Local shares are expected to sustain their gains this week as sentiment turned positive following dovish comments from the US Federal Reserve.
“Local market may try to extend its gains supported by hopes of more Fed rate cuts within the year,” said Japhet Tantiangco, head of research at Philstocks Financial Inc.
He said hopes may drive Wall Street higher and local bond yields lower, both of which are positive for the local market.
Last week, the US Fed hinted at two more rate cuts before the end of the year to support the country’s weakening labor market. These dovish comments are fueling hopes of more policy easing from the Bangko Sentral ng Pilipinas.
Tantiangco, however, noted that one factor dampening sentiment is the weakening of the peso against the dollar.
Last week, the Philippine Stock Exchange rallied by 115 points, or 2.5 percent, week-on-week to close at 6,264. Average value turnover jumped 38 percent to P8.8 billion while overseas investors became net buyers, averaging P71 million versus average selling of P31 million.
The rally was largely due to the 25 basis points rate cut by the US Fed, which also signaled 50 basis points rate cuts before year-end, assuming the inflation rate remains stable.
“With BSP tracking Fed’s rhythm, in the short/medium term, selective bets on high ROE (return-on-equity) names compelling arc for diversified portfolios, at least while the PSEi awaits on volume and momentum,” online brokerage firm 2TradeAsia.com said.
For this week, the PSEi’s immediate support is 6,000 while resistance is at 6,300.
