Stock market bullish; eyes on BSP meeting this week

Trading at the Philippine Stock Exchange is expected to remain upbeat as investors focus on the upcoming policy meeting of the Monetary Board scheduled Thursday.

Analysts said investors were anticipating the next move of the Bangko Sentral ng Pilipinas after an unexpected interest rate cut in November. Another 25 basis point rate cut will bring the policy rate to below two percent.

Investors will also monitor the upcoming meeting of the Federal Open Market Committee that could set the tone for the regional monetary policymaking.

“While the street expects the Fed to maintain status quo on rates, any hints to keep them below historical thresholds will inspire capital mobility given the low cost of money and more indirectly make yields on equities more attractive,” online brokerage firm 2TradeAsia.com said.

And with the Philippine government expecting the inflation rate to be benign, analysts said it will provide the BSP enough space for a lower policy rate, which could further boost market confidence and support economic recovery.

The market’s recent run-up, meanwhile, has made stocks expensive and vulnerable to technical correction and profit taking.

The lower economic growth projection of the World Bank and Asian Development Bank for the Philippines this year could also dampen investors’ confidence on the market.

The World Bank sees the gross domestic production shrinking 8.1 percent in 2020 while ADB expects it to contract 8.5 percent.

The PSE Index last week jumped 111 points of 1.6 percent to a fresh 10-month high of 7,246.16 following the government’s thrust to reopen a bigger part of the economy starting next year.

All sectorial indices ended in the green led by mining and oil (+6.75 percent), property (+4.01 percent) and industrial (+1.88 percent).

The average value turnover rose to P11.09 billion, up 14 percent from previous week’s average. Foreign investors, however, were net sellers for the week by P290 million.

Meanwhile, global stock markets and the pound stumbled Friday after London and Brussels warned that a no-deal Brexit was now a strong possibility.

When closing bells rang, London stocks had fallen by a collective 0.8 percent, while Frankfurt gave up 1.4 percent and Paris was off by 0.8 percent. 

Wall Street also had a lackluster day, with both the S&P 500 and Nasdaq retreating even as the Dow eked out a gain.

“We are starting to see the first meaningful de-risking from investors amid concern over Brexit,” remarked   Stephen Innes, chief global markets strategist at AXI.  

Rabobank analyst Jane Foley added: “In the past few weeks, the market consensus has gone from being reasonably confident that the EU and the UK would agree on a skinny deal to fearing that no deal may now be the mostly likely outcome.” With AFP

EU chief Ursula von der Leyen has told the bloc’s leaders there were “low expectations” that a post-Brexit trade deal could be struck with Britain, EU sources said.  

The clock was ticking down to the latest deadline, on Sunday, to make a call on prolonging negotiations or give up. With AFP