Market seen to test new highs this week

MANILA, Philippines -The local stock market is seen to test new highs after the Bangko Sentral ng Pilipinas decided to keep its key interest rates unchanged.

Analysts expect the country’s benchmark stock index to hit its 11th all-time high close, possibly breaching the 8,000 mark.

“Friday’s performance may be a prelude to what’s to come ahead, especially after the local central bank’s move to maintain benchmark rates.  The move came in light of subdued inflation outlook that prompted BSP to lower its inflation forecast from three percent to 2.3 percent this year, more as an offshoot of soft commodity prices, particularly oil,” said Jason Escartin, investment analyst at F. Yap Securities.

“The stable monetary environment may be a boon to the industry, particularly fast-growing subsectors construction and manufacturing,” Escartin added.

The Philippine Stock Exchange index (PSEi) opened last week on a strong note, marking its 10th record close this year with a 7,782.57.

Despite some declines in the middle of the week, the PSEi edged higher on Friday, gaining 45 points or 0.59 percent week-on-week at 7,773.

“At this point, the PSEi has pushed to new records 10 and 12 times, closing and intraday, respectively. This is characteristic (albeit better) than the pace registered a couple years back when the PSEi reset the closing record more than 30 times,” said Justino Calaycay Jr., analyst at Accord Capital Equities Corp.

Calaycay said the recent BSP decision to lower its inflation target as well as hold benchmark rates steady amid a general easing by global peers should translate to an increased attraction for consumer-related counters such retail, food, tourism, and transportation.

“All these, plus earnings, should play into the consciousness of investors when they return for the Chinese New Year-week of trades,” he said.

Analysts have placed immediate support at a range of 7,700 to 7,750, while resistance is pegged at 7,800 to 7,900.

“Challenges toward the 8,000 mark will be bolder, as the market attempts to break psychological resistance along its ascent.  Aside from developments at home, part of the macro backdrop is still tied to the US, specifically on the normalization of the Fed’s widely-followed interest rate,” Escartin said.