Stock market expected to again test 7,100

THE stock market is expected to again try for the 7,100 level this week and 2022 economic growth data due this Thursday could allow it to do so, analysts said.

The benchmark Philippine Stock Exchange index (PSEi) broke past 7,000 last week, hitting a high of 7,094.86 on Wednesday before closing on Friday at 7,056.62.

The broader All Shares ended the week at 3,682.86.

“The local market was seen to be having a hard time getting past its 7,000-7,100 resistance range as selling pressures kept on mounting while new catalysts are yet to be found,” Japhet Tantiangco, senior research analyst at Philstocks Financial Inc., said.

“Strong GDP (gross domestic product) figures may raise expectations that full-year 2022 corporate earnings will also be robust which, in turn, may also help the market get past its current resistance range,” he added.

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The Philippine Statistics Authority will announce fourth-quarter and full-year GDP results this Thursday. Economic managers have said that growth could have exceeded the 6.5- to 7.5-percent target for 2022.

Tantiango, however, said “recent hawkish signals from the Federal Reserve (Fed) despite the moderation in the US’ inflation” could weigh on investor sentiment.

He pegged the PSEi’s support level at 6,800.

Online brokerage 2TradeAsia, meanwhile, said speculation and volatility could run high ahead of the Fed’s first 2023 policy meeting on January 31 to February 1.

“For this week, several US catalysts are slated for the week and the next which may provide insights over rate-sensitive sectors and move the Fed’s needle on rates,” 2TradeAsia said.

“This comes as December data and 2023 business surveys brought forth a pessimistic look on output but China’s reopening and favorable dollar versus Asian currency basket should help regional economies cap January from a position of strength,” it added.

2TradeAsia also noted that only time would tell whether the rally to 7,000 had a proper foundation.

“The rally slowing down at the end of the week implies that some consolidation is in order, if no broad-based catalyst manifests in the coming week,” it said.

“With that in mind, earnings will come in the coming weeks which can help retain January’s volume and momentum.”

Support was seen at 6,700 and resistance at 7,150-7,200.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the market would continue testing 7,100 despite Friday’s profit-taking, which was blamed on overnight declines in US markets and continued hawkish statements from the US central bank.

“According to Federal Reserve Governor Lael Brainard, Fed rates will need to stay elevated for a period to further cool inflation that is showing signs of slowing but is still too high,” Ricafort noted.

“Markets are expecting the peak in Fed rates at about 4.9 percent, followed by rate cuts in the second half of 2023.”

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