Narrow trading on negative bias seen

MANILA, Philippines — Local stocks are seen trading in a narrow range this week as investors tread with caution amid growing inflation concerns.

The Philippine Stock Exchange index finished in the red last Friday at 6,281.01, down by 1.92 percent week-on-week.

“With the worsening situation in the Middle East adding to the already worrisome backdrop of slowing economic growth and elevated inflation, downside risks are again heightened for the local bourse,” Philstocks Financial research manager Japhet Tantiangco said.

He said the war between the US and Iran is escalating further with the Houthis from Yemen joining, causing global oil prices to surge again as Brent crude hits the $100-per-barrel mark.

“If the direction is sustained, it would cause inflationary pressures again, a headwind for the economy and the market,” he said.

2TradeAsia.com, the online arm of F. Yap Securities Inc., said volatile crude oil pricing and foreign exchange may continue, as choke points from the Strait of Hormuz expanded to the Red Sea.

It said the US re-imposition of tariffs on 60 global trading partners are also likely to induce rate hike expectations.

Heading into this week’s Federal Open Market Committee meeting, 2TradeAsia.com said crude’s rebound eliminates near-term cut expectations and reintroduces hawkish tail risks.

“For emerging market risk assets, this means elevated risk-free yields and a resilient US dollar will continue to put a hard cap on foreign buying,” it said.

“Focus this week is seen on high-conviction dividend plays, energy and infra shares, with strong pass-through advantage,” it added.

The Federal Reserve’s policy decision is among the key events which the market is expected to watch out for this week, according to Tantiangco.

He said raising of the Fed policy rate or signals that it would be done so in the near term may weigh on the local bourse.

Tantiangco said investors will also keep a close eye on President Marcos’ State of the Nation Address in hopes of catalysts, including policies that would address main macroeconomic concerns, namely slowing growth and rising inflation.

“With all the headwinds at play, the local market could move with a downward bias in next week’s trading. Hence, investors are advised to be cautious,” he said.