Investors seen wary ahead of MB policy meet

INVESTORS are expected to tread cautiously this week ahead of an expected Bangko Sentral ng Pilipinas (BSP) rate hike this Thursday, analysts said.

The benchmark Philippine Stock Exchange index (PSEi) closed last Friday at 6,876.79 — up 0.5 percent, or 34 points, from the previous day — but down 2.1 percent from a week earlier when it last hit the 7,000 level.

The broader All Shares, meanwhile, gained 9.67 points, or 0.27 percent, to close at 3,653.17.

“For the coming week, cautiousness is expected to prevail in the local market as investors await the BSP’s policy decision,” Japhet Tantiangco, senior research analyst at Philstocks Financial Inc., said.

“The possibility of a 50-basis-point (bps) rate hike is expected to be priced in following the Philippines’ strong January inflation data. This, in turn, could weigh on the local bourse,” he added.

Consumer price growth accelerated to an above-expectations 8.7 percent last month. The BSP, which earlier said that inflation likely peaked at 8.1 percent in December, had forecast a rise to 8.3 percent at most.

Analysts who had forecast a January result of around 7.6 percent said the BSP’s policymaking Monetary Board (MB) could be forced to front-load a 50-bps increase this Thursday instead of 25-bps hikes this month and in March.

The resulting size of the increase will weigh on trading decisions, analysts said, adding that investors could also look for clues from December and full-year overseas Filipino worker (OFW) remittances data due this Wednesday.

Tantiangco saw the PSEi’s immediate support at 6,800 and immediate resistance at its 20-day exponential moving average.

Online brokerage 2TradeAsia.com also agreed that inflation had raised market anxiety. It suggested that investors embrace higher capital costs and adjust their portfolio selections around companies that could grow despite stubborn headwinds.

“The bottom line is that with the macro picture unsteady in the short-medium term, there should be realization that the norm moving forward includes hurdle rates and risk premium not seen in decades,” 2TradeAsia said.

Upcoming earnings reports for the fourth quarter of 2022 could add to volatility in the coming weeks as the broader market catches up to what is likely to be a tempered outlook for 2023, at least on the dividend and capital expenditures side, it said.

“Flurries of broad market and corporate-level data tend to confound markets, no thanks to the pandemic as its after effects changed the way the world looked in the long run,” 2TradeAsia said.

“Train the eye to sift through the news and have a steady discipline in favor of picking up intraday bargains, as the index retests the 7,000 level,” it added.

Resistance was seen at 7,000 and support at 6,700.

For Rizal Commercial Banking Corp. chief economist Michael Ricafort, the PSE’s next resistance would be at 7,000-7,100.

“[I]mmediate major support levels for the week that will help keep intact the underlying upward momentum is at 6,650-6,750 levels,” he added.

Ricafort also pointed to the BSP rate-setting meeting and OFW remittances as possible catalysts.

“Meanwhile, in the US, there will be a slew of economic data coming in as US inflation is on February 14, and a whole bevy of them on Feb[ruary] 15 such as retail sales, industrial production capacity utilization and the NAHB (National Association of Home Builders) Housing Market Index,” he said.