Volatility to continue before Fed, BSP decisions

PHILIPPINE SHARES may see continued volatility this week before the policy meetings of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP), which investors will monitor for potential forward-looking statements.

On Friday, the Philippine Stock Exchange index (PSEi) climbed by 1.04% or 61.64 points to end at 5,949.22, while the broader all shares index rose 0.55% or 19.03 points to close at 3,477.68.

Week on week, however, the PSEi decreased by 73.02 points from its 6,022.24 close on Nov. 28.

Analysts said Friday’s rebound was driven by the slower-than-expected November Philippine inflation print, which bolstered BSP rate cut hopes.

However, Philstocks Financial, Inc. Research Manager Japhet Louis O. Tantiangco noted that the PSEi failed to return above the 6,000 mark.

“Seemingly, the market is not yet prepared to take the said level as worries over the local economy hinder investors’ confidence from building up further,” he said in a Viber message.

For this week, the focus will be on the Fed’s policy meeting on Dec. 9-10 and the BSP’s own review on Dec. 11, he said.

“Hopes of easing by both central banks may help the market bounce back. However, investors are also expected to monitor the movements of the peso. A further decline against the US dollar may weigh on the local bourse,” Mr. Tantiangco said.

A BusinessWorld poll showed that 17 of 18 analysts expect the Philippine central bank to deliver a fifth straight 25-basis-point (bp) reduction at the Monetary Board’s meeting on Thursday (Dec. 11) to bring the policy rate to 4.5%, its lowest since September 2022.

The BSP has cut benchmark borrowing costs by a total of 175 bps since it kicked off its easing cycle in August 2024. BSP Governor Eli M. Remolona, Jr. earlier said that weakening growth prospects raise the chances of an easing move this week.

Meanwhile, an interest rate cut is all but priced in at the Fed’s meeting this week, but a divided committee makes for a wild card, Reuters reported. Analysts expect a “hawkish cut,” where the language of the statement, median forecasts and Chair Jerome H. Powell’s press conference point to a higher bar on further rate reduction.

Mr. Tantiangco added that the market will wait for the release of the latest foreign direct investments data and labor force survey that could give more clues on the state of the Philippine economy.

He put the PSEi’s trading range this week from 5,800 to 6,000.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort put the PSEi’s immediate resistance at the 6,000 psychological mark and immediate major support at 5,785-5,850.

For its part, online brokerage 2TradeAsia.com said holiday liquidity and window dressing could boost market activity. “[Ultimately], we reiterate that this is a season of volatile and directionless spirits,” it said.

It placed the PSEi’s immediate support at 5,800 and resistance at 6,000, with secondary resistance at 6,100. — A.G.C. Magno with Reuters