THE stock market could build on lower-than-expected June inflation that has heightened expectations of an August rate cut and upcoming data releases, analysts said
The benchmark Philippine Stock Exchange (PSEi), which ended the first trading week of July up 1.26 percent week-on-week at 6,492.75 despite a Friday drop, has now recovered most of its losses during a volatile June that saw it fall to the 6,100 level.
Friday's close — the dip was attributed to profit-taking — came as the Philippine Statistics Authority (PSA) reported that inflation had eased to 3.7 percent in June, below the market consensus of 3.9 percent.
The news has raised the likelihood of the Bangko Sentral ng Pilipinas (BSP) following through with previously signaled rate cut plans.
Philstocks Financial Inc. senior research analyst Japhet Tantiangco said that they were seeing a buildup of momentum as the bourse was able to break above its 50-day exponential moving average.
"[T]he market could be able to extend its upward movement. This is primarily due to our latest inflation print, which showed a slowdown," he added.
The June decline is seen as supportive of prospects of a BSP rate cut, Tantiangco continued, which will be positive for the market.
"Investors are also expected to watch out for the US' June inflation print, which would provide clues on the Federal Reserve's policy direction," he said.
"Investors are also expected to watch out for clues on our local economy through our upcoming labor market, foreign trade and foreign direct investments (FDI) data," he added.
The United States' Bureau of Labor Statistics will release inflation results for June on Thursday, US time. The PSA, meanwhile, will issue labor and trade data for May today and Wednesday, respectively.
Wednesday will also see the BSP issuing FDI figures for April, to be followed by May bank lending and domestic liquidity data on Friday.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., noted that the peso-dollar rate was improving and appeared to have stabilized, which would be a good signal for the markets and the economy.
A "pause or cut in local policy rates is possible if the peso exchange rate is relatively stable, global crude oil prices still among 2.5-year lows, and headline inflation remains within the BSP's inflation target of 2 percent-4 percent," he said.
The peso, which fell to the P58:$1 level in May after the BSP first indicated that it could start cutting in August, strengthened by 5 centavos to P58.53 against the dollar on Friday, its best close in nearly a month.
Online brokerage firm 2TradeAsia.com, for its part, noted that the inflation result had broken a four-month streak of rising consumer prices.
"While this makes an August rate cut less imaginary and more real, there has to be more persuasive data points this July to tip the edge over rate cut territory," it said.
2TradeAsia said that consolidation was likely given historical trends.
Regina Capital Development Corp. Managing Director Luis Limlingan also said that the PSEi could consolidate ahead of the release of the US' July CPI.
Analysts said this week's immediate support would be at 6,300–6,400, while resistance was seen at 6,500–6,700.
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