Home Economy Slower inflation, rate bets to drive up PHL stocks

Slower inflation, rate bets to drive up PHL stocks

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PHILIPPINE SHARES are expected to rise this week as slower headline inflation in June strengthened the case for a Bangko Sentral ng Pilipinas (BSP) rate cut within the year, analysts said.

The Philippine Stock Exchange index (PSEi) fell by 0.22% or 14.74 points to close at 6,492.75 on Friday, while the broader all shares index went down 0.19% or 6.88 points to end at 3,508.99.

Still, week on week, the PSEi climbed by 1.26% or 80.84 points from its 6,411.91 finish on June 28.

“The local market was able to close higher last week despite episodes of profit taking in the start and end of the week. We’re seeing a buildup of upward momentum as the market was able to maintain its ground above 6,400 and at the same time break above its 50-day exponential moving average,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message over the weekend.

“The market sustained its recovery, further boosted by the lower inflation print for the month of June,” online brokerage 2TradeAsia.com said in a market report.

For this week, Mr. Tantiangco said the slower-than-expected June inflation print may give Philippine stocks a boost.

“The latest inflation data is seen to be supportive of prospects of a rate cut soon by the Bangko Sentral ng Pilipinas, which in turn is positive for the market,” he said.

Philippine headline inflation rose to 3.7% year on year in June, easing from 3.9% in May and 5.4% in the same month a year ago.

This was within the BSP’s 3.4-4.2% forecast for the month and was slightly slower than the 3.9% median estimate in a BusinessWorld poll of 14 analysts. This also marked the seventh straight month that the consumer price index (CPI) settled within the BSP’s 2-4% target band.

BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board is “on track” to deliver its first rate cut in over three years at its Aug. 15 meeting as they expect inflation to continue easing this semester.

“Investors are also expected to watch out for the US’ June inflation print, which would provide clues on the Federal Reserve’s policy direction,” Mr. Tantiangco added.

“More recent hawkish comments from the Fed point to a no cut in July, but the admission of disinflation and latest Fed minutes showing concern over the impact of elevated rates are suggesting a potential crack in September,” 2TradeAsia.com said.

June US CPI data will be released on Thursday, July 11.

Traders of federal funds futures saw a roughly 77% probability of a rate cut at the Fed’s Sept. 17-18 meeting, according to CME Group’s FedWatch tool, Reuters reported.

The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.5% range since last July.

Mr. Tantiangco put the PSEi’s support at 6,400 and resistance at 6,700, while 2Trade-Asia.com placed support at 6,350 and resistance at 6,600. — S.J. Talavera with Reuters

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