Month-end window dressing may drive trading

Philippine stocks may move sideways with an upward bias on Thursday due to month-end window dressing and following a one-day trading break.

On Wednesday, the benchmark Philippine Stock Exchange index (PSEi) dropped by 20.24 points or 0.31% to 6,502.85, while the broader all shares index went down by 6.65 points or 0.19% to close at 3,463.81.

The stock market was closed on June 28 for a regular holiday in observance of Eid’l Adha.

“Towards the end of the week, the PSEi may move sideways with some upward bias given the potential window dressing as the first half concludes and general sentiment remaining cautious ahead of key inflation data next week,” Unicapital Securities, Inc. Senior Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message.

“Following a strong bounce last Monday from the 6,400 levels and with the likely window dressing, coupled with high expectations of a sustained downtrend in inflation,… we anticipate the index to hold above 6,500 levels on Friday, which is higher than the May 31 close of 6,477,” Mr. Temporal added.

On Monday, the PSEi returned to the 6,500 level and closed at 6,523.09, rising by 129.54 points or 2.02% from its previous finish.

Philippine inflation data for June will be released on July 5.

Headline inflation slowed to 6.1% in May from 6.6% in April. For the first five months, the consumer price index averaged 7.5%, still well above the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target and 5.4% forecast for the year.

The BSP has said it expects inflation to return within its target range by the third quarter.

Meanwhile, China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said there could be some weakness in the market when trading resumes on Thursday as profit-taking could ensue.

“Ideally, we’d like to see the market continuing to hold above the 6,480 level as this keeps prospects of another rally in play. We also note that we may see some volatility on Thursday as markets react to developments from overseas markets, as many would remain open on Wednesday,” Mr. Mercado said in an e-mail.

“With respect our view for the end of the week, we think that the index could post a steep move in either direction given quarter-end window-dressing, especially given how thin liquidity has been in the local market. That said, we think investors should brace for a possible uptick in volatility,” he added.

Asian shares stalled on Wednesday as surprisingly upbeat US economic news warred with global growth concerns, while the embattled yen hit a 15-year low on the euro and Japan hinted at intervention to prevent further losses, Reuters reported.

The strength of US data also combined with hawkish commentary from the European Central Bank to undermine bonds as markets narrowed the odds on further rate hikes.

The rate risk kept markets cautious and MSCI’s broadest index of Asia-Pacific shares outside Japan was off 0.2%. — A.H. Halili with Reuters