Index climbs to new record high on rate cut speculation

MANILA, Philippines - The local stock index rose to a new record high yesterday on expectations the Bangko Sentral ng Pilipinas (BSP) is set to cut interest rates leading to more demand for loans and big purchases.

The Philippine Stock Exchange index (PSEi) gained 34.86 points or 0.75 percent to finish at 4,677.62, its highest level ever, led by large-cap stocks Philippine Long Distance Telephone Co., Ayala Land, and JG Summit Holdings Inc.

ALI went up 3.3 percent to close at P17.36 on news it was investing an additional 60 billion over a 25-year period to develop a First World cultural district, South High Street within the Bonifacio Global City. The project is in partnership with co-developer Evergreen Holdings Inc. of the Campos group.

PLDT inched up by 2.8 percent to P2,826 apiece while JG Summit rose 5.3 percent to P28 each share.

Value turnover amounted to P6.79 billion with losers outpacing gainers, 107 to 61 while 35 were unchanged.

Accord Capital Equities Inc.’s Jun Calaycay said inflation and developments in Europe would come to play into sentiments moving forward.

HSBC expects the local economy to grow by 3.6 percent this year, posting a 2.1-percent rise in the first quarter this year, which could accelerate to 2.4 percent in the second quarter, 4.2 percent in the third quarter and 5.5 percent in the fourth quarter.

PCCI Securities President Francisco Liboro said he expects the Bangko Sentral to cut interest rates by 0.25 percentage points, though inflation may be a concern because of rising fuel prices.

He also said Philippine stocks may no longer be cheap compared with others in the region.

Macquarie research head Alex Pomento said he thinks the central bank won’t cut rates, even if other market participants expect a cut. He said rates are already low, giving the BSP the luxury of calibrating its response to rising fuel prices. But he said he expects stocks to extend gains even without a rate cut.

Luz Lorenzo of ATR KimEng said successful bond auctions in Europe, despite ratings cuts in France and Austria, are boosting risk appetite and the flow of funds into Philippine stocks.