Analysts said inflation would be a key concern after accelerating to 4.5% in May, the fastest since November 2011, on account of higher food prices.
BPI Asset Management said further stoking domestic inflation worries was the sudden spike in oil prices because of the violence in Iraq.
Brent prices leapt to $114.69, touching the highest level since September 2013, as traders eyed worsening violence in key OPEC crude exporter Iraq.
That may put pressure towards an earlier rate hike if inflation suddenly rises locally, BPI Asset Management said.
“Any indication of an earlier-than-expected rate hike will be detrimental for equities, especially for banks and property. We expect the trading range to be from 6,744.32 to 6,835.37 this week,” BPI Asset Management said.
“We expect the market to consolidate this week, as investors await the central bank’s policy meeting. Investors will be a bit cautious on what actions the central bank may take, following the rise in inflation last month,” Lexter L. Azurin, research head at Unicapital Securities, Inc., said.
The policy-setting Monetary Board is set to revisit policy anew on June 19. It has kept key rates unchanged since October 2012 but raised bank reserve requirements twice this year.
Astro C. Del Castillo, managing director at First Grade Finance, Inc., said: “The market seems poised to consolidate around the 6,700 to 6,800 levels, as investors adopt a cautious stance ahead of the Monetary Board meeting.”
Investors will also keep an eye on overseas developments -- the unfolding Iraq civil war and the US Federal Reserve’s meeting this week.
“Apart from the US Federal Reserve, geopolitical risks would be reconsidered, as traders keep a close watch on immediate resistance targets for actively traded shares,” Jason T. Escartin, investment analyst at online brokerage firm 2TradeAsia.com, said.
Mr. Escartin placed the index’s immediate support at 6,700 and resistance at 6,850 to 6,870.
Investors may also be a bit cautious as valuations weigh, given that Philippine shares remain expensive, Mr. Azurin said.
Joanna M. Capiral, analyst at Papa Securities Corp., meanwhile, said: “There is a possibility for the market to consolidate on the upward bias as bargain hunting might come into play given the sell-off last week.”
The main index had a roller-coaster ride last week, alternating between gains and losses throughout the four days of trading given the lack of fresh leads on the local front and caution ahead of the Bangko Sentral ng Pilipinas’ decision.
Week on week, the benchmark Philippine Stock Exchange index added 22.33 points or 0.33% to close at 6,784.95 last Friday from its 6,762.62 finish on June 6.
The broader all-shares index, however, lost 9.09 points or 0.22% to 4,064.19 from 4,073.28 a week earlier.
“We advise investors to remain cautious and wait for the rate hike decision before positioning strongly in the market,” Joyce Anne J. Ramos, analyst at AB Capital Securities, Inc., said.