Bearish sentiment to persist on oil surge, war

Bearish Sentiment Expected to Persist on Oil Surge and War

The ongoing conflict in the Middle East continues to fuel concerns about oil prices, supply disruptions, and potential inflationary risks. As a result, investor sentiment remains bearish, and market analysts are warning of continued pressure in the coming weeks.

Uncertainty Lingers

The war between Iran, Israel, and the United States has sent oil prices surging to over $120 per barrel, sparking concerns about supply disruptions and potential inflationary pressures. This uncertainty is leading investors to adopt a risk-averse approach, resulting in a broad-based selloff in equities.

Valuations Still Attractive

Despite the decline, the market remains relatively attractive from a valuation perspective. The Philippine Stock Exchange index (PSEi) is currently trading at around 10.2 times its earnings, significantly lower than its historical average of 14.4 times and the regional average of 18.3 times. However, analysts caution that even attractive valuations may not be enough to prompt a strong rebound in the near term, given the persistent global risks.

Risk-Off Sentiment Dominates

According to online brokerage 2TradeAsia.com, risk-off sentiment remains prevalent in global markets as investors assess the potential economic fallout from the conflict and the sharp rise in oil prices. This cautionary approach is expected to persist, making it challenging for the market to stage a meaningful recovery in the near term.

Inflationary Pressures Mount

The surge in fuel prices could push inflation higher in the coming months, adding pressure on the peso to further depreciate. Analysts warn that headline inflation may test the upper end of the Bangko Sentral ng Pilipinas' 2- to 4-percent target band if oil prices remain elevated.

Technical Analysis

From a technical perspective, the market has broken below its 200-day exponential moving average and the 6,150 level, signaling bearish momentum. The PSEi is now expected to trade within the 6,000 to 6,150 range in the near term, with immediate support around the 6,000 level and resistance seen at the 6,300 to 6,400 range.

Conclusion

In conclusion, market analysts expect the market to remain under pressure in the coming weeks due to persistent uncertainties surrounding the conflict and oil price surge. While attractive valuations may provide some support, investors are likely to remain cautious until global risks subside. As a result, the PSEi's near-term outlook remains bearish, with the index expected to trade within a narrow range in the coming weeks.

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Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.