A STOCK market rebound is likely due to bargain hunting and an expected policy rate cut, analysts said, but a further weakening of the peso could continue weighing on sentiment this week.
The benchmark Philippine Stock Exchange index (PSEi), which hit an over four and a half-year high of 7,554.68 last Monday, closed Friday at 7,310.32 — 2.1 percent lower week-on-week.
Last week’s decline was a “healthy correction” after market gains for “most weeks since the latter part of June 2024,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said, adding that the peso’s fall had also contributed.
Philstocks Financial Inc. research manager Japhet Tantiangco said that “negative developments” had driven the bourse lower and that “trading has toned down as seen in the thinning value turnover and foreigners have turned net sellers for the past three trading days.”
Still, he said that the PSEi could 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,” he said, noting that “if it fails however, then this will be its resistance while support would be at 7,150.”
Bargain hunting might happen this week, Tantiangco also said, and “investors are expected to focus on the BSP’s (Bangko Sentral ng Pilipinas) upcoming policy meeting.”
The central bank’s policymaking Monetary Board will meet this Wednesday and is widely expected to again cut key interest rates by 25 basis points — the same as in August it started an easing cycle.
“A rate cut, if delivered, may give the market a boost,” Tantiangco said, adding that “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 among investors,” he added.
Tantiangco, however, said that tensions in the Middle East remained a downside risk along with the peso’s direction.
“A further depreciation of our currency and an escalation of tensions in the Middle East is expected to weigh on the market,” he added.
Investors could also act on August overseas Filipino worker remittance data due tomorrow, Tantiangco said.
Ricafort, meanwhile, said “the BSP could do a further/bigger -0.50 [percentage point, or 50 bps] local policy rate cut by 4Q (fourth quarter) 2024, at least,” either on October 17 or December 19, “as signaled by some local monetary authorities recently to match the latest -0.50 Fed (US Federal Reserve) rate cut on September 18, 2024.”
Online brokerage firm 2TradeAsia.com, however, said that “disinflation kicking in” was “taking off pressure for dramatic monetary policy action.”
“The clearer interest rate path and less CPI (consumer price index) stressors are seen to improve consumer confidence and credit activity, with an ‘artificial’ boost in early 2025 from the midterm elections,” it added.
“Potential spoilers to short/medium-term momentum include escalating tensions in the Middle East, which is threatening to push oil price outlook outside of our comfortable range, exacerbated by a stronger greenback in the past week.”
The online brokerage firm also cautioned investors, noting that the PSEi “continues to be hypersensitive to broader market data.”
Unicapital Group head of research Wendy Estacio-Cruz also said that last Friday’s closing was due to the weakened peso, driven by reduced expectations for a significant rate cut by the Fed following strong jobs data and the escalating conflict in the Middle East.
“This week, we anticipate the market fluctuating between the 7,200 and 7,600 levels ahead of the BSP monetary policy meeting on October 16,” she added.
EARL JOHN ALFARO
