PHILIPPINE STOCKS could continue to rise when trading resumes after a four-day pause after the US Federal Reserve indicated it could start cutting interest rates as early as next month.
The Philippine Stock Exchange index (PSEi) closed at 6,961.96 on Thursday, up 1.67% or 114.59 points from 6,847.37 on August 16 and marking its third straight weekly gain.
Philippine financial markets were closed on August 23 (Friday) in observance of Ninoy Aquino Day and on August 26 (Monday) for National Heroes Day.
“[This] This week, the local market could still move with an upward movement. Signals of monetary policy easing from the Federal Reserve during the Jackson Hole Economic Symposium are expected to boost positive sentiment,” said senior research analyst Japhet Louis O. Tantiangco of Philstocks Financial, Inc. in a Viber message.
“This is because interest rate cuts by the Fed give the BSP (Bangko Sentral ng Pilipinas) more room to cut their policy rates as well, making it more likely that they will continue easing monetary policy,” he said.
BSP Governor Eli M. Remolona Jr. has said they could cut interest rates again within a year after the Philippine central bank cut borrowing costs by 25 basis points this month, marking the first easing in nearly four years.
US Federal Reserve Chairman Jerome H. Powell on Friday approved an imminent start of interest rate cuts. He said further cooling in the labor market would not be welcome and expressed confidence that inflation is within range of the US central bank’s 2% target, Reuters reported.
“The time has come for policy adjustment,” Powell said in a highly anticipated speech at the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
With the policy rate currently between 5.25% and 5.5%, the Fed has “plenty of room” to cut borrowing costs to support the economy, Mr. Powell said.
“If the strengthening of the local currency continues, it is also expected to boost the market,” Mr Tantiangco added.
The PSEi could continue to test the 7,000 resistance level this week, he said. “If the market moves past and remains above the mentioned level, the next resistance will be seen at 7,100. Currently, major support is seen in 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 just 184 points (2.79%) for the month, the PSEi is up 7.94% year to date. “MSCI’s rebalancing this quarter could create friction in the short term, but the general easing of global yields should support the PSEi’s ambition to break 7,000,” the report said.
“Everything is a cycle, and markets are likely on the brink of a new cycle that resembles pre-pandemic conditions,” it added. — Revin Mikhael D. Ochave of Reuters