Bargain-hunting seen but strong rally unlikely

BARGAIN-HUNTING could buoy the stock market this week but a significant rally is unlikely ahead of a clearer view of where monetary policy is headed, analysts said.

The benchmark Philippine Stock Exchange index (PSEi) ended Friday at 6,496.32, down 1.6 percent week-on-week and 0.8 percent since the start of the year.

The market, Philstocks Financial Inc. research manager Japhet Tantiangco said, again fell below its 10-day exponential moving average and was “seemingly … having a difficult time holding its ground above this line.”

Still, “last week’s fall gives opportunities for bargain hunting,” he added. “However, a strong rally is not yet expected amid lingering risks.”

DragonFi Securities Inc. analyst Franco Fernandez also said that “looking ahead … the cautious sentiment observed [last] week is expected to persist.”

Investors will be on the lookout for the United States’ December 2024 inflation data, due for release on Jan. 15 and which could provide clues as to whether the Federal Reserve would cut rates anew or pause when it meets on Jan. 28-29.

Many analysts now expect the US central bank to keep interest rates unchanged during its first policy meeting for 2025. In the minutes of its last meeting in December, the Fed indicated that it could slow the pace of easing given inflation risks.

“The movement of the US’ long term Treasury yields may also affect the local market,” Tantiango said, noting that “a decline in the yields is expected to help in lifting the bourse while a rise may weigh on it.”

“The peso’s movement could also be another factor in the market’s performance,” he continued.

Online stock brokerage firm 2TradeAsia.com said the Fed had “put into paper a lot of market anxieties that are beginning to unfold in 2025.”

“[T]he Fed cited significantly increased upside risks to the inflation outlook borne from changes in trade and immigration policy,” it added.

The US central bank is now expected to cut just twice this year instead of the four that were earlier planned.

Locally, 2TradeAsia said that “inflation expectations that are more grounded … should help support optimism for local equities, despite growing worries abroad.”

December inflation, while up from a month earlier, was said to be within expectations.

The Bangko Sentral ng Pilipinas will likely keep pace with the Fed, 2TradeAsia continued, but will move to prop up growth amid a weakening China, Europe and other emerging markets, and global trade risks.

“That being said, forex (foreign exchange) exposure and imported energy and commodity risks are real detriments to earnings potential in the short term,” the online brokerage said, with traders likely to “shift towards corporates that have some resistance, if not immunity, to these risks.”

2TradeAsia advised investors to “brace for volatile trading sessions” due to having “no sight of a sweeping tide that could rouse the local market … in the very short term.”

“As fair-weather funds adjust to renewed downside risks, stay judicious and selective to find asymmetric returns,” it added.