PSEi rebound faces test amid inflation, Mideast crisis

Philippine stocks might remain volatile this week as investors continue to weigh elevated inflation, geopolitical risks and uncertainty over global interest rates, according to 2TradeAsia.

For this week, the brokerage placed immediate support for the PSEi at 5,800, while resistance was seen at 6,050 and 6,300.

In its latest market outlook, 2TradeAsia said optimism over a possible Middle East ceasefire helped fuel last week’s rebound, allowing the benchmark Philippine Stock Exchange Index to climb 127 points or 2.18 percent week-on-week to 5,960.97.

The rally came despite disappointing economic data, including the Philippines’ 2.8-percent first-quarter gross domestic product growth and April inflation print of 7.2 percent.

2TradeAsia said gains were led by the mining and oil sector as well as service, both of which rose by 5.79 percent.

Average daily turnover improved to P6.78 billion from P6.29 billion previously. Foreign investors turned net buyers with P181 million in inflows, reversing the prior week’s P470-million net outflow.

Still, the brokerage said sentiment remained fragile as investors grappled with persistent oil shocks, elevated borrowing costs and concerns over slowing economic activity.

“While the economic team maintains that the archipelago is not currently in a stagflationary environment, caution that these indicators are inherently lagged,” 2TradeAsia said.

The brokerage added that the gap between official optimism and market reality appeared to be widening as global markets continued to price in a “higher for longer” interest rate environment.

2TradeAsia said the local market remained trapped by “inert forces,” with domestic liquidity still sidelined as investors waited for clearer signals from policymakers and global central banks.

See Also

Leading in the fog: Communicating priorities in uncertain times

It also warned that unresolved geopolitical risks and volatility in the greenback continued to weigh on investor confidence.

Given the uncertain backdrop, the brokerage advised investors to maintain a defensive strategy and focus on high-yield defensive stocks.

“The antidote to market noise is quiet conviction,” it said.

Michael Ricafort, chief economist at Rizal Banking Commercial Corp., said a key upside catalyst for the market would be progress toward a possible peace agreement in the Middle East.