August 29, 2022

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PHL shares may drop as Powell spooks markets

PHILIPPINE SHARES may move sideways with a downward bias this week on hawkish signals from the US Federal Reserve chief and following Wall Street’s decline on Friday.

The Philippine Stock Exchange index (PSEi) went up by 46.07 points or 0.68% to close at 6,752.50 on Friday, while the broader all shares index rose by 12.17 points or 0.34% to 3,577.45.

Week on week, the PSEi declined by 111.36 points or 1.6% from its close of 6,863.86 on Aug. 19.

“Shares on the Philippine Stock Exchange rose at [Friday’s] close after sentiment as investors anxiously awaited a speech from Federal Reserve Chair Jerome H. Powell on their rate-hike path,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message.

“Local equities were skewed for plus-side bias as players positioned for improved second-half prospects in select shares,” online brokerage 2TradeAsia said in a report.

For this week, Mr. Arce said the market is expected to be volatile and track Wall Street’s decline on Friday after Mr. Powell said during the Fed’s annual Jackson Hole symposium attended by global central bankers that they may need to keep rates high for longer to keep inflation under control.

The Fed next meets to discuss policy on Sept. 20-21. It has raised rates by 225 basis points (bps) so far since March, including back-to-back 75-bp hikes in June and July.

Wall Street ended Friday with all three benchmarks more than 3% lower following Mr. Powell’s speech, as it increased bets of another 75-bp hike at the Fed’s review next month.

The S&P 500 lost 141.46 points or 3.37% to end at 4,057.66 points, while the Nasdaq Composite lost 497.56 points or 3.94% to 12,141.71. The Dow Jones Industrial Average fell 1,008.38 points or 3.03% to 32,283.40.

“On the local front, trading may remain volatile as investors digest and possibly shrug off the Fed’s warning on economic pain ahead,” he said. “The possibility that the Philippine central bank may not move in step with the Fed and instead consider a pause in rate hikes despite the continued tightening earlier this month could be a silver lining for equities.”

“The local market is expected to trade with a downward bias this week, especially in the earlier part, as investors digest Federal Reserve Chairman Jerome Powell’s hawkish remarks at the Jackson Hole Symposium,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

Investors will also watch out for the release of latest bank lending data and the S&P Global Philippines manufacturing purchasing managers’ index “for clues on how our local economy is faring.”

Globalinks Securities and Stocks’ Mr. Arce placed the PSEi’s support at 6,498 and resistance at 6,899, while the online brokerage 2TradeAsia.com put immediate support at 6,650 and resistance at the 6,750-6,800 range. — J.I.D. Tabile