THE stock market is set to re-test the 7,000-point level this week as the local bourse on Friday breached 6,800 points, fueled by the interest rate cut by the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) last Thursday, for the first time in four years.

As investors digested the 25 basis points (bps) rate cut announced by the BSP, the benchmark Philippine Stock Exchange index (PSEi) surged past 6,800 level after gaining 154.46 points on Friday, or 2.31 percent, to close at 6,847.37, a new 4.5-month high. This brought the local index to a 3-percent increase week-on-week.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said that the local policy rate cut by the BSP was "a pleasant surprise, despite some mixed/cautious signals a few days ago."

The 25 bps rate cut, ahead of the September 2024 policy rate meeting by the US Federal Reserve, provided "some relief and improved sentiment in the local financial markets and could help boost economic and other business activities through lower borrowing/financial costs," he added.

Ricafort also said that the gain in the local bourse was also backed by stronger peso exchange rate against the dollar, which hit P56.9 last Thursday.

Philstocks Financial Inc. senior research analyst Japhet Tantiangco, meanwhile, said that the local market was still "seen to be undervalued from a fundamental standpoint," noting that they still see room for advancement.

"With the [BSP] already going for one 25 basis point rate cut, together with the prospect of more monetary policy easing moving forward, we may see the market climb further next week,' he added.

Tantiangco also explained that if easing worries of recession in the US continued, it could also help the local bourse's climb next week.

China Bank Securities research director Rastine Mercado, for his part, said that investors would test the 7,000 resistance level this week, with a possibility of profit-taking to ensue by mid-week.

"Given this week's developments and reinvigorated investor interest and optimism on the local market, we think that we could see further gains in the week ahead — possibly leading to a test of the 7,000 resistance level," he said.

"Worthy to note that some index heavyweights have yet to substantially break higher, which underscores room for further index gains and market rotation," he added.

For its part, Online brokerage firm 2TradeAsia.com said the "long-run strategy should now consider the lag effects of current [and] upcoming rate cuts — material effects to corporate fundamentals may not be reflected until well into 2025, but lower cost expectations will only drive more aggressive [capital expenditures] projections [and] more conducive to growth plays."

"The dying out of the 'higher-for-longer' view on global interest rates may be the impetus the PSEi needs to approach 7,000 in the medium-term, but it is important to keep pace and not get lost in the exuberance," it said.

Analysts said that immediate support this week would be at 6,600-6,800, while resistance is seen at 7,000 points.