The Philippine Stock Exchange index (PSEi) could see further upside in the coming days, but investors were advised to stay cautious as the benchmark measure nears a crucial resistance level.
“The market looks poised to test the multimonth resistance at 6,750 after last week’s bullish consolidation aided by net foreign buying,” Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., said in a note to investors over the weekend.
The PSEi rose 1.24 percent to end the previous week at 6,647.56, data from the stock exchange showed.
Net foreign buying last week reached about P980 million. However, net selling since the start of the year still stood at around P21.9 billion.
“Whether there is a strong catalyst for a range breakout, however, depends on this week’s major news flows,” including the US Federal Reserve’s policy rate announcement, Colet said.
“A signal from the Fed that its rate hike campaign is in the final phase, or a shift to less hawkishness, could trigger a long-awaited breakout rally,” Colet said.
Investors will also be closely watching President Marcos’ State of the Nation Address (Sona) today, July 24.
Aris Dacanay, HSCB economist for Asean, said they would be monitoring the Sona for details on the government’s plans to address high inflation.
He said investors would want to hear reforms in the military and unformed personnel pension system that could help ease pressure on government expenditures.
“This would be especially timely given the country’s twin deficits (fiscal and current). On the second, any extension of Executive Order 10 (or even making this permanent) could lead to lower inflation expectations for 2024,” he said. In January, Mr. Marcos through an executive fiat extended the validity of lower import duties for pork and rice, among others.
“On the third, liberalization and investment policies on livestock, onion and sugar could also lower inflation expectations as the freer importation of these goods could bolster food supply and, in turn, temper overall food prices immediately,” Dacanay said.
—Miguel R. Camus INQ
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