PSEi seen trending up for the rest of 2021, but volatility still remains

MANILA, Philippines — The local bourse is expected to continue its trek up this year, but the possibility of a fresh round of lockdowns could trigger volatility that may deter some investors.

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In a report released Monday, analysts at First Metro Investment Corp. (FMIC) and the University of Asia & the Pacific (UA&P) said the Philippine Stock Exchange index went up 9.3% month-on-month to cap August above the 6,800-territory, outperforming other equity markets.

The positive second quarter results of blue chip companies mostly fueled the buying pressure in August, FMIC and UA&P analysts said. Foreigners became net buyers in the latter part of August while trading volume went up 13.9% month-on-month.

The local bourse continued to gain in early September to challenge the major resistance level of 7,000, but turbulence may be ahead for investors.

“The rest of the year should continue to see an upward trend, albeit quite volatile since uncertain quarantine restrictions, despite speedier vaccine rollouts, may sideline some investors,” the report said.

As it is, FMIC and UA&P said economic data turned “less alluring” in August after Metro Manila and some province returned to strict lockdowns during the month to curb another surge in infections.

The disruptions were enough to convince the government to lower its growth target for this year to 4-5% from 6-7% previously. Meanwhile, inflation in August climbed to a 33-month high of 4.9% and its continued rise may prompt the Bangko Sentral ng Pilipinas to hike its policy rate.

Already, FMIC and UA&P analysts said the elevated inflation print in August immediately pushed up long-term yields, although these have “steadied” by mid-September. For now, analysts expect investors to feast on short-dated debt papers as the market watches out for signals from the US Federal Reserve on its tapering.

“The next market mover would be a clearer indication of when and by how much will the Fed reduce its asset purchases. With new economic data showing clear signs of deceleration of the U.S. economy and inflation continuing to ease there, our initial call for a late-2021 or early-2022 move seems justified,” the report said.



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