Philippine shares are expected to take their cue from the US Federal Reserve’s policy decision this week, with traders betting on a 25-basis-point rate cut when the meeting concludes late Wednesday (Thursday morning Manila time).
Analysts said the Fed’s move could provide a near-term boost for local equities and the peso, though broader sentiment will remain cautious. Bargain hunters may also return after five straight weeks of losses pushed valuations to historic lows.
The Philippine Stock Exchange index (PSEi) closed last week 0.65 percent lower at 6,109.21, while the broader All Shares dropped 0.19 percent to 3,685.59. Foreign investors were net sellers of shares worth P153.99 million.
Japhet Tantiangco, research manager at Philstocks Financial Inc., said the PSEi was trading at just 10.5 times earnings—well below its five-year average of 17.3 times and the regional average of 17.9 times.
“With the five-week decline, we may see some bargain hunting next week,” he said at the weekend. “For a strong rebound, however, the local market still needs a catalyst. Investors are expected to look forward to the Federal Reserve’s upcoming policy meeting.”
Tantiangco added that a Fed rate cut would not only support equities but also strengthen the peso, “which would be favorable to the local bourse.”
He warned, however, that “lingering concerns over corruption issues in the Philippines may continue to weigh on sentiment.”
Investors will also parse July remittance data due September 15 for fresh clues on domestic demand.
Online brokerage 2TradeAsia.com noted that a 25-point cut is “nearly locked in,” given cooling inflation and a softening US labor market. “A wildcard is a potential 50-basis-point move if downside risks materialize,” it said, adding that a deeper cut could set the stage for a series of dovish adjustments over the next few quarters.
At the same time, 2TradeAsia.com flagged headwinds from the International Monetary Fund’s projection of global inflation picking up to an average of 4 percent next year.
It also said the Marcos administration’s intensified anti-corruption drive may cause overseas investors to adopt a wait-and-see stance in the short term, potentially pressuring the peso and curbing inflows.
“Longer-term, however, rooting out corruption could foster robust capital formation by rebuilding public trust and paving the way for efficient infrastructure rollouts,” 2TradeAsia.com said.
