THE stock market could continue moving higher this week, analysts said, building on momentum from last Friday’s announcement of lower-than-expected September inflation.
The benchmark Philippine Stock Exchange index (PSEi), which plummeted to as low as 7,272.65 last Monday, managed to close at 7,467.92 last Friday — up 0.5 percent week-on-week.
Inflation hit an over four-year low of 1.9 percent last month from 3.3 percent in August, falling below the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 2.8-percent estimate and the 2.6-percent median in a Manila Times poll of economists.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the inflation result could “warrant further or even more aggressive local policy rate cuts, particularly a possible -0.50 [percentage point] rate cut, on the next BSP rate-setting meeting on October 16, 2024…”.
He noted, however, that BSP Governor Eli Remolona Jr. had said that gradual rate cuts of two 25 basis points were more likely during the final policy meetings for this year.
Philstocks Financial Inc. research manager Japhet Tantiangco, meanwhile, said that “trading activity has been waning … implying diminishing conviction.”
The market’s moving average convergence/divergence (MACD) — a momentum indicator — is “already about to cross below the signal line, a continuation of which would signal bearish momentum,” he added.
The latest inflation result, however, could boost sentiment and strengthen the case for continued rate cuts.
Tensions in the Middle East are a downside risk but Tantiangco said that investors may choose to focus on upcoming data on unemployment, foreign trade, and foreign investments data.
Local data set to be released this week are gross international reserves for September, to be released today by the BSP and to be followed by foreign direct investments data for July on Thursday.
The Philippine Statistics Authority, meanwhile, will release the August labor force survey and factory output data tomorrow and August trade data on Thursday.
Unicapital Group head of research Wendy Estacio-Cruz said the benchmark index could range between “7,400-7,500 levels ahead of the next monetary policy meeting on October 16.”
“This inflation print should support our view of another policy rate reduction,” she added.
Regina Capital Development Corp. Managing Director Luis Limlingan, meanwhile, said the bourse’s “upward momentum will be tested as the US will be watching for their own CPI (consumer price index) and other economic data related to inflation and employment.”
Online brokerage firm 2TradeAsia.com said “speculation is high for what could be a 50 bps rate cut from the BSP as early as this month.”
“Expectations have shifted since the [US Federal Reserve] cut big in September, and central banks globally are in a cat-and-mouse game to get ahead of the curve,” it added.
Despite uncertainties as to the magnitude of the rate cuts, 2TradeAsia.com said “the direction towards looser policy remains strong up until 2025-2026.”
Exporters, cyclicals, and banking are expected to benefit from lower interest rates amid a foreign exchange advantage and the improved consumer confidence.
Volatility, however, “is to be expected over the next weeks as liquidity makes its way to markets,” 2TradeAsia said.
“There could be windows for quick gains in the short-term as major capital influx may excessively compress risk premiums, but long-term positioning is encouraged in light of structurally better data [and fundamentals] at present,” it added.
Immediate support this week was seen at 6,810-7,400 and resistance at 7,500-7,700.
