By Revin Mikhael D. Ochave, Reporter

FURTHER RATE CUTS by the Bangko Sentral ng Pilipinas (BSP) are expected to give the Philippine stock market a much-needed boost, analysts said.

The Philippine Stock Exchange index (PSEi) has been flirting with the 7,000 level since the BSP began its easing cycle with a 25-basis-point (bp) rate cut on Aug. 15.

“The dovish shift in monetary policy should bode well for the stock market. Lower interest rates mean lower borrowing costs and improved equity valuations,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet told BusinessWorld in a Viber message.

“Better market performance, a stable exchange rate, and sustained economic growth due to well-calibrated rate cuts would also help attract foreign fund flows that can significantly lift trading volumes,” he added.

First Metro Investment Corp. Head of Research Cristina S. Ulang said the PSEi is “already within striking distance” of the 7,000 level following the BSP rate cut.

The PSEi on Tuesday closed higher for a third day in a row, ending the day up by 0.79% or 54.89 points to 6,944.76. It reached as high as 7,005.27 during the session.

The Monetary Board last Thursday delivered a 25-bp rate cut, bringing the benchmark rate to 6.25% from the over 17-year high of 6.5%. This was the first time the BSP reduced rates since November 2020.

BSP Governor Eli M. Remolona, Jr. has said there is room for another rate cut, possibly by 25 bps, in the fourth quarter.

Globalinks Securities and Stocks, Inc. Trader Mark V. Santarina said in a Viber message that he expects the PSEi rising above the 7,000 level before yearend, “reflecting growing investor confidence and market strength.”

“The Philippine market is likely to see a generally positive trend in the remaining months of 2024, driven by the expected rate cuts from the BSP and Federal Reserve. These cuts should enhance liquidity and lower borrowing costs, which could stimulate economic growth and boost corporate earnings,” he said.

Mr. Santarina said there may be increased market volatility following the rate cuts. 

“Volatility may increase in response to the rate cuts as markets adjust to the new monetary policy environment,” he said. “Initially, we might see a spike in trading volumes as investors react to the news and reposition their portfolios, seeking higher returns in equities over fixed income.”

SECTORS TO BENEFIT
Property firms and real estate investment trusts (REITs), as well as consumer goods companies, are among those that will benefit from the central bank’s rate cuts, analysts said.

“The rate cuts will bode well for REITs, banks, and consumer-related stocks,” Ms. Ulang said in a Viber message.

Mr. Santarina said that consumer-related stocks may also get a lift as household spending is likely to pick up ahead of the holiday season.

“Specific sectors that are likely to benefit from the rate cuts include consumer discretionary, real estate, and financials. Consumer discretionary sectors could see a boost from increased consumer spending, as lower interest rates make financing more accessible,” he said.

Meanwhile, COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said she maintains a cautiously optimistic stock market outlook for the rest of the year as high inflation may further dampen consumer spending.

“Lower rates are good, but a bigger factor would be earnings. If corporate earnings continue to be affected by consumers that are still recovering from high prices, then it will be difficult to expect a continuous increase in share prices,” she said in a Viber message.

Household consumption, which accounts for about three-fourths of the economy, slowed to 4.6% in the second quarter from 5.5% a year ago, reflecting the impact of elevated inflation and high interest rates.

Ms. Tan said there is also the risk of a possible recession in the United States.

“Also, at this point there is still a risk that the US will suffer from a recession and a bear market. Historically, we always suffered from a contagion when this happens,” she added.

Mr. Colet flagged other risks such as geopolitical tensions, a potential economic slowdown, and natural calamities.

REGULATORS should make it mandatory for publicly listed companies in the country to have women representation on their boards, according to the Philippine Business Coalition for Women Empowerment (PBCWE). 

“In my view, make it mandatory but not penalize them (listed firms) immediately. Give them time to comply,” PBCWE Governing Council Chairperson Ma. Aurora D. Geotina-Garcia said on the sidelines of the launch of the “Census on Women in Leadership Roles in Philippine Publicly Listed Companies” report in Makati City on Tuesday.   

“Eventually, it becomes part of the DNA that they will consciously and intentionally say that when we start looking for board members, we should also deliberately have a goal of women’s representation,” she added.   

The new report showed female chief executive officers (CEOs) accounted for 13% of Philippine listed companies in 2022 from 12% in 2021 and 10% in 2020.

Majority of the female CEOs are from the services sector, followed by the industrial sector and the property sector.

The percentage of females on the boards of directors of listed firms reached 21% in 2022 from 19% in 2021 and 18% in 2020.   

Ms. Garcia said the ideal representation of women across the boards of listed companies should be around 30%.

“We have countries who’ve actually imposed quotas including Malaysia, France, and many of the Scandinavian countries. If you impose quotas, there’s more compelling reason for companies to deliberately and intentionally recruit females,” she said.

Ms. Garcia said the Securities and Exchange Commission (SEC) should spearhead the proposal on mandatory women representation, with support from the Philippine Stock Exchange (PSE).

“It should be the SEC because this is regulatory. Although, it should work together with the PSE because the PSE also is part of the decision process of who is going to be listed. I would be happy to see if one of their considerations for the company applying for listing is its diversity and inclusion policies,” she said.

The report also showed that women comprise 40% of executive leadership teams in Philippine listed companies in 2022.

“While there has been progress, many women in executive leadership teams continue to occupy functional or support roles. However, the data indicate an improvement in the representation of women in line or operational roles, which are critical for career advancement to top leadership positions,” the report said.

The report also noted only 2% of large companies and none of the small- and medium-sized firms have set specific gender diversity targets.

“Most (publicly listed companies) have broad diversity policies; however, these need to be complemented by concrete targets in order to be measured and ultimately achieved,” the report said.

The study was done by the PBCWE in partnership with WR Numero Research and supported by Investing in Women and the SEC. The data collection period was from Aug. 15 to Sept. 15 last year.

Meanwhile, SEC Commissioner Javey Paul D. Francisco said sustainability reporting is a tool that can be used by listed firms to disclose women representation in boards, establish inclusivity benchmarks, and track progress on their development.

“It’s evident that women remain under-represented in executive leadership teams and boards and we still have a long way to go,” he said in his keynote speech at the launch event.

Mr. Francisco added that the SEC has introduced guidelines on the issuance of social bonds under the ASEAN Social Bond Standards in the Philippines.

“This allows investors to direct their capital to eligible social projects, including gender bonds, which expand financial opportunities for women, support women-led businesses, and enhance women’s financial inclusion,” he said.

“It’s clear that our journey towards gender equality is far from over. Our vision is a future where gender equality is a given; where it is not just a matter of social justice but rather a strategic necessity and a smart business move leading to greater employee retention, enhanced creativity, and overall better business outcomes,” he added. — Revin Mikhael D. Ochave