Stocks to move sideways as year comes to a close

PHILIPPINE STOCKS may move sideways in the last trading week of the year as investors price in economic concerns that may linger in 2023.

The bellwether Philippine Stock Exchange index (PSEi) declined by 35.91 points or 0.54% to close at 6,541.03 on Friday, while the broader all shares index lost 9.79 points or 0.28% to 3,432.47.

Week on week, the PSEi closed higher by 44.53 points or 0.69% versus its close of 6,496.50 on Dec. 16.

For this month, the PSEi has so far declined by 3.5% after it gained 10.2% in November, which was the biggest monthly gain in more than 12 months or since September 2010.

Philippine financial markets were closed on Dec. 26 due to a special non-working holiday.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said the market may move sideways this week as investors price in their expectations for 2023.

“Investors are expected to weigh economic concerns that could still be present next year including the country’s high inflation, the monetary tightening of the Bangko Sentral ng Pilipinas (BSP) and the Federal Reserve, and the possible global economic slowdown, against hopes that next year would still be a robust one for our local economy, particularly its growth, despite the aforementioned challenges,” Mr. Tantiangco said in a Viber message.

The BSP raised benchmark interest rates by 50 basis points (bps) at its meeting on Dec. 15, bringing its policy rate to 5.5%. Rates on the central bank’s overnight deposit and lending facilities were likewise raised to 5% and 6%, respectively.

The Philippine central bank has now raised rates by 350 bps since May.

Meanwhile, the US Federal Reserve hiked its benchmark overnight interest rate by 50 bps to the 4.25%-4.5% range at its Dec. 13-14 meeting and projected it could go up to 5%-5.25% next year.

The Fed has now raised borrowing costs by 425 bps since March. 

Online brokerage 2TradeAsia.com said the benchmark index could retest the 6,600 and 6,800 levels before the year ends.

“At this level, the price is around 13x forward earnings. While this supports broad optimism, there is some wisdom to picking apart the basket and aiming for the crème de la crème — the high yield, recession-resistant plays that have their multi-year growth stories intact,” it said in a report. “As the curtains close for 2022, eyes are trained towards 2023 and the movers for the first quarter of the year.”

2TradeAsia.com said global interest rates, inflation and China’s reopening will be key considerations for the market going into 2023.

“Spending, public and private, will be a key metric for 2023, as the much higher effective cost of capital now rewards efficiency over anything,” it said.

2TradeAsia.com placed the PSEi’s immediate support between 6,350 and 6,400 and resistance at 6,600, while Philstocks Financial’s Mr. Tantiangco put the index’s immediate support at its 200-day exponential moving average and immediate resistance at the 6,600 level. — Justine Irish D. Tabile