Better-than-expected inflation seen to sustain lift

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PSE BGC bell

SHARES could move up overall in the shortened trading week ahead, with investors shrugging off any negative sentiment following better-than-expected inflation data reported last week.

The Philippine Stock Exchange index pulled back by 62.57 points or 0.80% to end at 7,740.74 on Friday, but was up by 1.45% or 110.48 points from its June 1 finish, ending three straight week-on-week declines that began on May 18.

The market was lifted from the preceding week by services, which gained 2%, alongside financials which jumped 1.9%. Trading was subdued as turnover averaged P5.3 billion, with net foreign selling amounting to P2.08 billion.

Trading this week will be interrupted by the Independence Day and the Islamic Eid al-Fitr holidays on June 12 and 15, respectively.

“Sessions rounded on the green side, as United States fund managers reverted attention to macro fundamentals and took a respite from trade spats,” online brokerage said in a weekly market note.

“At the local front, buyers took heart on better-than-expected inflation for May, as well as S&P’s credit rating upgrade on local bank.”

The Philippine Statistics Authority reported last week that inflation accelerated by 4.6% in May, marking a fresh five-year peak but falling below the Department of Finance’s estimate of 4.9% that was also the median of a BusinessWorld poll and at the low end of the Bangko Sentral ng Pilipinas’ 4.6-5.4% target range for that month.

“(This) has calmed the jitters that investors have been experiencing in the last few months. The market continues to show signs of recovery after bouncing off the 7,500 support line last week. If it can sustain this momentum, we will start to see a reversal to test resistance at 8,000,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

Meanwhile, said that investors will be tracking international developments this week, including the results of the G7 Summit.

“What the market would abhor is for any discord, as the ideal direction is for leaders to work towards reconciliation. The summit will also provide clearer steps on US decision, whether to pullout from an earlier nuclear deal with Iran, as the outcome could take its toll on crude futures pricing,” the online brokerage said.

The US Federal Open Market Committee will also meet on June 12-13 to decide whether to hike benchmark interest rates even further.

“With only three trading days next week due to the holidays, the index will continue in this congestion area between 7,500 and 7,830 on low volume,” Eagle Equities’ Mr. Mangun said.

“The following weeks are going to be very crucial as investors will decide to start coming in or to stay on the sidelines and wait for a catalyst.”

The analyst placed market support at 7,500-7,625 and resistance at 7,830-7,900. — Arra B. Francia