Stocks to move sideways ahead of BSP meeting

SHARES may move sideways this week ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting and as investors await the incoming administration’s economic plans.

The benchmark Philippine Stock Exchange index (PSEi) plunged by 153.13 points or 2.34% to close at 6,379.17 on Friday, while the broader all shares index sank by 59.81 points or 1.70% to close at 3,457.40.

Week on week, the PSEi also dropped by 380.73 points from its close of 6,759.90 on May 6.

“The local bourse was tinged red [last] week amid a combination of post-election jitters and global economic uncertainties, shrugging off a better-than-expected 1Q2022 GDP (gross domestic product),” 2TradeAsia.com said in a report.

“GDP printed at a much higher figure than market consensus at 8.3% in the first quarter versus the 3.8% contraction during the same period last year, but got buried under the market’s knee-jerk reaction to a Marcos administration come next quarter,” it said. “Anxiety may be stemming from policy uncertainties, heading into a fragile global economy that is very much different from the baton pass the market saw in 2016.”

For this week, 2TradeAsia.com said investors will focus on the BSP Monetary Board’s meeting on May 19, noting the market is “expecting a parallel hawkish move from the US Federal Reserve” in line with regional central banks that adjusted their own policy settings last week.

A ����ý poll held last week showed 9 out of 17 analysts expect the central bank to keep its key rates at record lows, while eight see a possibility of a 25-basis-point (bp) rate hike at the BSP’s meeting.

A slim majority of analysts said the BSP may choose to hold fire as it waits for more evidence that economic recovery is already entrenched, while some are pricing in a rate increase due to stronger-than-expected first-quarter growth that could further stoke inflation.

The central bank has not touched borrowing costs since slashing rates by a total of 200 bps in 2020.

The market will also monitor the incoming administration’s statements on economic policy, analysts said.

“In view of the transition phase before the new administration takes office on June 30, the financial markets and general public are still waiting for additional details on the new administration’s economic team and Cabinet members, continuity narrative, reform measures, and other policy priorities for the coming weeks,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in an e-mail.

Presumptive Philippine president Ferdinand “Bongbong” R. Marcos, Jr. said he is looking to build a Cabinet that will steer the economy by boosting jobs, managing food and fuel prices and pushing more infrastructure projects, Bloomberg reported.

For the coming week, 2TradeAsia.com placed the PSEi’s immediate support at 6,200 to 6,300 and resistance at 6,500.

Meanwhile, RCBC’s Mr. Ricafort put support from 6,100 to 6,200 and immediate resistance between 6,560 and 6,670. — Luisa Maria Jacinta C. Jocson with Bloomberg