The country’s exit from the Financial Action Task Force (FATF) gray list and the lower bank reserves hold the potential to extend a stock market rally this week.
Graduating from the FATF gray list, as well as the Bangko Sentral ng Pilipinas’ (BSP) decision to reduce further the banks’ reserve requirement by 200 basis points to 5 percent from 7 percent, are likely to support sentiment, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said.
These market-positive factors “could increase investor confidence in the country, going forward,” Ricafort added.
These developments, however, are not direct catalysts that could drive the market higher over a long period of time, said Jonathan Ravelas, managing director at eManagement for Business and Marketing Services (EMBM)
The FATF exit has the potential to extend the market rally up to 200 points, Ravelas said.
“No catalyst, but the recent exit from the FATF gray list could extend a rally in stocks close to the 6,300 levels,” he added.
The main PSEi gained 0.52 percent to 6,098.04 points on Friday, and 0.6 percent week-on-week to 6,061.33.
Ravelas, however, pointed out that investors should “still sell on strength” as trading could also “remain sideways to down.”
In view of the Trump factor that had weighed on the markets in recent weeks, Ricafort said the exit from the FATF gray list after nearly four years “would help increase foreign investment inflows into the country, as well as reduce the costs and other requirements when sending money to the Philippines.”
“It is also a good signal on the country’s improved governance, especially in view of the country’s POGO ban by end-2024 and other remedial measures in recent years,” Ricafort said.
Ricafort sees the decision to cut the reserve requirement ratio for banks by 200 bps starting March 28, 2025 releasing P330 billion of liquidity into the financial system, boosting loans and investments.
But online stockbroker 2tradeasia.com has a dimmer view of the market short-term, because of the “protracted risk-off sentiment pending stabilization of external noise, particularly concerning the inflation-interest rate trend and geopolitics as the second quarter approaches.”
“Stay liquid for opportunities while the index finds a stronger identity around 6,000,” 2TradeAsia said.
