Stocks to rise as market awaits BSP, Fed easing
PHILIPPINE SHARES are expected to climb this week amid growing expectations of benchmark interest rate cuts from both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.
On Friday, the bellwether Philippine Stock Exchange index (PSEi) fell by 1.32% or 88.53 points to end at 6,605.30, while the broader all shares index retreated by 0.88% or 32.28 points to finish at 3,596.90.
Week on week, the PSEi dropped by 1.79% or 120.71 points from its 6,726.01 close on July 26.
“The local market extended its decline to a second week, shedding 1.79% after failing to take its 6,700-6,800 resistance range,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
“On a positive note, the market remains above its 50-day and 200-day exponential moving averages. Trading remains tepid, however, as many are still on the sidelines,” he added.
For this week, Philippine stocks may rise on bargain hunting amid expectations of lower borrowing costs, Mr. Tantiangco said.
“Growing hopes of monetary easing in the Philippines and the United States soon following recent dovish cues from both the BSP and the Federal Reserve may help the market climb this week,” he said. “However, the recession fears in the US, if it lingers this week, are seen as a downside risk to the local bourse.”
BSP Governor Eli M. Remolona, Jr. last week said that they could cut benchmark rates by 25 basis points (bps) at their Aug. 15 meeting, and by another 25 bps later in the year.
The BSP has kept its policy rate at a 17-year high of 6.5% since October 2023.
Meanwhile, employers added just 114,000 jobs in July, the US Labor department reported, and the unemployment rate rose to 4.3%, from 4.1% in June, marking an unexpected deterioration in a labor market that had held up surprisingly well during the US Federal Reserve’s aggressive rate-hike campaign in 2022 and 2023, Reuters reported.
The data prompted traders to pile into bets that the Fed will deliver a half-percentage-point rate cut at its Sept. 17-18 meeting, and drive borrowing costs down further from there, with the policy rate expected to end 2024 in the 4%-4.25% range.
“Investors may also take cues from our upcoming macroeconomic data including the July inflation rate, June labor force survey, and second-quarter gross domestic product. Investors are also expected to continue monitoring corporate results,” Mr. Tantiangco said.
“Philippine inflation to be released on Aug. 6 is expected to pick up in July from 3.7% in June, largely due to massive damage by Typhoon Carina, though offset by lower tariffs that effectively provided a 20% discounted on imported rice,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail.
For its part, online brokerage 2TradeAsia.com said in a market note that the PSEi’s immediate support is at 6,600-6,650 and resistance is at 6,900. — Revin Mikhael D. Ochave with Reuters