WHILE TRADERS turn to inflation figures of the United States and its heating trade tension with China, the main index is expected to struggle to breach the 8,100 mark this week amid the lack of fresh leads.
The local bellwether Philippine Stock Exchange index (PSEi) dropped 0.95% or 76.5 points to 7,945.66 points on Friday. Week on week, it slid 0.42% amid heightening tensions between the US and China.
Value turnover stood at P7.58 billion last week, while net foreign selling was logged at P1.5 billion.
For this week, investors will focus on US reports and developments between Washington and Beijing.
“Investors are anticipating the release of the core inflation report in the US on April 11,” Timson Securities, Inc. equity trader Jervin S. de Celis said in a mobile message on Monday.
An uptick in inflation in March might be taken by the markets as indicative of stronger and stable US economic growth and will signal that the US Federal Reserve will raise borrowing rates a few more times this year. About three hikes are expected.
In his first speech as Fed Chairman delivered last week, Jerome H. Powell expressed optimism on a robust US economy, also noting that tightening monetary policy in a gradual pace will be necessary.
Rate hikes will result in heavier foreign selling of local equities as investors transfer their funds to US treasuries due to attractive rates.
“I think that aside from the pessimism that the trade wars are causing the world markets right now, we should keep our eyes on the US inflation rate report this week as it will be the main catalyst whether or not the FOMC (Federal Open Market Committee) will be more hawkish or dovish in increasing interest rates for the remaining policy meetings this year,” Mr. De Celis added.
For his part, Regina Capital Development Corp. Managing Director Luis A. Limlingan said investors will keep watch over updates on the escalating trade war between the world’s two biggest economies.
“Markets will be taking cues from the latest developments of the trade war to kick off the week,” Mr. Limlingan said in a mobile message today, April 9.
US President Donald J. Trump ordered officials to look into slapping higher tariffs on $100 billion worth of Chinese products. This is on top of the proposal covering $50 billion worth of products that has been elevated to the World Trade Organization.
Current resistance stands at 8,100. For support, Timson Securities’ Mr. De Celis said it remains at 7,800, which might be retested after the index failed to close above resistance level last week.
As local markets were closed for a holiday, other Southeast Asian stock markets inched higher on Monday as a bounceback in US stock futures whetted risk appetite, although heightened trade tensions between the United States and China tempered the gains. — JCL with Reuters