Stocks to consolidate ahead of BSP policy meet

LOCAL EQUITIES may continue consolidating in the week ahead, with investors setting their eyes on the first policy meeting of the Bangko Sentral ng Pilipinas (BSP) for this year. 

The benchmark Philippine Stock Exchange index (PSEi) capped the week with a gain of 0.82% or 72.03 points to 8,810.75 after a three-day losing streak that saw it fall to as low as the 8,700 level. 

Week on week, the main index dropped 2.55%, with holding firms giving up the most at 3.47% followed by property, that weakened 3.22%.

Major leads in the coming days include the BSP’s meeting on Thursday, where the central bank is expected to keep rates steady in preparation for an eventual hike in March, prompted by the impact of the Tax Reform for Acceleration and Inclusion program on the economy.

“The spotlight will revert to local monetary authorities during their first meeting for 2018. Given hints from officials the peso-dollar rate is still within range and no significant spikes is seen for consumers prices, players are pricing-in for local interest rates to remain firm,” online brokerage firm 2TradeAsia.com said in a weekly market note.

The release of corporate earnings results is also drawing nearer, with Metropolitan Bank & Trust Co. kicking off the season, announcing a 10% growth in core income to P18.2 billion for 2017. With Globe Telecom, Inc. set to release its results on Tuesday, 2TradeAsia said attention could shift to the telco sector.

“Attention for the telco sector should zero in on the impact of the third player’s entry and balancing pricing vs regulatory structure of frequencies.”

Nevertheless, analysts said the market’s losses will help it establish a stronger support level in preparation for the 9,000 mark.

“I think we will continue to see the market consolidate between 8,750 to 8,950 this week. Nothing could be better for the market right now as it builds momentum to break and stay above 9,000,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a research note.

While the index saw a pullback in foreign funds last week, with net foreign selling at P6.7 billion against net inflows of P500 million the week before, Mr. Mangun said foreign investors might start placing their funds back into the PSEi. 

“The Federal Reserve did not raise rates [last] week even though everyone expected it which is why I think we shall see these funds come back into our market in the following weeks,” Mr. Mangun said.

Mr. Mangun placed the market’s support level within the range of 8,575 to 8,750, while resistance is pegged at 8,930 to 9,000.

On Wall Street, worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields sent investors fleeing equities on Friday, with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months. — Arra B. Francia with Reuters