PHL stocks may decline before Fed, BSP meetings

REUTERS

PHILIPPINE SHARES may continue to decline this week ahead of the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The Philippine Stock Exchange index (PSEi) slipped by 26.90 points or 0.4% to close at 6,548.77 on Friday, while the broader all shares index went down by 22.49 points or 0.64% to 3,474.41.

Week on week, the PSEi declined by 57.23 points or 0.87% from its close of 6,606 on Sept. 9.

“The local bourse lost steam midweek onwards, mimicking Wall Street’s weakness after US inflation missed consensus,” online brokerage 2TradeAsia.com said in a report.

The US consumer price index (CPI) rose in August amid rising rent and healthcare costs, strengthening the case for another aggressive Fed rate hike this week.

Consumer inflation edged up by 0.1% to 8.3% last month after being unchanged in July. In the 12 months through August, the CPI increased to 8.3%.

Fed Chair Jerome H. Powell earlier said the central bank was “strongly committed” to fighting inflation. The Fed is meeting to review policy on Sept. 20-21 and has raised rates by 225 basis points (bps) since March, including two 75-bp hikes in June and July.

“Philippine stocks slid [on Friday] following the latest FTSE (Financial Times Stock Exchange) rebalancing and after investors digested a couple of economic reports that showed a muddy picture of the US economy,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“Initial jobless claims came in better than expected, but import prices dropped less than estimated. Retail sales beat expectations but were negative when excluding autos. Manufacturing data also showed a slowing economy,” Mr. Limlingan added.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the PSEi may drop ahead of expected rate hikes from the Fed and the BSP.

“We may see episodes of bargain hunting as the market lies at attractive levels. However, the general mood is still expected to be bearish as investors price in another possible 75-basis-point rate hike by the Fed to combat their still elevated inflation,” Mr. Tantiangco said.

“Investors are also expected to watch out for the BSP who may also act aggressively amid the demand-side risks to our country’s inflation, and the weakening of our local currency which also poses upside risks to the rise of our general price level. A 75-basis-point rate hike by the Fed, which puts more depreciation pressure on the peso, may lead to a 50-basis-point rate increase by the BSP,” he added.

The BSP will hold its policy meeting on Sept. 22, right after the Fed’s review. It has hiked borrowing costs by 175 bps since May to rein in rising prices.

2TradeAsia.com placed the PSEi’s immediate support at 6,500, secondary support at 6,400 and resistance at 6,700, while Philstocks Financial’s Mr. Tantiangco put support at 6,400 and resistance at 6,600. — Justine Irish D. Tabile