Stocks may sustain momentum on policy support

PHILIPPINE SHARES may sustain their momentum and continue to climb this week following the bellwether’s return to the 6,000 level on Friday after both the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve delivered rate cuts to provide economic support.

On Friday, the Philippine Stock Exchange index (PSEi) climbed by 0.78% or 46.72 points to end at 6,036.72, while the broader all shares index declined 0.53% or 18.49 points to close at 3,434.94.

This was the first time that the main index closed at the 6,000 level in two weeks or since it ended at 6,022.24 on Nov. 28.

Week on week, the PSEi increased by 87.5 points from its 5,949.22 close on Dec. 5.

“The local bourse reclaimed the crucial 6,000 level as investors cheered the ‘double rate cut’ catalyst from both the BSP and the US Fed,” 2TradeAsia.com said in a market note.

“The local market is back above the 6,000 level again, attributed to the rebound driven by the Fed and the BSP’s monetary policy easing. Sustaining position above the said level remains questionable, however amid lingering concerns and challenges over our economic growth outlook,” Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco said in a Viber message.

The Fed cut interest rates by a quarter-percentage point on Wednesday in an uncommonly divided vote, but signaled it would likely pause further reductions in borrowing costs as officials look for clearer signals about the direction of the job market and inflation that “remains somewhat elevated,” Reuters reported. Wednesday’s cut brought the policy rate to a range of 3.5%-3.75%.

On Thursday, the BSP lowered benchmark rates by 25 basis points (bps) for a fifth straight meeting to bring the policy rate to 4.5%, the lowest level in more than three years, as expected by 17 out of 18 analysts in a BusinessWorld poll. The Monetary Board has now delivered 200 bps in reductions since August 2024.

BSP Governor Eli M. Remolona, Jr. said benign inflation gives them room to help support weak domestic demand amid governance concerns that have affected investments, but said that they are nearing the end of their current easing cycle, even as economic prospects remain dim.

For this week, economic concerns will remain in focus, Mr. Tantiangco said. “While the latest monetary policy easing provides additional support, tempered consumer and investor confidence amid lingering corruption concerns may continue to weigh on economic activities.”

“Chart-wise, aside from the 6,000 level, the local market has also gotten past its 50-day exponential moving average… So far, short run technical indications are bullishly biased,” he added. “The local market may test the validity of its breach of the 6,000 line. If it manages to hold its position above the said level, 6,000 will serve as its new support while its next resistance is seen at 6,150.”

2TradeAsia.com placed the PSEi’s immediate support at 5,800 and resistance at 6,000, with secondary resistance at 6,100. — Alexandria Grace C. Magno