PSEi rallies to 7,400 level after jumbo RRR cut

The main index surged to the 7,400 level on Monday, notching its best finish since February 2022 and marking its return to bull market territory, after the Bangko Sentral ng Pilipinas (BSP) announced a jumbo cut in banks’ reserve ratios.

The Philippine Stock Exchange index (PSEi) rose by 2.27% or 164.93 points to end at 7,417.25 on Monday, while the broader all shares index gained by 1.6% or 62.40 points to finish at 3,958.02.

This was the PSEi’s best close in 31 months or since it finished at 7,440.91 close on Feb. 22, 2022. It was also the first time the index ended above the 7,400 mark since March 2022.

“The benchmark index continued its very bullish momentum to close at its highest level since February 2022 on the back of the BSP’s significant reduction of the reserve requirement ratio (RRR) and strong foreign fund flows,” Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

He added that the PSEi is now in bull market territory as it is now up by more than 20% from the 52-week low of 6,158.48 logged on June 21, 2024.

“The market is technically overbought and we expect a pullback very soon,” Mr. Colet said.

The BSP on Friday said it will reduce the RRR for universal and commercial banks and nonbank financial institutions with quasi-banking functions by 250 basis points (bps) to 7% effective on Oct. 25.

It will also cut the RRR for digital banks by 200 bps to 4%, while the ratio for thrift lenders will be reduced by 100 bps to 1%. Rural and cooperative banks’ RRR will likewise go down by 100 bps to 0%.

“The local bourse opened the week above 7,400 ahead of key data releases. In the US, the durable goods report on Thursday and the core personal consumption expenditures inflation report on Friday will be closely monitored for inflation signals,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“Several Federal Reserve officials are also set to speak, potentially providing insights into monetary policy,” he said.

Almost all sectoral indices closed higher on Monday. Financials climbed by 3.68% or 84.05 points to 2,362.18; services surged by 2.01% or 44.72 points to 2,264.75; holding firms increased by 1.95% or 120.65 points to 6,297.69; property went up by 1.71% or 50.02 points to 2,961.74; and industrials inched up by 1.06% or 102.93 points to 9,747.52.

Meanwhile, mining and oil inched down by 0.01% or 1.04 points to 8,527.22.

Value turnover declined to PHP 8.72 billion on Monday with 698.15 million issues changing hands from the PHP 16.98 billion with 1.09 billion shares traded on Friday.

Advancers outnumbered decliners, 121 versus 93, while 52 names were unchanged.

Net foreign buying went up to PHP 1.77 billion on Monday from PHP 1.28 billion on Friday. — Revin Mikhael D. Ochave