Investors will play it safe during the shortened trading week

MANILA, Philippines — With trading reduced to three sessions this Holy Week, investors are likely to hold onto their portfolios unless major developments on the local and global fronts prompt them to stay active.

Last week, the benchmark Philippine Stock Exchange or PSEi closed at 7,018.02, triggering a three-day decline as investors gobbled up bargains from the sudden sell-off.

That figure was down 134.86 points or 1.9% week-on-week, however, after the previous week’s 0.4% gain.

The market pullback last week was mainly fueled by the US Federal Reserve’s hawkish stance, which had global repercussions on interest rates.

The Fed’s aggressive stance to rein in US inflation weighed heavily on investor sentiment and outweighed local economic news, Unicapital said in a commentary.

Recent economic data such as the pandemic unemployment rate of 6.4% and the high six-month inflation rate of 4% also affected sentiment.

For this week, RCBC Chief Economist Michael Ricafort said the main leads that could affect the market include the trend in global oil prices, which are already down more than $32 from the 130 high. $.50 per barrel posted on March 7, 2022; the evolution of the Russian-Ukrainian conflict; trend on new local daily COVID-19 cases and possible increase in dollar remittances from overseas Filipino workers due to Holy Week break.

Further steps to reopen the economy in the coming months would also lead to greater normality, following the adoption of the smaller scale/granular lockdowns under the nationwide alert level system since November 2021, added Ricafort.

Against this backdrop, he said immediate support for the PSEi is seen at the 7000 mark, with the next major support at the 6800-6900 levels, which prevent any further downward correction in the near future.

For its part, 2TradeAsia said first-quarter corporate earnings will also influence sentiment this week and the weeks ahead.

In global markets, investors will be looking for bargains in battered growth and technology stocks, betting they will shine as the Fed struggles to slow the US economy and rein in runaway inflation.

Growth stocks – which have beaten their value-oriented counterparts over the past decade – have felt the brunt of the Fed’s hawkish turn this year, with the Russell 1000 Growth Index down more than 11% since the start of the year, compared to a plus-minus five percent loss for the benchmark S&P 500.

In contrast, value stocks – often defined as stocks of economically sensitive companies trading at a price below their full value – are broadly flat on the year.

Underlying these moves is the perception that the Fed’s fight against inflation will keep interest rates higher, eroding future cash flows on which growth stocks are heavily valued. Value stocks, meanwhile, found support from a strong economy and soaring commodity prices.

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