Shares may rise on bargain hunting before data

Local stocks may climb this week on bargain hunting after the US Federal Reserve said rates could stay high and as investors await the release of latest Philippine manufacturing data.

The Philippine Stock Exchange index (PSEi) fell by 65.17 points or 1.04% to close at 6,160.61 on Friday, while the broader all shares dropped by 25.17 points or 0.75% to end 3,332.40.

Week on week, the PSEi likewise dropped by 129.66 points or 2.06% from its close of 6,290.27 on Aug. 18.

“We may see episodes of bargain hunting given the local market’s current position,” Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said in a Viber message.

“However, we may not see a strong rally yet as confidence towards the economy is weighed down by mounting inflationary risks and a tempered outlook,” he added.

Philippine headline inflation eased for the sixth consecutive month to 4.7% in July from 5.4% in June, bringing the seven-month average to 6.8%.

The Bangko Sentral ng Pilipinas this month raised its inflation forecasts to 5.6% from 5.4% for 2023, 3.3% from 2.9% for 2024, and 3.4% from 3.2% for 2025.

“The market might enter a consolidation phase with a downward inclination. This projection stems from escalating concerns about rising Fed rates in the wake of Fed Chair Powell’s speech, signaling a substantial likelihood of an additional rate hike within this year,” Unicapital Securities, Inc. Senior Equity Research Analyst Carlos Angelo O. Temporal said in a Viber message.

“This move could counteract any upward movements triggered by bargain hunting, especially as the index approaches its critical support level,” Mr. Temporal said.

The US Federal Reserve may need to raise interest rates further to cool still-too-high inflation, Fed Chair Jerome Powell said on Friday, promising to move with care at upcoming meetings as he noted both progress made on easing price pressures as well as risks from the surprising strength of the US economy, Reuters reported.

While not as hawkish a message as he delivered this time a year ago at the annual Jackson Hole Economic Policy Symposium, Mr. Powell’s remarks still delivered a punch, with investors now seeing one more rate hike by year-end more likely than not.

The Fed has raised rates by 5.25 percentage points since March 2022, and inflation by the Fed’s preferred gauge has moved down to 3.3% from its peak of 7% last summer. Although the decline was a “welcome development,” Mr. Powell said, inflation “remains too high.”

Both analysts said that investors are awaiting the release of  the S&P Global Philippines Manufacturing Purchasing Managers’ Index data on September 1 (Friday) and the producer price survey report on August 30 (Wednesday) for leads.

For this week, Mr. Tantiangco placed the PSEi’s support at 6,000-6,100 and resistance at 6,400. — S.J. Talavera with Reuters