Stocks are expected to keep moving sideways this week, as investors remain anxious about rising interest rates following the US Federal Reserve’s hawkish tone.
Analysts said the lower-than-excepted February inflation rate could push the Bangko Sentral ng Pilipinas to reduce the size of its rate hike to 25 basis points, instead of the previous 50-basis-point pace.
The BSP’s next policy move will also depend on the Fed’s policy action.
“Any adjustments in the BSP’s key rates also depends on future Fed hikes, particularly after the recent signals provided Fed chair Jerome Powell on possible higher peak in the policy rate, especially if US labor remains robust,” BDO Unibank Inc. said in its weekly outlook.
Inflation rate in the Philippines eased in February to 8.6 percent from its recent peak, but analysts also noted that consumer prices remained elevated. The BSP will hold its next policy meeting on March 23.
A series of fund raising activities this March—the initial public offering of Alternergy Holdings Corp. and Upson International Corp.—could provide excitement to investors.
Offer period for Alternergy’s P1.6-billion maiden share offering is slated this week, while Upson’s IPO period will commence March 21.
Online brokerage firm 2TradeAsia.com said that amid the volatile trading conditions which could last until the middle of 2023, investors should stick to reliable stocks to offset the impact of rising inflation and interest rates.
“These value plays may require time and patience to fully unravel, but the trade-off is consistent cash-flow plus growth stories will survive some of the most testy market cycles,” 2TradeAsia.com said.
The bellwether Philippine Stock Exchange index fell by 0.98 percent to close at 6,589 last week. This week, the market’s immediate support is 6,400, while resistance is at 6,700.
Meanwhile, global markets took a beating on Friday as US jobs data boosted the likelihood of further aggressive interest rate hikes, while bank shares wobbled amid the collapse of SVB.
After sharp losses on Thursday, Wall Street’s top indices had managed to peek into the green before regulators closed the troubled Silicon Valley Bank, sending stocks tumbling into the red again.
European equity markets ended sharply lower, with London stocks sliding 1.7 percent while both Paris and Frankfurt dropped 1.3 percent. Asian stocks also posted steep losses.
Markets were rocked after SVB, which specializes in venture-capital financing, on Thursday announced a stock offering and offloaded securities to raise much-needed cash as it struggled with falling deposits.
In reaction, the firm’s shares collapsed 60 percent in New York on Thursday and trading was suspended Friday morning, before regulators announced they had closed the bank. The move makes SVB the largest retail bank to fail since 2008.
“It’s the second day of concerns around the banking sector and questions whether this reflects any systemic risk,” said Angelos Kourkafas of financial services firm Edward Jones.
“Probably, the answer to that is no. But still, confidence is a bit shaken,” he said.
SVB’s problems were sparked by customer withdrawals that led the company to liquidate securities positions whose values had plummeted due to the Federal Reserve’s interest rate hikes. The quick jump in interest rates meant that securities they had bought were selling for significantly less.
That is a situation that probably holds true for other banks and could pose a problem if they need to raise funds.
“What today and this week shows is that we are beginning to feel the effect of Fed tightening on the markets and the economy,” Kourkafas said.
In the United States, hard-hit banks included First Republic Bank which slumped 14.8 percent, and Comerica, which slipped five percent. Larger banks like JPMorgan Chase and Bank of America had a mixed performance on Friday. With AFP