Shares to move sideways amid lack of catalysts

Philippine shares could move sideways this shortened trading week amid cautious sentiment and a lack of catalysts.

On Friday, the benchmark Philippine Stock Exchange index (PSEi) fell by 1.16% or 81.25 points to end at 6,881.97, while the broader all shares index declined by 0.75% or 27.34 points to close at 3,587.90.

Still, week on week, the PSEi improved by 0.87% or 59.65 points from its 6,822.32 close on March 15.

“The US Federal Reserve’s status quo move boosted another round of global buying this week, but supply pressure capped local gains,” online brokerage firm 2TradeAsia.com said in a market note.

Fed Chair Jerome H. Powell said on Wednesday recent high inflation readings had not changed the underlying “story” of slowly easing price pressures in the US as the central bank stayed on track for three interest rate cuts this year and affirmed that solid economic growth will continue, Reuters reported.

Speaking after a policy meeting at which officials left the benchmark overnight interest rate in the 5.25%-5.5% range and held onto their outlook for three cuts in borrowing costs this year, Mr. Powell said the timing of those reductions still depends on officials becoming more secure that inflation will continue to decline towards the Fed’s 2% target even as the economy continues to outperform expectations.

For this week, the PSEi may move sideways due to “cautious market sentiment,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“At 6,881.97, the local market is still at attractive levels with a price earnings ratio of 14.1 times, lower compared to its 2019-2023 average of 18.2 times. This shows that there is still room for bargain hunting. However, the market is not seen to have a strong positive catalyst,” he said.

“Looking at other markets, Wall Street’s rally, if sustained, may give positive spillovers to the local bourse which could help it move with an upward bias. Meanwhile, the peso’s depreciation against the dollar, if it continues, may weigh on market sentiment,” Mr. Tantiangco added.

He placed the PSEi’s support at 6,700 and resistance at 7,000.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s immediate minor support at 6,600-6,760.

“One of the upcoming Philippine economic data is the next local policy rate-setting meeting on April 8, which could match the Fed rate pause on March 20 in order to maintain healthy interest rate differentials to help support the peso exchange rate, import prices, and overall inflation,” Mr. Ricafort said in a Viber message.

2TradeAsia.com placed the main index’s immediate support at 6,800 and resistance at 7,000.

“Brace for month- and quarter-end window dressing in the upcoming shortened trading week, whilst anticipating potentially lower volumes ahead of Lent,” it said.

Philippine financial markets will be closed on March 28-29 in observance of Maundy Thursday and Good Friday. — R.M.D. Ochave with Reuters