

“The next local policy rate-setting meeting on May 16 could match the United States Federal Reserve’s latest rate pause on May 1 in order to maintain healthy interest rate differentials to help support the peso exchange rate, import prices, and overall inflation,” Mr. Ricafort said in a Viber message.

For its part, 2TradeAsia.com placed support at 6,400 and resistance at 6,700-6,800. — R.M.D. Ochave