Return of the bull

Three important data releases scheduled this week are making investors upbeat on Philippine stocks.

The inflation data on 7 August, gross domestic product (GDP) figures in the second half of the year the next day and the result of the next policy meeting of the Monetary Board, during which the Bangko Sentral ng Pilipinas (BSP) is expected to raise policy interest rates by at least 50 basis points (bps).

Ahead of the announcement of these critical data, the local stock barometer returned to an uptrend with the benchmark Philippine Stock Exchange index (PSEi) closing at 7,819.39, up 59.84 or 0.77 percent while the broader All Shares ended the week at 4,668.29, higher by 23.61 points or 0.50 percent. For the week, the PSEi added a total of 118.01 points or 1.5 percent.

“Next week will be more eventful as more corporate earnings, the BSP meeting outcome, second quarter Gross Domestic Product (GDP) and inflation data will be released,” said Luis Limlingan of Regina Capital in a phone interview.

Financial analysts earlier had anticipated the market to rise again after officially entering the bear territory last June. But they said going back to the 8,000 mark will take a lot of efforts to achieve.

“It will take PSEi some time to go back to the 8,000-mark (this August). Given the circumstances. Around 7,800 to 7,900 will be more probable,” Philstocks’ Reseach Head Justino Calaycay Jr. said.

“The recent trend of the PSEi tells us that investors were unable to make a strong direction to predict prices,” he added, citing the stock market’s week-long trend.

But most analysts see the local index to return to the bull market, mainly if the BSP delivers a more hawkish policy statement next week with a 50 bps interest rates hike to tame inflation and to arrest the drop of the Philippine peso against the US dollar.

Mining and oil firms had the most growth spurt last week marked by the 4.99 percent advancement on Wednesday to return to the 10,000 zone.

The market reacted positively from twin reports coming from the Department of Environment and Natural Resources, with Environment Secretary Roy Cimatu announcing the end of the two-year mining exploration ban which opens opportunities in the sector and increasing competitiveness.

The next day, the Mining Industry Coordinating Council (MICC) under the DENR released the results of a review on the compliance of mining firms and found only four of the 27 mining companies have failed to pass the regulatory requirement.

Oil-producing countries also pumped higher outputs in July that further provided a positive outlook for the oil sector with Saudi Arabia nearing record-high production at more than 10 million barrels per day. Russia is also producing 11.25 million barrels per day, a number not seen since it joined the Organization of Petroleum Exporting Countries.

The BSP forecast July’s headline inflation to be around 5.1 to 5.8 percent, after climbing to a seven-year high 5.2 percent in June. Stockbrokers have predicted the numbers within the BSP’s range, with Philstocks’ Calaycay projecting between 5.4 and 5.6 percent and Limlingan seeing the markup rate at 5.7 percent.

Despite the above-target inflation rates in May and June, consumer spending remains high with Fitch Solutions, a unit of Fitch Group reporting household consumption actually grew in the second quarter, buoyed up by the growing labor market.

“Our favorable outlook for the Philippine consumer is further underpinned by an improving labor market,” Fitch Solutions said, adding that its trend analysis on consumer and retail noted that spending has risen this year and will continue until 2019.

External and foreign factors have also taken an impact in the Philippine stock market.

Earlier this week, the United States and China had restarted their trade negotiations, almost a month since the start of the stand-off between the two economic powerhouses. Washington later stated that it would impose a 25 percent tariff on $200 billion worth of imports which was formerly at 10 percent.

Tech companies in the US were hit by huge blows, as Twitter shed eight percent and Snapchat slid by four percent on 31 July. However, positive numbers for Apple have set Nasdaq counter its losses after the iPhone manufacturer sets the market cap above one trillion dollars to end the week.

The European and Middle East economic drama also caused PSEi’s wild swings.

The Bank of England (BoE) expectedly raised interest rates for the second time in less than a year from 0.5 to 0.75 percent, but the unanimous 9-0 voting turnout seems to be a surprise.

Calaycay added, “Next week, the numbers will be more hard to predict. We will look at more corporate earnings, so it will be a give and take for the market. He said it “would more likely give indication and outlook for investors.”