Stocks to move sideways with Fed meet in focus
PHILIPPINE SHARES may move sideways this week ahead of the US Federal Reserve’s policy meeting as investors await clarity on the path of monetary easing in the world’s largest economy.
On Friday, the Philippine Stock Exchange index (PSEi) rose by 0.83% or 55.74 points to end at 6,726.01, while the broader all shares index gained by 0.64% or 23.29 points to close at 3,630.10.
Week on week, however, the PSEi dropped by 0.97% or 65.68 points from its 6,791.69 finish on July 19.
Trading at the stock market was disrupted last week as Super Typhoon Carina (international name: Gaemi) enhanced a southwest monsoon, causing torrential rains in Metro Manila.
“Amid the onslaught of Super Typhoon Carina, local equities broke their multi-week winning streak, although losses were trimmed before weekend,” online brokerage firm 2TradeAsia.com said in a market note.
“The local market has already exhibited a golden cross as its 50-day exponential moving average crossed above its 200-day counterpart. This signals a possible rally in the medium- to long-term for the bourse. Trading remains tepid, however, as many are still on the sidelines amid lingering uncertainties,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
For this week, the Fed’s July 30-31 policy review will take center stage, Mr. Tantiangco said.
“In particular, investors are expected to watch out for clues regarding the Fed’s policy outlook. If the Fed gives a dovish outlook, this may spur optimism in the local market,” he said.
The Fed is widely expected to keep its target rate at the current 5.25%-5.5% range for the eighth straight meeting this week. However, markets are awaiting more hints from Fed Chair Jerome H. Powell on the central bank’s easing cycle, which investors expect to begin by September.
Mr. Tantiangco added that the market will monitor the July S&P Global Philippines Manufacturing Purchasing Managers’ Index data scheduled to be released on Aug. 1.
He put the PSEi’s support at 6,400 and resistance at 6,700-6,800.
Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort placed the market’s immediate major support at 6,360 and resistance at 6,800-7,000.
For its part, 2TradeAsia.com put immediate support at 6,600 to 6,650 and resistance at 6,850.
“Momentum generated by an improving macro backdrop of inflation and growth are likely to persist until data confirms otherwise, and positive earnings growth should help the PSEi brute force its strong resistance near the 7,000 mark,” it said. “On that note, the upcoming ghost month may increase friction in the short term.”
The ghost month is a period in the Lunar calendar when some Asian investors refrain from making big investments or decisions, resulting in lower trading volumes. For this year, the period is scheduled to start on Aug. 4 and end on Sept. 2. — R.M.D. Ochave