Index may test 7,200 level this week

MANILA, Philippines — Share prices may test the 7,200 level this week after the main composite index closed on a stronger note last week following the decision of the Bangko Sentral ng Pilipinas (BSP) to raise interest rates anew by 25 basis points to quell inflation.

F. Yap Securities said that while there are still challenges that need to be hurdled by the stock market, including the still strong net foreign selling, last week’s performance was a welcome change from weeks of poor market sessions.

Market investors welcomed the move of the Bangko Sentral ng Pilipinas as it is seen quashing inflation to more muted levels after the 6.7 percent in September and October from 6.4 percent in August.

Thus, gauges surged by 114 points to close at 7,083 last week as buyers positioned in extremely oversold stocks.

F. Yap Securities said in its report the central bank raised benchmark rates by 25 basis points, while crude futures fell sharply as US production continued to rise. Financials were the top gainers with 5.7 percent as well as property with a one percent gain.

It was a welcome reprieve, said the brokerage company.

“Local monetary board’s move to do a preemptive rate hike should help quell inflation concerns, and aid the peso’s recent strength. This is on top of the Palace’s move to suspend the scheduled excise tax increase on fuel for 2019, including approval of rice tariffication measure. The biggest headline was on crude prices, having fallen by as much as 26 percent from $76 per barrel in early October this year to $56 per barrel,” F. Yap said.

These should all blend in and induce consumer spending, which would help cascade its effects on the economy through pump-primed investment.

“With US markets getting feelers on China’s recent response to Pres. Trump, this lead may support improved confidence on both parties’ willingness to resolve the trade spat, and foster economic cooperation. Timed with President Xi Jinping’s anticipated visit to the Philippines on Nov. 20 to 21, market participants will be eager to see price actions on sectors likely to benefit from potential investment deals: infra, energy, property, telco, agri and mining,” F. Yap said.

It also said that Friday’s advance of the index was worth noting, having resurfaced above the 7,000 zone on strong turnover.

Moving forward, the third quarter results have been factored-in, and the market would likely give higher regard to prospects that would support a rally in the fourth quarter.