Philippine shares inch up on Fed’s dovish shift

Philippine shares inched up to a near five-month high on Tuesday after US Federal Reserve Chair Jerome H. Powell said they could begin their easing cycle next month.

The Philippine Stock Exchange index (PSEi) rose by 0.16% or 11.45 points to finish at 6,973.41 on Tuesday, while the broader all shares index improved by 0.3% or 11.55 points to end at 3,761.28.

This was the PSEi’s best close in nearly five months or since it ended at 6,979.81 on April 1.

“The PSEi followed global indices higher after Federal Reserve Chairman Powell said that the time has come for the Fed to adjust rates. However, profit-taking kept the benchmark index below the key 7,000 level,” AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message.

“Investors cheered the Fed’s dovish signals as monetary policy easing by the Fed would give more room for the Bangko Sentral ng Pilipinas (BSP) to ease their policy, too,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

Mr. Powell on Friday endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank’s 2% target, Reuters reported.

With its policy rate currently in the 5.25%-5.5% range, the Fed has “ample room” to reduce borrowing costs to cushion the economy, Mr. Powell said.

Meanwhile, the BSP on Aug. 15 reduced its target reverse repurchase rate by 25 basis points (bps) to 6.25%. Prior to the cut, the Monetary Board kept the policy rate at an over 17-year high of 6.5% for six straight meetings following cumulative hikes worth 450 bps between May 2022 and October 2023 to combat elevated inflation.

BSP Governor Eli M. Remolona, Jr. said they could cut rates by another 25 bps within the year. The Monetary Board’s remaining policy-setting meetings this year are on Oct. 17 and Dec. 19.

“Philippine shares slowly inched towards the 7,000 level as investors start to rebalance ahead of both the MSCI and the end of month closing,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan added in a Viber message.

The majority of sectoral indices closed lower. Services declined by 0.4% or 8.95 points to 2,229.11; holding firms dropped by 0.33% or 19.45 points to 5,864.39; financials went down by 0.04% or 0.97 points to 2,121.42; and industrials slipped by 0.32 point to 9,237.62.

On the other hand, property surged by 2.71% or 73.54 points to 2,778.13; and mining and oil rose by 0.12% or 10.23 points to 8,166.20.

Value turnover slipped to PHP 6.8 billion on Tuesday with 831.25 million shares changing hands from the PHP 6.99 billion with 653.22 million issues traded on Thursday.

Advancers beat decliners, 110 versus 94, while 51 names were unchanged.

Net foreign buying went down to PHP 897.83 million on Tuesday from PHP 2.34 billion on Thursday. — R.M.D. Ochave with Reuters