Philippine shares may draw strength this week from regional optimism over the rate cut and stimulus measures announced by the European Central Bank (ECB) last week.
Asian stocks hit a seven-month high on Friday, with key regional markets reacting positively to the ECB rate cut.
“The ECB ruling was much anticipated and led to a rally in US markets and generally positive sentiment across regions. While it didn’t immediately reflect on the local market’s reaction, regional strength in the coming week may help boost our market,” DA Market Securities Inc. equity analyst Gab Aguila said.
On Thursday, the ECB announced it was cutting its deposit rates to negative as it continues to battle deflation in the region. It also lowered its growth forecast for this year but raised its GDP estimate for 2015.
“We advise investors to stay alert when the market nears resistance levels,” Aguila said.
The local market dropped on Friday after investors cashed in their gains amid worries that a rate hike could be on the horizon following higher May inflation data.
The government reported on Thursday that headline inflation accelerated to 4.5 percent in May, a 29-month high.
“The market inched down as concerns heightened about a possible hike in benchmark rates,” Aguila said. These rate hike worries “tempered buying optimism after May core inflation rose to a two-and-half-year high,” he added.
The Philippine Stock Exchange index (PSEi) ended Friday’s trade down 9.82 points or 0.14 percent at 6,762.62, while the wider all shares slipped 3.90 points or 0.10 percent to 4,073.28.