Stocks up nearly 5% on news of an interest rate cut

THE LOCAL market ended on a positive note on Friday on news that the Bangko Sentral ng Pilipinas (BSP) cut its policy rates by another 50 basis points (bps) to support the economy, which is struggling from the impact of the coronavirus disease 2019 (COVID-19) pandemic.

The 30-member Philippine Stock Exchange index (PSEi) rose by 4.78% or 264.37 points to 5,789.97 on Friday, while the broader all shares index increased by 3.62% or 122.3 points to 3,492.43.

Darren Blaine T. Pangan, trader and head of online trading at Timson Securities, Inc., said in a text message that the market ended in green territory as reports circulated that the BSP slashed interest rates.

“The move by BSP was to further support the economy amid the COVID-19 pandemic,” he said.

Claire T. Alviar, research associate at Philstocks Financial, Inc., said in a text message that the local bourse gained by almost 5% after the central bank cut policy rates by another 50 bps to bring interest rates to record lows.

“According to the BSP, it aimed to encourage lending to different sectors particularly to those most vulnerable during this time,” she said.

Ms. Alviar added that the market shrugged off the 6.8% year-on-year fall of China’s first quarter gross domestic product (GDP). It was its first GDP decline since 1992.

However, the unemployment rate in China’s urban areas was at 5.9% in March, lower than the 6.2% recorded in February.

“Investors were anticipating it already on the back of COVID-19 pandemic and disappointing data including a fall in retail sales by 19% and a decline of industrial production by 8.4%,” Ms. Alviar said.

However, Mr. Pangan said that the decline in China’s GDP might affect market sentiments.

“This may affect market sentiment negatively in the local bourse as investors price in its effect on companies that have operations in China,” he said.

On Friday, all sectoral indices registered an increase. Financials rose by 3.1% or 37.19 points to 1,235.72; industrials went up by 3.43% or 251.58 points to 7,566.82; holding firms increased by 4.84% or 265.05 points to 5,731.72; property climbed by 5.67% or 159.15 points to 2,963.69; services picked up by 4.2% or 52.21 points to 1,294.84; mining and oil improved by 0.36% or 16.97 points to 4,688.22.

“Investors reacted positively, and mostly banking on properties — with an increase of 5.67% and was the top gainer — It is one of the sectors to benefit the most when interest rates are reduced given its expansion plans,” Ms. Alviar said.

Advancers outnumbered decliners 142 to 63, while 27 names ended unchanged. Net foreign selling was at P814 million.

“With the index on a short-term uptrend, we may have to observe if support at 5,500 holds, and if so, nearest resistance to test is the 6,000 level,” Mr. Pangan said.

Robinsons Land Corp. (RLC) was among companies that disclosed corporate moves on Friday. It announced receiving greater demand for its P15-billion fixed-rate bonds as it moved to double its over-subscription option.

The Gokongwei-led property developer said its board had agreed to raise the over-subscription for its latest bond offer to P10 billion from P5 billion. Shares in the company rose 5.83% to close at P15.26 each.

Meanwhile, Manila Water Co., Inc. held its annual stockholders meeting on Friday. The meeting resulted in amendments to its seventh article of its Articles of Incorporation.

Stockholders approved the increase in the company’s authorized capital stock to P4.4 billion from P3.5 billion, creating an additional 900 million common shares.

The meeting also approved the increase in Manila Water’s carved-out shares to 900 million unissued common shares, from its previous 300 million common shares.

Last month, Manila Water disclosed details of Enrique K. Razon, Jr.’s P10.7-billion investment in the firm. The businessman’s Prime Metroline Holdings, Inc. will own 28% in the firm once it completes its acquisition of 820 million shares priced at P13 each.

“The signing of the subscription with the Razon group is just the beginning. Definitely bringing him (Razon) is important to the group,” said Manila Water Chairman Fernando Zobel de Ayala during the annual meeting, which was held online.

On Friday, shares in Manila Water rose by 0.18% and closed at P11.08 apiece. — Revin Mikhael D. Ochave