Concerns over potential rate hikes from the US Federal Reserve caused profit takers to dominate the stock market last week, ignoring the prevailing benchmark rates set by the Bangko Sentral ng Pilipinas (BSP).
As a result, the Philippine Stock Exchange Composite Index, which serves as the benchmark, declined by 1.76 percent or 114 points, settling at 6,393 by the end of last week.
This led to a significant year-on-year decrease in average turnover by 76.06 percent to P4.58 billion.
Foreign net selling returned, averaging P165 million compared to last week’s net buying of P1.39 billion.
Against this backdrop, stock portal 2TradeAsia predicts immediate support for the index at 6,350, with resistance anticipated at 6,500 for the current week.
According to 2TradeAsia, short-term relief is possible for local risk assets as inflation drivers stabilize.
The availability of additional resources in July may encourage aggressive quarterly window dressing, potentially resulting in volatility.
The upcoming second-quarter earnings reporting season could further validate strategic positioning, considering the increased liquidity in the market.
While the US Federal Reserve hints at potential rate hikes, the Philippine central bank reiterates that rate cuts should not be expected soon.
The governor believes rate cuts would only be considered after two consecutive months with inflation below four percent. This uncertainty adds to the market’s outlook.
Managing director at China Bank Capital Corp., Juan Paolo Colet believes that the local index finds itself at a critical juncture, hovering near 6,400.
It must rally above this level to prevent further declines toward the support zone of 6,300 to 6,350.
The trading week will be shorter due to the non-working holiday on June 28, observed for the Feast of the Sacrifice.
Market activities are expected to be primarily influenced by window dressing and technical trading as the year’s first half comes to a close.
Colet mentions that investors will also begin positioning themselves for the year’s second half, evaluating the outlook for inflation and interest rates.
Their assessment will consider whether central bankers can ensure a smooth economic transition amidst the most hawkish monetary policies witnessed in decades in the Philippines and the United States.
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