PSEi up as slower CPI boosts Fed rate cut hopes

Philippine stocks climbed on Thursday as US consumer inflation eased last month, boosting US Federal Reserve rate cut hopes, and as the market awaited the Bangko Sentral ng Pilipinas’ (BSP) policy announcement after trading hours.

The Philippine Stock Exchange index (PSEi) rose by 1.06% or 69.57 points to end at 6,628.20 on Thursday, while the broader all shares index went up by 0.71% or 25.10 points to 3,524.52.

“The index rose with most Asian markets as data showing that US consumer inflation eased slightly in April reignited bets that the Federal Reserve will start cutting interest rates this year,” Chinabank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

AB Capital Securities, Inc. Vice-President Jovis L. Vistan likewise said in a Viber message that cooler US consumer inflation “reignited optimism for potential rate cuts in the US.”

“This development reignited optimism for potential rate cuts in the US, with the market now factoring in the likelihood of two cuts within the year. Consequently, this has alleviated some of the pressures on the Philippine local currency and domestic interest rates,” Mr. Vistan said.

US consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut, Reuters reported.

The consumer price index (CPI) rose 0.3% last month after advancing 0.4% in March and February, the Labor department’s Bureau of Labor Statistics said.

In the 12 months through April, the CPI increased 3.4% after climbing 3.5% in March. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month and 3.4% year on year.

Mr. Colet added that the PSEi rose as investors expected the BSP to keep benchmark rates unchanged on Thursday. The Monetary Board maintained its policy rate at 6.5% for a fifth straight meeting, it announced after market hours.

BSP Governor Eli M. Remolona, Jr. said after the meeting that they are now “less hawkish” as upside risks to inflation have ebbed, adding that rate cuts could start by the third or fourth quarter.

Almost all sectoral indices rose on Thursday, except for financials, which dropped by 0.33% or 6.71 points to 2,024.75.

Property climbed by 3.72% or 91.66 points to 2,552.23; holding firms went up by 1.63% or 94.56 points to 5,876.51; mining and oil rose by 0.2% or 18.66 points to 9,217.99; services increased by 0.19% or 3.84 points to 1,973.99; and industrials inched up by 0.01% or 1.73 points to 9,170.95.

Value turnover rose to PHP 7.05 billion on Thursday with 886.04 million shares switching hands from the PHP 5.5 billion with 464.27 million issues traded on Wednesday.

Advancers outnumbered decliners, 120 to 78, while 46 names were unchanged.

Net foreign selling went up to PHP 196.95 million on Thursday from PHP 84.66 million on Wednesday. — Sheldeen Joy Talavera with Reuters