Market recovery unlikely due to geopolitical problems

PHILIPPINE SHARES will continue to suffer from volatility this week due to the ongoing conflict in the Middle East and ongoing concerns about inflation at home.

On Friday, the Philippine Stock Exchange index (PSEi) fell 1.22% or 80.19 points to close at 6,443, while the broader all-stock index fell 1% or 34.77 points to close at 3,421.55.

Week on week, the PSEi fell 3.25% or 216.39 points from the closing price of 6,659.39 on April 12.

“Sentiment remained subdued amid geopolitical tensions and macroeconomic headwinds,” online brokerage 2TradeAsia.com said in a market note.

The market may not see a “strong and sustainable recovery” this week due to inflation and geopolitical concerns, Philstocks Financial, Inc. senior research analyst Japhet Louis O. Tantiangco said. in a Viber message.

“Primary concern [this] This week, tensions in the Middle East could still be on the agenda, especially the course of action Iran would take after the attack from Israel. A retaliation by the former could send the market lower,” Mr Tantiangco said.

Iran’s foreign minister said on Friday that Tehran was investigating an overnight attack on Iran, adding that a link to Israel had not been proven so far as he downplayed the attack, Reuters reported.

“Inflation concerns are also expected to weigh on the market given the inflation risks at play, including rising oil prices, tight energy supplies, the impact of El Niño on our agricultural production and a weakening peso. Finally, investors are expected to watch for catalysts that could return bullish sentiment,” Mr. Tantiangco added.

Investors could also continue to buy bargains after the market decline, he said.

Meanwhile, Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said in a Viber message that the main support for the PSEi is at 6,360, while the main resistance is at 6,740-6,820.

“Any healthy further upward correction on the PSEi could be possible, especially if markets have already priced in most or all of the bad news regarding the recent geopolitical risks from increased tensions in the Middle East,” he said .

“Bargain hunters are looking for discounts, especially as the geopolitical situation stabilizes. Although the market will continue to take a wait-and-see approach in the coming days and weeks as to how future geopolitical risks will evolve,” he added.

2TradeAsia.com pegged the PSEi’s immediate support at 6,300 and resistance at 6,550-6,600.

“The PSEi is now slightly lower than where it was as of the end of 2023 close. Expect a shift from growth and deployment to capital preservation, while risks are high. As a result, passive income generation and bargain hunting are likely to outperform in the short term, while growth narratives are adjusted amid new variables for the second half,” the report said.

Mr. Tantiangco placed the market’s support at 6,400 and resistance at 6,700. — RMD Ochaaf of Reuters