Volatile trading seen ahead of Fed, BSP meetings

PHILIPPINE STOCKS may see a volatile trading week ahead of the policy meetings of both the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

The bellwether Philippine Stock Exchange index (PSEi) added 54.96 points or 0.84% to close at 6,580.12 on Friday, while the broader all shares index increased by 11.54 points or 0.33% to 3,437.40.

Week on week, the PSEi also went up by 90.47 points or 1.39% from its close of 6,489.65 on Dec. 2.

“The local stock market gauge gained for the second day in three days in line with the latest overnight gains in the US stock markets, which mostly corrected higher, by 0.5% to 1.1%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

On Thursday, Wall Street rebounded on the rise of weekly jobless claims which investors see as a sign of slower rate hikes from the Fed, Reuters reported.

However, on Friday, US stocks closed lower due to mixed economic data that fueled conflicting Fed bets.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said investors will take their cue from the policy decisions of the Fed and the BSP, as well as Philippine foreign direct investments and trade data.

“Aside from inflation concerns, offshore recession worries amid the Federal Reserve’s monetary tightening may weigh on sentiment. [This] week, investors are also expected to watch out for the Bangko Sentral ng Pilipinas’ policy decision, with a 25 to 50-basis-points (bp) policy rate hike anticipated. Investors are expected to watch out for clues regarding the outlook of the country’s inflation on the BSP’s upcoming policy meeting,” Mr. Tantiangco said.

“Capital markets are expected to gyrate with the Fed’s final meeting for the year [this] week — as was the case for all Fed meetings throughout the year. Baseline expectations is for the Fed to hike by a slightly less aggressive 50 basis points, to end its four consecutive 75-bp increases,” online brokerage 2TradeAsia.com said in a market report.

2TradeAsia.com said the BSP is likewise expected to continue hiking rates this week and could give hints on its future policy path.

The US central bank has raised borrowing costs by 375 bps since March, with the fed funds rate now at the 3.75%-4% range. Its next meeting is scheduled on Dec. 13-14.

Meanwhile, the BSP has raised benchmark interest rates by 300 bps since May, with the policy rate now at 5%, and is seen to continue tightening at its Dec. 15 review.

A BusinessWorld poll last week showed 13 of 15 analysts expect a 50-bp hike on Thursday. One economist sees a 25-bp increase, while another expects no change in policy.

2TradeAsia.com placed the PSEi’s immediate support at 6,450 to 6,500 range and resistance at 6,800, while Philstocks Financial’s Mr. Tantiangco put support at the market’s 200-day exponential moving average of 6,578.67 and resistance at 6,600. — J.I.D. Tabile