Shares may trade sideways amid lack of drivers

Philippine shares may move mostly sideways this week, with bargain hunting likely to ensue as the market looks for fresh drivers, analysts said.

On Friday, the Philippine Stock Exchange index (PSEi) fell by 0.6% or 40.10 points to end at 6,619.89, while the broader all shares index dropped by 0.39% or 13.80 points to close at 3,523.49.

Week on week, however, the PSEi rose by 0.02% or 1.20 points from its 6,618.69 close on May 17.

“Hawkish comments from the US Federal Reserve prevented the PSEi from gaining higher ground [last] week,” online brokerage firm 2TradeAsia.com said in a market note.

US Federal Reserve officials at their last policy meeting said they still had faith that price pressures would ease at least slowly in coming months, but doubts emerged about whether the current level of interest rates was high enough to guarantee that outcome and “various” officials said they’d be willing to hike borrowing costs again if inflation surged, Reuters reported.

That meeting was held before data showed the pace of consumer price increases beginning to cool again in April, yet reflected what US central bank officials since then have said is increased uncertainty about the path of inflation and monetary policy.

For this week, investors are expected to hunt for bargains and trade cautiously amid a lack of fresh leads, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Primarily, investors are expected to watch out for more cues on our inflation and interest rate outlook,” Mr. Tantiangco said.

“Investors are also expected to monitor the movements of our local currency against the US dollar. A rebound above the PHP 58 level may spur positive sentiment but a further depreciation may weigh on the bourse,” he added.

On Friday, the peso closed at PHP 58.19 versus the dollar, weaker by six centavos from the previous day.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s major support at 6,540 and immediate major support at 6,800-6,820.

2TradeAsia.com placed the market’s immediate support at 6,400-6,500 and resistance at 6,700-6,800.

“The PSEi remains range-bound around the 6,400-6,800 band, with macro downside risks preventing any propulsion towards the medium-term resistance of 6,800,” it said.

Mr. Tantiangco added that the PSEi is currently trading with an immediate support at its 200-day exponential moving average (EMA) and immediate resistance at its 50-day EMA.

“If the market gets past its 50-day EMA, we may see a retesting of the 6,700 resistance line. If the market falls below its 200-day EMA, however, the market may test next its recent trough at 6,511.93 touched last May 10,” he said.

“Falling below this level too will be taken as a bearish development for the local bourse,” Mr. Tantiangco added. — Revin Mikhael D. Ochave with Reuters