Investors are expected to pick up bargains this week on expectations of a 25-basis-point (bps) rate cut by the Bangko Sentral ng Pilipinas (BSP) at its next policy meeting on Thursday.
Buying interest may be fueled further by hopes the US Federal Reserve would also cut its policy rate next month, analysts said.
This week, however, trading is shortened by a holiday and analysts are expecting prices to move sideways amid a lack of other strong catalysts. Philippine markets, schools and offices are closed on Monday, August 25, for National Heroes Day.
Peter Louise Garnace, an equity research analyst at Unicapital Securities Inc., expects the local market to “trade sideways with an upward bias, as investors anticipate the BSP to sustain its easing cycle.”
Last week, the market closed lower, with the benchmark PSEi down 0.54 percent, ending Friday’s trade at 6,281.58.
The broader All Shares index fell 0.36 percent to 3,737.58. Foreign funds were net sellers, with outflows of P1.53 billion, contributing to a year-to-date net selling position of P41.57 billion.
Japhet Tantiangco, research manager at Philstocks Financial Inc., attributed last week’s decline to a lack of positive news.
Tantiangco and Garnace agreed investors are now digesting recent remarks by US Federal Reserve Chairman Jerome Powell that a “softening US labor market could warrant an adjustment on the Fed’s policy stance while inflation risks are contained.”
Tantiangco added that local “buying activity is expected to be boosted by hopes of a Federal Reserve policy rate cut next month following cues from its Chairman Jerome Powell at the Jackson Hole Symposium.”
Investors will also be monitoring local and international data this week, including the Philippines’ August trade figures and the US’ core Personal Consumption Expenditure (PCE) price index.
Online stock brokerage 2TradeAsia.com said the PSEi is currently buoyed by steady second-quarter earnings from banks and consumer companies, even as it contends with “tepid momentum amid foreign outflows.”
The brokerage firm suggested that the government’s recent anti-corruption efforts and reshuffling in key bureaus could signal positive fiscal reforms. This, along with the BSP’s anticipated rate cuts and renewed government spending post-elections, could create a favorable environment for equities, the firm said.
2TradeAsia advised investors to “wait for clarity before doubling down on risk” in the short term, but noted that “in the long run, markets hum with possibility: accumulate in undervalued growth pockets, balancing with defensive assets to weather global tremors.”
