BSP rate cut signals could provide initial lift
SHARE PRICES could rise this week as investors react to the Bangko Sentral ng Pilipinas’ (BSP) hint of more cuts in interest rates.
The benchmark Philippine Stock Exchange index (PSEi) surged 0.60% or 47.89 points to close at 7,992.32 on Friday. It ended the week 0.74% higher due to gains in the mining and oil sector as well as the financials counter.
Foreign investors were net buyers for the week at P419.5 million, while turnover stood at P30.81 billion.
“On the early part of next week the local market could climb past the 8,000 level following the rate cut hints of the BSP,” Philstocks Financial, Inc. Research Associate Japhet Louis Tantiangco said in a mobile phone message on Friday.
BSP Governor Benjamin E. Diokno said last Friday that a planned further reduction in interest rates by 25 basis points (bps) could take place before November. The BSP’s Monetary Board will hold its sixth policy review for the year on Sept. 26.
That would bring the year’s total interest rate reduction to 75 bps, after the BSP cut key rates by a total of 50 bps in its May 9 and Aug. 8 meetings. But that would still partially dial back last year’s cumulative 175-bp hike.
Mr. Diokno also said that monetary authorities are assessing whether to adopt further cuts in banks’ reserve requirement ratios in one go or in a phased manner.
Philstocks’ Mr. Tantiangco added that investors will also look at the Federal Open Market Committee’s own Sep. 17-18 policy review.
“If they lower their rates, then our local market could sustain ground above the 8,000 mark. If not however, we may fall back to our 7,800-8,000 trading range,” he said.
TIMELY
For AAA Southeast Equities, Inc. Research Head Christopher John Mangun, investors may be holding on to their funds for the moment due to the number of firms scheduled to conduct an initial public offering (IPO) before the year ends.
“Overall, we remain bullish on local equities in the longer term. Right now may be a good time for investors to position themselves in this market as treasury bonds in the west have been giving negative yields. We may start to see money flow to emerging markets bonds and equities,” Mr. Mangun said in a market report.
This comes amid the general cautiousness seen in international markets due to fears on the global economy’s slowdown triggered by the US-China trade war and the yield curve inversion seen in the US.
“The general investor sentiment remains extremely cautious due to the slowdown in global economic growth and the looming fears over a recession in the world’s biggest economy. However, the Philippine economy could not be in a better spot,” Mr. Mangun said.
Mr. Mangun placed initial market support this week at 7,750-7,630 and resistance at 7,920-8,000. — Arra B. Francia
