Bargain hunting, cautious trading in play

MANILA, Philippines — Cautious trading is expected to persist in the local stock market this week, but episodes of bargain hunting could lift the bourse up after last week’s sharp sell-off.

The benchmark Philippine Stock Exchange index fell to 5,855.91 last Friday, down by 3.40 percent week-on-week.

Online brokerage 2TradeAsia.com said volatility in global crude pricing has returned, amplifying the need to contain further increases in consumer prices.

It said investors’ radar screen is also emphasized on the volatile peso plus high import bill.

“Expect sentiment to remain volatile to geopolitical progress on Saudi Arabia crude supply and local political pages on impeachment verdict this week,” 2TradeAsia.com said.

“Check for possible cues on possible off-cycle rate hike from BSP (Bangko Sentral ng Pilipinas), in the event of wild peso volatility,” it said.

The US Federal Reserve tightened its benchmark interest rates by 25 basis points last week, citing the need to further cap inflation.

Philstocks Financial Inc. said the Fed’s latest policy increase has fueled expectations that the BSP may follow.

It said elevated global oil prices and the weakness of the peso, meanwhile, continue to weigh on the local market.

Moving forward, 2TradeAsia.com said the more immediate swing factor for the market is domestic liquidity absorption.

It said Vitro REIT’s roughly P24 billion IPO and the Mynt listing, which at nearly P92 billion will be the largest offering in PSE history, are expected to pull a meaningful amount of investible cash out of secondary market trading in early fourth quarter.

“We caution trading small caps until the IPO pipeline drains out as liquidity will be harder to chase in the lead up to the mega listings. That being said, large-cap, index-heavy names should hold up better through the drain and remain preferable while the PSEi re-attempts 6,000 before September ends,” it said.