PSE index to retest 7,000 as Fed rate cuts loom
PHILIPPINE SHARES could continue to rise when trading resumes after a four-day break after the US Federal Reserve signaled that they could begin cutting rates as early as next month.
The Philippine Stock Exchange index (PSEi) closed at 6,961.96 on Thursday, rising by 1.67% or 114.59 points from its 6,847.37 finish on Aug. 16 and marking its third consecutive weekly gain.
Philippine financial markets were closed on Aug. 23 (Friday) in observance of Ninoy Aquino Day and on Aug. 26 (Monday) for National Heroes Day.
“[This] week, the local market could still move with an upward bias. The monetary policy easing cues from the Federal Reserve in the Jackson Hole Economic Symposium are expected to drive positive sentiment,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.
“This is as Fed rate cuts are seen to give more room to the BSP (Bangko Sentral ng Pilipinas) to cut their policy rates too, thereby increasing the likelihood that they will continue with their monetary policy easing,” he said.
BSP Governor Eli M. Remolona, Jr. has said they could cut rates again within the year after the Philippine central bank this month slashed borrowing costs by 25 basis points, marking its first easing move in almost four years.
US Federal Reserve Chair Jerome H. Powell on Friday endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank’s 2% target, Reuters reported.
“The time has come for policy to adjust,” Mr. Powell said in a highly anticipated speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
With its policy rate currently in the 5.25%-5.5% range, the Fed has “ample room” to reduce borrowing costs to cushion the economy, Mr. Powell said.
“The strengthening of the local currency, if it continues, is also expected to give the market a boost,” Mr. Tantiangco added.
The PSEi may continue to test the 7,000 resistance level this week, he said. “If the market gets past and sustains ground above the said level, next resistance is seen at 7,100. Currently, major support is seen at the 6,700 to 6,800 range.”
For its part, online brokerage firm 2TradeAsia.com said in a market note that the market’s immediate support is at 6,800 and resistance is at 7,000-7,500.
“After dropping as low as 184 points (2.79%) for the month, the PSEi is up 7.94% year to date. This quarter’s MSCI rebalancing might cause friction in the near term, but the overall dovish shift in global rates should help sustain the PSEi’s ambition to breach 7,000,” it said.
“Everything is a cycle goes a quote, and markets are likely at the edge of a new one that resembles pre-pandemic conditions,” it added. — Revin Mikhael D. Ochave with Reuters
