Stocks seen to sustain rally

MANILA, Philippines — The stock market could be up for another rally this week, backed by sustained investor optimism on easing monetary policies.

The Philippine Stock Exchange index finished last Friday’s session with a new high in over two years at 7,252.32, up by 3.27 percent week-on-week.

“The local bourse has successfully hit the 7,200 level for the first time since 2022, this time backed by a clearer path toward lower rates, tame inflation and more grounded forward valuations,” 2TradeAsia.com said in a report.

Unicapital head of research Wendy Estacio-Cruz said the PSEi may continue trading above the 7,000 level this week as the market digests the larger-than-expected interest rate cut by the US Federal Reserve along with some capital inflows expected to Southeast Asian markets, such as the Philippines.

“Currently, the Philippines and Indonesia JCI (Jakarta Composite Index) remain the most undervalued indices, trading at significant discounts to their 10-year historical average price-to-earnings (P/E) ratios. The JCI is trading at 14.6x P/E, representing a 41 percent discount to its 10-year average, while the PSEi is at 12x P/E, a 42 percent discount to its historical average,” she said.

Estacio-Cruz said the local market may start entering the bull market this week should it reach 7,390 points, which is 20 percent higher than the recent low of 6,150 last June 21.

On his end, Philstocks Financial research manager Japhet Tantiangco said there is a chance that the market may see some episodes of profit taking in the coming days given its three-week rally.

However, Tantiangco said the market may still end the 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.

“The peso’s appreciation, if it continues, is also expected to help in sustaining the market’s upward movement. Investors may also watch out for the BSP’s upcoming business and consumer expectations survey for clues on the local economy,” he said.

Support is seen at 7,100 to 7,150, while resistance is at 7,400 to 7,500.

Estacio-Cruz said key sectors such as property, REITs, consumer, power and conglomerates are expected to benefit from the declining interest rate environment, lower cost of borrowing and lower inflationary pressures.

“Going forward, if the US Fed cuts rates by a total of 100 basis points (bps) while the BSP cuts by only 50 bps this year, the divergence in central bank policies may pressure the BSP to either make further rate cuts or adjust other monetary tools, such as reserve requirements, to stimulate growth,” she said.