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Shares may decline on rate concerns, rebalancing

February 26, 2023By BusinessWorld

PHILIPPINE STOCKS are expected to drop this week on monetary policy concerns and ahead of the MSCI rebalancing.

The Philippine Stock Exchange index (PSEi) declined by 13.33 points or 0.19% to close at 6,685.90 on Thursday, while the broader all shares index dropped by 7.16 points or 0.2% to end at 3,572.20.

Philippine financial markets were closed on Friday for a special non-working day.

Week on week, the PSEi lost 93.12 points or 1.37% from its close of 6,779.02 on Feb. 17.

“The market’s decline last Thursday was likely due to a prevalent ‘no interest’ environment, leading to muted buying appetite, coupled with continuing selling pressure due to higher terminal rate worries,” China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail.

Minutes from the US Federal Reserve’s Jan. 31-Feb. 1 meeting said that “almost all” Fed officials agreed to slow the pace of increases in interest rates to a quarter of a percentage point.

Its next policy review is on March 21-22.

For this week, First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said in an e-mail that a technical bounce is expected this week, but the market’s downward trend could be sustained.

“The market is expected to move sideways to lower as the pressures from high interest rates will dampen investors’ enthusiasm. Corporate earnings can provide some relief but the lag effect of the high cost of money is a concern for investors,” AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort in a Viber message that Philippine stocks are expected to drop and track US stocks’ decline.

On Friday, the Dow Jones Industrial Average declined by 336.99 points or 1.02% to 32,816.92; the S&P 500 lost 42.28 points or 1.05% to 3,970.04; and the Nasdaq Composite dropped 195.46 points or 1.69% to 11,394.94.

“We may see volatility come Monday following the sudden holiday, as investors are likely to react to two days’ worth of price action in offshore markets. We are also set to see possible sharp movements in index issues given the conclusion of the MSCI rebalancing on Tuesday,” China Bank Securities’ Mr. Mercado added.

“For [this] week, we may see episodes of bargain hunting. Still, the local market is not expected to pose a strong rally amid weighing monetary policy concerns and lack of a strong catalyst. The hawkish outlook of the Bangko Sentral ng Pilipinas and the Federal Reserve are still expected to cloud sentiment,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

Mr. Tantiangco put the PSEi’s support at 6,600 and resistance at 6,800, while China Bank Securities’ Mr. Mercado placed support at 6,600-6,640 and resistance at 6,850. FMIC’s Ms. Ulang pegged support at 6,500 and resistance at 6,800. — Ashley Erika O. Jose

This article originally appeared on bworldonline.com

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