September 16, 2024 | 12:00am
MANILA, Philippines — After successfully breaching the psychological 7,000 level last week, the local stock market looks to stay above the mark in the coming days on hopes of a possible interest rate cut by the US Federal Reserve.
The benchmark Philippine Stock Exchange index (PSEi) successfully returned to the 7,000 level last Thursday after over 19 months.
Despite closing in the red last Friday, it managed to stay above the 7,000 mark at 7,022.85, up by 1.25 percent week-on-week.
Unicapital head of research Wendy Estacio-Cruz said the PSEi may continue trading above the 7,000 level this week as the market anticipates a potential interest rate cut by the US Fed during its FOMC meeting on Sept. 17 and 18.
“This expectation is supported by easing inflation in the US and slower-than-expected job creation. While the August unemployment rate was close to expectations, the soft jobs report points to a deterioration in labor market conditions,” she said.
US inflation in August declined to 2.5 percent, its lowest level since February 2021, compared to 3.7 percent in August 2023 and slightly below the expected 2.6 percent.
“However, higher-than-expected core inflation may affect the magnitude of the interest rate cut, making a more aggressive reduction less likely. While we initially anticipated a 50 basis points rate cut, we now expect a 25 bps cut at the upcoming Fed meeting,” Estacio-Cruz said.
Philstocks Financial research manager Japhet Tantiangco, for his part, said while the local market was able to close above the crucial 7,000 level last week, the trading activity backing the market’s breach of the said level was tepid, implying that conviction was lukewarm.
As such, Tantiangco said the market may continue to test the validity of its breach of the 7,000 level this week.
“Taking the center stage would be the Federal Reserve’s policy decision and outlook. A policy rate cut by the Fed together with hints of further easing moving forward is expected to fuel optimism at the local front since this would give the Bangko Sentral ng Pilipinas more room to ease their policy too,” he said.
Tantiangco said the local currency’s strengthening against the US dollar, if it continues this week, is also expected to help the local bourse.
Investors are likewise expected to watch out for our upcoming OFW cash remittance data for clues on the local economy.
“Chartwise, if the market holds ground at 7,000, its trading range is seen from 7,000 to 7,150,” Tantiangco said.
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