Market to test 7,000 anew

MANILA, Philippines — Shares prices slumped for the third straight week, still reeling from the runaway inflation print in January although a potential upside to test the 7,000-level anew is on the plate as the market takes its cue on the release of the latest US inflation data tomorrow.

The benchmark Philippine Stock Exchange index (PSEi) ended at 6,876.79 last Friday, down by 150.59 points or 2.1 percent week-on-week.

This week, among the factors that will affect the market include the latest US inflation data due tomorrow, Feb. 14. The US Federal Reserve has been hinting at less hawkish signals recently.

“(This) week’s US inflation data will mark a turning point for the equity rally at a time when investors are swapping stocks for bonds amid the likelihood of a recession,” D.A. Market Securities said in a note.

Unicapital Securities said investors would also be keeping watch on the next rate setting meeting of the Bangko Sentral ng Pilipinas scheduled on Thursday.

“Following the 8.7 percent inflation print in January, markets expect a possible 50-basis-point rate hike on Feb. 16. We retain our expectation that the market would test the 6,800 support level, buoyed by the release of 2022 corporate earnings reports,” it said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said he sees immediate major support levels at 6,650 to 6,750 and the next minor support levels at 6,580 to 6,790.

The next resistance target is at the 7,000 to 7,100 levels, which will serve as the next gateway prior to further upside, he said.

In the US, a range of factors have lately been driving an upswing in stocks, including the attractiveness of beaten-up shares, a tailwind from falling bond yields, and market participants unwinding bearish bets against stocks.

Some investors, however, are skeptical that the gains will last, especially if markets continue recalibrating expectations for how high the Fed will need to raise rates this year to keep cooling off inflation.

While it’s not unusual to see a reversal of trends to begin a year, “the extent to which it’s occurred is pretty dramatic,” said Walter Todd, chief investment officer at Greenwood Capital. “It certainly can’t continue at the extremes it has been.”