By Arra B. Francia
Senior Reporter

LOCAL SHARES may continue rising this week on the back of window dressing and ahead of the Bangko Sentral ng Pilipinas’ (BSP) second reserve requirement ratio (RRR) cut.

The 30-member Philippine Stock Exchange index (PSEi) climbed 0.41% or 33.05 points to close at 8,055.47 on Friday. It advanced by 65 points on a weekly basis driven by holding firms and mining and oil, which both jumped by two percent.

Turnover slipped by three percent to P7.3 billion on average last week, while foreign investors were on a net selling position at P234 million versus the previous week’s P406-million net inflows.

“Semester-end portfolio window dressing is seen this week, as fund managers prepare for the run-up in the second half. This week, BSP’s second phase of RRR cut will take effect that will pump up available liquidity in the financial system,” online brokerage 2TradeAsia.com said in a weekly market note.

After a 100-basis-point (bp) reduction on May 31, the BSP will again slash the RRRs of universal and commercial banks and thrift banks by 50 bps to 16.5% from 17% and to 6.5% from 7%, respectively, this Friday as part of its phased reduction that will trim the RRR by a total of 200 bps. The next 50-bp cut will take effect on July 26.

BSP Deputy Governor Diwa G. Guinigundo said last week that these RRR reductions are expected to unleash a total of P200 billion into the financial system once the phased implementation is completed.

Meanwhile, AAA Southeast Equities, Inc. Research Head Christopher John Mangun said the main index may rally past the 8,150 level this week.

“A successful break above this level will trigger a bull run which may lead back to the previous all-time high of the PSEi at 9,000. However, the main index has ended positive for the last 5 weeks which means there is a strong possibility that we see a pullback next week,” Mr. Mangun said in a market report.

Should the PSEi pull back, Mr. Mangun noted they are still confident of seeing a rally soon.

“With second-quarter earnings coming out in the next few weeks, and with companies across-the-board expecting robust growth, this could be the fuel that this market needs to go higher.”

2TradeAsia.com also noted the possibility of the PSEi rising to the 9,100 level driven by the lower borrowing costs for the second half of the year.

“After the [US Federal Reserve] and BSP maintained their status quo on interest rates, lower borrowing costs are in store for second half, which would propel infra rollout from both government and the private sector,” the company said, adding that they are considering upsides in their target price for the PSEi.

AAA Equities’ Mr. Mangun placed the market’s support from 7,880 to 8,000, while resistance is from 8,150 to 8,300.