LOCAL stocks are expected to regain momentum this week, rallying closer to the 7,000-points resistance level, as the peso continues to trade stronger and as investors anticipate the release of August inflation and other economic data this week.
The benchmark Philippine Stock Exchange index (PSEi) has been trying to breach the 7,000-points milestone, closing last week at 6,897.54 points. Week-on-week, the local bourse corrected lower after gaining for three consecutive weeks, slipping 64.42 points, or 0.9 percent.
Despite the week-on-week drop, the stock market is still near its five-month high reached last April 2, 2024, Rizal Commercial Banking Corp. chief economist Michael Ricafort said.
The Bangko Sentral ng Pilipinas (BSP) estimates August inflation will improve to 3.2-4.0 percent, which Ricafort believes "could support possible further local policy rate cuts and match future Fed [US Federal Reserve] rate cuts."
The peso last week continued to strengthen against the US dollar, reaching a five-month high on August 30, when it closed at P56.111 to the dollar.
"Local monetary officials still reiterated another possible 0.25 [basis point] local policy rate cut on October 17, 2024 or December 19, 2024," Ricafort added.
Philstocks Financial Inc. senior research analyst Japhet Tantiangco, meanwhile, said that the market "has been maintaining its position above its 10-day exponential moving average."
He added that the local market "could move with an upward bias on the back of expectations that the Philippines' August inflation print, which will be released on Thursday, would be lower than July's 4.4 percent."
Confirmation of such inflation expectations may somehow give the market a boost later in the week, he added.
"Investors are also expected to take their cues from other upcoming economic data, including the peso's movement against the US dollar, the S&P Global Philippines' Manufacturing PMI (purchasing manager index) for August, and Philippine labor force figures for July," he continued.
Online brokerage firm 2TradeAsia.com, for its part, projects that attention this week will shift to local inflation data scheduled for release on Thursday after investors took a breather last week.
"Note that a BSP rate cut plus a potential decline in August CPI (consumer price index) are likely to manifest another 25 basis points (bps) rate cut in late October, in time for fund repositioning ahead of [third quarter] earnings reports in November [and the] outlook for 2025," 2TradeAsia said.
"A potential transition to growth is reiterated, while acknowledging the impact to consumer spending and private capital formation to be more lagged and backloaded," it added.
The benchmark PSEi remained below the 7,000-level two-thirds into the year and at the tail-end of the so-called "ghost month," 2TradeAsia continued, adding that the "evolving geopolitical downside risks should provide additional short-term friction on top of supply pressure."
Analysts predict that immediate support this week would be at 6,700-6,800 while resistance is still seen at 7,000 points.
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