PHILIPPINE SHARES could continue to rise this week on positive market sentiment following the US Federal Reserve’s decision to start the rate cutting cycle.
On Friday, the main Philippine Stock Exchange index (PSEi) rose 0.69% or 50.16 points to close at 7,252.32, while the broader all-stock index rose 0.61% or 23.94 points to close at 3,895.62.
Friday’s close was the PSEi’s best finish in more than two years or since closing at 7,288.07 on March 7, 2022.
Week on week, the benchmark index rose 3.27% or 229.47 points from the closing price of 7,022.85 on September 13, rising for the third week in a row.
“The Fed officially kicked off its easing cycle with a massive rate cut, sending global markets into a buying frenzy,” an online brokerage said. 2TradeAsia.com said in a market note.
“The local market is showing bullish momentum and has been rising for three weeks in a row, with the latest passing the 7,150 resistance level,” said senior research analyst Japhet Louis O. Tantiangco of Philstocks Financial, Inc. in a Viber message.
The Fed last week cut its policy rate by 50 basis points (bps) to 4.75%-5%, marking the first easing since March 2020.
Interest rate futures contracts are now pricing in about a 30% chance that the Fed will make a second cut of the same size in November, Reuters reported. The market-based probability of a quarter-point rate cut in November is now about 70%, compared to about 65% before the data.
Before this week, Mr. Tantiangco said the Philippine stock market could continue its rally, although profit-taking could follow.
“The market may still end this week on a positive note as the dovish monetary policy outlook from the Bangko Sentral ng Pilipinas (BSP) and the Fed may continue to maintain optimism,” he said.
He placed the PSEi’s support at 7,150 and resistance at 7,400.
Analysts have said the start of the Fed’s easing cycle gives the BSP more room to further cut its own interest rates.
The Monetary Board cut the policy rate by 25 basis points to 6.25% on August 15, from a 17-year high of 6.5%. BSP Governor Eli M. Remolona Jr. has said the central bank may implement another 25 basis point interest rate cut in the fourth quarter. The remaining Monetary Board meetings this year are scheduled for October 17 and December 19.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., estimated the market’s immediate support at 7,000 and resistance at 7,338.66-7,552.20.
“Usually weaker U.S. economic data lately could increase the likelihood of future Fed rate cuts in the coming months, which could be matched locally,” Ricafort said in an email.
2TradeAsia.com placed the PSEi’s immediate support at 7,100 and resistance at 7,500. “The local stock market successfully reached the 7,200 level for the first time since 2022, this time supported by a clearer path to lower interest rates until 2026, subdued inflation and more substantiated future valuations.” — RMD Ochaaf of Reuters