The stock market is expected to sustain its upward momentum this week amid strong indication of an end to the Bangko Sentral ng Pilipinas’ monetary tightening.
Analysts said the recent move by the BSP to keep interest rates at current level on Thursday supports the investors overall expectations of potential start of an easing cycle.
“The PSEi’s moving at a tight band in the 6,400 to 6,700 range for most of the second quarter hints at possibility price breakthroughs; while technically the break could go either direction, strong positive catalysts can potentially propel the index closer to 7,000 in the medium term,” online brokerage firm 2TradeAsia.com said.
Investors, however, should watch out for profit-taking as they would want to lock in gains after the market has risen over the past trading days, it said.
The BSP last week kept interest rates on the overnight deposit and lending facilities at 5.75 percent and 6.75 percent, respectively following the recent downward trajectory of inflation and stronger-than-expected first quarter economic growth.
BSP Governor Felipe Medall said the central bank could maintain a “prudent pause” by keeping key policy rates steady in the next two to three policy meetings. He also hinted at the possibility of cutting the reserve requirement, which is the highest in the region.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the market was expecting a possible cut in reserve requirement as early as June 2023 as an option to ease monetary policy other than a local policy rate cut.
Analysts said the pause on rate hike cycle would benefit the property sector, which was affected by cancellations because of successive rate hikes.
The Philippine Stock Exchange index climbed 86 points last week to close at 6,664 on Friday, with all sub-indices ending in the green, led by property and holding firms.
Foreign investors were net buyers last week by an average of P46.1 million, while the value turnover declined by 11.5 percent week-on-week to P4.68 billion.