Index may retest 7,400 before BSP policy meet

By Sheldeen Joy Talavera, Reporter

THE MAIN INDEX could retest the 7,400 mark this week as the market awaits the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Wednesday, with a rate cut expected to boost sentiment.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) dropped by 1.36% or 101.15 points to end at 7,310.32, while the broader all shares index shed 0.55% or 22.36 points to close at 4,015.16.

Week on week, the PSEi declined by 2.11% or 157.60 points from its 7,467.92 finish on Oct. 4.

“Last week, negative developments were seen in the local bourse. After five straight weeks of rallying, the market pulled back, giving up its position at the 7,400-7,500 range in the process. Trading has toned down as seen in the thinning value turnover and foreigners have turned net sellers for the past three trading days,” Japhet Louis O. Tantiangco, senior research analyst at Philstocks Financial, Inc., said in a Viber message.

For this week, the market may rebound on bargain hunting before the BSP’s review, he said.

“A rate cut, if delivered, may give the market a boost. Investors are also expected to watch out for clues on the BSP’s policy outlook. If hints of more policy easing would be given, then it is expected to spur optimism amongst investors,” Mr. Tantiangco said.

“We could see a resurgence of selling pressure on Wednesday as investors await the BSP’s policy decision… We believe markets will closely monitor how the recent positive inflation surprise, and rising geopolitical tensions in the Middle East would factor into the BSP’s policy decision and guidance,” Rastine Mackie D. Mercado, research director at China bank Securities Corp., said in an e-mail.

A BusinessWorld poll conducted last week showed that 16 of 19 analysts expect the Monetary Board to cut benchmark interest rates by 25 basis points for a second straight meeting at its policy review on Oct. 16 (Wednesday). This would bring the policy rate to 6% from the current 6.25%.

Jayniel Carl S. Manuel, an equity trader at Seedbox Securities, Inc., said sentiment may be mixed this week “as both technical and fundamental factors weigh in.”

“On the technical front, the PSEi has recently pulled back after peaking near 7,415, now sitting around 7,310, down 1.36%. This decline suggests that the index may enter a consolidation phase or face further downside pressure,” he said.

Mr. Mercado placed the PSEi’s support at 7,100 and resistance at 7,550-7,600.

“The market may retest the 7,400-7,500 range. If it manages to come back to this area, then this will be considered as its support while resistance would be at 7,700. If it fails, however, then this will be its resistance while support would be at 7,150,” Mr. Tantiangco said. “Key downside risks seen for the market are the movement of our currency as well as the tensions in the Middle East.”