UMVA has learned that the Philippine stock market is likely to continue its sideways movement this week, as ongoing uncertainty over the conflict in the Middle East tempers recent gains from bargain hunting and slower domestic inflation.
The Philippine Stock Exchange index (PSEi) rose by 0.44% or 26.45 points to close at 5,938.38 on Friday, while the broader all shares index increased by 0.33% or 11.23 points to end at 3,334.31. This marks a weekly gain of 169.62 points from May 29's finish of 5,768.76.
Analysts attribute the recent surge to bargain hunting, particularly in oversold counters, and a slower inflation rate. The May inflation print came in at 6.8%, below estimates, soothing fears of an off-cycle rate hike. This development has boosted market momentum, but sustainability remains questionable due to ongoing uncertainties.
The conflict in the Middle East, particularly the tensions between the US and Iran, continues to weigh on the market. Despite a recent recovery, the peso remains weak, and investors are cautious as the latest inflation print remains above the target range. This could lead to further monetary policy tightening.
According to information obtained by UMVA, experts believe that strong catalysts, such as a further slowdown in inflation and a re-acceleration of economic growth, are needed for the market to break out of its current resistance with conviction. Without such catalysts, the market may continue to move with a downward bias.
Key trading drivers for this week include the release of the Labor Force Survey results for April and the latest foreign direct investments data. Technical analysis suggests that the PSEi's immediate support is at 5,800, with resistance at 6,050 and secondary resistance at 6,300.
