PSEi climbs back to 6,000 after US Fed Reserve’s modest stimulus tapering

Screengrab from https://www.pse.com.ph/stockMarket/home.html

MANILA, Philippines—The local stock barometer rallied back to the 6,000 level on Thursday after the US Federal Reserve unveiled a modest – and widely anticipated – tapering of its monetary stimulus that has buoyed emerging market assets.

As of 9:50 a.m., the main-share Philippine Stock Exchange has gained 87.57 points or 1.47 percent to reach 6,049.12, tracking an upbeat overnight trading in Wall Street.

This was after the US Federal Open Market Committee announced a reduction in its monthly bond-buying operations to $75 billion from $85 billion while giving assurance that monetary policy would remain easy moving forward.

Although the move has been the opening salvo to the much-ballyhooed tapering of easy money, US stocks rallied as the US Fed committed to keep interest rates low “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below” the Fed’s 2 percent goal.

Overnight, the Dow Jones Industrial Index (DJIA) surged by 292.71 points to 16,167.9.

“Looking at the performance of the DJIA, it seems that the market has priced the taper. With the Fed move quite small, any future taper would be data-dependent and their reiteration (would be) to keep interest rate low. This should set risk assets to bounce and the greenback stronger,” said Banco de Oro Unibank chief strategist Jonathan Ravelas.

With this development, Ravelas said the PSEi might try the 6,000 -6,100 levels and the US dollar/peso exchange rate to try the 44.50/44.75 levels. “As for interest rates this should provide a reason for rates to move slightly higher,” he said.