MANILA - COL Financial forecasts a tough second half for the Philippine Stock Exchange as share prices continue to be influenced by shifting monetary policy and high inflation in the global market.

COL analysts said the current downtrend in the PSE index is still in place and there are scenarios wherein the main index could fall as low as 5,800.

Investors are advised to diversify into fixed income assets and to invest wisely. Upcoming risk events including the Second Quarter GDP report of the PSA and the July Inflation report later this week

One of the biggest drags on the PSE this year has been the exodus of foreign investors, with P47.1 billion in total net outflows so far.

COL Financial Chief Technician Juanis Barredo said this shows offshore investors are simply not interested in Philippine equities at this time. He said the bright side of this is there will be a huge upswing when foreign funds return. However, Barredo does not see that happening in the second half of this year.

Several uncertainties are contributing to the uncertainty including fluctuations in key interest rates around the world, specifically the US Federal Reserve.

The price of oil in the global market is also a key factor.

“If we see $94 per barrel break, that is the time we see lower oil prices. Maybe even $87.50. That will help tremendously to put inflation on a path downward," he said.

However, Barredo said there is also a scenario where oil hovers between $105 and $110 per barrel on the New York Mercantile Exchange.

April Tan, Head of Research at COL also discussed upcoming risk events such as the government’s 2nd quarter GDP report on August 9.

“We will still see strong growth, but again, considering last year was a low base because we did some lockdowns during that time, Q2. For analysts like me, we will look for clues, how consumer spending will hold up in spite of inflation.”

She also commented on what investors want to see when it comes to how the Marcos administration will handle elevated inflation moving forward.

“It is a tricky balance at this point. I think we are not yet prepared to abandon importation. Maybe our agricultural sector is not yet prepared for it. We should be continuing with the importation of agricultural products," Tan said.

She said the government has to increase local agricultural productivity but should not abandon imports right away.

"Actually when you talk about food security, it is not just about producing your own. It is making sure there is food available for everyone at a cheap price,” Tan said.

COL Financial’s Marvin Fausto says the company’s retail investors are more or less resigned to a tough second half. Based on a COL survey, Fausto found that 43 percent of their retail investors are concerned about high inflation while another 42 percent are concerned about a global recession affecting the United States and other major markets. A whopping 73 percent of the respondents expect local inflation to continue to accelerate until the end of 2022.

Only 33 percent of the respondents were bullish, while 44 percent were neutral, and 23 percent were bearish on the PSEi. However, most remain heavily invested in Philippine equities, and 71 percent of them actually plan to increase their stock exposure. Fausto said while some are seeing the downtrend at the PSEi as an opportunity to buy stocks at cheap prices, they must tread carefully as many uncertainties could drag the main index lower.

The Philippine Statistics Authority will release the July inflation report on Friday, August. 5. The BSP expects the July inflation rate to be within 5.6 and 6.4 percent, from 6.1 percent in June.

The PSEi finished flat on Monday, the first trading day of the so-called "ghost month".

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