Dovish signals from the Bangko Sentral ng Pilipinas (BSP) is boosting the confidence of a market that has been trying to survive tepid trading in recent months.
With a shot in the arm, which analysts believe could be carried over to this week, the benchmark Philippine Stock Exchange Index (PSEi) was finally able to breach the 6,400 level on Friday. For most of the week, the market was on a rallying mode, overturning a previous eight consecutive days of losses.
But the strength was more apparent on Friday as the BSP made clearer signs of a rate cut by August. By the closing bell on the last trading day of the semester, the PSEi hit 6,411.91, jumping by 4.12 percent from the previous week.
“Prospects of monetary easing are expected to boost confidence toward the market given its positive impact on the general economy, as well as on the corporate sector,” said Japhet Tantiangco, research manager at Philstocks Financial Inc.
This week, investors will also be keeping a close eye on June inflation data, which could still influence monetary policy.
The central bank typically cuts interest rates when inflation slows to spur spending and investments. It raises rates when inflation quickens in order to temper liquidity.
BSP Governor Eli Remolona Jr. believes inflation is finally easing, allowing the Monetary Board elbow room to cut rates in the third and fourth quarters. —Meg J. Adonis INQ