INVESTORS are expected to continue keeping an eye on the peso, which last week dampened sentiment in the stock market after plunging to its lowest point in almost two years.

The bellwether Philippine Stock Exchange index (PSEi), which has gained for two straight weeks, still edged 0.02 percent higher week-on-week at 6,619.89 last Friday.

Average net market value turnover weakened by 33.7 percent week-on-week to P6.35 billion, while average net foreign selling amounted to P102 million.

Japhet Tantiangco, senior research analyst at Philstocks Financial Inc., said a "cautious tone" could prevail this week while investors await fresh leads, particularly with regard to inflation and key interest rates.

Continued bargain hunting should be extended, he added.

Tantiangco noted that a peso appreciation could "spur positive sentiment," but a further weakening may continue to "weigh on the bourse."

Volatility remains a concern, Rizal Commercial Banking Corp. chief economist Michael Ricafort said, even as the peso-dollar exchange rate may have "somewhat stabilized" after the central bank intervened.

The weaker currency, he added, could lead to increased importation costs and a potential pick-up in headline inflation, which inched up to 3.8 percent in April from the preceding month's 3.7 percent.

Ricafort said that the upcoming Philippine economic data include universal and commercial bank loans and domestic liquidity growth, both due on Friday. In the US, investors will be awaiting the release of growth data on Thursday.

Online brokerage 2TradeAsia.com, meanwhile, said the start of the rainy season could prompt some seasonal pivots, including the shift from volume-based utilities — power and water — and construction-allied sectors.

"The PSEi remains range-bound around the 6,400–6,800 band, with macro-downside risks preventing any propulsion towards the medium-term resistance of 6,800," it added.

"Bountiful speculation should provide opportunities to range trade, albeit recent headlines have tilted to the downside. That being said, the best entry point is the point of maximum pessimism."

Moving forward, former PSE President Jose Luis Yulo Jr. expressed optimism that the stock market "would not go down below 6,000" despite persistent macroeconomic and geopolitical concerns.

"Because of China, in my opinion, there is sentiment among the world to help the Philippines economically. Many of them (foreign investors) are coming here to see what they can do," he said on the sidelines of The Manila Times forum last week.