The stock market is expected to test the 7100 level again

The stock market is expected to try again this week to the 7100 level, and the 2022 economic growth data due this Thursday may allow it to do so, analysts said.

The Philippine Stock Exchange’s underlying index (PSEi) broke above 7000 last week, peaking at 7094.86 on Wednesday before closing at 7056.62 on Friday.

The broader All Shares index closed the week at 3682.86.

“It was observed that the local market was having a hard time breaking through the 7000-7100 resistance range as selling pressure continued to build and no new catalysts have yet been found,” said a senior analyst at Philstocks Financial Inc. Japhet Tantiangko.

“Strong GDP (gross domestic product) readings could raise expectations that corporate earnings for all of 2022 will also be strong, which in turn could also help the market overcome the current resistance range,” he added.

Get the latest news


delivered to your mailbox

Subscribe to The Manila Times daily newsletters

By registering with an email address, I acknowledge that I have read and agree to Terms of Use and Privacy Policy.

The Philippine Bureau of Statistics will announce fourth quarter and full year GDP results this Thursday. Economic managers said growth could exceed the 6.5% to 7.5% target for 2022.

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

He estimated the support level of PSEi at 6800 points.

Meanwhile, online brokerage 2TradeAsia said that speculation and volatility could increase ahead of the Fed’s first policy meeting in 2023, which will take place from Jan. 31 to Feb. 1.

“There are several U.S. catalysts planned this week for the week and next that could provide insight into rate-sensitive sectors and shift the Fed’s rate needle,” 2TradeAsia reported.

“This comes as December 2023 data and business reviews showed a downbeat outlook on manufacturing, but the opening of China and the dollar’s ​​favorable basket against the Asian currency should help regional economies cap January from a position of strength,” he added.

2TradeAsia also noted that only time will tell if the rally to 7000 had a proper basis.

“A slowdown in the rally at the end of the week means some consolidation is needed unless a broad catalyst emerges next week,” the report said.

“With that in mind, profits will emerge in the coming weeks, which will help maintain January volumes and momentum.”

Support was at 6700 and resistance was at 7150-7200.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the market will continue to test the 7100 level despite Friday’s profit-taking, which was fueled by the downturn in US markets the night before and continued hawkish statements from the US central bank.

“According to Federal Reserve Governor Lael Brainard, Fed rates will need to remain elevated for a period to further reduce inflation, which is showing signs of slowing but is still too high,” Ricafort said.

“Markets expect Fed rates to peak at around 4.9 percent, followed by rate cuts in the second half of 2023.”