US events, local data to drive PSEi direction

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STOCK market trading this week is expected to be heavily influenced by the outcome of the US elections, a Federal Reserve (Fed) policy meeting, and third quarter and October inflation results for the Philippines.

Trading was shortened last week as the country marked All Saints’ Day on Friday. The benchmark Philippine Stock Exchange index (PSEi) closed Thursday at 7.142.96 down 2.3 percent week on week amid concerns over the pace of Fed rate cuts and a possible return to the White House for Donald Trump.

On a monthly basis, the PSEi fell by 1.7 percent from September, which in contrast saw a 5.4-percent gain.

Rizal Commercial Banking Corp. chief economist Michael Ricafort called last week’s result “healthy profit-taking” after gains for most weeks over the past four months.

Philstocks Financial Inc. research manager Japhet Tantiangco, meanwhile, said that “trading participation has weakened while foreign investors have been exiting on the net amid headwinds.”

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The PSEi remains attractive and could be buoyed by some bargain-hunting, he added, but this could change as the Nov. 5 US elections will “have a big impact on the global economy.”

“The peso’s weakness … if sustained, is still expected to weigh on the market,” Tantiangco said.

The currency closed at P58.1 against the dollar on Thursday.

“Investors are also expected to watch out for the Philippines’ October inflation data,” Tantiangco said.

The Philippine Statistics Authority (PSA) is set to release the October inflation report on Tuesday.

“An inflation print, which falls within the [Bangko Sentral ng Pilipinas’] 2.0-2.8 percent [estimate], especially one which is biased to the lower end, is expected to give sentiment a boost,” Tantiangco said.

Also expected to weigh on trading decisions will be the PSA’s release of preliminary third-quarter economic growth data, which together with October and November inflation results, will factor in the BSP’s final policy meeting for the year on Dec. 19.

Tantiangco said that investors will continue to monitor the third-quarter corporate results, “so far … the source of upward force for the bourse.”

Unicapital Group research head Wendy Estacio-Cruz, meanwhile, also said that “investors remained cautious due to uncertainties surrounding the upcoming US elections on November 5.”

“This week, we expect the index to fluctuate between the 7,100 and 7,300 levels in anticipation of fresh catalysts, including the release of Philippine October inflation data, also on November 5, and the FOMC (Federal Open Market Committee) meeting on November 7,” she added.

Online brokerage firm 2TradeAsia.com said that “global marts are expected to hyper-fixate on Western events [this week], as guesswork on the US elections conclude just in time for the Fed to deliver what is expected to be its penultimate rate cut for the year.”

“Trade, policy and growth outlook will be recalibrated post-November, warranting very guarded fund activity over the next few weeks and effectively helping the momentum from Q3’s rate cuts,” it added.

“The recent strength in the US [dollar] plus the short-run rally in yields have implied that there has been renewed anxiety with regard to growth specifically, potentially from markets pricing in tariff impacts/more China decoupling/inflationary US tax cuts; ultimately, brace for even elevated volatility until the dust settle.”

Initial corporate earnings, it noted, have been a source of cheer for the market.

“Consistent EPS (earnings per share) beats for Q3 (third quarter), with the guidance implying some continuation until next year, are offsetting recalibrations in models,” 2TradeAsia said.

“Staying selective is optimal for returns while broader market events bake and develop,” it added, noting that “holding significant cash is relatively less appealing amid rate adjustments, [and] some shift toward safe havens with neutral risk profiles or income plays that maximize last-quarter-dividends might be viable in the short term.”

The online brokerage expects funds to move into defensive positions, with the next few weeks rife with events that markets will have to parse and digest.

“Adaptability heading into the last section of 2024 is underscored as uncertainties are likely to drive price deviations more widely, opening range trade opportunities in the short run and bargains/cost averaging in the medium/long run,” it added.

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