PSE index gets boost from BSP rate hike decision

THE Philippine Stock Exchange index (PSEi) got a boost from the local central bank’s decision to hike interest rates last week, floating above the 7,770 level by Friday.

The bellwether index jumped 2.39% or 181.11 points to close at 7,752.11 on Friday, amid thin trading for most of the week.

On a weekly basis, the PSEi soared 2.73% or 205 points, buoyed by a 4.9% increase in property and 2.3% rise in services.

“Optimists were favored for most of the week’s mixed trades, as first quarter 2018 GDP ( gross domestic product) came within consensus and the central bank’s move to raise interest rates to address inflation,” online brokerage 2TradeAsia.com said in a weekly market note.

The Bangko Sentral ng Pilipinas (BSP) had increased interest rates by 25 basis points, the first rate hike implemented in around four years. The overnight lending rate is now at 3.75%, overnight reverse repurchase rate is at 3.25%, while the overnight deposit rate is now at 2.75%.

The rate hike is expected to temper inflation expectations in the coming months, as the general increase in prices of goods and services has been hitting fiveyear highs amid robust economic growth.

Eagle Equities, Inc. Research Head Christopher John Mangun noted that the 7,500 level has proven to be a strong support for the index.

“The index barely moved in the first four days of the week. However, it was able to stay above 7,500 which again cements its status as strong support,” Mr. Mangun said in a market report.

Investors had stayed on the sidelines before the release of economic data on Thursday, resulting in an average value turnover of P5.8 billion.

“Most of Friday’s gains came because of the lack of sellers which allowed buyers to push prices up on very little volume,” Mr. Mangun said.

Corporate earnings reports also allowed the market to register gains for the week, with most property firms reporting double-digit growth in the first quarter of 2018.

SM Prime Holdings, Inc. booked a 15% increase in net income to P7.6 billion driven by its provincial mall expansion. Ayala Land, Inc.’s profit went up 17% to P6.52 billion due to strong residential sales for the period. Andrew L. Tan’s Megaworld Corp. saw attributable profit go up 11.3% to P3.2 billion, while Gokongwei-led Robinsons Land Corp. improved its attributable profit by 12% to P1.54 billion.

US President Donald J. Trump’s decision to pull out of the Iran nuclear deal provided a temporary scare for investors last week, seen to trigger geopolitical tensions in the Middle East.

Overseas, on Friday, the Dow Jones Industrial Average gained 0.37% or 91.64 points to 24,831.17. The S&P 500 index went up 0.17% or 4.65 points to 2,727.72, while the Nasdaq Composite index dipped 0.03% or 2.09 points to 7,402.88.