Shares to rebound as market awaits BSP rate cut

By Arra B. Francia
Senior Reporter

SHARES MAY bounce back in the coming days after the main index sustained losses for most of last week, with investors’ eyes trained on the Bangko Sentral ng Pilipinas’ (BSP) policy decision and the passage of the 2020 national budget.

The 30-member Philippine Stock Exchange index (PSEi) dropped 0.5% or 40.21 points to close at 7,871.11 last Friday. The main index fell 1.52% on a weekly basis as it declined for four consecutive sessions during the week.

Net foreign outflows averaged at about P350 million last week amid an average turnover of P6.24 billion.

“The next catalyst [this] week should now be the BSP’s policy decision. Consensus expects the central bank to cut by 25 basis points (bps),” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an e-mail.

The BSP’s Monetary Board will review policy settings anew on Thursday. Economists widely expect the central bank to reduce rates by another 25 bps this week.

So far, the central bank has trimmed rates by a total of 50 bps this year — by 25 bps each last May 9 and Aug. 8 — to a range of 3.75% to 4.75%, partially dialing back the 175-bp cumulative hikes put in place last year to arrest multi-year high inflation.

Headline inflation slowed to 1.7% in August from the 2.4% print in July and the 6.4% pace logged in August 2018. Year-to-date, inflation averaged at 3%, which is within the BSP’s 2-4% target range for 2019, albeit still above the BSP’s 2.6% forecast for the year.

Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said investors will look at the rate cut in addition to expectations on the national budget’s progress in Congress.

“We think that investors might also consider the passage of the P4.1-trillion budget…since the passage of the bill will continue the infrastructure projects, as opposed to what happened in the first quarter of the year where we saw a huge drop in GDP (gross domestic product) as a result of the budget impasse,” Mr. Tan said via text message.

The analyst also pointed to developments abroad which may affect investor sentiment locally.

“Catalysts abroad, especially the US-China trade talks and the oil markets which disrupted global supply, can drive the market for this week.”

On the other hand, this week will also see the start of the offer period for Axelum Resources Corp.’s initial public offering. The coconut products manufacturer will offer a total of 800 million common shares at P5 each from Sept. 24 to 30, in a bid to raise P4 billion in fresh capital.

Villar-led AllHome Corp. will also finalize its offer price for its own IPO on Sept. 26. It will sell up to 1.293 billion common shares at up to P16 per share.

Philstocks’ Mr. Tan placed the PSEi’s support at 7,850, with resistance at 8,000.