Stocks may drop ahead of US central bank meet

PHILIPPINE SHARES may go down ahead of the US Federal Reserve’s policy review and due to profit taking as investors wait for more leads.

The bellwether Philippine Stock Exchange index (PSEi) went up by points or 0.13% to close at 7,052.16 on Friday, while the broader all shares index added 4.74 points or 0.12% to end at 3,697.63.

Week on week, however, the PSEi inched down by 4.36 points or 0.06% from 7,056.52 on Jan. 20.

“The local market has been moving sideways within the 7,000-7,100-resistance range as it is having a hard time getting past the said zone. Advancing further has been difficult amid lingering macroeconomic concerns from inflation to interest rates to external headwinds,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The market turned sideways, taking a breather after weeks of strong rallies, amid positive GDP (gross domestic product) print for the fourth quarter of 2022. The PSEi made a second attempt to breach 7,100 but ultimately failed, closing the week flattish at 7,052,” online brokerage 2TradeAsia.com said in a market commentary.

Philippine fourth quarter-GDP grew by 7.2%, slower than the 7.6% in the third quarter and 7.8% in the same period a year earlier.

In 2022, the economy expanded by 7.6% in 2022, surpassing the government’s 6.5-7.5% target and faster than the 5.7% growth in 2021.

For this week, Philstocks Financial’s Mr. Tantiangco expects the market to take cues from the Fed’s policy meeting this year on Jan. 31 to Feb. 1 and the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) to be released on Feb. 1.

“In particular, investors are expected to watch out for the Fed’s policy move as well as its outlook on its policy. An aggressive increase in rates and a hawkish outlook may put downward pressure on the bourse,” said Mr. Tantiangco.

The Fed last year raised borrowing costs by 425 basis points to a 4.25%-4.5% range.

“While [last] week’s mini consolidation appears to be a plateauing after several weeks of bullish energy, the narrowing trading range should be healthy for the larger uptrend to gather more steam, pending stronger catalysts later in the first quarter,” 2TradeAsia.com said.

“That being said, expect some selling pressure during intraday rallies as weak hands will take this window to cash out,” it added.

Mr. Tantiangco placed the PSEi’s immediate support at its 10-day exponential moving average as its immediate resistance at 7,000-7,100, while 2TradeAsia.com put support at 6,900 and resistance at 7,100-7,200.

Meanwhile, on Friday, the local bourse operator announced the outcome of its index review for 2022, which resulted in the inclusion of DMCI Holdings, Inc. and UnionBank of the Philippines, Inc. in the main board to replace Megaworld Corp. and Robinsons Land Corp. — Justine Irish D. Tabile