BARGAIN hunting could help boost the stock market this week, analysts said, but the trimmed rate cut projections by the US Federal Reserve (Fed) and the Bangko Sentral ng Pilipinas (BSP) could potentially dampen investor sentiment.
The benchmark Philippine Stock Exchange last week hit an over five-month low on Dec. 19, closing at 6,395.60, but rebounded a day after, ending the week at 6,406.38, down by 3.2 percent week-on-week.
This was the lowest close of the stock index since it closed at 6,358.38 on July 2.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the stock market has been on a decline for over two months, largely due to US President-elect Donald Trump’s statements on protectionist policies, which could lead to higher US inflation, fewer Fed cuts, slower global trade, and clipped gross domestic product growth.
Philstocks Financial Inc. research manager Japhet Tantiangco described last week’s trading as “turning more bearish” as it extended its decline.
“The bourse’s MACD (moving average convergence/divergence) line has crossed below the signal line, indicating downward momentum,” he said.
“Its 50-day and 200-day exponential moving averages are about to form a death cross with the appearance of such indicating a possible downtrend in the medium to long run,” Tantiangco added.
He further said that the market is still unable to break above its 10-day exponential moving average, but the 6,400 support line still holds.
With the continuous decline, Tantiangco said that “from a fundamental standpoint, the local market has been driven to more attractive levels, giving opportunity to bargain hunters.”
“However, the trimmed rate cut projections of both the Federal Reserve and the Bangko Sentral ng Pilipinas may weigh on the market,” he noted, adding that concerns about the 2025 national budget may also affect market sentiment.
Tantiangco said that the further depreciation of the peso is still expected to pose downside risks to the market. The peso hit a record low of P59 against the dollar last Dec. 19.
For its part, online brokerage firm 2TradeAsia.com said that hawkish comments from the US and Philippine central banks spooked local equities and led to the stock index falling below 6,500.
“The Fed and the BSP played out their predicted moves this December round of policy meetings: both 25-bps (basis points) sized cuts to cap the year,” it said.
“The catch is in the outlook for next year, both scaling back on aggressive rate cutting; by the end of this week, consensus is at less than 100-bps cuts for the entirety of 2025,” it added.
The online brokerage firm said this is another case of central banks’ commentary moving the markets instead of the actual rate change, which is a phenomenon likely to continue well into next year as policy magnitude shifts to be more dependent on evolving data.
“On a sliding scale with hawkish and dovish policy on either end, a lot of 2025 is shaping up to be played at the gray area in the middle,” it explained.
2TradeAsia added that central banks remain directionally leaning toward a neutral rate, acknowledging the role of pro-growth policy amid weaker global economic growth.
It advises investors to “expect quiet sessions in the final trading week of the year.”
“Take the time to reassess portfolio strategies/make tactical pivots to average down/lock in yields amid the recent bout of pessimism,” it said.
“2025 forces and themes are looking to demand more active management styles as the hunt for alpha becomes less straightforward and more challenging,” it added.
Unicapital Group research head Wendy Estacio-Cruz, meanwhile, said, “The index bounced on Friday (Dec. 20) amid bargain hunting as investors digested the rate cuts from both the US Fed and the BSP.”
“We expect a range of 6,300 to 6,700 next week, with a possible Santa rally,” she concluded.
Analysts said that investors are expected to watch out for more positive catalysts for the week and that the immediate support this week would be at 6,400, with resistance at 6,500-6,800.
