Stocks to move sideways before inflation, GDP

Stocks could move sideways this week as investors await the release of the latest Philippine inflation and gross domestic product (GDP) data.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) ended its six-day slide as it rose by 0.85% or 53.40 points to close at 6,306.13, while the broader all shares index went up by 0.39% or 14.76 points to end at 3,751.67.

Week on week, however, the PSEi was down by 1.67% or 107.05 points from its 6,413.18 finish on July 25.

“A late-week rebound proved insufficient to reverse the sustained market selloff, heavily influenced by lingering caution following the State of the Nation Address (SONA) and mounting anxieties over new US tariff rates on Philippine exports,” online brokerage 2TradeAsia.com said in a market note.

“The local market has been on a six-day decline, which was only snapped last Friday on bargain hunting. Bearish sentiment took over last week amid investors’ dismay over the recent SONA, uncertainties on the Federal Reserve’s policy outlook, and worries on global trade. With last week’s fall, the market is now back to the 6,150-6,400 trading range,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

For this week, the market will focus on the July inflation report to be released on Tuesday (Aug. 5) and the second-quarter gross domestic product data that will come out on Thursday (Aug. 7), Mr. Tantiangco said.

“A well contained inflation figure and a GDP growth print significantly faster than the prior quarter’s 5.4% may give the market a boost.”

Mr. Tantiangco added that investors will monitor the peso’s movement against the dollar after the local unit fell to the P58 level anew last week.

“A rebound of the local currency may also help the market, but a further depreciation may also bring the market lower,” he said. “Finally, investors are expected to watch out for further second quarter corporate reports.”

Mr. Tantiangco said the market is expected to continue its decline if there are no positive catalysts this week. “The market is exhibiting a bearish bias, forming a lower high and lower low when compared to July 14’s peak and July 17’s trough. With its six-day decline, the bourse has fallen below its 10-day, 50-day, and 200-day exponential moving averages. Its moving average convergence/divergence line is moving downwards below the signal line.”

2TradeAsia.com put the PSEi’s immediate support at 6,300 and resistance at 6,600.

“Navigate this week with a tilt toward quality, defensive plays to hedge inflation risks, while eyeing selective consumer plays for momentum and second quarter tailwinds,” it said.

“Stay nimble as global data drops could sway sentiment, while prudence remains paramount, with thin trading volumes expected during the Chinese Ghost Month.” — Revin Mikhael D. Ochave