The local stock market is seen to remain bearish this week as investors weigh lingering risks from the Middle East conflict, while awaiting key economic data including April inflation and first-quarter gross domestic product (GDP) figures.

“The local market is still expected to move with a downward bias this week as it continues to deal with lingering concerns from elevated global oil prices to rising inflation and interest rate expectations. Adding to the worries is the weakening of the peso to record lows and the inflationary risks it brings,” said Philstocks Financial Inc. research manager Japhet Tantiangco. The peso slid to a historic low of ₱61.567 against the United States (US) dollar last week.

Tantiangco noted that Brent crude has been testing the $110-per-barrel level as prospects of a deal between the US and Iran remain bleak, while a sustained weakness of the peso is expected to continue discouraging foreign investors and pose inflationary risks.

“Inflation expectations remain high due to the upside risks brought by the effects of the blocked Strait of Hormuz and the weakening peso. This strengthens the case for more policy tightening by the Bangko Sentral ng Pilipinas (BSP) in their upcoming meetings,” he said.

Key data investors will be watching include S&P Global’s Philippines manufacturing purchasing managers’ index (PMI) for April on May 4, April consumer price index (CPI) on May 5, the Philippine Statistics Authority’s (PSA) March labor force survey (LFS) on May 6, and Philippine GDP data on May 7.

Online brokerage 2TradeAsia.com said, “The lingering second-round effects of the US-Iran conflict and the associated energy shock remains a major variable across markets.”

It noted that the likelihood of a US Federal Reserve (Fed) rate hike increases further if crude prices hold firm above $100 per barrel. This reinforces a stronger US dollar and adds meaningful headwinds for emerging-market (EM) assets, where currency depreciation and imported inflation often compound domestic challenges.

The BSP now faces a more complex balancing act, with currency stability concerns amid rising inflation limiting room for any policy stimulus.

Against this backdrop, 2TradeAsia.com expects attention to shift from broader catalysts to micro factors such as the first-quarter earnings season.

“While the broader interest-rate path remains important, the critical variable for near-term sentiment will be corporate guidance for the second quarter and the remainder of the year. Specifically, whether firms can demonstrate that margin compression from elevated oil has begun to stabilize, and if value can be created in such a capital expenditure (capex)-hostile year,” it added.

The brokerage said the silver lining is that recent sharp compression in share prices has lifted dividend yields in selected companies, offering tactical income opportunities as the local yield curve continues to adjust.

“With its current level, the local market is deemed to be at a bargain. However, investors are still advised to remain cautious. With the downside risks at play, the market may continue to decline,” Tantiangco said.

For stock picks, COL Financial Group Inc. is sticking to its BUY recommendation for Ayala-led Bank of the Philippine Islands (BPI) despite lowering its fair value estimate to ₱142 per share from ₱148 per share.

“Despite the downward revisions, we believe BPI remains well-positioned to navigate a more challenging macro environment. While the bank’s growing exposure to consumer lending may drive higher provisioning in the near term, we view these pressures as manageable given its solid capital and earnings buffers. Over the longer term, we believe BPI’s growth drivers remain intact,” COL explained.