Shares to extend climb on Fed, BSP rate cut hopes

Philippine stocks may climb further this week as investors expect further monetary easing here and in the United States, which would support economic growth.

On Friday, the Philippine Stock Exchange index (PSEi) rose by 0.49% or 30.87 points to close at 6,264.49, while the broader all shares index increased by 0.17% or 6.36 points to 3,740.81.

Week on week, the PSEi also went up by 155.28 points from its 6,109.21 close on Sept. 12.

“The local market rose further, backed by positive cues from Wall Street and lower local yields,” Philstocks Financial Inc. Research Manager Japhet Louis O. Tantiangco said in a market note on Friday. “These come following the Federal Reserve’s move to cut their policy rates by 25 basis points (bps) together with their signal of more possible rate cuts within the year.”

“Philippine equities gained traction [last] week as momentum gained for more Fed rate cuts in its next policy meetings that may be seconded by local monetary authorities,” online brokerage 2TradeAsia.com said in a market report.

The Federal Reserve, goaded by the risk of rising unemployment, reduced interest rates on Wednesday for the first time since December and indicated more cuts would follow to halt any slide in a labor market already experiencing higher joblessness among Blacks, a declining workweek, and other signs of weakness, Reuters reported.

Fed Chair Jerome H. Powell, speaking in a press conference after the US central bank lowered its benchmark interest rate by a quarter of a percentage point to the 4%-4.25% range and indicated more cuts would follow at meetings in October and December, said the softening job market was now top of the mind for him and his fellow policymakers.

Meanwhile, last month, the Bangko Sentral ng Pilipinas (BSP) reduced borrowing costs by 25 bps for the third consecutive meeting, bringing the policy rate to 5%. It has slashed benchmark interest rates by a total of 150 bps since August 2024.

BSP Governor Eli M. Remolona, Jr. has left the door open to one more cut within this year to support the economy if needed.

2TradeAsia.com said prospects of more Fed and BSP cuts “should provide a tailwind to global risk assets as lower rates and a steeper yield curve tend to lift valuations.”

“This should also give opportunity for cyclicals and emerging markets a chance to shine, especially in the context of a weaker greenback.”

Lower rates would also boost corporate earnings, which will improve market sentiment, it added. It put the PSEi’s immediate support at 6,000 and resistance at 6,300.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message that the end of the “Ghost Month” could boost market activity. The Ghost Month is a period in the Lunar calendar when some investors refrain from making big investments or decisions, resulting in lower trading volumes. For this year, it ran from Aug. 23 to Sept. 21. — A.G.C. Magno with Reuters