US Fed, peso at play for PSEi
Investors will likely tread the week on a cautious note as they expect the US Federal Reserve to hike interest rates that would be detrimental to Asian markets, analysts said.
Investors are expected to approach the week with caution due to fears that the US Federal Reserve might raise interest rates, which could negatively impact Asian markets, including the Philippine Stock Exchange index (PSEi), according to analysts. F. Yap Securities Inc. forecasts a week of thin trading as investors await the Federal Reserve's decision at the end of the week.
As of Saturday, financial markets were considering a 60-percent chance that the Fed would increase rates in its meeting on September 15-16 to curb price hikes. F. Yap Securities predicts that a Fed hike would exacerbate the economic outlook of emerging markets in Asia, particularly the Philippines. Such a rate increase would discourage capital outflows, as investors may need to borrow at higher rates for expansion.
Additionally, the peso is struggling due to pressure, having reached its lowest point at 62.68 to $1, despite the Bangko Sentral ng Pilipinas (BSP) raising interest rates multiple times to 5 percent this cycle. F. Yap Securities maintains that rate hikes alone may not suffice to prevent further peso depreciation, emphasizing the importance of capital flow dynamics and the widening current account gap.
Philstocks Financial Inc. research manager Japhet Tantiangco notes that the PSEi lacks a positive catalyst to support its recovery. Currently, the index is trading between a support level of 6,000 and a resistance level of 6,150. Since peaking at 6,488.35 on July 21, the market has been on a downward trajectory. Tantiangco warns that anticipation of September inflation potentially surpassing August's 6.1 percent, driven by oil price hikes and the peso's ongoing challenges, adds to investors' caution.
Externally, the ongoing instability in the Middle East presents no assurance of long-term peace, leaving commodities vulnerable. Given these factors, Tantiangco advises investors to remain cautious. Last week, the PSEi fell by 0.47 percent, or 29 points, on a weekly basis to 6,061.81, influenced by renewed inflation concerns and the potential Fed hike.
Written by urgent.news from Philippine Star Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
