PSEi seen reacting to Fed and BSP moves

Analysts expect the market to be regressive this week as the Philippine Stock Exchange (PSEi) index fell along with Asian markets last Friday.

This is due to the upcoming US Federal Reserve policy meeting on the interest rate on September 20-21, 2022, when investors expect to raise the interest rate again by 75 basis points in order to combat inflation.

“The local stock market index, the composite index of the Philippine Stock Exchange, fell for the fourth consecutive day (on September 16, 2022), after the overnight decline in US stock markets to new lows in one week and after the World Bank warned that the global economy may face a recession in In 2022 due to tight monetary policy tightening, it may not be enough to reduce high inflation, as the World Bank also noted the most simultaneous decline of monetary and fiscal stimulus measures by central banks around the world. said Michael Rycafort, chief economist at Rizal Commercial Banking Corp. , in about 50 years.

There are many other factors last week that could have an impact on the markets this week of trading such as the exchange rate of the US dollar and the peso hitting new record lows.

However, Rycafort said there are still positive offsetting factors for the peso, which could help mitigate its recent weakness, such as the drop in global crude oil prices to 7.5-month lows. Also, global commodity prices are also similarly declining in part due to recession risks in the US, while the continuation of the lockdown in China could help to some extent ease the country’s import bill and trade deficit from record levels, which could ease headline inflation.

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The proposed voluntary wearing of face masks outdoors, similar to other countries, indicates that the economy is moving toward greater normality, and could translate into increased sales and net income and increased economic activities.

Rycafort sees immediate support at 6500 levels, with intermediate major support at 6370-6400 levels. In the meantime, immediate resistance can be seen at 6,634-6,701 with the next important resistance at 6750.

As for 2TradeAsia, they see Bangko Sentral ng Pilipinas following the Fed’s lead along with other central banks in raising rates again this week. There is also a lack of domestic catalysts to help mitigate downside risks on the financial side.

“We expect this week’s trading to be regressive with the upcoming Fed rate hike and as investors absorb the impacts of the 2023 policy,” 2TradeAsia said in its report.

He sees immediate support at 6500, secondary support at 6400 and resistance at 6700.


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