Share prices may move sideways this week with an upward bias, as investors await the release of January inflation rate, which could provide a hint to the Bangko Sentral ng Pilipinas’ next policy direction.
Analysts said the January inflation would be a crucial indicator for the BSP’s policy decision in its meeting slated this month and could indicate the trend in the first half of the year.
The BSP earlier said January inflation likely accelerated to 8.3 percent from a 14-year high of 8.1 percent in December on the back of higher prices of electricity, fuel and food items.
Online brokerage firm 2TradeAsia.com said while the US Federal Reserve’s decision to implement smaller rate hikes fueled enthusiasm among investors, investors should not be too optimistic about the prospects of rates going down.
“We maintain our view that equity holders are better off expecting rates to remain elevated than project a pivot over the next three to six months, as macro indicators have shown little to no evidence that rates should be lowered anytime soon,” 2TradeAsia.com said.
The online brokerage firm noted Philippine Stock Exchange index’s staying power at the 7,000 level, accompanied by decent turnover and foreign buying. It said the level was supportive of a healthy correction needed to achieve the 7,500 level.
It said the start of the earnings season would also boost investor sentiments as companies were expected to report strong fourth-quarter performance.
Companies may report lower capital spending and dividend guidance for 2023 which could dampen investor sentiments.
“Earnings confirmation over the short term may force participants to break from this broad-based exuberance in favor of asset-specific fundamentals,” it said.
The PSEi closed lower by 0.35 percent last week to 7,027.38 on Friday, while the broader all-share index rose 0.21 percent to 3,705.46.
Menwhile, Wall Street stocks declined Friday after a blowout January jobs reports raised fresh questions about the outlook for monetary policy as markets digested disappointing earnings.
The United States added 517,000 jobs in January, nearly double the December figure, after a five-month slowdown in hiring, according to the data.
The report also showed unemployment edging down to 3.4 percent, the lowest level since 1969.
The data calls into question investor assumptions that the Federal Reserve will soon pivot from a policy of aggressively hiking interest rates, an expectation that boosted stocks in January.
“It was a hot number,” said Angelo Kourkafas, an investment strategist at Edward Jones, who added that some of the losses may have been due to profit taking.
The Dow Jones Industrial Average ended down 0.4 percent at 33,926.01.
The broad-based S&P 500 dropped 0.8 percent to 4,136.48, while the tech-rich Nasdaq Composite Index tumbled 1.6 percent to 12,006.95. With AFP