Stocks may extend climb on slower Sept. inflation

PHILIPPINE SHARES may climb further this week after September headline inflation settled below 2% for the first time in over four years, bolstering bets of further interest rate cuts by the Bangko Sentral ng Pilipinas (BSP).

On Friday, the benchmark Philippine Stock Exchange index (PSEi) rose by 1.06% or 79 points to close at 7,467.92, while the broader all shares index went up by 1.48% or 58.99 points to end at 4,041.65.

This was the PSEi’s best finish in more than two-and-a-half years or since it closed at 7,502.48 on Feb. 9, 2022.

Week on week, the PSEi climbed by 0.53% or 39.62 points from its 7,428.30 finish on Sept. 27, logging its fifth consecutive week of gains.

“The bellwether index mostly held steady but gained momentum towards the end of the week after local inflation hit a four-year low. After a weak start, the PSEi managed to eke out gains,” 2TradeAsia.com said in a market note.

“Despite the episodes of profit taking, the local market still managed to close the week with gains and in the process closed above 7,400,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

For this week, inflation data released on Friday could prop up Philippine stocks, he said.

“The below-expected inflation print of the Philippines for September is seen to boost market sentiment due to its positive implications on the local economy. The low inflation figure could mean stronger household consumption, which would benefit our overall economic growth given its significant contribution. The low inflation also strengthens the case for the continuation of the BSP’s monetary policy easing,” Mr. Tantiangco said.

Headline inflation slowed to 1.9% in September from 3.3% in August and 6.1% a year ago, the Philippine Statistics Authority reported on Friday.

This was below the BSP’s 2%-2.8% forecast for the month and the 2.5% median estimate yielded in a BusinessWorld poll of 15 analysts. It was also the slowest in over four years or since the 1.6% print in May 2020.

In the first nine months, headline inflation averaged 3.4%, matching the BSP’s full-year forecast.

However, Mr. Tantiangco warned that the growing conflict in the Middle East is a risk for the market. “An escalation of tensions are expected to raise oil prices and cause negative spillovers to the rest of the global economy. It is expected to weigh on sentiment.”

“Chart-wise, the market may continue to test the 7,400 level. If it holds its ground at the said line, this will be considered as its support, while its next resistance is seen at 7,700,” he added.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail that the PSEi’s immediate support is at 7,060-7,220 and resistance is at 7,552.70-7,800.

For its part, 2TradeAsia.com placed the market’s immediate support at 7,100, primary resistance at 7,500, and secondary resistance at 7,650. — Revin Mikhael D. Ochave