PHL shares seen to climb as inflation slows further

By Arra B. Francia, Reporter
SHARES ARE SEEN to rise on Wednesday following the better than expected inflation reading for the month of January.
The 30-company Philippine Stock Exchange index fell 0.91% or 74.68 points to close at 8,069.48 on Monday, snapping a two-day ascent for the market.
“The slightly better reading should bode well for the market. Buying momentum should continue as investors will be encouraged that this will soon fall closer to the admissible range of 2%-4%,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile message following the release of the inflation data on Tuesday.
Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan also noted that the market could firm up on Wednesday on positive news on inflation.
“I think that the market will be up and sustain the rally above 8,000 because of the inverse relationship of inflation to our index. When inflation goes down our index goes up since our economy is consumption drive,” Mr. Tan said in a text message.
The Philippine Statistics Authority reported on Tuesday that headline inflation eased to 4.4% in January from December’s 5.1%. This is the slowest recorded in 10 months since March 2018’s 4.3%.
The January inflation figure is lower than the 4.5% median estimate from a BusinessWorld poll of 12 analysts.
The figure however is still higher than January 2018’s inflation print of 3.4%.
“Also the market will be pricing in the stance of BSP (Bangko Sentral ng Pilipinas) not to raise interest rates since we see the inflation is going down. This is a very positive news for our local bourse,” Mr. Tan added.
The BSP’s Monetary Board will meet on Thursday to review policy rates. A BusinessWorld poll of the same analysts said the Monetary Board will likely keep benchmark rates steady at 4.25-5.25% for its first policy review this year.
Instead of adjusting key interest rates, analysts expect the BSP to first cut the reserve requirement ratio (RRR) of banks.
BSP Governor Nestor A. Espenilla, Jr. earlier said there is scope to pursue further cuts to the 18% RRR for big banks. This forms part of Mr. Espenilla’s long-term goal of bringing down the RRR to single-digit levels when his six-year term as governor ends in 2023.
Local financial markets will reopen on Wednesday following the Chinese New Year holiday.
Meanwhile, major Wall Street indices ended in positive territory on Monday, as investors became optimistic for the prospects of the trade war between the United States and China.
The Dow Jones Industrial Average gained 0.7% or 175.48 points to close at 25,239.37. The S&P 500 index climbed 0.68% or 18.34 points to 2,724.87, while the Nasdaq Composite index jumped 1.15% or 83.67 points to 7,347.54.