The local bourse clinched a 31-month high on Monday as it barreled through the 7,400 level fueled by the Bangko Sentral ng Pilipinas’ (BSP) move to cut the cash buffer requirement for banks, but analysts warned a big plunge may be forthcoming.
The benchmark Philippine Stock Exchange Index (PSEi) rallied by 2.27 percent, or 164.93 points, to 7,417.25 on Monday, representing its highest closing value since February 2022.
Likewise, the broader All Shares Index gained by 1.60 percent, or 62.40 points, to 3,958.02.
Data from Philstocks Financial Inc. showed value turnover hit P8.27 billion, which is above the year-to-date average of P5.12 billion as foreigners made net purchases worth P1.77 billion.
Philstocks research manager Japhet Tantiangco said investors got adrenaline from the BSP’s move to slash the reserve requirement ratio (RRR) for big banks and nonbank financial institutions by 250 basis points to 7 percent. Cutting the RRR, or the minimum amount a bank must keep in their vaults, allows them to deploy more cash for lending, therefore increasing spending.
Traders are also still reeling from the recent rate cuts in both the Philippines and the US, which they said could pave the way for the start of a monetary easing era.
Such frenzy was particularly evident in the 3.69-percent rise recorded by banks amid an expected surge in demand for loans.
But the PSEi may not be able to maintain the rally and stay above 7,400.
Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., warned the bourse was “technically overbought, and we expect a pullback very soon.”
Wendy Estacio-Cruz, Unicapital Securities Inc. head of research, also said while the index could continue trading above 7,000 this week, it may experience “some healthy pullbacks as the market prices in the easing monetary policies.”
When a stock market is overbought, this generally means that it has risen rapidly over a short period of time, and that prices may be inflated.
As a result, there may be a temporary decline in the index, especially when stockholders try to lock in profits by selling their shares.
In the PSEi’s case, it has risen by 7.10 percent since the beginning of the month.
Colet sees the PSEi’s next support level at around 7,200 to 7,250.
Metropolitan Bank and Trust Co. was the most actively traded stock as it gained 2.38 percent to P79.45.
It was followed by International Container Terminal Services Inc., up 2.63 percent to P414; BDO Unibank Inc., up 1.88 percent to P163; Security Bank Corp., which surged by 7.82 percent to P96.50; and Ayala Land Inc., up 2.48 percent to P37.20 each.
Bank of the Philippine Islands rallied by 5.06 percent to P139.20; SM Prime Holdings Inc., up 1.86 percent to P32.80; Puregold Price Club Inc., up 2.36 percent to P30.40; SM Investments Corp., up 2.16 percent to P991; and Ayala Corp., up 0.72 percent to P695 per share.
Gainers overpowered losers, 121 to 93, while 52 companies closed unchanged, stock exchange data also showed.