THE interest rate-sensitive stock market may not see a strong run this week, analysts said, amid tempered hopes of an earlier-than-expected policy easing by the US Federal Reserve.
The bellwether Philippine Stock Exchange index (PSEi) closed down 1.73 percent at 6,822.32 last Friday, snapping a seven-week winning streak.
Friday's sell-off, Philstocks Financial Inc. senior research analyst Japhet Tantiangco noted, resulted in the bourse dropping below its 10-day and 20-day exponential moving averages.
While last week's drop has opened opportunities for bargain hunting, he said a "strong rally could be difficult" following a higher-than-expected US producer price index that has dashed hopes of an earlier Fed rate cut.
"Hence, the market may only move sideways," Tantiangco said.
The Fed's upcoming rate-setting meeting abroad is seen as crucial as analysts believe that the Bangko Sentral ng Pilipinas (BSP), which will meet on April 4 to discuss policy, is expected to mirror this week's US central bank move.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the BSP could again match a Fed rate pause to "maintain healthy interest rate differentials" to help stabilize exchange rates, import prices, and overall inflation.
"[A] pause in local policy rates [is] possible if the peso exchange rate is relatively stable, global crude oil prices continue the easing trend, and headline inflation eases further within the BSP's inflation target of 2.0 to 4.0 percent," he added.
While the consensus has long been firm on a continued pause, online brokerage 2TradeAsia.com said "comments about the timing of easing should fuel short-term speculation."
"A May cut is also getting uncertain, albeit still fairly possible, which confirms our earlier notes that investor sentiment is gradually coming back to earth and that year-end 2023 aspirations did skew ambitious," it added.
2TradeAsia.com also stressed that the PSEi, which cracked under selling pressures, would need more strong catalysts that could drive a breach of the 7,000 resistance mark.
"Positive corporate results so far seem to only move the trading needle ever so slightly, and swings seem to still be tied to macro movements, particularly to headlines that affect the cost of capital," it added.
Chartwise, the stock market's support is still expected between 6,700 and 6,800, analysts said.
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