Philippine Market Outlook April 01, 2019

MARKET OUTLOOK

Local shares are seen to rally in the week ahead as investors await the release of March inflation data.

The main index is in an incredibly good position despite the tumble that seen last week. It could be seen as a slight pullback after being up more than 2% in the week before.

Once the PSEi breaks through the 8,000 mark, this could further boost investor sentiment and allow it to rise to the 9,000 level.

March inflation numbers are also to be expected this week, which is seen coming in at the lower end of the government’s target range. This will be very positive and may prompt investors to come into the market with conviction which in turn will help fuel the PSEi’s rally.

The central bank’s Department of Economic Research estimates March inflation to have landed within the 3.1% to 3.9% range, compared to February’s 3.75 to 4.5%. Actual February headline inflation was reported at 3.8%.

If realized, the lower end of the estimate for last month would be the slowest pace in 15 months, and would be the fifth straight month of slowdown from the nine-year high of 6.7% seen last September and October.

A poll of economists yielded a 3.5% median inflation rate for the month, which if realized will be slower than February’s pace and the 4.3% rate posted in March last year.

Slower inflation will give local monetary authorities more leeway to keep current policy settings intact, although noting that there might be potential consumer price index increases from April to June.

This depends on the extent of El Niño’s damages to crops, plus the effect of higher global crude futures pricing on electricity charges. Adjustments are also anticipated post-election, or until 2019’s fiscal budget clearance is granted that would jumpstart infra-based construction initiatives.

Overseas, investors will look at the outcome of high-level trade talks between the US and China.

At the onset, markets would give regard on possible new timeline for an accord. This runs parallel with the Fed’s next policy stance, as more are inclined to hold the view for a potential rate cut.

The PSEi’s support is placed from 7,800 to 7,900, with resistance from 8,000 to 8,140.