PHILIPPINE SHARES may remain at the 7,000 level this week as the US Federal Reserve is expected to cut interest rates for the first time in more than four years.
On Friday, the Philippine Stock Exchange index (PSEi) fell 0.02% or 1.82 points to close at 7,022.85, while the broader all-stock index fell 0.08% or 3.02 points to close at 3,788 ,63.
Still, the PSEi finished week over week 86.76 points or 1.25% higher than the 6,936.09 on September 6, marking its second straight week of gains.
“Momentum favored local equities ahead of what is likely to be the Fed’s first rate cut since March 2020. The PSEi closed above the 7,000 level for the first time since February 2023,” according to online brokerage. 2TradeAsia.com said in a market note.
For this week, the expected Fed cut at the September 17-18 meeting is expected to boost Philippine stocks, according to Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco. in a Viber message.
“[This] This week, the market could continue to test the validity of the break from the 7,000 level. Central to this would be the Federal Reserve’s policy decisions and prospects. A cut in policy rates by the Fed, along with indications of further easing going forward, is expected to boost optimism on the local front as this would give the Bangko Sentral ng Pilipinas more room to ease their policy as well,” said Mr. Tantiangco.
The Federal Reserve is almost as likely to make an outsized rate cut this week as a more typical cut, as suggested by trading in interest rate futures on Friday, as financial markets priced in a greater chance that the Fed would take more action. aggressively, Reuters reported.
A quarter-point cut at the Fed’s September 17-18 meeting is still seen as the slightly more likely outcome, but only marginally.
Futures tied to the Fed’s policy rate now reflect about a 47% chance that the Fed will cut its policy rate, currently in the 5.25%-5.5% range, by half a percentage point. That’s up from about 28% on Thursday.
“The local currency will strengthen against the dollar if this continues [this] This week, the local stock market is also expected to be helped,” Mr Tantiangco added. “Graphically, if the market holds at 7,000, the trading margin is between 7,000 and 7,150.”
On Friday, the peso ended at P55.995 per dollar, up 20.50 centavos from Thursday’s closing rate of P56.20, data from the Bankers Association of the Philippines showed.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the PSEi’s next resistance is the September 10 intraday high at 7,109.75, while the immediate minor support level is at 6,835-6,940.
2TradeAsia.com estimates the market’s immediate support at 6,900 and resistance at 7,100-7,200.
“With macro and corporate data moving positively in a similar direction, volumes should be helped by institutional funds returning to risk after consecutive quarters of being hit by a tight capital environment or limited growth opportunities,” the report said. — RMD Ochaaf of Reuters