PSEi zooms past 7,100-level on BSP's shocking rate cut

MANILA, Philippines — A surprise rate cut from the Bangko Sentral ng Pilipinas and resumption of stimulus talks in the US pushed local equities above 7,100 on Friday.

Investor optimism returned to the trading floors of the Philippine Stock Exchange, where the main index rallied 2.46% to end the week at 7,169.79. The broader All Shares index, meanwhile, climbed 2.23%.

All counters finished in the positive territory led by mining and oil which trekked 2.88%. Holding firms came next after gaining 2.87% followed by property (2.83%), financials (2.80%), industrial (1.70%) and services (0.49%).

"Local shares cross well above 7100 as investors bought up shares after the surprise cut of the BSP and by hopes that Washington lawmakers still could come together and pass a coronavirus aid relief package to limit the economic damage wrought by the pandemic," Luis Limlingan of Manila-based brokerage Regina Capital said in a commentary.

After two straight months of pause on easing moves, the BSP's seven-member Monetary Board led by Governor Benjamin Diokno shocked the market with a 25-basis point cut to its key rate, which is now at a new historic-low of 2%.

Analysts doubt that the latest rate cut could boost anemic loan growth after the previous easing moves did little to encourage borrowing and lending activities as the country's consumption-relaint economy remains in recession. But Diokno said the BSP's surprise move was necessary to "bolster economic activity and boost market confidence" amid the coronavirus pandemic.

"The Monetary Board noted that while domestic output contracted at a slower pace in the third quarter of 2020, muted business and household sentiment and the impact of recent natural calamities could pose strong headwinds to the recovery of the economy in the coming months," Diokno said.

In Washington, investors are watchful as talks are due to resume on a new, desperately needed rescue package for the world's top economy.

While Republicans do not look likely to back down on their demands for a small stimulus and Democrats are calling for a multi-trillion-dollar deal, observers say news that they are back at the table is positive.

Back home, a total of 32 billion local shares valued at P10.9 billion switched hands on Friday. Advancers trumped decliners, 159 against 66, while 45 names were unchanged.

Elsewhere, stock markets in Hong Kong, Shanghai, Seoul, Singapore, Mumbai and Bangkok were all up. — with AFP