The Philippine stock market may be facing a volatile week, with foreign funds seen moving local share prices when US inflation figures, due out this week, show any possible trigger for a Fed interest rate hike.
Any market dip from recent record levels, however, could also pave the way for buyers on the sidelines to jump back into attractively low-priced stocks and provide an upward push for the indices.
“Sessions might face continued volatility where a potential upside surprise on US core inflation might spur further foreign selling,” Jason Escartin, investment analyst at online brokerage firm 2TradeAsia.com, said in a weekly outlook.
Some institutional players “might secure positions in stocks that have positive correlation to US interest rates, such as treasuries,” he added.
At the same time, Escartin expects that any dip in the market may give way for some buyers to get back in, though “modestly,” due to valuation concerns.
On Friday, the benchmark Philippine Stock Exchange index (PSEi) closed little changed, or just 0.02 percent or 1.31 points lower at 7,946.89, and the broader All Shares index up 0.06 percent or 2.54 points at 4,536.86.
Last week’s trade dragged the main index off its 8,100-point record territory to the 7,900 level.
BPI Asset Management sees “continued net foreign outflows” this week, possibly pulling the index down to as low as 7,780 points. It sees the upper end of the range at 8,000.
“Continued net foreign outflows as seen this week will drag the index down,” BPI Asset Management said in its weekly report.
“Inflation data from the US, which is expected to come out next week, could influence the direction of the market,” it said, adding that in the event inflation remains low, the data could “result in positive sentiment in the equities market as it could indicate a delayed normalization of Fed rates.”
Anton Alfonso of RCBC Securities Inc. said in his weekly market cap the PSEi went through a 2.2-percent week-to-date decline last week, roughly due to the P4.5-billion foreign net outflow during the period.
“As the release of 2014 corporate earnings results has ended, most investors seemed to have opted to cash in on their profits while they waited for fresh news, and for the first quarter of 2015 results to come out in mid-May,” Alfonso said.