PHILIPPINE STOCKS could rise further this week after headline inflation fell below 2% in September for the first time in more than four years, reinforcing expectations for further rate cuts by the Bangko Sentral ng Pilipinas (BSP).
On Friday, the Philippine Stock Exchange index (PSEi) rose 1.06% or 79 points to close at 7,467.92, while the broader all-stock index rose 1.48% or 58.99 points to end at 4,041, 65.
This was the PSEi’s best performance in more than two and a half years or since it closed at 7,502.48 on February 9, 2022.
Week on week, the PSEi rose 0.53% or 39.62 points from the finish of 7,428.30 on September 27, posting its fifth straight week of gains.
“The indicator index remained broadly stable but gained momentum towards the end of the week after local inflation hit a four-year low. After a weak start, the PSEi managed to post gains,” 2TradeAsia.com said in a market note.
“Despite the profit-taking episodes, the local market still managed to end the week with gains, closing above 7,400,” said senior research analyst Japhet Louis O. Tantiangco of Philstocks Financial, Inc. in a Viber message.
For this week, inflation data released Friday could support Philippine stocks, he said.
“It is believed that lower-than-expected inflation in the Philippines for September will boost market sentiment due to its positive impact on the local economy. The low inflation rate could mean stronger household consumption, which would benefit our overall economic growth given its significant contribution. Low inflation also strengthens the case for continuing the BSP’s monetary policy easing,” Mr. Tantiangco said.
Headline inflation fell to 1.9% in September from 3.3% in August and 6.1% a year ago, the Philippine Statistics Authority said Friday.
This was lower than the BSP’s 2%-2.8% forecast for the month and the average estimate of 2.5% delivered in a Business world poll among 15 analysts. It was also the slowest in more than four years or since the 1.6% in May 2020.
In the first nine months, headline inflation averaged 3.4%, in line with the BSP’s annual forecast.
However, Mr Tantiangco warned that the growing conflict in the Middle East is a risk to the market. “An escalation of tensions is expected to increase oil prices and cause negative spillovers to the rest of the global economy. The expectation is that this will weigh on sentiment.”
“Graphically, the market could continue to test the 7,400 level. If the country holds firm at the said line, it will be considered as its support while the next resistance is seen at 7,700,” he added.
Meanwhile, Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said in an email that the PSEi’s immediate support is 7,060-7,220 and resistance is 7,552.70-7,800.
For his part, 2TradeAsia.com placed the market’s immediate support at 7,100, primary resistance at 7,500 and secondary resistance at 7,650. — Revin Mikhael D. Ochave