The Philippine Stock Exchange index is expected to continue its upward trend this week, driven by sustained bargain hunting, although renewed tensions in the Middle East and a lack of fresh leads may lead to cautious investor sentiment. The index jumped 1.01% to close at 6,286.70 on Friday, its best close in over four months. The broader all shares index also rose by 0.67% to end at 3,393.34. This uptrend is a positive sign for the market, which has been gaining momentum in recent weeks.
The recent inflation rate of 6.4% in June, down from 6.8% in May, has buoyed market sentiment, enabling the index to finish 98 points up despite tempered global GDP outlook and renewed conflict in the Middle East. The local market has shown positive momentum in the last two weeks, climbing a total of 3.53%, with support from foreign investors who have posted net inflows in the last six trading days. However, trading remains thin, with value turnover averaging P5.55 billion last week, implying that the rally is not backed by strong conviction.
Bargain hunting may continue to support the local bourse this week, although lingering downside risks and the lack of a clear catalyst could limit gains. The situation in the Middle East remains a concern, and a re-escalation of tensions could cause oil prices to rebound, weighing on the local market and adding to domestic inflation pressures. Inflation still poses a threat, remaining above the government's 2%-4% target, which could lead to further tightening by the central bank.
Investors are also expected to focus on second-quarter corporate results, with average earnings per share projected to decline by 2%. The index is expected to trade from 6,150 to 6,400 this week, with its positive momentum reflected by its position above its 10-day, 50-day, and 200-day exponential moving averages. Despite the potential for further gains, the market remains vulnerable to external risks, including oil price volatility and geopolitical tensions.
