Bargain hunting starts this week

Analysts are expected to look for bargains during this trading week as investors digest interest rate hikes in the US Federal Reserve (Fed) and Bangko Sentral ng Pilipinas (BSP).

The dollar also closed at a new low of P58.50 against the US dollar during the last trading day of the previous week.

Japhet Tantiangkou, Senior Research Analyst at Philstocks Financial Inc. , he is not expecting a significant rally from the market yet as he is seen as continuing to deal with the expectations of rate hikes by the Fed and BSP.

“With five consecutive weeks of declines, last week recording 4.42 percent losses, we may see chase trades in the next trading week. Trading may remain tepid as the market continues to move without a positive catalyst,” Tantiangkou explained.

Chartwise, Tantiangco sees immediate resistance at 6400 while he sees immediate support at 6200 followed by major support in the 6000-6100 range.

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2TradeAsia also sees the same scenario, saying in a report that Fed rates have risen to the highest level since 2008 and another rate hike is expected in November.

“Regional banks have also followed suit with a synchronization not seen in decades. A recent World Bank study warned of the risks of simultaneous increases in interest rates, including a severe global deflation in 2023 if tightening is not systematically reported and if policymakers ignore other options Available to rein in inflation,” a 2TradeAsia report stated.

He suggested creating a defensive portfolio with strong balance sheets in order to offset the brunt of currency weakness, high cost debt and an overall volatile input market where timing will be key in the next few quarters given the amount of data available before 2023.

2Trade sees immediate support at 6000 while resistance will be at 6400.

For his part, Michael Rycafort, chief economist at Rizal Commercial Banking Corp, noted that the benchmark 10-year US Treasury yield hit a new 11-year high of 3.68 per cent which could drive up borrowing costs for some listed companies.

The Fed also signaled additional Fed rate increases of about 1.00-1.25 for the rest of 2022 in order to bring down the US CPI (Consumer Price Index)/inflation from a 40-year high of 8.3 per cent to the 2 per cent target. ‘ said Rycafort.

Moreover, updated estimates of the federal funds rate from Federal Reserve officials said it will be 4.40 percent by the end of 2022, 4.60 percent in 2023, 3.90 percent in 2024, and 2.90 percent in 2025.”

Rycafort sees next support at 6250 levels, which prevents a possible retest of 6054.79 posted on June 23, 2022. Meanwhile, he sees immediate resistance at 6400-6500 levels.

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