Shares to move sideways ahead of inflation data

Philippine stocks may move sideways this week as investors await the release of July inflation data and corporate results for the second quarter.

The benchmark Philippine Stock Exchange index (PSEi) lost 52.66 points or 0.78% to close at 6,625.26 on Friday, while the broader all shares index dropped by 20.08 points or 0.56% to 3,526.92.

Week on week, the PSEi dropped by 22.3 points or 0.34% from its close of 6,647.56 on July 21.

“The local market fell last week primarily due to the Federal Reserve’s latest policy rate hike as well as its expression of openness for further monetary tightening. On a positive note, the market was able to hold its ground above the 6,600 support level,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

The US Federal Reserve hiked overnight borrowing rates by a quarter of a percentage point during its two-day Federal Open Market Committee meeting last Wednesday, Reuters reported.

The central bank set the benchmark overnight interest rate in the 5.25%–5.5% range, a level last seen just before the 2007 housing market crash, and which has not been consistently exceeded for about 22 years.

The Fed said in a statement that it would “continue to assess additional information and its implications for monetary policy,” which left the central bank’s policy options open as it searches for a stopping point to the current tightening cycle.

For this this week, China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said selling pressure is expected to continue.

“Generally, we think that price action [this] week will be driven by the following: (1) further reactive moves, particularly at the beginning the of [this] week, to the Bank of Japan’s surprise adjustment to its bond yield control, (2) earnings-related developments as the second-quarter earnings season kicks into full gear, and (3) data releases, particularly domestic inflation, US jobs data, and global manufacturing and services PMI (purchasing managers’ index),” Mr. Mercado said in an e-mail.

Mr. Tantiangco likewise said second quarter financial results and July inflation data would drive market movements this week as “a continued downtrend in inflation is seen to spur optimism, which in turn could lift the market higher.”

July inflation data will be released on Friday, Aug. 4.

Meanwhile, the Bank of Japan made its bond yield control policy more flexible and loosened its defense of a long-term interest rate cap, as it kept its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%.

Mr. Tantiangco placed the PSEi’s support at 6,600 and resistance at 6,800, while Mr. Mercado put support and resistance at 6,580 and 6,750, respectively. — A.H. Halili with Reuters