Market investors likely to stay on the sidelines this week

Investors are expected to stay on the sidelines this week as they brace for the outcome of some key data releases.

The Philippine Statistics Authority is set to release on May 10 first quarter gross domestic product (GDP) data, while the Bangko Sentral ng Pilipinas is scheduled for a policy rate setting meeting.

Traders said these data could lead to two scenarios this week – one is that the benchmark Philippine Stock Exchange index (PSEi) will be able to hold above the 7,500 level and could try to retest the 7,800 level.

Another scenario is that the market would break below the 7,500 mark and will call for further losses to 7,000 to 7,200.

But it is likely that the market would continue to go down amid rising inflation, traders said.

Last week, the PSEi fell anew by 2.26 percent week-on-week for the fifth straight week to 7,546.19.

This came about after inflation in April came in at 4.5 percent, a fresh five-year high.

The Philippine Statistics Authority (PSA) attributed the rise in inflation to increases in the indices of alcoholic beverages and tobacco, transport, fuel and utilities such as water and electricity.

But Joseph Roxas of Eagle Equities said investors had already factored in rising inflation.

Jonathan Ravelas, chief market strategist at BDO, said a 25 basis points hike in the BSP’s overnight rate is expected also on May 10.

Ravelas said investors would also be keeping a close watch on the first quarter GDP report.

“The economy probably grew by 6.8 percent year-on-year in the first quarter, according to median estimates, slightly higher than revised 6.5 percent expansion in the fourth quarter of 2017,” Ravelas said.

“Chartwise, the week’s close at 7,546.19 highlights near-term support has emerged at the 7,500 levels. Should this level hold, expect a retest of the 7,800 levels in the near-term,” he said.