Shares may go down on profit taking, rate bets

THE Philippine stock market could succumb to profit taking this shortened trading week following its recent rally and amid expectations that interest rates here and abroad will remain high in the near term.

On Friday, the 30-member Philippine Stock Exchange index (PSEi) rose by 23.30 points or 0.37% to close at 6,269.50, while the all shares index went up by 20.21 points or 0.6% to 3,348.22.

Week on week, the PSEi climbed by 57.61 points or 0.93% from its 6,211.89 close on Nov. 17.

“Slight gains amidst anemic turnover characterized [last] week’s trade in light of Thanksgiving holiday plus ahead of a shortened trading week,” online brokerage 2TradeAsia.com said in a market report.

Philippine financial markets were closed on Monday due to a public holiday for Bonifacio Day.

For the coming days, the market may decline anew as investors could pocket their profits after the PSEi recorded gains in three out of five trading days last week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Expectations that interest rates will remain high for a while following Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr.’s hawkish statements … may also weigh on the market,” Mr. Tantiangco said.   

“The local market has been building momentum lately, rising for four weeks with a total gain of 5.16%. However, trading has been lethargic, implying that the market’s current rally is not backed by strong investor participation,” he added. 

BSP Governor Eli M. Remolona, Jr. on Friday said their policy stance will remain “hawkish for a while,” reiterating that the Monetary Board could still resume tightening to keep inflation expectations anchored.

At its Nov. 16 meeting, the BSP kept its policy rate at a 16-year high of 6.5% amid easing inflation following an off-cycle hike of 25 basis points (bps) last month.

The Monetary Board has raised borrowing costs by 450 bps since it began its tightening cycle in May 2022.

It will hold its last policy review for this year on Dec. 14.

Meanwhile, the Fed kept its benchmark interest rate steady at the 5.25%-5.5% range for a second straight time during their Oct. 31-Nov. 1 meeting. It has hiked rates by 525 bps since it began its tightening cycle in March 2022.

The Federal Open Market Committee will next meet on Dec. 12-13 to review policy.

“[This] week, investors are expected to watch out for catalysts that can spur optimism towards the local economy. Without such, we may see selling pressures dominate leading to a pull back for the local bourse,” Mr. Tantiangco added. “Chart-wise, the market’s immediate support is seen at its 50-day exponential moving average. Resistance is seen at the 6,400 level.”

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s immediate major resistance at the 6,300 level and immediate major support at 6,055-6,100.

For its part, 2TradeAsia.com placed the PSEi’s support at 6,100 and resistance at 6,400. — RMDO