PH stocks seen to trade higher

MANILA, Philippines—The local stock market is seen continuing to trade with an upward bias this week with 6,400 seen offering a strong support to bouts of profit-taking.

The main-share Philippine Stock Exchange index last week gained 201.58 points, or 3.2 percent, to close at 6,561.20 even as some local investors locked in gains in the last two trading sessions.

Banco de Oro Unibank chief strategist Jonathan Ravelas said last week’s rally was driven mainly by US Federal Reserve chair Janet Yellen’s speech, which signaled that an accommodative policy would remain in place for some time.

“Chartwise, the week’s close above the 6,500 level highlights that further uptick toward the 6,700 levels is to be expected. Any pullback should be limited to the 6,400 levels,” Ravelas said.

Bank of the Philippine Islands economist Emilio Neri Jr. said the recent rally in the local equity market would most probably be supported by rising expectations of sustained accommodative monetary policy through the second quarter of this year. He said the Philippines was likely to post a “soft” first-quarter economic growth of below 6 percent, likely curbing the Bangko Sentral ng Pilipinas’ hawkish bias.

This “soft” growth, along with the deceleration in inflation rate as reported last week, could prompt the BSP to hold back on any early tightening of interest rates, Neri said.

For the full year, however, Neri said the country could still grow by 6.2 percent, still one of the fastest among emerging markets.

Neri issued the research note on Friday after the government reported that inflation had decelerated for a second month in a row to 3.9 percent from 4.1 percent in February and 4.2 percent in January 2014.

If April inflation decelerates further from the lower-than-expected March level, Neri said the BSP would have a more difficult time justifying an early increase in key interest rates. He added that this would likely push back increases in the BSP’s special deposit accounts (SDA) and overnight borrowing rate to the third quarter instead of the second quarter of this year.—Doris C. Dumlao