PSEi to rise as easing inflation fuels rate cut bets
PHILIPPINE SHARES may continue to climb this week as slower-than-expected inflation in August could give the central bank confidence to cut benchmark rates more than initially planned, analysts said.
On Friday, the Philippine Stock Exchange index (PSEi) rose by 0.4% or 28.12 points to close at 6,936.09, while the broader all shares index went up by 0.36% or 13.59 points to end at 3,752.86.
Week on week, the PSEi climbed by 0.56% or 38.55 points from its 6,897.54 finish on Aug. 30.
“Bulls came to life after an early week slump, empowered by Philippine inflation hitting a new seven-month low,” online brokerage firm 2TradeAsia.com said in a market note.
“In general, the local market went back to tepid trading last week as uncertainties over the US economy clouded investor sentiment. The market showed that it still respects the 6,700-6,800 support range, but at the same time, it is still unable to get past the 7,000 resistance line,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
For this week, Mr. Tantiangco said the PSEi may move with an upward bias.
“The latest inflation figures are seen to strengthen the case for the continuation of the BSP’s (Bangko Sentral ng Pilipinas) monetary policy easing. This in turn is seen to drive optimism in the market,” he said.
Headline inflation eased to a seven-month low of 3.3% in August from 4.4% in July and 5.3% in the same month a year ago, the Philippine Statistics Authority reported on Thursday. This was within the BSP’s 3.2-4% forecast for the month and was well below the 3.7% median estimate in a BusinessWorld poll of 15 analysts.
The slower-than-expected August print could justify further policy easing, analysts said.
The central bank on Aug. 15 cut its policy rate by 25 basis points (bps) to 6.25%, marking its first easing move in nearly four years.
BSP Governor Eli M. Remolona, Jr. has said they could cut rates by another 25 bps within the year. The Monetary Board’s last two policy-setting meetings this year are on Oct. 17 and Dec. 19.
“Also, the local currency has recently exhibited appreciation against the US dollar. If this continues this week, it is also expected to give the market a boost,” Mr. Tantiangco added.
The peso closed at P55.905 per dollar on Friday, surging by 30.50 centavos from its P56.21 finish on Thursday, Bankers Association of the Philippines data showed.
This was the peso’s first time to return to the P55-per-dollar level in almost six months. It was also its best finish since its P55.58-a-dollar close on March 18.
Mr. Tantiangco said worries over the US economy’s health could also continue to affect market sentiment this week.
2TradeAsia.com put the PSEi’s immediate support at 6,850 and resistance at 7,000-7,100.
“With macro fundamentals turning for the better, attention should quickly revert to corporate valuations,” the online brokerage said. — Revin Mikhael D. Ochave