Stocks may rebound this year as rates go down

Philippine shares may rise this year as a robust economic outlook and expectations of monetary policy easing could lift market sentiment, analysts said.

The Philippine Stock Exchange index (PSEi) ended at 6,450.04 on Dec. 29, the last trading day of 2023. This was down by 116.35 points or 1.8% from its 6,566.39 finish at end-2022.

The market took a “rollercoaster ride” in 2023, China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“We peaked in January, trended down in February, went into a sideways pattern from mid-March to August, cratered and ultimately hit the year’s intraday bottom on the last day of October, after which the index staged a strong rally,” Mr. Colet said.

Still, even after a weaker year for the Philippine stock market, the PSEi may rebound this year and could even climb to as high as 7,500, Mr. Colet said.

“We expect Philippine equities to do well in 2024, primarily on the back of better macroeconomic data and a dovish shift in monetary policy. Other factors that could attract funds to the stock market are capital markets reforms as well as significant progress in steps to liberalize the economic provisions of the Constitution,” he said.

The Bangko Sentral ng Pilipinas (BSP) is widely expected to begin cutting benchmark interest rates this year to keep a healthy differential with the US Federal Reserve.

However, BSP Governor Eli M. Remolona, Jr. last month said the central bank is unlikely to cut borrowing costs in the next few months and is leaning towards keeping rates higher for longer.

The central bank raised benchmark interest rates by a total of 450 basis points from May 2022 to October 2023, bringing the policy rate to a 16-year high of 6.5%.

The index could retest the 6,700 to 7,000 levels this year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

“The PSEi could rebound in 2024 and could be positively affected by and play catch up with the bullishness in the United States and other major global stock markets,” Mr. Ricafort said. 

“For early 2024, there is a good chance for start of the year gains amid the possible tail end of the Santa Claus rally on Wall Street,” he said. 

However, investors could remain cautious during the first trading week of the year amid a lack of catalysts, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

December inflation data to be released on Friday could drive trading in the coming days, he said.

“An inflation print lower than the preceding month’s 4.1%, especially one which is near the lower end of the BSP’s 3.6-4.4% forecast range, may spur positive sentiment in the market. However, one which is faster than the preceding month may weigh on the local bourse,” Mr. Tantiangco added.

He put the PSEi’s support at 6,400 and resistance at 6,700 for this week. — R.M.D. Ochave