Stock market in search of strong catalyst

MANILA, Philippines — The local stock market is not expected to open the first trading week of June on a high note, with investors still desperately searching for a strong catalyst to boost sentiment.

“Market will continue to languish around 5,750 as bargain hunters will be sidelined, reminded of elevated inflation out this week and hawkish BSP policy move either on or earlier than its  next meeting in June,” First Metro Investment Corp. head of research Cristina Ulang.

The benchmark Philippine Stock Exchange index (PSEi) plummeted to a six-month low of 5,768.76 last Friday, down by 3.23 percent week-on-week.

2TradeAsia.com, the online arm of F. Yap Securities Inc., said the PSEi capitulated below the crucial 5,800 psychological support as persistent inflation fears, US-Iran conflict flare-ups, weakening peso, political rifts on the local front and caution ahead of this week’s latest inflation release triggered a sell-off.

It said geopolitical volatility has remained the dominant theme as the US-Iran conflict swings unpredictably between short-lived truces and renewed limited strikes.

“Moving forward, the local market is expected to continue taking cues from the developments between the US and Iran. It is also expected to look forward to the upcoming inflation data,” Philstocks Financial research manager Japhet Tantiangco said.

Tantiangco said the market is looking forward to the May inflation data, which will be released on June 5, as it would give clues on the direction of the country’s household consumption and the policy outlook of the Bangko Sentral ng Pilipinas.

According to Tantiangco, an inflation print exceeding April’s 7.2 percent is expected to weigh on the local bourse.

Tantiangco said the PSEi, having broken below its 5,800 support level, could test the validity of the said breach this week.

“If it is able to get back above 5,800, the market’s trading range is seen from 5,800 to 6,000. If it fails to do so however, next support is seen at 5,600,” he said.