PSEi to rise on dovish Powell speech, BSP bets

SHARES may continue to climb this week following dovish comments from the US Federal Reserve chief over the weekend and as the Bangko Sentral ng Pilipinas (BSP) is expected to deliver a third straight rate cut on Thursday.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) edged up by 0.05% or 3.71 points to 6,281.58, while the broader all shares index rose by 0.06% or 2.44 points to 3,737.58.

Week on week, however, the PSEi was down by 0.54% or 34.35 points from its 6,315.93 finish on Aug. 15.

The stock market was closed on Monday for National Heroes’ Day.

“Local equities went sideways through a shortened week as investors turned cautious ahead of Fed Chairman Jerome H. Powell’s remarks at Jackson Hole summit,” online brokerage 2TradeAsia.com said in a market note.

Mr. Powell, in a closely watched speech at the Fed’s annual Jackson Hole symposium on Friday, opened the door to an interest rate cut at the central bank’s meeting next month, Reuters reported.

Mr. Powell’s dovish change of course has seen futures price in an 84% chance of a quarter-point rate cut in September, and at least 100 basis points (bp) of easing to 3.25-3.5% by the middle of next year.

2TradeAsia.com said Mr. Powell’s speech could set the tone for this week’s trading and pegged the PSEi’s support at 6,300 and resistance at 6,600.

Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message that Mr. Powell’s dovish tilt could fuel buying activity at the stock market this week.

“Hopes of a rate cut by the Bangko Sentral ng Pilipinas in their Monetary Board meeting [this] week may also lift sentiment. Investors are also expected to look for clues on the BSP’s policy outlook at the said meeting,” he said.

All 20 analysts in a BusinessWorld poll expect the Monetary Board to reduce the target reverse repurchase rate by 25 bps to 5% from the current 5.25% at its policy meeting on Thursday.

This would be the BSP’s third consecutive 25-bp cut since April. It has lowered benchmark interest rates by a total of 125 bps since it began its easing cycle in August 2024.

Mr. Tantiangco put the PSEi’s major support at 6,150 and major resistance at 6,400.

“Chart-wise, the local market remains bearishly biased as it continues to form lower highs… This week, the market is expected to continue testing these lines,” he said. “Taking these lines under strong trading activity is seen as the market’s primary objective to be able to rise further moving forward.”

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort placed the index’s support at 6,204.04 and resistance at 6,370.

Mr. Ricafort said the market will monitor policy hints from both the BSP and the Fed as potential rate cuts by the US central bank would also support further easing at home. — R.M.D. Ochave with Reuters