Philippine Market Outlook

MARKET OUTLOOK

The main index surged past the 8,300 mark on Monday as investors continued to bet on monetary policy easing by the US central bank.

This strong close in the PSEi may also have been influenced by the dovish statement from the US Fed (Federal Reserve) minutes last week. Investors are also looking at the Monetary Board meeting.

Philippine stocks broke into bull market territory after Federal Reserve Chairman Jerome Powell in two days of congressional testimony last week bolstered investor expectations for an interest rate cut at the end of the month.

Fed chair Jerome Powell, in a testimony before the US Congress last week, hinted on a possible cut in benchmark rates, saying the central bank will “act as appropriate” to sustain expansion as “crosscurrents” such as trade tensions and concern on global growth are weighing on the world’s largest economy.

Mr. Powell’s dovish cues were reinforced by the minutes of Federal Open Market Committee’s June 18-19 meeting, wherein several Fed officials said a near-term interest rate cut is warranted to quell the effects of possible economic headwinds.

Meanwhile, the central bank’s policy-setting Monetary Board will review its settings anew on Aug. 8.

Central bank Governor Benjamin E. Diokno last week said the local central bank will likely cut policy rates in the second semester before moving to reduce banks’ reserve requirement ratio.

Q2 earnings start in earnest this week, kicking off with SM Prime Holdings, Inc., and both investors analysts alike are already expecting a generally positive season.

Solid earnings could give Philippine stocks a further boost.

After slumping to become one of the world’s biggest losers last year, the nation’s equities surged Monday, entering a bull market as traders cheered the central bank’s commitment to resume its policy easing in H2 of this year amid cooling inflation, an interest rate cut in May and a stronger peso.