Philippine shares face cautious trade as inflation, earnings data loom

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Philippine stocks cautious on data

Highlights

Philippine Stock Exchange index dropped 0.44% to 5,680.35 on Friday and declined 48.28 points week-on-week amid global oil price increases and geopolitical tensions.
Investors await October consumer price index on Nov. 5 and Q3 GDP on Nov. 9, with focus on major banks and property developers for earnings impact from higher rates.
A BusinessWorld poll estimates October headline inflation at 7.6%, the fastest in nearly four years and exceeding April and September's 7.2% peak.

Inflation and earnings set the near-term market tone

As reported by BusinessWorld Online, investors are closely watching the release of October consumer price index data on Nov. 5 and third-quarter corporate results for signals on the market's next direction.

On Friday, the Philippine Stock Exchange index fell 0.44%, or 25.23 points, to 5,680.35, while the broader all shares index lost 0.51%, or 16.31 points, to 3,178.42. Week on week, the PSEi declined by 48.28 points from its Oct. 23 close of 5,728.63.

Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said the market weakened last week as global oil prices rose and geopolitical risks intensified. He pointed to concerns over Houthi attacks on Saudi Arabia and recent tanker incidents involving mines in the Strait of Hormuz.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said the local market is likely to remain volatile and largely earnings-driven after October's sharp swings. He said investors are expected to stay selective, with banks including BDO Unibank, Inc., Bank of the Philippine Islands, and Metropolitan Bank & Trust Co. among the companies to watch for signs of how higher interest rates are affecting margins, loan demand, and credit quality.

Mr. Arce added that property developers Ayala Land, Inc. and SM Prime Holdings, Inc., as well as consumer and holding firms Jollibee Foods Corp., SM Investments Corp. and Ayala Corp., are also in focus as investors gauge the effect of inflation and higher borrowing costs on performance and spending. He said the market is likely to stay cautious, with room for selective rebounds rather than a broad rally.

Data releases may shape rate expectations and index direction

BDO Securities Corp. President John Tristan D. Reyes said investors are also focused on third-quarter gross domestic product data due on Nov. 9, with the broader market still showing a downward bias. He said the PSEi could retest the 5,600 psychological level.

COL Financial Group, Inc. Research Analyst Denise Joaquin said the October inflation report could influence expectations for the central bank's policy decision in December. She added that third-quarter earnings will also help investors assess how companies are performing amid elevated inflation and a weaker peso.

A BusinessWorld poll of 22 analysts and economists produced a median estimate of 7.6% for October headline inflation. If realized, that would mark the fastest inflation print in nearly four years, sharply above the 1.7% recorded a year earlier and higher than this year's previous peak of 7.2% in April and September.

In our earlier article on the PSEi rebound despite a record-low peso, we covered how Philippine shares recovered from early losses as investors returned to beaten-down stocks after a sell-off. We also noted that sentiment stayed cautious as the peso slipped to an all-time low against the U.S. dollar, while foreign buying turned positive and helped lift several sector indices.

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