Stock Talk: Philippine stock market surges on foreign investment wave 

The Philippine Stock Exchange (PSE) experienced a significant upturn on Monday, driven by a sustained influx of foreign investment. The benchmark PSE index (PSEi) climbed 2.27% to close at 7,417.25 points, marking a notable increase in market activity and investor confidence.

Foreign investors injected PHP 1.8 billion into the market, primarily targeting large-cap stocks. This surge in foreign buying comes as the Philippine peso (along with other ASEAN and emerging market currencies) gains some ground against the US dollar.

The day’s trading volume remained robust at PHP 8.2 billion, with activity concentrated in the banking, services, and conglomerate sectors. Surprisingly, local:foreign participation in the market remains fairly balanced around 50:50 of the day’s trades, indicating locals taking profit on the market’s run up.

More ammo for profit

Banks, in particular, led the market rally, buoyed by the central bank’s recent announcement of a reduction in the reserve requirement ratio (RRR) to 7% by October. This move is expected to release additional liquidity into the financial system, potentially offsetting any compression in net interest margins that might result from lower interest rates.

Banks can deploy these additional funds idling in the BSP towards interest earning assets – whether government bonds or customer loans. Either way, that’s extra profitability for banks.

Among the top gainers, BPI (Bank of the Philippine Islands) saw its stock price surge by 5.06%, while telecommunications giant PLDT Inc. followed closely with a 4.83% increase. Other notable performers included JG Summit Holdings, GT Capital, and Meralco, all posting gains above 4%.

Sustaining the momentum

Market technicals indicate a medium-term uptrend with the emergence of ‘higher highs and higher lows.’ However, recent price activity suggests potential buyer exhaustion, with the PSEi trading in overbought territory for six consecutive days, hinting at a sideways or corrective move before continuing the price trend. Historical pivot points indicate strong resistance at 7,550. However, forward-looking valuations remain subdued, providing further runway.

In the broader regional context, the Philippine market outperformed many of its Southeast Asian peers. While the ASEAN index showed a slight decline of 0.03%, the PSE’s strong performance aligns more closely with the broader Asian market, which saw a 0.96% increase.

Looking ahead, market participants are eyeing key economic data releases, including the US second-quarter GDP revision and Core PCE (Personal Consumption Expenditures) figures, scheduled for later in the week. These indicators could provide further insight into global economic trends and potentially influence foreign investment flows.

As the Philippine market continues to attract international capital, investors and analysts alike will be watching closely to see if this momentum can be sustained in the face of global economic uncertainties and domestic policy shifts.

EMUEL OLIMPO is the Head of Equities for Metrobank Trust Banking Group. He formulates strategies for the local market across a broad set of mandates from high-net-worth individual and institutional clients, as well as the bank’s UITF portfolios. He covers the consumer and real estate sectors. Emuel holds a BS in Applied Corporate Management from De La Salle University – Manila. He’s an avid cyclist out and about on weekends, an upstart runner on weekdays, and an enthusiastic gamer the rest of the time.