Shares to move sideways before Fed, CPI report

STOCKS may move sideways ahead of the policy meeting of the US Federal Reserve and the release of Philippine consumer price index (CPI) data for April.

The bellwether Philippine Stock Exchange index (PSEi) jumped by 0.62% or 41.40 points to close at 6,625.08 on Friday, while the broader all-share index gained 0.67% or 23.67 points to 3,532.53.

Week on week, the PSEi increased by 104.64 points or 1.6% from its close of 6,625.08 on Friday.

“The local market performed positively on Friday, leading to a close above the 6,600 resistance level. Trading was active with net value turnover registering PHP 6.6 billion, higher than the year-to-date average of PHP 5.72 billion,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

For this week, anticipation for positive first-quarter corporate results may continue to dictate market sentiment, Mr. Tantiangco said.

“How the market will close the week, however, may depend on our April inflation figures. An inflation reading slower than March’s 7.6%, especially one near or at the lower end of the Bangko Sentral ng Pilipinas’ (BSP) 6.3%-7.1%, forecast may give the local market a boost,” he added.

“Lower inflation figures could also potentially signal that the central bank may hold off on further monetary policy tightening measures,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message.

The lower end of the BSP’s CPI estimate for April would match the 6.3% print in August 2022.

It would also be the slowest rate in 10 months or since June last year, when it stood at 6.1%.

Still, this would surpass the central bank’s 2-4% target for the 13^th consecutive month.

The Philippine Statistics Authority will release April inflation data on Friday.

BSP Governor Felipe M. Medalla last month said if inflation eased further in April, the Monetary Board will likely consider pausing its tightening cycle at their May 18 review.

The Philippine central bank has increased borrowing costs by 425 basis points  (bps) since May 2022 to tame inflation, bringing its policy rate to 6.25% — the highest in nearly 16 years.

The US Federal Reserve’s policy decision this week will also affect the market, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“There’s a chance the BSP might signal its view on the path of domestic policy rates soon after the Fed’s policy announcement,” Mr. Colet added.

The Fed is expected to hike rates by another 25 bps at its May 2-3 meeting.

The US central bank has raised the fed funds rate by 475 bps since March 2022 to a range between 4.75% and 5%.

Philstocks Financial’s Mr. Tantianco placed the PSEi’s support at 6,600 and resistance at 6,800. — By AHH