Rate cut optimism to boost market

MANILA, Philippines — Continued optimism amid expectations of a rate cut could fuel the stock market to make another strong run this week, with profit takers seen as potential hurdles.

Last Friday, the benchmark Philippine Stock Exchange index ended on a high note at 6,648.23, up 2.39 percent week-on-week, after mirroring Wall Street gains following higher than expected inflation decline in the US.

“The local market continues with its positive momentum as it extends its climb to a third straight week,” Philstocks Financial research manager Japhet Tantiangco said.

“The market was also able to get past its 200-day exponential moving average which is considered as a bullish move. Trading remains tepid but has improved compared to the prior week,” he said.

Considering the factors at play, Tantiangco said the market may still move with an upward bias this week.

“Optimism driven by expectations that the BSP will ease monetary policy soon may continue to fuel the market. Adding to this is the improvements in the peso’s position against the US dollar. If it continues, then it is also expected to help the local bourse” he said.

Tantiangco said the record performances at Wall Street, if sustained, would also provide positive spillovers to the local market.

He added that investors could likewise watch out for upcoming OFW remittances and balance of payments data for clues.

However, Tantiangco said the market’s three-week rally gives opportunities for those with short term horizons to book gains, noting that at its current level, the local market is still deemed attractive.

He said bargain-hunting possibilities, especially for long-term investors, are also seen this week.

In a report, 2TradeAsia.com said the PSEi’s recovery shows how deeply entangled the broader market still is on the inflation-interest rate story.

As such, it said investors should brace for interim volatility as a rate cut would not be confirmed until September and speculation tends to skew prices towards the extremes instead of the mean.

Given this, it has placed immediate support at 6,500 and resistance is at 6,750 to 6,800.