PSEi braces for inflation test

Philippine stocks face another cautious week as investors await September inflation data and weigh the pull of government bonds and GCash’s initial public offering (IPO) on market liquidity.

F. Yap Securities Inc. said the Oct. 6 inflation report could determine whether the Philippine Stock Exchange Index (PSEi) rebounds toward 5,800 or tests support at 5,500.

For September, F. Yap forecasts inflation at 6.6 percent to 7 percent, compared with August’s 6.1 percent.

F. Yap’s estimate overlaps with the Bangko Sentral ng Pilipinas’ (BSP) projected range of 6.4 percent to 7.4 percent.

The brokerage cited storm damage to agriculture, three fuel price increases in September and peso weakness as potential sources of price pressure.

Meat and electricity prices could provide some relief.

An inflation reading at or below 6.5 percent could trigger a rebound toward 5,800, the company said.

A result of 6.8 percent or higher would strengthen expectations of another interest rate increase and put the 5,500 support level under pressure.

F. Yap considers a further 25-basis-point hike at the BSP’s Oct. 22 meeting very likely unless inflation comes in below 6.5 percent.

Meanwhile, equities face competition for funds.

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A 2.5-year retail Treasury bond offering carrying a 6.875-percent rate attracted nearly P190 billion in tenders against an initial P30-billion offer.

GCash’s IPO offer period, scheduled for Oct. 6 to Oct. 12, adds another draw on liquidity.

F. Yap said its P6.60 offer price, below the earlier P7-to-P10 indication, points to tougher pricing conditions for upcoming IPOs.

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