Shares may move sideways before inflation data

PHILIPPINE SHARES may move sideways this week as the market awaits the release of the latest inflation and labor data, as well as more corporate results.

On Friday, the Philippine Stock Exchange index (PSEi) breached the 6,700 level as it gained 84.24 points or 1.27% to close at 6,707.25, while the broader all shares index rose by 30.79 points or 0.88% to finish at 3,516.82.

Week on week, the PSEi went up by 21.16 points or 0.32% from its 6,686.09 finish on Jan. 26.

“After a slow start due to a gross domestic product (GDP) miss, local equities rallied in the latter half of the week on a renewed bullish outlook on rates,” online brokerage firm 2TradeAsia.com said in a market report.

Philippine GDP expanded by 5.6% in 2023, below the government’s 6-7% target and slower than the 7.6% increase in 2022, the Philippine Statistics Authority (PSA) reported last week.

For this week, investors will wait for the release of January inflation data for leads, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“An inflation print lower than December 2023’s 3.9%, especially one which is near or at the Bangko Sentral ng Pilipinas’ 2.8%-3.6% [forecast], may spur optimism, which in turn may drive the market higher,” Mr. Tantiangco said.

“Aside from this, investors may also watch out for our upcoming labor force survey for clues on the health of the local economy.”

The PSA will release January consumer price index data on Tuesday and results of the December 2023 labor force survey on Wednesday.

A BusinessWorld poll of 16 analysts yielded a median estimate of 3.1% for January headline inflation.

If realized, this would be the second consecutive month that inflation was within the BSP’s 2-4% target band. It will also be below the 3.9% seen in December.

“[This] week, the market may test the validity of its breach of the 6,700 level. If the market succeeds in sustaining ground at 6,700, this will be its new support while a minor resistance is seen at 6,800. If the market fails however, the market may retest its 10-day exponential moving average,” Mr. Tantiangco added.

For its part, 2TradeAsia.com put the PSEi’s immediate support at 6,600 and resistance at 6,900-7,000.

“The PSEi managed a trek in the psychological support zone of 6,700. Positive corporate results will be critical in directing investor energy towards 7,000,” it said.

“Note that Federal Reserve comments in the Jan. 31 meeting only solidified expectations of a May-June rate cut, which further support bullish calls in the short-to-medium term,” the online brokerage added.

The Federal Open Market Committee last week held its target rate steady at the 5.25-5.5% range for a fourth straight meeting.

Fed Chair Jerome H. Powell said after the review that they are unlikely to ease their policy stance in their March 19-20 meeting due to lingering inflation risks. — R.M.D. Ochave