Bargain hunting to ensue this week

ANALYSTS are anticipating bargain hunting this trading week as investors have digested the policy rate hikes of the US Federal Reserve (Fed) and the Bangko Sentral ng Pilipinas (BSP).

Also, the dollar closed to a new low at P58.50 against the United States dollar during the last trading day of the previous week.

Japhet Tantiangco, senior research analyst at Philstocks Financial Inc., said he does not expect a significant rally from the market yet as it is seen to continue dealing with expectations of further policy rate hikes by the Fed and the BSP.

“With five straight weeks of decline, the last one posting 4.42 percent worth of losses, we may see bargain hunting this coming trading week. Trading may remain tepid as the market continues to move without a positive catalyst,” Tantiangco explained.

Chartwise, Tantiangco sees immediate resistance at the 6,400 level while immediate support is seen at 6,200 followed by a key support at the 6,000-6,100 range.

2TradeAsia also sees the same scenario, saying in a report that the Fed’s interest rates have gone up to the highest level since 2008 and another rate hike is expected in November.

“Regional banks also followed suit with a synchronicity that has not been seen in decades. A recent World Bank study warned of risks from simultaneous rate hikes including a sharp global downturn in 2023 if tightening is not communicated orderly and if policymakers ignore other options available to curb inflation,” the 2TradeAsia report stated.

It suggested setting up a defensive portfolio with strong balance sheets in order to weather the brunt of a weak currency, higher cost of debt and generally volatile inputs market as timing will be key in the next few quarters given the amount of data available before 2023.

2Trade sees immediate support at 6,000 while resistance will be at 6,400.

For his part, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., also took note of the benchmark 10-year US Treasury yield posted a new 11-year high of 3.68 percent that could lead to higher borrowing costs for some listed companies.

“The Fed also signaled additional Fed rate hikes of about 1.00-1.25 for the rest of 2022 in order to bring down elevated US CPI (consumer price index)/inflation from the 40-year high of 8.3 percent to the target of 2 percent,” Ricafort said.

“Moreover, updated Fed rate estimates from Fed officials said that it will be at 4.40 percent by end-2022, 4.60 percent in 2023, 3.90 percent in 2024 and 2.90 percent in 2025.”

Ricafort sees next support at the 6,250 levels, which prevents a potential retest of the 6,054.79 posted on June 23, 2022. Meanwhile, he sees immediate resistance at the 6,400-6,500 levels.