Another BSP rate cut seen to boost stocks

October 14, 2024 | 12:00am

MANILA, Philippines — The bellwether Philippine Stock Exchange index (PSEi) may re-enter the 7,500 level this week on confidence the Bangko Sentral ng Pilipinas (BSP) would deliver another rate cut in its policy meeting on Wednesday.

Philstocks Financials Inc. research manager Japhet Tantiangco said the market may rally back to the 7,400 to 7,500 range as investors fetch value stocks affected by last week’s slump.

Likewise, the PSEi stands to gain from another round of monetary easing, if the BSP chooses to slash interest rates for the second meeting in a row on Wednesday.

“With last week’s decline, we may see some bargain hunting [this] week. Investors, however, are expected to focus on the BSP’s upcoming policy meeting,” Tantiangco said.

“A rate cut, if delivered, may give the market a boost, [and] 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.

However, Tantiangco warned against expecting too much this week, as the geopolitical conflict in the Middle East, particularly in Gaza, enters its second year, with no clear path to a resolution.

Online brokerage 2TradeAsia believes the resistance level is at 7,500, with immediate support at 7,100, as investors tend to be sensitive to the outcome of economic data.

The BSP is scheduled to release this week the overseas Filipino remittances data and the overall balance of payment position, both of which may swing trading activities.

Still, 2TradeAsia expects investors to head into the week on the upside, lifted by the combo of a clearer interest rate path and easing inflation. In August the BSP brought down its policy rate by 25 basis points to 6.25 percent, marking the first reduction in almost four years.

Following that, BSP Governor Eli Remolona Jr. said the central bank has room for one more rate cut, and investors believe it could be delivered on Wednesday. On top of this, inflation slowed to 1.9 percent in September, the lowest rate in more than four years.

2TradeAsia said risks are on the rise, too, pointing out that the worsening situation in the Middle East could push oil prices outside comfortable range.

The PSEi last week lost 157 points to close at 7,310.32, down by 2.11 percent on a weekly basis, as investors cashed out from the recent surge of the market.