Policy rate hike decisions this week by the US Federal Reserve and the Monetary Board, along with latest developments in the US-China trade war, will figure in investors’ equity decisions this week.
Analysts said the Philippine Stock Exchange index (PSEi) could trade sideways ahead of Thursday’s Monetary Board meeting, after which another rate hike—the fourth since May—is likely to be announced given an August inflation surprise.
The US Fed, meanwhile, will begin a two-day meeting on Tuesday and its benchmark rate is also expected to be raised for the third time this year. US President Donald Trump’s latest tariffs against Chinese goods also take effect on Monday and investors will be looking for news as to how the trade war will develop.
Stock markets worldwide mostly gained last week after China’s retaliatory tariff broadside was viewed as not as extreme as expected, although reports have said that planned talks between Washington and Beijing will be shelved. Investors have also chosen to focus on favorable data showing that the US economy is thriving.
On Wall Street, the Dow rode a wave of bullish investor sentiment to a second straight record on Friday, while the Nasdaq declined on weakness in semiconductor stocks and some tech giants.
The PSEi plunged into bear territory for two days last week, having fallen by over 20 percent from January 29’s record close of 9.058.62 to the 7,100 level, but staged a 3.48-percent rebound on Friday to end 7,383.00.
The wider All Shares grew 2.16 percent or 95.44 points to end at 4,507.40.
Regina Capital Development Corp. head of sales Luis Limlingan said he expected the market to hover between the 7,100 to 7,400 level in anticipation of the Monetary Board rate hike.
“We will [also]probably have some quarter-end window dressing,” he added.
Christopher Mangun, research head at Eagle Equities, Inc., said the market could react positively to a rate hike as this would mean that something was being done to curb above-target inflation.
Consumer price growth hit a new nine-year high of 6.4 percent in August, the government reported earlier this month, well over the 2.0-4.0 target for the year and exceeding market expectations.
Above-target inflation since March has prompted the Bangko Sentral ng Pilipinas’ policymaking Monetary Board to raise key interest rates by 100 basis points since May, the last a 50-bps increase in June.
Central bank Governor Nestor Espenilla Jr has all but signaled another rate hike, pledging “strong monetary action” during the September 27 meeting.
Mangun also said that “another positive effect of an interest hike is it may encourage foreign funds to flow back in to the peso as our currency has performed better than what is expected.”
“If the index can hold support at 7,350, this may create higher lows and continue a positive momentum,” he added.
FROM REPORTS BY ANGELICA BALLESTEROS AND AFP
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