Shares rebound on hopes of early BSP rate cuts

Local shares rebounded on Tuesday amid hopes that the Bangko Sentral ng Pilipinas (BSP) would cut rates by May on expectations of easing inflation.

The Philippine Stock Exchange index (PSEi) rose by 0.82% or 56.05 points to finish at 6,854.66 on Tuesday, while the broader all shares index climbed by 0.53% or 19.09 points to close at 3,581.70.

“This Tuesday, the local market bounced back by 56.05 points to 6,854.66 as investors regained confidence after a two-day decline. The positive sentiment was fueled by rate-cut hopes from the Bangko Sentral ng Pilipinas after Pantheon Economics stated that the central bank may start to cut rates by May,” Philstocks Financial, Inc. Research and Engagement Officer Mikhail Philippe Q. Plopenio said in a Viber message.

The BSP is widely expected to gradually cut benchmark interest rates this year starting as early as May, with prices likely to be under control, analysts said.

Monetary authorities are becoming less hawkish based on their policy statement last week, Pantheon Economics Chief Emerging Asia Economist Miguel Chanco said in a note, with a potential pivot this year on the table.

The Monetary Board last week kept the policy rate at a near 17-year high of 6.5% for a third straight meeting, as expected by 15 of 17 analysts in a BusinessWorld poll. Interest rates on the overnight deposit and lending facilities were also left unchanged at 6% and 7%, respectively.

The BSP raised borrowing costs by 450 basis points from May 2022 to October 2023.

BSP Governor Eli M. Remolona, Jr. said in a statement that the central bank is ready to adjust its monetary policy settings as necessary amid upside risks to inflation.

“Additionally, investors cheered the recent moves by the People’s Bank of China wherein it held its short-term interest rates unchanged and cut its five-year loan prime rate by 25 basis points,” he added.

The PSEi recovered following a technical sell-off on Monday, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

“Economic data from the previous week raised concerns that the Federal Reserve might delay interest rate cuts, prompting uncertainty among market participants,” he said.

Majority of sectoral indices closed higher. Services went up by 2.39% or 41.34 points to 1,766.85; financials increased by 0.83% or 16.46 points to 1,999.39; holding firms rose by 0.74% or 47.38 points to 6,391.33; and property climbed by 0.71% or 20.42 points to 2,897.50.

On the other hand, industrials fell by 0.85% or 78.27 points to 9,121.59, and mining and oil fell by 0.22% or 20.25 points to 8,803.58.

Value turnover rose to PHP 4.94 billion on Tuesday with 520.65 million issues changing hands from the PHP 4.22 billion with 637.72 million shares seen the previous day.

Advancers outnumbered decliners, 106 versus 78, while 46 names closed unchanged.

Net foreign buying rose to PHP 666.48 million on Tuesday from PHP 339.37 million on Monday. — R.M.D. Ochave