Shares to move sideways amid banking concerns

PHILIPPINE SHARES are expected to move sideways this week as investors remain cautious due to banking concerns abroad and following rate hikes by the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The bellwether Philippine Stock Exchange index (PSEi) went up by 65.81 points or 1% to close at 6,602.17 on Friday, while the broader all shares index increased by 23.95 points or 0.68% to 3,516.72.

Week on week, the PSEi increased 132.45 points or 2.05% from its close of 6,602.17 on March 24.

“On the last trading day of the week, the local market jumped, as investors digested Bangko Sentral ng Pilipinas’ monetary policy decision and forecasts,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

The Fed on Wednesday raised interest rates by 25 basis points (bps) to a range between 4.75% and 5%, but hinted at a pause due to the collapse of two US banks.

The US central bank has now raised rates by 475 bps since March 2022.

California regulators on March 10 closed Silicon Valley Bank. This was the largest US bank failure since the 2008 financial crisis.

Meanwhile, the BSP, in its own meeting on Thursday, also decided to hike benchmark interest rates by 25 bps to anchor inflation expectations.

The latest move brought its policy rate to 6.25%, with cumulative increases since May 2022 reaching 425 bps.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said investor sentiment may be influenced by lingering concerns over offshore banks.

“On a positive note, the said banking concerns and the risks they bring to both local and global economic prospects may also fuel hopes that the BSP and the US Federal Reserve will end their monetary tightening soon. This in turn may help the market,” he added.

Shares of Germany’s largest bank Deutsche Bank plunged on Friday as investors fretted that regulators and central banks have yet to contain the worst shock to the sector since the 2008 global financial crisis, Reuters reported.

In the latest effort to reassure investors, the US Treasury said the Financial Stability Oversight Council — which comprises the heads of various US regulators — agreed at a Friday meeting that the US banking system is “sound and resilient,” even after the collapse of Silicon Valley Bank and Signature Bank earlier this month.

Earlier in the day, Germany’s Deutsche Bank was thrust into the investor spotlight and slumped 8.5% alongside a sharp jump in the cost of insuring its bonds against the risk of default. The index of top European bank shares ended down 3.8%.

Mr. Tantiangco placed the PSEi’s immediate support at 6,600 and resistance at 6,800, while Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put immediate support at 6,250 and resistance at 6,900 to 7,000. — A.H. Halili with Reuters