Stocks may drop on profit taking, lack of leads

Philippine shares may decline this week due to profit taking and amid a lack of major trading drivers.

The Philippine Stock Exchange index (PSEi) climbed by 27.12 points or 0.41% to end at 6,629.64 on Friday, while the broader all shares index rose by 16.76 points or 0.48% to close at 3,502.52.

Week on week, the PSEi rose by 179.6 points or 2.78% from its 6,450.04 finish on Dec. 29.

“The local market started the week on a positive note, rising 2.78% to 6,629.64. The market’s technical reading has also been bullishly biased. The market has been on an uptrend since bottoming last Oct. 31, 2023,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The local bourse greets the New Year on a high note, breaking past 6,600 on the first week of trading in 2024,” online brokerage 2TradeAsia.com said in a market report. 

However, for this week, stocks may drop on profit taking as investors look for positive catalysts, Mr. Tantiangco said.

“Investors are expected to look for clues on inflation and monetary policy outlook,” he said.

“To sustain the momentum, the market is seen to need more positive catalysts. While the decline of inflation last December is seen to have helped in lifting sentiment, investors are still expected to look further, primarily how the inflation trend and the BSP’s (Bangko Sentral ng Pilipinas) policy path will be this year,” Mr. Tantiangco added.

Inflation slowed to 3.9% in December from 4.1% in November and 8.1% a year ago, the Philippine Statistics Authority reported on Friday. This was the slowest reading and was the first time the consumer price index (CPI) settled within the BSP’s 2-4% target in 22 months or since the 3% in February 2022.

The December print was also a tad lower than the 4% median estimate in a BusinessWorld poll and was within the 3.6% to 4.4% estimate given by the BSP for the month.

For 2023, headline inflation averaged 6%, slightly faster than the 5.8% in 2022 and marking the second straight year that the CPI exceeded the BSP’s 2-4% target.

This was the fastest print in 14 years or since the 8.2% full-year average in 2008, at the height of the global financial crisis.

The BSP said risks to the inflation outlook remain significantly on the upside, citing possible inflationary pressures from higher transport charges, increased electricity rates, rising oil prices, and elevated food prices due to strong El Niño conditions.

“Looking ahead, the Monetary Board deems it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes evident,” the central bank said on Friday.

The market will also await the release of latest labor and foreign direct investments data this week, Mr. Tantiangco said.

Meanwhile, 2TradeAsia.com put the PSEi’s immediate support for the week at 6,500 and resistance at 6,700-6,750. — R.M.D. Ochave