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Profit taking seen ahead of BSP policy meeting

PHILIPPINE SHARES may move sideways this week as investors pocket gains from the market’s rise on Friday and await the Bangko Sentral ng Pilipinas’ (BSP) rate hike.

The benchmark Philippine Stock Exchange index (PSEi) gained 119.20 points or 1.93% to close at 6,286.77 on Friday, while the broader all shares index rose by 51.23 points or 1.56% to 3,328.89.

Week on week, the PSEi climbed by 101.24 points or 1.64% from its close of 6,185.53 on Nov. 4.

AB Capital Securities, Inc. Vice-President Jovis L. Vistan said in a Viber message that the PSEi rebounded on Friday as October US inflation was slower than expected.

“Stocks rebounded as investors reacted to the US inflation data. Prior to the inflation report, investors were also feted with a better-than-expected third-quarter GDP (gross domestic product) report,” Mr. Vistan said.

“The print … may be indicative that the Federal Reserve’s aggressive stance versus inflationary pressures is having its desired impact, and ultimately spark a pivot in the December meeting,” online brokerage 2TradeAsia.com said in a market note.

The US consumer price index (CPI) rose 0.4% last month. In the 12 months through October, the CPI increased 7.7%, slower than the 8.2% logged in September.

The US Federal Reserve hiked rates by 75 basis points (bps) for a fourth straight time earlier this month, bringing total increases since March to 375 bps. Its last meeting for the year is on Dec. 13-14.

Meanwhile, Philippine GDP grew by 7.6% in the third quarter, slightly faster than the revised 7.5% expansion in the preceding three-month period and 7% a year earlier.

For this week, Mr. Vistan said the PSEi’s positive momentum is expected to continue, but investors are also seen to pocket their gains from the market’s recent rally.

“The market will be jittery anew ahead of the expected Bangko Sentral ng Pilipinas (BSP) 75-bp hike set for [this] week and use it as an excuse to take some profits on the strong Philippine GDP growth-led rally on Friday, likely spilling over to early [this] week,” First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said in an e-mail.

BSP Governor Felipe M. Medalla earlier said the Monetary Board will hike benchmark interest rates by 75 bps at their Nov. 17 meeting to match the Fed’s latest move as it seeks to stabilize prices and support the peso.

The BSP has raised rates by 225 bps since May.

China Bank Securities Corp. Research Director Rastine Mackie D. Mercado likewise said investors are expected to book gains this week.

“While we believe that prospects of retesting immediate resistance levels remain on the table, it’s more likely that the market will take a breather [this] week,” Mr. Mercado said in an e-mail.

2TradeAsia.com put the PSEi’s support at 6,100 and resistance at 6,400 to 6,600, while FMIC’s Ms. Ulang placed support at 6,100 and resistance at 6,500. China Bank Securities’ Mr. Mercado said the PSEi’s support is pegged at 6,200 and resistance at 6,360-6,380. — A.E.O. Jose