Shares to trade sideways ahead of BSP decision

LOCAL EQUITIES are expected to trade sideways this week ahead of the policy meeting of the Bangko Sentral ng Pilipinas (BSP).

The Philippine Stock Exchange index (PSEi) declined by 97.31 points or 1.45% to end at 6,578.15 on Friday, while the all shares index fell by 40.53 points or 1.14% to 3,510.95.

Week on week, the PSEi shed 107.51 points or 1.61% from its close of 6,685.66 on May 5.

“On the last trading day of the week, the market failed to hold its ground above the 6,600 support level. The sentiment was dampened by the uncertainties surrounding the US debt ceiling,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

US President Joseph R. Biden said on Saturday that talks with Congress on raising the US government’s USD 31.4-trillion debt limit were moving along and more will be known about their progress in the next two days, Reuters reported.

Ms. Alviar said the higher debt-to-gross domestic product (GDP) ratio as of end-March also weighed on sentiment on Friday.

Data from the Bureau of the Treasury showed the national government’s outstanding debt as a share of the GDP rose to 61% as of end-March from the 60.9% seen at end-December.

Local shares went down on selling pressure following the quarterly MSCI rebalancing, China Bank Securities Corp. Research Associate Lance U. Soledad said in an e-mail.

For this week, the PSEi is expected to retest the 6,600 level, but investors are expected to tread cautiously ahead of the BSP’s policy meeting on Thursday, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said.

“A pause in the BSP’s monetary tightening may help the market end this week on a positive note, but another rate hike may keep the market moving on a downward bias,” Mr. Tantiangco said.

A BusinessWorld poll conducted last week showed 13 out of 18 analysts expect the Monetary Board to keep rates on hold this week.

Meanwhile, the remaining five see it hiking borrowing costs by 25 basis points (bps) at this meeting before pausing in the meantime.

The BSP has raised borrowing costs by 425 bps since May 2022, bringing its key rate to 6.25%, the highest in nearly 16 years.

“While investors would certainly welcome a strong indication of an end to the BSP rate hike cycle and a path for rate cuts in the second half of the year, it is likely for our central bank policy makers to be reserved in their outlook until they see a continued drop in inflation,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet added.

For this week, Philstocks Financial’s Mr. Tantiangco placed the PSEi’s support level at 6,400 and resistance at 6,600 if the market fails to return to its 6,600-6,800 trading range, while China Bank Securities’ Mr. Soledad put support at 6,500. — By Ashley Erika O. Jose with Reuters