PHL shares may stay weak on economic worries

PHILIPPINE STOCKS may move lower this week as concerns over the Middle East war and its impact on the domestic economy continue to weigh on investor sentiment.

On Friday, the Philippine Stock Exchange index (PSEi) fell by 1.21% or 73.30 points to close at 5,960.97, while the broader all shares index dropped by 0.67% or 23.04 points to 3,373.37.

Meanwhile, week on week, the benchmark index rose by 127.33 points from April 30’s 5,833.64.

“The local bellwether staged a firm rebound [last] week, as optimism over a potential Middle East ceasefire sparked a broad-based rally, effectively overshadowing a disappointing 2.8% first quarter GDP (gross domestic product) print and April’s three-year inflation peak of 7.2%,” online brokerage 2TradeAsia.com said in a note.

For this week, Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said local shares may remain under pressure amid concerns over the Philippine economy and developments in the US-Iran conflict.

“Latest data with March inflation rate at 7.2% and Q1 GDP growth of 2.8% show that the local economy is in a tough spot. With inflation expected to remain elevated in the immediate to medium term, household consumption and ultimately the general economy may continue to suffer,” he said.

“Meanwhile, the BSP (Bangko Sentral ng Pilipinas) signaling preparedness to take further action to control inflation spells further challenges to growth. Finally, the government’s tempered public infrastructure spending, if it continues, won’t be able to provide the needed support to the local economy.”

He added that the US-Iran situation remains volatile.

“While a ceasefire is still in effect and the two are seemingly moving towards a deal, hostilities remain, which include episodes of exchanges of military force. With this, global oil prices remain elevated with the Brent crude currently testing $100 per barrel.”

Mr. Tantiangco said the PSEi’s inability to push past the 6,000 mark last week shows that this remains a strong resistance for the market. Meanwhile, he placed the main stock benchmark’s immediate support at 5,800.

“At 5,960.97, the local market remains at bargain levels. However, given the negative factors in play, the market may pull back [this] week.”

Meanwhile, for its part, 2TradeAsia.com placed the PSEi’s immediate support at 5,800, resistance at 6,050, and secondary resistance at 6,300.

“The PSEi remains trapped by ‘inert forces’ as the market grapples with a hawkish interest rate cadence vis-a-vis deep-seated growth anxiety… Ultimately, domestic liquidity remains sidelined, waiting for clearer smoke signals, yet the complexity of the current downside risks suggests that volatility will remain the primary feature of the local landscape at least until the fourth quarter,” it said. — Alexandria Grace C. Magno