Peso improves, PSEi rises to 8K-level

MANILA — Both the Philippine peso and main stocks gauge ended the week at better levels after the Bangko Sentral ng Pilipinas (BSP) decided to keep key rates steady.

The local currency ended the day at 52.32 from 52.84 Thursday, which was traced to the BSP’s decision.

The BSP’s policy-making Monetary Board (MB) decided to maintain the key rates after noting the sustained deceleration of inflation rate and that domestic output remains firm.

This is contrary to expectations of some analysts following earlier statements by BSP Governor Benjamin Diokno of a hundred basis points cut in the reserve requirement ratio (RRR) per quarter in the next four quarters if inflation continues to slow down.

BDO Unibank, Inc. chief strategist Jonathan Ravelas told the Philippine News Agency (PNA) that a cut in the RRR is considered easing even if it is not the policy rate.

He, however, cited statements by monetary officials that a 1-percentage point reduction in the RRR is inflationary since it will release some PHP90-billion worth of liquidity in the system.

“This is the reason for the strengthening of the peso today. The BSP did not ease its policy,” he said.

He thus forecast the peso to consolidate between 52 and 52.50 to the dollar next week.

“This will be the case until such time wherein you have more clues on growth and inflation,” he said.

The peso opened the day at 52.6, an improvement from its 52.77 start in the previous session.

It traded between 52.67 and 52.32, also its closing level, bringing the day’s average to 52.539.

Volume reached USD1.18 billion, up from USD1 billion a day ago.

Relatively, the Philippine Stock Exchange index (PSEi) rose 0.74 percent, or 58.70 points, to 8,013.42 points.

Most of the counters tracked the main index, with the broader All Shares up by 0.50 percent, or 24.52 points, to 4,913.31 points.

Services posted the highest increase at 1.07 percent, followed by the Industrial, 0.71 percent; Holding Firms, 0.62 percent; Property, 0.58 percent; and Financials, 0.40 percent.

Only the Mining and Oil index ended in the red after it fell 0.29 percent.

Volume reached 1.4 billion shares amounting to PHP7.6 billion.

Gainers led losers at 116 to 77, while 50 shares were unchanged.

Ravelas traced the PSEi’s rise to the peso’s improvement, as well as the Federal Open Market Committee’s (FOMC) decision to maintain the Federal Reserve’s key rates.

He said FOMC’s decision gave the BSP some policy space.

He, however, said the question now is on whether the PSEi can sustain its rally at the 8,000 level.

“We need more clues on the economy, as well as on the budget impasse,” he added, referring to the pending implementation of the government’s 2019 national budget since legislators have yet to submit to Malacañang the enrolled copy of the budget, which the Bicameral Committee approved and ratified last February.

BPI Research also attributed PSEi’s positive close to the same outturn of Wall Street, as well as the MB’s decision.

“Investors in the equity market may have also cheered the BSP’s decision to hold the RRR as it demonstrates the Monetary Board’s independence and credibility in pursuing its key mandate of price stability,” it added. (PNA)