Shares may rise further despite lingering risks

PHILIPPINE STOCKS may sustain their momentum this week on expectations of easing inflation, but investors may stay cautious over geopolitical developments and macroeconomic risks.

On Friday, the Philippine Stock Exchange index (PSEi) jumped by 1.01% or 62.31 points to close at 6,188.03, while the broader all shares index rose by 0.83% or 27.91 points to end at 3,370.94.

Week on week, the PSEi increased by 115.79 points from June 26’s finish of 6,072.24.

“The local market exhibited positive momentum as global oil prices declined while the Philippine economy achieved higher income status from the World Bank. However, trading was thin, reflecting tepid market confidence as uncertainties remain,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

For this week, June Philippine inflation data to be released on Tuesday (July 7) would be one of the key trading drivers as well as negotiations between the US and Iran.

“Philstocks estimates inflation to come in at 6.5%. If inflation exhibits a decline from the prior month’s 6.8%, we may see a positive reaction from the local bourse,” Mr. Tantiangco said.

“Expectations of tamer consumer prices in June will support follow-through buying. A June print below May (6.8%) should help the PSEi sustain its short-term push towards 6,200-6,400,” F. Yap Securities, Inc. said in a market note.

A BusinessWorld poll of 18 analysts yielded a median estimate of 6.6% for June inflation, slower than the 6.8% recorded in May but faster than the 1.4% in the same month last year. This is within the Bangko Sentral ng Pilipinas’ (BSP) 6%-7% forecast.

If realized, June inflation would ease for a second straight month and would be the slowest since the 4.1% recorded in March.

However, it would also be the fourth consecutive month that the consumer price index would breach the BSP’s 2%-4% target.

“The situation between the US and Iran is seemingly subdued so far. This in turn has calmed oil prices, somehow giving us relief with our inflation outlook. However, no permanent resolution has been established between the two yet. Hence, uncertainties remain,” Mr. Tantiangco added.

He said the market’s latest rise could fuel bargain hunting, although investors are likely to stay cautious amid downside risks.

With the PSEi now above the 6,150 resistance as well as its 200-day exponential moving average, these could be retested this week, he added. “If the market manages to hold ground at 6,150, this will be considered as its new support while next resistance is seen at 6,400.”

“Political risk premium views will be on spotlight, depending on how the Senate will tackle (Vice President Sara Z.) Duterte’s impeachment trial. Also, firmer details are awaited from Doha-mediated US-Iran peace treaty, as discussions remain fluid,” F. Yap Securities said. “June’s inflation print and BSP’s forward guidance on interest rates have a direct impact on consumer and investment spending.” — Alexandria Grace C. Magno