Fresh Mideast tensions seen to test stocks

MANILA, Philippines — The local stock market may once again make a run to hit 6,150 this week, but things are looking bleak following recent developments in the Middle East, according to analysts.

Philstocks Financial Inc. research manager Japhet Tantiangco yesterday said investors look like they have yet to fully recover their confidence to bet on risky assets.

This is driving the benchmark Philippine Stock Exchange index (PSEi) to hang around the 6,000 to 6,150 level, with no major catalysts that could propel a sustained rally.

Tantiangco said oil price pressures are easing as a result of the initial deal to end the war reached by Iran and the US. However, the agreement is being tested right now, as the US mounted missile strikes on Iranian bases close to the Strait of Hormuz.

Iran conducted retaliatory attacks by hitting US allies Bahrain and Kuwait. There is no certainty yet on when this latest round of exchanges would end.

“A reignition of the tensions between the two (Iran and US), which could lead to a rebound in oil prices, is expected to pose upside risks to inflation,” Tantiangco said.

“Taking all this into consideration, investors are advised to remain cautious with their trades,” he added.

F. Yap Securities Inc. said the local stock market is dealing with a liquidity vacuum ahead of the listing of GCash’s parent Mynt Inc. and PLDT Inc.’s data center operator VITRO Inc.

The brokerage said the listing of the two could raise as much as P120 billion combined. This is a risk to watch out for, as funds may be withdrawn from mid-cap holdings, creating an overhang in the broader secondary market.

F. Yap Securities also warned against buying immediately consumption-dependent stocks to gain quickly from the oil price drop. The broker said this may be premature to assume, given the long time it takes for cheaper fuel costs to push up household purchasing power.

“Instead, we advocate for defensive anchors still, specifically utility margin plays that capture the immediate fuel cost relief,” it said.

Last week the PSEi lost one percent, or 63 points, to close at 6.072.24, hurting from declarations that the Strait of Hormuz was temporarily closed and from monetary policy tightening.