Volatility likely as market eyes Fed, BSP reviews

THE STOCK MARKET may see heightened volatility this week as investors await the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).

On Friday, the Philippine Stock Exchange index (PSEi) declined by 0.37% or 24.84 points to close at 6,616.51, while the broader all shares index increased by 0.08% or 3.34 points to 3,752.73.

Still, week on week, the PSEi climbed by 1.67% or 112.63 points from its 6,729.14 close on Dec. 6.

“The local market is still moving sideways with a bearish bias as investors maintain a cautious stance, dealing with lingering headwinds while waiting for positive leads,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“Chart-wise, the market has so far been unable to get past its 10-day exponential moving average. On a positive note, the market is holding its position above the 6,600 level,” Mr. Tantiangco said.

For this week, the Fed and BSP meetings will be the main trading drivers for the market, he said.

“Investors are expected to look forward to the policy rate decisions of the Federal Reserve and the Bangko Sentral ng Pilipinas. A rate cut from the two as well as hints of further easing are expected to give a boost to sentiment which in turn could help the market achieve a positive close,” he added.

“We expect heightened trading activity and price movement this week as investors anticipate and react to the upcoming policy rate decisions of the Federal Reserve and BSP. Both are expected to cut their respective interest rates by 25 basis points (bps), which should encourage some bullishness,” Juan Paolo E. Colet, managing director at Chinabank Capital Corp., said in a Viber message. “Investors, however, will be keeping a very close eye on each institution’s outlook for rate cuts next year. Any hint of fewer, slower, or no rate cuts could trigger stock market volatility.”

Mr. Colet put the PSEi’s immediate support at 6,550 and resistance at 6,750-6,850.

The Fed will hold its last policy meeting for the year on Dec. 17-18, while the BSP’s Monetary Board is scheduled to have its own review on Dec. 19. Markets widely expect both central banks to continue their respective easing cycles and cut benchmark interest rates by 25 bps this week.

Mr. Tantiangco added that investors will also monitor the peso’s performance against the dollar this week.

“A further depreciation of the local currency may weigh on the bourse,” he said.

He placed the PSEi’s immediate support at 6,600 and major resistance at 6,000.

“From a valuation standpoint, the local market remains at attractive levels and is hence good for bargain hunting. However, investors are expected to continue waiting for positive catalysts before getting into the market strongly,” Mr. Tantiangco added. — Sheldeen Joy Talavera