Cautious trading seen ahead of Fed review, SONA

PHILIPPINE SHARES may move sideways this week on expectations of another aggressive rate hike from the US Federal Reserve and ahead of President Ferdinand “Bongbong” R. Marcos, Jr.’s first State of the Nation Address (SONA) on Monday.

The benchmark Philippine Stock Exchange index (PSEi) inched up by 7.22 points or 0.11% to close at 6,263.39 on Friday, while the broader all shares index declined by 0.80 point or 0.02% to 3,381.06.

Still, week on week, the PSEi jumped by 68.13 points or 1.1% from its close of 6,195.26 on July 15.

“[Last] week’s trades had an upward bias ahead of Fed meeting and more local earnings results [this] week. The PSEi ended with a modest gain of 68 points to 6,274,” online brokerage 2TradeAsia.com said in a report.

“The PSEi modestly ended higher [on Friday] … amid the recent gains in the US stock markets to new highs in nearly 1.5 months, after global crude oil prices eased to near three-month lows that could lead to further rollbacks in local fuel pump prices and help ease inflationary pressures,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in an e-mail.

For this week, 2TradeAsia.com said they expect volatile trading ahead of the US central bank’s July 26-27 review.

“[A] 75 bps (basis points) rate hike is practically set in stone, although 100 bps is not too far from imagination as inflation remains stubbornly high and is pushing the US to recession territory,” the online brokerage said.

Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that as investors have already priced in a 75-bp hike at that meeting, “[a] policy tightening more aggressive than the aforementioned may cause downward pressure on the market.”

“[This] week, we expect the local market to start on cautious trading as investors await President Ferdinand Marcos, Jr.’s first State of the Nation Address for clues on the local economy’s direction,” Mr. Tantiangco added.

2TradeAsia.com said the market will also wait for more second-quarter results from listed firms.

“As our corporate notes suggest, overall results for the first half should print better year on year… Balance sheet strength will be a metric that will prove itself more critical in the coming quarters,” it said.

“As market sentiment continues to walk on eggshells, there is something to be said on how valuations have been favorable to the long-term investor now versus when the pandemic started, back when concerns were relatively graver,” the brokerage added.

2TradeAsia.com put the bellwether index’s immediate support at 6,000-6,100 range and resistance at 6,500.

Meanwhile, Philstocks Financial’s Mr. Tantiangco placed the PSEi’s immediate support at 6,100-6,150 and resistance at its 10-day exponential moving average of 6,274.17, while RCBC’s Mr. Ricafort sees the psychological support being at the 6,000 mark and resistance between 6,300 and 6,500. — Justine Irish D. Tabile