Bargain hunting seen amid Fed, BSP rate bets

THE MARKET may see bargain hunting this week due to dampened investor sentiment and expectations of further interest rate hikes.

On Friday, the benchmark Philippine Stock Exchange index (PSEi) fell by 70.30 points or 1.07% to end at 6,496.50 points, while the broader all shares index went down 30.76 points or 0.89% to close at 3,400.13. 

Week on week, the PSEi dropped 83.62 points or 1.27% versus its close of 6,580.12 on Dec. 9. 

For this week, analysts said investors may pick up bargains.

“We may see bargain hunting [this] week following [last] week’s decline. However, the market is still expected to go through a rough path as monetary outlooks weigh on growth prospects, which in turn may still cloud sentiment,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a mobile phone message.

“The Federal Reserve’s policy outlook poses recession risks on the US which may spill over to the rest of the global economy. Meanwhile, the Bangko Sentral ng Pilipinas (BSP), which is still on a tightening path, may slow down our local economic growth,” he added.

The US Federal Reserve last week hiked its benchmark overnight interest rate by 50 basis points (bps) to the 4.25%-4.5% range and projected it could go up to 5%-5.25% next year.

The US central bank has now raised borrowing costs by 425 bps since March.

Meanwhile, the BSP raised benchmark interest rates by 50 bps at its meeting on Thursday, bringing its policy rate to 5.5%. Rates on the central bank’s overnight deposit and lending facilities were likewise raised to 5% and 6%, respectively.

The Philippine central bank has now raised rates by 350 bps since May.

Chiefs of both central banks said last week that they need to tighten further to bring down elevated inflation.

Online brokerage 2TradeAsia.com likewise said in a market note that bargain hunting is expected in the upcoming trading week. 

“Last-minute shopping for beaten down plays in the last few sessions of 2022 might prove itself rewarding, as intraday volumes tend to get thinner around the holidays and there is more opportunity to quietly snap some bargains,” it said. 

“Sentiment weakened alongside the Fed’s and the BSP’s 50-bp rate hikes, as the former hinted of a more hawkish 2023 that what was initially expected,” it added. 

Mr. Tantiangco said the PSEi’s major support is at 6,400, while major resistance is at 6,600.

“Last week, the market has fallen below its 200-day exponential moving average. If it is unable to get back above the said line in the immediate term, then we may see more bearish movements from the market moving forward,” Mr. Tantiangco said. 

2TradeAsia.com said the PSEi’s immediate support is seen at 6,350-6,400, while resistance is at 6,600. — R.M.D. Ochave