PSE banks on better inflation data sinking in

LOCAL SHARES may climb in the week ahead as investors — in the absence of any untoward foreign development — digest recent signs that inflation began to slow in November, accompanied by a stronger peso.

The bellwether Philippine Stock Exchange index (PSEi) dropped 0.99% or 74.26 points to finish at 7,461.06 on Friday last week. The main index was up by 1.26% or 93.21 points on a weekly basis, thanks to the PSEi’s rally on signs at the start of the week of an easing in the China-US trade spat.

Last week was marked by P796 million in foreign net buying, compared to the preceding week’s P733-million foreign net selling.

Initial optimism about easing trade tensions between the world’s two biggest economies, however, gave way to revived jitters after Canada arrested Chinese telco giant Huawei’s chief finance officer Meng Wanzhou on Dec. 1, triggering a global equities sell-off.

In the week ahead, some analysts are still banking on November’s better inflation data to continue supporting PSEi’s ascent. “With inflation getting better and the currency getting stronger, there is still strong indication that investors will begin to see the market in a better light and start getting back in,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market report.

The Philippine Statistics Authority reported on Wednesday last week that inflation clocked in at six percent in November, slowing from September and October’s nine-year-high 6.7%.

Online brokerage 2TradeAsia.com shared this view, saying that slower inflation could help the Bangko Sentral ng Pilipinas (BSP) steady monetary policy in its eighth and last policy meeting for the year on Dec. 12.

“If this is upheld, monetary authorities would provide room to aid consumer spending and possibly prod enterprises to tap credit lines with banks, especially those with capital-intensive expansion initiatives starting next year,” 2TradeAsia.com said in a weekly market note.

2TradeAsia.com noted that the meeting of the BSP’s Monetary Board will come ahead of the US Federal Open Market Committee’s Dec. 18-19 meeting.

“Judging from crude prices’ latest downtrend, the likelihood appears high for Fed tightening to be deferred to next year,” the online brokerage said.

Eagle Equities’ Mr. Mangun pegged this week’s initial resistance level at 7,500-7,800 and support at 7,000-7,270. He noted that the goal for this week would be to reach the 7,500 mark, after which the index could target 7,800 and even 8,000 before the month ends. “We are still banking on the fact that a ‘Santa rally’ is in the making,” he said.

2TradeAsia.com expects PSEi to test 7,900-8,000, unless negative developments in SinoUS trade tensions again upset investors.

PSEi: 7,461.06