THE Philippine market is likely to struggle for direction this week in search of leads on how the policy-setting Federal Open Market Committee (FOMC) will decide on interest rates when it meets on March 14 to 15.
Though investors and fund managers have discounted Fed Chair Janet Yellen’s previous statements on the likelihood of raising rates sooner than later, online brokerage 2TradeAsia.com said the outcome of the Fed’s meeting will influence global trading, including Philippine shares.
“Attention will revert to the FOMC’s meeting this week, even as fund managers have seemingly priced-in the possibility of three quarters rate hike,” 2TradeAsia.com said.
The Fed is eyeing to raise interest rates three times this year, each time by 0.25 percentage point.
“What should be underscored is the extent at which FOMC officials will acknowledge the pace of US economic growth, starting with labor data expansion,” it added.
The recent US non-farm data showed that 235,000 jobs were added in February compared to the 190,000 forecasted.
The Fed earlier said signs of a stabilizing US economy will result in increased likelihood of rate hikes.
Joylin Telagen, equity analyst for IB Gimenez Securities Inc., said the market may incur losses on further risk-off trading.
“It will be a cautious week with a downward bias because of the Fed meeting. The PSEi might retest the 7,000 support level, and there is downside risk to as low as 6,800. If the Fed continues to hold off the rate hike, the index might move back to 7,300,” Telagen said.
Despite the risks of higher rates this week, 2TradeAsia.com said there are investors who may regard the situation as an opportunity to “position on lows” depending on industry prospects, especially incentives under the Duterte administration that can attract long-term investments.
“Having corrected to as low as 7,146, investors might seize on this base to position in select shares and trade the market within range. [We suggest to] focus on growth opportunities and ride the wave. Immediate support is 7,100, resistance 7,250-7,300,” 2TradeAsia.com said.
The benchmark PSEi lost 149.18 points or 2.05 percent to close at 7,146 on Friday, while the broader All Shares declined by 59.42 points or 1.35 percent to 4,343.39.