Fed, BSP meetings to drive this week’s trading

THE UPCOMING policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) will be the main drivers of this week’s stock trading as investors await guidance on the direction of benchmark interest rates here and abroad.

On Thursday, the Philippine Stock Exchange index (PSEi) declined by 71.08 points or 1.12% to end at 6,234.77, while the broader all shares index retreated by 22.08 points or 0.65% to close at 3,329.58. 

Week on week, the PSEi fell by 10.41 points from its 6,245.18 close on Dec. 1. The stock market was closed on Friday for a nonworking day.

“The local bourse was range-bound for the week amid steady local inflation in November,” online brokerage 2TradeAsia.com said in a market report.

The market has been on a losing streak for two straight weeks amid profit-taking, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

“The local market remains at bargain levels with a price-earnings ratio of 13.46 times, below the 2018-2022 average of 19.08 times. However, strong buying may only happen if investors see catalysts that would brighten our economic outlook,” he added.

For this week, the policy meetings of the Fed and the BSP will be the main trading drivers, Mr. Tantiangco said.

The Federal Open Market Committee will hold its final review for the year on Dec. 12-13, while the BSP’s Monetary Board will meet to discuss policy on Dec. 14.

“[This] week, investors are expected to focus on the policy meetings of the Federal Reserve and the BSP as they look for clues on the outlook for interest rates. Hints of easing may spur optimism in the market while hints of further tightening is expected to weigh on sentiment,” he said.

“The BSP is likely to echo the Fed in a status quo in rates. Philippine inflation has further eased to 4.1% in November from October’s 4.9%, and prior rate hikes have seemingly impacted foreign exchange and money supply as intended,” 2TradeAsia.com said. 

The market will also await hints on the timing of Fed and BSP rate cuts, it said.

The BSP has raised benchmark interest rates by a cumulative 450 basis points (bps) since May 2022 to help bring down its inflation, with its policy rate now at a 16-year high of 6.5%.

Meanwhile, the US central bank has hiked rates by a cumulative 525 bps to the 5.25%-5.5% range since it began its tightening cycle in March 2022.

Investors expect both the BSP and the Fed to start easing their policy stances by 2024.

“Investors may also look towards our upcoming foreign trade, foreign investment, and overseas Filipino workers cash remittances data for clues on our local economy,” Mr. Tantiangco added. 

He expects the PSEi to retest its 10-day exponential moving average this week.

“The market’s major support is seen at 6,000. Major resistance is seen at 6,400,” he added. — R.M.D. Ochave