Buoyant trades seen this week

MANILA, Philippines — The stock market took a breather last week after a market rout the past weeks.

Unicapital Securities said the move of the Bangko Sentral ng Pilipinas to further raise its benchmark policy rates, although by a smaller 25 basis points, sends a signal to investors that inflation is easing.

Inflation remained elevated at 8.6 percent in February, though lower than the 8.7 percent print in January.

Unicapital said with the rate hike expected to ease inflation further, market sentiment would likely remain buoyant.

“The market took a breather (last) week, as investors found some reprieve following dovish tone from the US Federal Reserve amid financial sector concerns,” 2TradeAsia said.

Last week, the Philippine Stock Exchange index (PSEi) jumped by 132 points or 2.05 percent to 6,602 week-on-week. All sectors rallied, primed by services, property and holdings. Average value turnover eased to P4.6 billion while net foreign buying returned to average P44 million.

2TradeAsia said the BSP rate hike mirrored the move of the US Fed, which came on the heels of several bank collapses in the US and inflation proving to be sticky in the first quarter.

“Per the usual, capital markets honed in on the Fed’s subtle change in tone; that is, a pause in the rate hike cycle may be forthcoming. The reality that credit and liquidity has tightened to a degree that banks are experiencing significant distress has forced monetary authorities to rethink how policy will move versus initial expectations (i.e. initially, no cut until 2024). Fed fund futures are showing signs that a cut may be seen as early as the third quarter of 2023 and short-term yields are pricing in similar timing and should explain the renewed exuberance toward risk assets,” 2TradeAsia said.

Overall, it said, it remains cautious of inflation-interest rate movements in the medium-term, as drivers have yet to go down convincingly.

The Market Call, a joint publication of the University of Asia & the Pacific and First Metro Investment Corp., said despite the uncertainty in the market, current prices may still be attractive to long-term investors.

The market’s price-to-earnings (P/E) has dropped to 13.6x, some 12.5 percent lower than the 10-year average P/E of 15.5x.

“This could become attractive for long-term investors, but during a period of strong risk aversion, that may convince only the brave.”