Stocks may move sideways amid lack of leads

Philippine shares may move sideways this week, with investors expected to stay on the sidelines as they await fresh leads.

The Philippine Stock Exchange index (PSEi) fell by 74.70 points or 1.17% to close at 6,290.27 on Friday, while the broader all shares index went down by 26.39 points or 0.77% to end at 3,383.41.

Week on week, the PSEi went down by 115.64 points or 1.81% from its close of 6,405.91 on Aug. 11.

“A key support level was broken [last] week, as sentiment glided with the US Fed meeting minutes reaffirming a hawkish stance [plus] the Bangko Sentral ng Pilipinas’ (BSP) higher inflation projections in the long term,” online brokerage 2TradeAsia.com said in a report.

Fed officials were divided over the need for more interest rate hikes at the US central bank’s July 25-26 meeting, with “some participants” citing the risks to the economy of pushing rates too far even as “most” policy makers continued to prioritize the battle against inflation, according to minutes of the session that were released on Wednesday, Reuters reported.

The Fed raised borrowing costs by 25 basis points (bps) at its July meeting, bringing its target rate to the 5.25% to 5.5% range. Since it began its tightening cycle in March 2022, it has hiked rates by a cumulative 525 bps.

Meanwhile, the BSP last week raised its inflation forecasts to 5.6% from 5.4% for 2023, 3.3% from 2.9% for 2024, and 3.4% from 3.2% for 2025.

Investors may face a challenging trading week due to negative sentiment amid concerns over the Chinese property sector, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Embattled developer China Evergrande Group last week filed for US bankruptcy protection as part of one of the world’s biggest debt restructurings, as anxiety grows over China’s worsening property crisis and its impact on the weakening economy, Reuters reported.

A string of Chinese property developers have defaulted on their offshore debt obligations since Evergrande ran into trouble, leaving unfinished homes and unpaid suppliers, shattering consumer confidence in the world’s second-largest economy.

The property crisis has also fanned worries about contagion risks to the financial system, which could have a destabilizing impact on an economy already weakened by tepid domestic and foreign demand, faltering factory activity and rising unemployment.

“Moreover, many investors are expected to stay cautious as they await news from the Federal Reserve’s annual economic policy symposium at Jackson Hole, Wyoming later this week. All eyes and ears will be on the speech of Fed Chairman Jerome Powell, which investors hope could offer clues on the direction of US monetary policy, particularly whether the narrative is “how high will rates go” or “how long will rates remain high,” Mr. Colet added.

Mr. Colet placed the PSEi’s support at 6,150-6,200 and resistance at 6,370-6,400, while 2TradeAsia.com put immediate support at 6,350 and resistance at 6,600-6,700. — AHH with Reuters