Recent BSP rate cut seen to provide market lift

By Arra B. Francia, Senior Reporter

LOCAL SHARES may rebound in the days ahead as investors continue to digest the central bank’s most recent interest rate cut.

The 30-member Philippine Stock Exchange index went down 0.76% or 59.77 points to close at 7,854.39 on Friday, bringing its weekly loss to 275.54 points or 3.39%. The PSEi weakened with the rest of the world on escalating trade tensions between the United States and China.

Philippine markets were closed on Aug. 12 in observance of Eid’l Adha, or the Islamic Feast of Sacrifice.

“My expectation is for the index to trade between 7,800-8,000 this week as investors continue to digest the rate cut by the BSP last week,” AAA Southeast Equities, Inc. President Matthew Cabangon said in a mobile phone message.

The Bangko Sentral ng Pilipinas cut benchmark rates by 25 basis points for the second time this year last Thursday in the face of slowing inflation and economic growth.

BSP Governor Benjamin E. Diokno told both ABS-CBN News Channel and Bloomberg TV that another reduction in banks’ reserve requirement could take place in the next few weeks, while another 25 bp cut will likely be on the table when the Monetary Board reviews policy for the sixth time this year on Sept. 26.

“Barring more negative surprises coming out from the US-China spat, I expect market volatility to subside and for the market to remain rangebound until the US Federal Reserve meeting in September,” Mr. Cabangon added.

China has continued to allow the yuan to weaken amid the trade spat with the United States. Aside from labelling China as a currency manipulator, the US has yet to retaliate. US President Donald J. Trump noted that Washington would still be talking to Beijing, but deals are unlikely for now.

Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said via e-mail that he expects the market to move “sideways” in the trading days this week “with a lack of clear immediate catalysts.”

Investors could stay on the sidelines during the Aug. 1-29 “ghost month”, during which — according to Chinese tradition — they should hold off from making important decisions.

Amid the raging Sino-US trade war, Friday saw the Dow Jones Industrial Average slump 0.34% to close at 26,287.44, the S&P 500 index drop 0.66% to 2,918.65 and the Nasdaq Composite index give up one percent to end 7,959.14.

Most Asian stocks ended higher on Monday, amid the volatility seen in the previous week. Japan’s Nikkei 225 gained 0.37% or 76.79 points to 20,593.35. The Shanghai Composite surged 0.93% or 25.87 points to 2,794.55, while the Hang Seng index rose 0.48% or 123.74 points to 26,120.77.

Papa Securities’ Mr. Perez placed the PSEi’s immediate resistance at about 8,000, with support at around 7,720.