Market volatile ahead of inflation report

MANILA, Philippines — The local stock market is expected to remain volatile this week, with higher inflation expectations seen weighing on equities.

The Philippine Stock Exchange index went winless last week, finishing Friday’s session at 5,629.03, down by 3.38 percent week-on-week.

Unicapital Securities head of research Wendy Estacio-Cruz said the PSEi extended its losing streak to five sessions as inflation risks, weak manufacturing activity and elevated global oil prices and bond yields kept investors cautious.

“In our view, a sustained recovery will require easing inflation pressures and clearer signs of improving growth,” she said.

Estacio-Cruz said investors are now looking ahead to this week’s September inflation report, with the Bangko Sentral ng Pilipinas (BSP) projecting inflation to hit anywhere from 6.4 percent to 7.4 percent versus August’s 6.1 percent, strengthening the case for another rate hike.

For her part, First Metro Investment Corp. head of research Cristina Ulang said the market's path would be mainly a reaction to the still elevated inflation and consequently hawkish BSP policy reaction.

“As such, PSEi will be on a narrow trading range, flattish in the absence as well of positive geopolitical news flow,” Ulang said.

2TradeAsia.com also expects sentiment to sway to the official September inflation print.

“Results at the higher-end of estimated range could cement expectations for Oct. 22 rate hike, and might expose the 5,500 support,” the online brokerage said.

“Overall, we stay on a sit-out mode on risk as the allure for fixed income keeps any equities from achieving any meaningful momentum at or above 6,000,” it said.