Stocks seen sideways ahead of BSP, Fed reviews

THE MAIN INDEX will likely trade sideways in the week ahead as investors anticipate the Bangko Sentral ng Pilipinas’ (BSP) action on interest rates on Thursday. The bellwether Philippine Stock Exchange index (PSEi) surged 3.48% or 248.27 points to close at 7,383 on Friday, lifting itself out of bear territory after three days of consecutive losses that pulled it back to the 7,100 level on Thursday. Friday’s performance, however, failed to lift the index for the week, as it still lost 0.41% or 30.15 points on a weekly basis.

Turnover stood at P32.19 billion for the week. Net foreign selling slowed to P1.70 billion versus the massive figure of P33.52 billion logged the week before.

Eagle Equities, Inc. Research Head Christopher John Mangun noted that Friday’s gain indicates that local investors have been supporting the market despite foreign investors’ consistent selling spree.

“Based on the technicals and market sentiment, the index may trade sideways next week as investors sit on the sidelines waiting to see if the BSP will raise interest rates at the Monetary Board meeting next Thursday,” Mr. Mangun said in a weekly market note.

Economists expect the BSP to hike rates by another 50 basis points (bps) when the Monetary Board meets on Sept. 27, given the faster-than-expected August inflation print of 6.4%. Should this materialize, the rate hike will follow the 100 bps increase the local central bank has implemented since May, with benchmark rates now ranging from 3.5-4.5%.

“If they raise rates [this] week, we may see the market go up as this will come as a positive to investors that something is being done to curb higher inflation. Another positive effect of an interest hike is it may encourage foreign funds to flow back in to the peso as our currency has performed better than what is expected,” Mr. Mangun explained.

Online brokerage said inflation should taper off in the fourth quarter as long as the Department of Finance executes a proper implementation of its 10-point inflation buster program.

“The only unknown variable so far is the extent of holiday spending growth, which might prod demand-push cycle,” said in a weekly market note.

The BSP’s policy meeting will come after the US Federal Open Market Committee’s two-day meeting on Sept. 25-26, where analysts are also looking at a potential rate hike.

“Any aggressive move could widen the greenback’s differential with peer currencies, unless regional counterparts adopt similar steps. Meanwhile, there are also those anticipating a status quo, pending resolution of trade-related spats,” said.

Eagle Equities’ Mr. Mangun placed the market’s support level from 7,200 to 7,350, with resistance from 7,500 to 7,840. (