Stock market expected to advance this week after Bangko Sentral kept interest rates unchanged

By Jenni er B. Austria

THE stock market is expected to sustain its upward momentum this week amid strong indication of an end to the Bangko Sentral ng Pilipinas’ monetary tightening. Analysts said the recent move by the BSP to keep interest rates at current level on Thursday supports the investors overall expectations of potential start of an easing cycle.

“The PSEi’s moving at a tight band in the 6,400 to 6,700 range for most of the second quarter hints at possibility price breakthroughs; while technically the break could go either direction, strong positive catalysts can potentially propel the index closer to 7,000 in the medium term,” online brokerage fi rm 2TradeAsia.com said.

Investors, however, should watch out for profit-taking as they would want to lock in gains after the market has risen over the past trading days, it said.

The BSP last week kept interest rates on the overnight deposit and lending facilities at 5.75 percent and 6.75 percent, respectively following the recent downward trajectory of inflation and stronger-than-expected first quarter economic growth.

BSP Governor Felipe Medall said the central bank could maintain a “prudent pause” by keeping key policy rates steady in the next two to three policy meetings. He also hinted at the possibility of cutting the reserve requirement, which is the highest in the region.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the market was expecting a possible cut in reserve requirement as early as June 2023 as an option to ease monetary policy other than a local policy rate cut.

Analysts said the pause on rate hike cycle would benefit the property sector, which was affected by cancellations because of successive rate hikes.

The Philippine Stock Exchange index climbed 86 points last week to close at 6,664 on Friday, with all sub-indices ending in the green, led by property and holding firms.

Foreign investors were net buyers last week by an average of P46.1 million, while the value turnover declined by 11.5 percent week-on-week to P4.68 billion.

It said despite the deficit in April, the cumulative BOP position registered a surplus of $3.3 billion in the first four months, higher than the $79-million surplus recorded a year ago.

Preliminary data from the BSP showed that the cumulative BOP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the government and foreign direct investments.

The BOP deficit hit $7.3 billion last year, a turnaround from the $1.3-billion surplus recorded in 2021.

The gross international reserves level increased to $101.8 billion as of endApril from $101.5 billion as of endMarch. The latest GIR level represented a more than adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.

It was also about 6.0 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

BOP is the difference in total value between payments into and out of a country over a period.

The BSP adjusted its BOP deficit forecast this year to $1.6 billion from a previous assumption of a $5.4-billion deficit.

Car manufacturers support extension of incentives program

By Othel V. Campos

CAR manufacturers welcomed the government’s extension of the Comprehensive Automotive Resurgence Strategy program for another five years.

“The extension of the CARS program is a very welcome development. The auto industry expresses its appreciation to the current administration for continuing the government’s strong support to the industry particularly the auto manufacturing sector,” said Chamber of Automotive Manufacturers of the Philippines Inc. president and Toyota Motor Philippines first vice president Rommel Gutierrez.

The extension, approved by President Ferdinand Marcos Jr., seeks to sustain the gains in local automotive manufacturing and encourage more automotive firms to set up assembly and manufacturing operations in the Philippines.

“CARS program is a significant government support as it helps the industry, among others, maintain and promote employment not only to the manufacturers but also parts suppliers and other allied industries. With continued industry-government collaboration, we can further attract more investments for auto manufacturing which is a significant contributor to the Philippine economy,” Gutierrez said.

The program is a result of the Industry Roadmapping Project launched by the Board of Investments in 2012. Under Executive Order No. 182, the thrust of the program is to provide time-bound and output- or performance-based fiscal support to attract strategic investments in the manufacturing of motor vehicles and parts.