Stocks to move sideways before BSP rate decision
PHILIPPINE STOCKS may move sideways this week as the market awaits the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Thursday, with a rate cut seen to boost sentiment.
On Friday, the bellwether Philippine Stock Exchange index (PSEi) increased by 1.5% or 98.53 points to end at 6,647.80, while the broader all shares index rose by 1.01% or 36.10 points to finish at 3,608.24.
Week on week, the PSEi went up by 0.64% or 42.5 points from its 6,605.30 finish on Aug. 2.
“The local bourse recovered after an early week slump as attention moves to the BSP’s meeting,” online brokerage firm 2TradeAsia.com said in a market note.
“The local market bounced back last week after hitting its 6,400 support level, eventually ending the week with a 0.64% gain… However, trading has remained anemic, as seen in the thin value turnovers,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
For this week, the Philippine central bank’s rate-setting meeting on Aug. 15 (Thursday) will take the spotlight, Mr. Tantiangco said.
“A policy rate cut is expected to sustain the local market’s upward momentum, while an unchanged policy rate might lead to a market decline,” he added.
Analysts are divided on the Monetary Board’s rate decision this week as faster headline inflation in July caused BSP Governor Eli M. Remolona, Jr. to take a less dovish policy stance.
A BusinessWorld poll showed that nine out of 16 analysts surveyed expect the Monetary Board to deliver a 25-basis-point (bp) rate cut at Thursday’s review.
This would bring the target reverse repurchase rate to 6.25% and would be the first reduction in benchmark borrowing costs since November 2020, or during the coronavirus pandemic.
The BSP has kept its policy rate at an over 17-year high of 6.5% since October 2023 following cumulative hikes worth 450 bps.
Headline inflation accelerated to a nine-month high of 4.4% in July from 3.7% in June, the Philippine Statistics Authority reported last week. This was slower than the 4.7% print in the same month a year ago and was within the BSP’s 4%-4.8% forecast.
However, this was the fastest in nine months or since the 4.9% clip in October 2023 and also marked the first time since November that inflation exceeded the BSP’s 2-4% annual target.
The Monetary Board is now “a little bit less likely” to cut rates at this week’s policy meeting following the worse-than-expected July inflation print, Mr. Remolona said after the data release.
“Investors are also expected to monitor the developments at Wall Street. A further easing of recession concerns is seen to help in lifting market sentiment while a worsening of the said concerns is expected to weigh on the market,” Mr. Tantiangco added.
He put the PSEi’s support at 6,400 and resistance at 6,700.
Meanwhile, 2TradeAsia.com placed the market’s immediate support at 6,400-6,500 and resistance at 6,800. — R.M.D. Ochave
