PHL shares may rally as Fed cut boosts sentiment

PHILIPPINE SHARES may continue to climb this week amid positive market sentiment following the US Federal Reserve’s decision to start its rate cut cycle.

On Friday, the bellwether Philippine Stock Exchange index (PSEi) rose by 0.69% or 50.16 points to end at 7,252.32, while the broader all shares index went up by 0.61% or 23.94 points to close at 3,895.62.

Friday’s close was the PSEi’s best finish in more than two years or since it ended at 7,288.07 on March 7, 2022.

Week on week, the benchmark index surged by 3.27% or 229.47 points from its 7,022.85 close on Sept. 13, climbing for a third consecutive week.

“The Fed officially started its easing cycle with a supersized rate cut, sending global markets into a buying frenzy,” online brokerage firm 2TradeAsia.com said in a market note.

“The local market has been showing bullish momentum, rising for three straight weeks, with the latest one getting it past the 7,150 resistance level,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

The Fed last week cut its policy rate by 50 basis points (bps) to 4.75%-5%, marking its first easing move since March 2020.

Interest rate futures contracts now price in about a 30% chance that the Fed will deliver a second cut of the same size in November, Reuters reported. The market-based probability of a quarter-point rate cut in November is now about 70%, up from around 65% before the data.

For this week, Mr. Tantiangco said the Philippine stock market could extend its rally, although profit taking could ensue.

“The market may still end this week on a positive note as the dovish monetary policy outlook of the Bangko Sentral ng Pilipinas (BSP) and the Fed may continue to uphold optimism,” he said.

He placed the PSEi’s support at 7,150 and resistance at 7,400.

Analysts have said the start of the Fed’s easing cycle gives the BSP more space to cut its own benchmark interest rates further.

The Monetary Board on Aug. 15 reduced its policy rate by 25 bps to 6.25% from the over 17-year high of 6.5%. BSP Governor Eli M. Remolona, Jr. has said the central bank may deliver another 25-bp cut in the fourth quarter. The Monetary Board’s remaining meetings this year are scheduled for Oct. 17 and Dec. 19.

For his part, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the market’s immediate support at 7,000 and resistance at 7,338.66-7,552.20.

“Mostly weaker US economic data recently could increase the odds of future Fed rate cuts in the coming months that could be matched locally,” Mr. Ricafort said in an e-mail.

2TradeAsia.com placed the PSEi’s immediate support at 7,100 and resistance at 7,500. “The local bourse has successfully hit the 7,200 level for the first time since 2022, this time backed by a clearer path towards lower rates up to 2026, tame inflation, and more grounded forward valuations.” — R.M.D. Ochave with Reuters