PSEi to move sideways amid US debt limit talks

STOCKS may move sideways this week, with investors to remain cautious as they await developments in the US debt ceiling talks.

The bellwether Philippine Stock Exchange index (PSEi) rose by 35.91 points or 0.54% to end at 6,664.55 on Friday, while the broader all shares index went up by 13.73 points or 0.38% to 3,548.37.

Week on week, the PSEi gained 86.4 points or 1.31% from its close of 6,578.15 on May 12.

“Philippine shares were bought up during the last trading day of the week as investors cheered the BSP’s (Bangko Sentral ng Pilipinas) latest policy decision and the potential RRR (reserve requirement ratio) cut in June, Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

The BSP last week kept its policy rate unchanged at 6.25%. Rates on the overnight deposit and lending facilities were also maintained at 5.75% and 6.75%, respectively.

This is the first time the BSP left rates untouched after nine meetings. Since it began its aggressive monetary tightening cycle in May 2022, the central bank has raised borrowing costs by a total of 425 basis points.

BSP Governor Felipe M. Medalla also hinted at a possible reduction in banks’ reserve ratios next month. The RRR for big banks is currently at 12%, while the ratios for thrift and rural lenders are at 3% and 2%, respectively.

For this week, Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message that the central bank’s rate decision and expectations of easing inflation may boost sentiment.

“Investors are expected to maintain caution, however, while monitoring the developments on the US’ debt ceiling negotiations. An agreement reached by the US government on their debt ceiling concerns may provide a boost to the local market,” Mr. Tantiangco added.

“Last week’s positive momentum could encourage investors to push prices higher, but the local market’s direction will depend largely on developments in the US, particularly the progress of debt ceiling talks… In the near term, a timely resolution of the US debt limit could be a strong catalyst for bullish action,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet likewise said in a Viber message.

US President Joseph R. Biden and top congressional Republican Kevin McCarthy could speak as soon as Sunday in talks over raising the federal $31.4-trillion debt ceiling, Reuters reported.

There are less than two weeks before June 1, when the US Treasury department has warned that the federal government could be unable to pay all its debts. That would trigger a default that could cause chaos in financial markets and spike interest rates.

For this week, Philstocks Financial’s Mr. Tantiangco placed the PSEi’s support at 6,600 and resistance at 6,800. — A.H. Halili with Reuters