Trade war, inflation seen moving stocks

For this week, the local stock market will be influenced global trade tensions as well the release of Philippine inflation figures which could signal another rate hike.

“Next week, markets will be watching for any signs regarding the resurfaced trade tensions between the US and China,” said Regina Capital Development Corporation Managing Director Luis Limlingan.

He added that, “locally, inflation will be eyed by investors as this May data may hit a new high. The BSP themselves expects monthly inflation to settle within the 4.6 percent to 5.4 percent percent range for May, with 2012 as the base year.”

Papa Securities Trader Gio Perez noted that “with an acceleration of inflation expectations, should we now expect the Monetary Board to hike rates once more in their next meeting on June 21?”

According to 2TradeAsia. com, if the inflation rate is high, the BSP may consider adjusting interest rates to at least cap the peso’s further weakness.

“Set against this backdrop, it would be prudent to select stocks with adequate foreign exchange hedge or a sustainable cash flow that can support working capital needs. These will aid in pricing strategies, especially when margins are challenged due to inflation,” it added.

For his part, Limlingan said “we would look more at property (issues) since their first quarter results were quite impressive.”

Eagle Equities Head of Research Chris Mangun pointed out that “the 7,500 support level has continued to prove as very strong support both technically and psychologically. Despite all the negative factors in the market right now both locally and abroad, the index still held 7,500.”

Thus, Mangun said that, “based on the current market sentiment, the index will continue to trade within this congestion area between 7,500 and 7,830.”