Stocks may extend climb on BSP rate cut hopes

PHILIPPINE STOCKS could climb further this week on hopes of further monetary easing by the Bangko Sentral ng Pilipinas (BSP) as the November inflation print was within market expectations.

On Friday, the Philippine Stock Exchange index (PSEi) rose by 0.57% or 38.37 points to close at 6,729.14, while the broader all shares index increased by 0.36% or 13.79 points to 3,790.68.

Week on week, the PSEi climbed by 1.74% or 115.29 points from the 6,613.85 close on Nov. 29.

“The local bourse shrugged off the slight uptick in domestic inflation, posting gains to end the week,” online brokerage firm 2TradeAsia.com said in a market note.

Philippine headline inflation picked up to 2.5% year on year in November from 2.3% in October, the government reported last week.

Still, this was slower than 4.1% in the same month a year ago and was within the BSP’s 2.2%-3% forecast for the month. The November print also matched the median estimate in a BusinessWorld poll of 15 analysts.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the market could continue to rise amid improving sentiment, placing the PSEi’s support at 6,700-6,800 and resistance at 7,000.

“The market could move with an upward bias amid hopes that the BSP will further ease monetary policy. This comes as inflation is seen to remain under control based on the latest figures,” he said.

The Monetary Board will hold its last review for the year on Dec. 19. The BSP has cut benchmark borrowing costs by a total of 50 basis points (bps) since kicking off its easing cycle in August, bringing its policy rate to 6%.

“In addition, the local currency’s appreciation against the US dollar, if it continues, may give the market a boost,” Mr. Tantiangco added.

On Friday, the peso closed at P57.735 per dollar, strengthening by 14.5 centavos from its P57.88 finish on Tuesday, Bankers Association of the Philippines data showed. This was the local unit’s best finish in more than six weeks or since its P57.59 close on Oct. 21.

“Investors are also expected to watch out for the US’ upcoming November inflation numbers as these would give clues on the Federal Reserve’s policy outlook,” Mr. Tantiangco said. US consumer and producer inflation data will be released on Dec. 11 (Wednesday) and Dec. 12 (Thursday), respectively.

The Fed will hold its last policy meeting for the year on Dec. 17-18. Markets widely expect the US central bank to cut rates by 25 bps next week.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort and 2TradeAsia.com put the PSEi’s support at 6,500 and resistance at 7,000.

“Local equities, fundamentally, are in a position of strength relative to counterparts in developed markets, common headwinds notwithstanding… Forces in the short-run are likely to maintain pressure on the PSEi, which may camp south of 7,000 until yearend,” 2TradeAsia.com said. — Revin Mikhael D. Ochave