Narrow range trading seen this week
MANILA -The Philippine Stock Exchange index (PSEi) will trade in a narrow range as investors place bets ahead of the next US Federal Reserve policy meeting on Wednesday.
The PSEi shed 0.90 percent to 6,507.15 the past week despite government data showing headline inflation slowing in May to 6.1 percent, which was within expectations.
Juan Paolo Colet, managing director at Sy-led investment bank China Bank Capital Corp., sees the PSEi staying within a tight 6,400 to 6,600 range.
“Market movement this shortened trading week will be driven predominantly by US news, particularly May inflation data and the Federal Reserve’s policy rate decision,” Colet said.
“Many analysts are expecting a US rate hike pause this month, but it is the Fed’s interest rate outlook that will be most keenly watched. Any hawkishness will weigh down on our market, so traders are hoping for a dovish tone,” he added.
Investors will also be monitoring domestic data on overseas remittances for the month of April, he said.
Article continues after this advertisementBSP’s policy
Last week, the Bangko Sentral ng Pilipinas (BSP) announced a cut in the reserve requirement ratio of banks but signaled this did not mean a shift in its monetary policy stance and that cooling inflation remains a priority.
Article continues after this advertisementBSP cuts banks’ reserve requirements starting June 30
HSBC Global Research Asean economist Aris Dacanay expects the BSP to maintain its interest rate outlook after the recent inflation print.
“The BSP will likely keep its policy rate at 6.25 percent, not only in the upcoming monetary board meeting (22 June 2023), but even in the many meetings after.
Our baseline view is for the BSP to be on hold until the second half of 2024,” he said in a research note.
After pause in rate hikes, BSP to mimic US Fed
“The BSP will likely follow the Fed by cutting the policy rate only after the Fed cuts its own,” he added. “Our baseline view is for the Fed to only begin cutting rates in [the second quarter] 2024.” INQ
