Stocks are poised for a volatile week as investors weigh monthlong rally against the risk of profit-taking and looming suite of economic data from the United States (US).

The Philippine Stock Exchange index has climbed for four consecutive weeks, bolstered by steady foreign inflows and optimism over potential interest rate cuts.

Net foreign buying has reached an 11-day streak totaling ₱5.61 billion, according to Japhet Tantiangco, research manager at Philstocks Financial Inc.

While the benchmark index has rebounded toward the 6,500 level, the pace of the advance may stall. The peso’s recent weakness and the potential for investors to lock in gains after the recent run-up could serve as immediate headwinds.

"The local market continues with its bullish move, extending its rally to a fourth straight week," Tantiangco said. "Other numbers are also encouraging, with net value turnover averaging ₱6.64 billion, reflecting quite strong conviction."

Investors are looking to the US for direction, where upcoming reports on gross domestic product, manufacturing, and core inflation will provide clarity on the Federal Reserve’s policy path.

Domestically, focus is shifting toward the Bangko Sentral ng Pilipinas and its February policy meeting. While some market participants are speculating on a 50-basis-point rate cut as early as next month, others maintain a more cautious outlook.

Online brokerage 2TradeAsia.com suggested a more conservative path of zero to one cut in the early part of the year, noting that current rates are already nearing their expected terminal level.

The brokerage noted that the “critical catalyst” for a sustained market re-rating will be how effectively liquidity translates into actual capital formation, a metric that has lagged over the last two quarters.

Despite the recent gains, Philippine equities remain among the cheapest in the region. The PSEi is currently trading at a forward price-to-earnings ratio of less than 10 times, a level 2TradeAsia.com described as being near “historic troughs.”

“The current market environment demands a disciplined accumulation of oversold blue chips,” the brokerage said. “With fundamentals stabilizing and valuations at decadal lows, the risk-reward profile is skewed heavily to the upside for patient capital.”