By Revin Mikhael D. Ochave, Reporter
THE BELLWETHER Philippine Stock Exchange Index (PSEi) may see a “relief rally” this week after entering bear territory last Friday, with market movements likely to be driven by upcoming economic data.
“Barring any negative surprises, a relief rally is possible,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.
“This week’s market action will be driven mainly by the Philippine January inflation report, US December jobs data, and the evolving situation on tariffs,” he added.
The PSEi plunged by 4.01% or 245.07 points to close at 5,862.59 on Friday — its lowest finish in 27 months, since the 5,853.63 close on Oct. 12, 2022.
The main index officially entered bear territory after dropping over 20% from its intraday high of 7,604.61 and highest close of 7,554.68, both recorded on Oct. 7 last year.
The broader All Shares Index also declined by 2.19% or 79 points to 3,520.32.
Philippine inflation data for January will be released on Wednesday, Feb. 5. The Bangko Sentral ng Pilipinas (BSP) recently projected that January inflation could range from 2.5% to 3.3%, within its 2% to 4% target range.
On Feb. 1, US President Donald J. Trump imposed a 25% tariff on goods from Mexico and Canada, as well as a 10% tariff on products from China. He demanded that these countries act against the flow of fentanyl into the US, as well as address the issue of illegal immigration in the cases of Mexico and Canada.
“The January inflation data out on Feb. 5 must not add to the gross domestic product (GDP) disappointment,” First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.
“Inflation should decelerate below last December’s 2.9% and beat consensus estimates. If not, the market will remain in the bear trap,” she added.
Last Thursday, Philippine Statistics Authority data revealed that the country’s GDP expanded by a weaker-than-expected 5.2% in the fourth quarter, bringing full-year growth to 5.6%, short of the revised 6% to 6.5% target set by the government.
COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said in a Viber message that the PSEi is expected to recover next week following adjustments to the index’s composition.
“There is a chance next week for the market to bounce back immediately because the index rebalancing is already done,” she said.
“Last Friday, a lot of fund managers had to sell their other index stocks to make way for the addition of AREIT, Inc. and China Banking Corp. (Chinabank). Since volumes were so thin, they had to sell at a lower price to get their orders through,” she added.
AREIT, Inc. and Chinabank will join the 30-member PSEi starting Monday, Feb. 3, following the market operator’s index review for 2024.
The two companies will replace Nickel Asia Corp. and Wilcon Depot, Inc., which will become members of the 20-member PSE MidCap Index.
Philippine Seven Corp. will also join the PSE MidCap Index, replacing DDMP REIT, Inc.
Robinsons Land Corp. will be added to the PSE Dividend Yield Index following the removal of International Container Terminal Services, Inc.
All sector indices will remain unchanged except for the industrial sector, which will see the addition of Pryce Corporation and the exclusion of Fruitas Holdings, Inc.
“This was an extraordinary circumstance because the drop was due to index rebalancing. I’m optimistic that we should bounce back next week,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message.
“We have Philippine inflation coming out next Wednesday and US jobs report coming out next Friday. These two data points could dictate market direction next week,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that a “healthy upward correction” is possible for the local bourse next week.
“The market is also waiting for bottoming out signals to do some bargain-hunting, avoiding a risk of further losses. It is still wait-and-see until the dust settles and to grab opportunities for long-term purchases of high-quality listed companies with strong valuations,” he said.
