LOWER-THAN-EXPECTED second quarter economic growth will continue to weigh on the stock market ahead of Thursday’s monetary policy meeting, analysts said.
The benchmark Philippine Stock Exchange index (PSEi) came close to falling to the 6,300 level last Friday, ending the day at 6.405.91 and down 0.7 percent from a week earlier.
“With our second quarter real GDP (gross domestic product) growth coming in below expectations, cracks in the confidence toward the economy could already be present, which in turn would make the building of market momentum even harder,” Philstocks Financial Inc. senior research analyst Japhet Tantiangco said.
An indication of dovish policy from the Monetary Board later this week, he added, could give sentiment a boost.
“We may also see bargain hunting … due to the fact that it (the stock market) has already declined for three straight weeks,” Tantiangco continued.
“However, with the tempered confidence towards the economy following the recent GDP data release, a strong rally would be challenging, as adding already to the concerns is the mounting food inflationary risks primarily the impact of El Niño [weather pattern].”
The PSEi could trade from 6,400 to 6,600 this week, Tantiangco said.
Online brokerage 2TradeAsia.com noted that second quarter corporate results were overall strong, but investors were unimpressed given signs of deceleration, particularly in consumer staples, retail and power, which in turn pointed to an economic slowdown.
Growth appears solid for now, but further erosion in key indicators, particularly consumer confidence, could call for significant revisions in 2024 expectations.
“With the Chinese ghost festival starting on August 16, 2023, expect the thinning out of trading volume within the next few weeks and the investors anticipating the BSP’s Monetary Board policy meeting as they look for stronger direction amidst the divergence between economic deceleration versus neutral to positive corporate earnings,” 2TradeAsia said.
“Hunt for bargains. Immediate support is at 6,350; resistance is at 6,700.”
Rizal Commercial Banking Corp. chief economist Michael Ricafort said investors would also be looking at upcoming data on bank loan growth, domestic liquidity, and remittances.
“The next support level will be at the 6,375.26 immediate low level posted on July 10, 2023; then the 6,330.53 level posted on March 16, 2023,” he said.
“As for resistance, the next important resistance will be at the 6,600 levels, which will serve as the next gateway prior to further upward correction in the near future (versus a potential retest of the 6,750.06 immediate high posted on May 8, 2023).”
FROM A REPORT BY ED SALTING