Stocks seen to strengthen after Fed rate decision

AFTER ENDING in the 7,300 level last week as concerns on the US Federal Reserve’s interest rate stance eased, the main index is seen to hover around the 7,300 to 7,450 level this week in anticipation of the Bangko Sentral ng Pilipinas’ (BSP) own policy review.

The bellwether Philippine Stock Exchange Index ( PSEi) gained 66.42 points or 0.91% to end at 7,345.02 on Friday.

Week on week, the main index was up 2.78% from its 7,146.27 close last March 10.

Trading last week was mostly driven by the Fed’s two-day meeting last March 14-15, where it raised interest rates by 25 basis points. The US central bank also hinted on two more rate hikes this year and three in 2018 amid expected stable growth in the US.

On Thursday, the BSP’s policysetting Monetary Board holds its own review. Analysts polled by BusinessWorld said it will likely hold fire on policy settings this week despite a rate hike in the US, although analysts expect as much as two increases later this year in light of rising inflation and a weaker peso.

Ten economists expect the central bank to keep policy rates steady on Thursday, in line with BSP Governor Amando M. Tetangco, Jr.’s signals that there is no “urgent” need for adjustments at the moment.

Mr. Tetangco last week said there remains room for the BSP to stand pat on current borrowing rates despite a fresh 25-basispoint increase announced by the US Federal Reserve last week, as the markets have already priced in its impact and with local conditions seen remaining upbeat.

The benchmark borrowing rate currently stands at 3%, while overnight lending and overnight deposit rates are set at 3.5% and 2.5%, respectively.

“With several central banks giving their guidance last week especially the Fed, attention will also focus to our own BSP when they convene later in the week,” Luis A. Limlingan, managing director of Regina Capital Development Corp., said in a text message over the weekend.

Last week’s close gave encouragement that the main index may establish a firm support of 7,300, stirring a new expected range level this week of around 7,300 to 7,450, Mr. Limlingan said.

“Although BSP already reiterated it will not move in sync with the Fed, the latest decision could still serve as among the driving factors that could affect the pesodollar trend,” read the weekly outlook report of online brokerage 2TradeAsia.com.

2TradeAsia.com said investors are expected to closely monitor how finance ministers in the G-20 meeting would take and address the looming protectionist policies and border taxes the US is mulling to implement.

Meanwhile, players will also monitor the speech of US President Donald J. Trump, with markets still looking for more hints on the direction of policies there.

Having breached an intraweek high of 7,417 Friday, the online brokerage firm said markets will test the PSEi’s ability to climb past 7,500 towards 7,600. •