INVESTORS are expected to take their cue from the Bangko Sentral ng Pilipinas’ (BSP) recent policy decision and local economic data as the market reopens today after a one-day break.

The benchmark Philippine Stock Exchange index fell by 90.43 points or 1.42% to close at 6,236.40 on Wednesday. The broader all shares index also declined by 49.96 points or 1.27% to 3,858.

Financial markets were closed on Thursday in observance of the Feast of Ramadan or Eid al-Fitr.

“We may have to see how the market reacts to the BSP’s revision of its inflation forecasts for 2021,” Darren Blaine T. Pangan, trader at Timson Securities, Inc., said in a Viber message on Wednesday.

“The market ended on green territory during the first two days of the week, following reports of [improved] trade activity for the first quarter of the year 2021. However, the index slid on Wednesday as investors may have assessed the MSCI rebalancing activities as well as the GDP (gross domestic product) report for the [first] quarter of the year,” Mr. Pangan said.

AAA Southeast Equities, Inc. Research Head Christopher John J. Mangun said the index showed more weakness after the release of “disappointing key economic data.”

“This has generated more fear among investors that the economic situation might be a lot worse than what was perceived,” Mr. Mangun said via e-mail on Wednesday.

“Bank lending for the month of March also contracted by 4.5% mainly due to the decline in loans for production activities. This tells us that companies are currently not doing enough business to justify the need for more liquidity despite lower rates,” Mr. Mangun added.

The BSP held its key interest rate at a record low for a fourth straight meeting on Wednesday, as it continues to support the economy’s recovery from the pandemic.

The Monetary Board maintained the overnight reverse repurchase rate at a historic low of 2%. Both the lending and deposit rates were also kept at 2.5% and 1.5%, respectively.

Meanwhile, the central bank lowered its inflation outlook this year to 3.9%, from a previous estimate of 4.2%. On the other hand, the forecast for 2022 was raised to 3%, from 2.8% previously. This will put inflation back within the BSP’s 2-4% annual target range.

The BSP’s decision to keep rates steady came a day after release of disappointing first-quarter GDP data. For the first three months of 2021, GDP shrank by an annual 4.2%, keeping the economy in a recession for a fifth consecutive quarter.

Mr. Mangun however noted that the market is “forward-looking” and is expected to improve.

“Most are expecting GDP growth in Q2 despite the tighter restrictions. We may see the market lose another 5-7% in the short term although, we still believe that current levels provide a good opportunity for investors in anticipation of higher valuations in the medium to long term,” he said.

Meanwhile, Timson Securities’ Mr. Pangan expects the index to move between 6,010 and 6,500. — Keren Concepcion G. Valmonte