Cautious trade seen ahead of Fed meet, inflation


PHILIPPINE STOCKS will be range-bound as trading resumes this week ahead of the release of October inflation data and the US Federal Reserve’s policy meeting.

On Friday, the benchmark Philippine Stock Exchange index (PSEi) went down by 77.15 points or 1.23% to finish at 6,153.43, while the broader all shares index declined by 25.09 points or 0.76% to end at 3,257.29.

Still, week on week, the PSEi climbed by 169.87 points or 2.84% from its close of 5,983.56 on Oct. 21. 

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado said in an e-mail that the PSEi went down on Friday on selling pressure as investors pocketed their gains after the market’s four-day rally.

“The index capped four straight days of gains with profit taking. The index surged throughout the week as sentiment got a boost from a strong start to the third-quarter earnings season, a Fed official’s pronouncement, which raised prospects of a scaling back in the pace of future rate hikes, and the peso’s strength against the greenback,” Mr. Mercado said in an e-mail on Friday.

The Fed has raised rates by 300 basis points (bps) since March and is expected to deliver a fourth straight 75-bp hike in its Nov. 1-2 meeting before considering slower increases by December.

Meanwhile, the peso closed at an over one-month high of P57.97 on Friday, rising by 25 centavos from its P58.22 finish on Thursday and by 78 centavos from its P58.75-per-dollar close on Oct. 21. 

For this week, Mr. Mercado said the Fed’s meeting and the release of October Philippine inflation data will drive sentiment.

The Bangko Sentral ng Pilipinas on Monday gave a 7.1% to 7.9% estimate for October headline inflation amid higher food prices and transport fares.

The Philippine Statistics Authority will release October inflation data on Nov. 4.   

First Metro Investment Corp. Research Head Cristina S. Ulang said investors are awaiting the result of the Fed’s policy meeting.

“If Fed signals a pivot to slower hikes, it will be cheered by the local market,” Ms. Ulang said in an e-mail on Friday. “A key risk is if the Fed surprises by more than 75 bps, which can trigger further profit taking.”

“The PSEi is likely to be range-bound in the coming week. Volatility may only resume Wednesday given the market’s two-day absence in light of the holiday,” COL Investment Management, Inc. President Marvin V. Fausto said in an e-mail on Friday.

Local financial markets were closed on Monday and Tuesday in observance of public holidays.

“The recent recovery in the peso should provide tailwind for local equities to be more buoyant, so long as it remains at the P58 level or lower,” he added.

First Metro Investment’s Ms. Ulang placed the PSEi’s support and resistance at 5,700 and 6,300, respectively, while COL Investment Management’s Mr. Fausto put support at 6,080 and resistance at 6,200. — A.E.O. Jose