Shares may move sideways before inflation report

PHILIPPINE SHARES may move sideways as trading resumes after a two-week break as investors weigh geopolitical risks and domestic March inflation data that could reflect the initial impact of the Iran conflict on the economy.

On Wednesday, the Philippine Stock Exchange index (PSEi) rose by 0.83% or 49.74 points to close at 5,998.68, while the broader all shares index went up by 0.59% or 19.68 points to end at 3,353.60.

Week on week, the PSEi went up by 25.85 points from its March 27 finish of 5,972.83.

Philippine financial markets were closed on April 2 and 3 in observance of Holy Week.

“Hopes for potential de-escalation of the Middle East conflict placed gauges on positive terrain as sentiment glided with US markets,” 2TradeAsia.com said in a note.

“Hopes that the war in the Middle East would end soon fueled the local market to a positive close last week. With this, the bourse was able to snap its four-week losing streak,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message. “However, it still fell short of closing above the 6,000 line.”

For this week, he said sentiment may remain weak amid lingering uncertainty over the war involving the United States, Israel and Iran. “The US’ military threats towards Iran which risk further escalation of the conflict cast doubts on the former’s claim that the war would end in two to three weeks.”

“On the other hand, encouraging developments with respect to the Strait of Hormuz including: the Philippines’ safe passage through the Strait as granted by Iran; the discussion of around 40 countries of means to reopen the Strait; and Iran and Oman’s drafting of a protocol to monitor traffic in the Strait, may give the market relief.”

Mr. Tantiangco said investors are also expected to monitor the release of Philippine inflation data on March scheduled for Tuesday (April 7), as this could provide a look into how the Middle East conflict is affecting the economy.

A BusinessWorld poll of 18 analysts yielded a median estimate of 3.8% for the March consumer price index in March, faster than the 2.4% in February and 1.8% a year ago. This is within the Bangko Sentral ng Pilipinas’ (BSP) 3.1%-3.9% forecast for the month and 2%-4% target.

Mr. Tantiangco said the PSEi’s support is still pegged at 5,800, while resistance remains at 6,000.

For its part, 2TradeAsia.com placed the PSEi’s immediate support at 5,800, resistance at 6,050, and secondary resistance at 6,300.

“At home, the oil crisis continues to bite hard and fast… Headline inflation and BSP policy risks have ticked higher on the back of the shock; we maintain that the central bank’s room for maneuver is more constrained versus last year, making stimulus from that end supplementary at best,” it said.

“With demand destruction from elevated pump prices compounding supply-side pressures that cascade into grocery shelves and services, expectations are set for this summer season to post the weakest consumption and output figures since the pandemic.” — Alexandria Grace C. Magno