Consumer prices and interest rates will be on investors' radar this week, even as market sentiment remains muted as evident in thin trades.
Analysts said inflation would continue to be a major consideration in the stock market.
'The extended El Niño until the summer of 2024 is an inflation wildcard and CPI (consumer price index) expectations have been lifted accordingly, the BSP's baseline inflation is at six percent (from 5.8 percent) for 2023 and 3.7 percent (from 3.5 percent in 2024. Outside of this, however, inflation is looking to be more manageable relative to early and mid 2023,' 2TradeAsia said in a market commentary.
It noted that globally, inflation expectations have also cooled to a little under three percent for 2024 and 2025 on the back of easing supply-side concerns.
Against this backdrop, the US Federal Reserve may start slashing rates by mid-2024, which means pro-growth policy may return sooner than expected.
2TradeAsia said a test of the 6,500 level by yearend is not impossible, especially if the market sees the usual Christmas rally.
'Volume remains less than ideal, however, which warrants some caution in the near-term, as the strength of technical signals are skewed by this anemic participation,' it said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the Philippine Stock Exchange index (PSEi) may test the 6,220 to 6,300 levels as its next major resistance, which could be the next gateway to potentially retest a previous high of 6,412.94 recorded last Sept. 28.
Following last week's performance, he also sees immediate minor support levels at 6,110 to 6,160 levels while immediate major support levels are seen at 6,040 to 6,080.
Factors that would likely affect the index are upcoming economic data, including the next policy rate setting meeting of the Bangko Sentral ng Pilipinas on Dec. 14 .
The BSP, he said, could match the next Fed rate decision on Dec. 13.
'A pause on local policy rates is also a possibility, especially if the peso exchange rate is relatively stable, global crude oil prices continue the easing trend, and headline inflation eases further toward the BSP's inflation target of two percent to four percent,' he said.
Last week, the BSP kept the key local interest rate unchanged at the 16-year high of 6.50 percent in a widely expected move following the 25-basis-point off-cycle rate hike on Oct. 26.
The PSEi closed higher last week, finishing at 6,269 or up by 0.93 percent week on week. Most counters were up, led by industrials and services, although the average turnover was light at P3.33 billion or down by 5.27 percent week on week.
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