The Philippine stock market is expected to trade mixed this week as traders speculate on the interest rate decision of the Bangko Sentral ng Pilipinas (BSP), due out Thursday.
The BSP has said it may not be expected to follow the next move by the US Federal Reserve Board, which announced last week it was widening its doors on a rate hike, triggering a global market rally.
While Wall Street analysts remain torn over the timing of a possible interest rate hike in the US, local investors continue to speculate where the BSP’s own rate decision will take the Philippine market.
Jason Escartin, investment analyst at F. Yap Securities Inc., said in a weekly outlook that the market will see companies preparing for the tax filing season next month, more preliminary quarterly earnings results, and take positions for the outcome of the BSP meeting on March 26, Thursday.
“This week, local monetary officials might highlight cheap oil in its policy meeting, underscoring benign inflation. Further reductions in crude futures could offset any scheduled upward adjustment in water tariffs and electricity, including moves to more expensive natural gas imports amid the maintenance shutdown of Malampaya,” Escartin said.
“Interest rate-sensitive shares may get a boost, in case the status quo is upheld,” he added.
Escartin noted that several funds may re-enter the market, “more as a consequence of firms’ growth prospects this year.”
AB Capital Securities Inc. forecast a “bullish” trend for the market in the next few days, expecting the US Fed to keep its interest rates steady for now.
“The decline in interest rate targets is widely considered as bullish for asset prices as it implies that the Fed will hold interest rates lower for a longer timeframe. Meanwhile, Wall Street analysts are still torn between a rate hike coming in either June or September,” it said.
AB Capital said resistance is seen up at 7,865 points. A breach above this level will lead to all-time highs at 7,900 to 8,000 points, it said, adding that support is expected at 7,730 and 7,650 points.
BPI Asset Management, in its weekly market review, said it expects the benchmark Philippine Stock Exchange index (PSEi) to “continue to consolidate and move in a tight range next week” between 7,800 and 7,950.
Other than the interest rates hype, BPI Asset said “catalysts for the week remain to be corporate earnings releases and any movement in US equities.”
Justino Calaycay Jr. of Accord Capital Equities Corp. said the market’s consolidation and sideways movement bear “uncertainty” as to whether it is only taking a pause to more rallies in the coming days, or has taken a pessimistic turn.
“The main question that needs an urgent answer is whether this shift to a sideways bias is a mere pause in the bullish trend or the stirrings of a bearish mood that will, on hindsight, mark the last up-leg a terminal move,” he said.
“Nevertheless, the “uncertainty” in the trends and patterns is emerging only over shorter timelines. It remains to be seen if this will eventually spill over to the medium term prognosis—which is likewise seeming to move towards a neutral bias—and the longer term outlook, which to this day remains arguably bullish,” he added.
But Calaycay noted that the PSEi is more likely to be influenced and “correlated” to corporate earnings than inflation, interest rates and gross domestic product (GDP) figures.
“Our studies indicate that the market is most correlated with corporate earnings than with inflation, interest rates, even GDP. This does not negate the import of these economic parameters – it, in fact, heightens it. However, it must be considered in the context of how these numbers will impact on listed firms’ profits,” Calaycay said.
“It is in this light that a favorable bias remains in the mind of the market. Earnings so far have been more than decent and that should provide a new set of impetus for investors to return after the risks presented by external volatilities dissipate—as they seem to have (done) last week,” he added.
The release of full-year 2014 corporate earnings is on its last leg in the week to end-March. In the summer months—April to May— investors are normally keen on the first quarter earnings results, as well as on corporate updates at annual stockholders’ meetings during the period.
On Friday, the main PSEi ended with a 3.83-point gain or 0.05 percent to 7,818.38, while the All Shares index climbed 8.53 points or 0.19 percent to 4,529.31.