THE stock market is expected to remain pressured this week as investors await potential rate cut clues following this Thursday's Bangko Sentral ng Pilipinas (BSP) policy meeting.
The benchmark Philippine Stock Exchange (PSE) index plunged to 6,158.48 last Friday, closing 3.53 percent lower week-on-week, amid worries over a peso weakening said to be due to the BSP's willingness to start cutting rates ahead of the US Federal Reserve.
Online brokerage firm 2TradeAsia.com said the first half of the year was looking to end with a whimper after having tallied a gain of 9.62 percent last April, "back when it breached the key 7,000 [level in intraday trade]."
Regina Capital Development Corp. Managing Director Luis Limlingan said investors would be focusing on window-dressing for the end of the semester and an FTSE rebalancing.
While the market's decline has made prices more attractive for bargain hunters, Philstocks Financial Inc. senior research analyst Japhet Tantiangco said a strong rally was unlikely this week.
"The upcoming Monetary Board policy meeting is expected to be a key event, with investors looking for hints on future rate cuts," he added.
"If no such indications are provided, the market may continue its bearish trend," Tantiangco continued.
"Additionally, the peso's movement against the US dollar will be closely monitored, as sustained currency weakness could further dampen market sentiment, especially among foreign investors."
Rastine Mercado, research director at China Bank Securities, also highlighted the BSP policy meeting and pointed to a possible bounce-back for the FTSE rebalancing.
"We could see an initial bounce on Monday given the removal of the FTSE rebalancing overhang. However, given the persisting investor disinterest, we may see prices continuing to trend lower in the short term," he said.
"We think, however, that this has likely more to do with technical conditions and lack of near-term market catalysts as earnings growth prospects remain intact," Mercado added.
Investors, he continued, "will be closely monitoring cues from the BSP as to when they will begin cutting rates, especially given the encouraging progress on and improving outlook for inflation."
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the BSP was likely to match the Fed's pause earlier this month in order to maintain healthy interest rate differentials, which would help support the peso.
The currency is currently trading in the P58:$1 level — it fell to P58.80 versus the greenback on Friday — amid concerns that an early BSP easing would make Philippine assets less attractive.