PHL shares may move sideways ahead of US CPI

LOCAL SHARES are expected to move sideways this week ahead of the release of US consumer price index (CPI) data, which could solidify expectations of more US Federal Reserve rate hikes this year.

The bellwether Philippine Stock Exchange index (PSEi) went down by 93.36 points to close at 6,667.97 on Friday, while the broader all shares index lost 37.38 points or 1.05% to end at 3,513.07.

Week on week, the PSEi closed higher by 101.58 points or 1.55% from 6,566.39 on Dec. 29.

“Bulls dominated 2023’s first week of trading, shrugging off record-level consumer price index for December 2022, although gains were capped by last-minute profit taking,” Online brokerage 2TradeAsia.com said on a market note.

Headline inflation quickened to 8.1% in December, from 8% in November and 3.1% in December 2021. This was the fastest since the 9.1% print in November 2008.

Inflation averaged 5.8% in 2022, matching the central bank’s forecast but faster than its 2-4% target and the 3.9% average posted in 2021.

“Philippine shares finally had the first profit taking session of the year, on the back of strong US jobs data…, fueling speculations for further rate hikes ahead,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

Nonfarm payrolls increased by 223,000 jobs last month, the smallest gain in two years, after rising 256,000 in November, Reuters reported. The economy added 4.5 million jobs in 2022, with employment gains averaging 375,000 per month.

Average hourly earnings rose 0.3% after gaining 0.4% in the prior month. That lowered the year-on-year increase in wages to 4.6%, the smallest rise since August 2021, from 4.8% in November.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said that the market could move sideways as investors weigh the Philippines’ growth prospects against inflation and interest rate concerns.

“Our latest labor force survey could become a point of contention. While our jobs data reflect a strong local economy, they also show a tightening of the labor market which could lead to stronger aggregate spending and conse-quently, demand side inflationary pressures,” Mr. Tantiangco said.

Meanwhile, Mr. Limlingan said the market could see more profit taking this week ahead of the US CPI report to be released on Jan. 12.

Online brokerage 2TradeAsia.com said “the main index’s primary technical challenge is in the 6,800-7,000 zone, where last year’s fourth quarter rally hit a dead end; key is to understand that the PSEi must build a base from here in order to amass enough escape velocity to trade back to 7,500 levels.”

It placed the market’s support at the 6,400-6,500 range and resistance at 6,800, while Philstocks Financial’s Mr. Tantiangco put support at 6,600 and resistance at 7,000-7,100. — Justine Irish D. Tabile