Sideways trading with upward bias likely

Share prices may remain stable this abbreviated trading week, with a slight tendency to rise, as investors await signals from the Bangko Sentral ng Pilipinas (BSP) regarding its interest rate strategy, according to recent updates. The Philippine Stock Exchange index (PSEi) managed to close positively last Friday at 6,297.30, reflecting a 0.11 percent increase week-on-week.

First Metro Investment Corp.'s head of research, Cristina Ulang, noted that BSP Governor Eli Remolona Jr. has started expressing a more dovish stance, which could encourage market participants and boost stock purchases in anticipation of an economic rebound in the second half of the year and beyond into 2027.

Remolona stated that the BSP can afford to be less aggressive in raising interest rates given that economic growth remains below its potential. Meanwhile, 2TradeAsia.com pointed out that foreign exchange fluctuations could play a role, contingent upon the actions of other global central banks in adjusting their benchmark interest rates.

The online division of F. Yap Securities Inc. mentioned that the debate continues over whether the BSP will maintain its policy stance or initiate rate hikes at its upcoming Monetary Board meeting on August 27. This uncertainty could keep equity multiples limited unless the US Federal Reserve demonstrates greater conviction in its future policy direction.

Experts advised investors to maintain a cautious approach, avoiding the temptation to chase high-beta cyclicals based on global rate-cut news that may not have a direct impact on BSP decisions. They suggested concentrating portfolio allocations in well-capitalized banks with robust deposit base and high-yield utilities or conglomerates that offer dividend visibility, offering yields comparable to bonds.

They also recommended capitalizing on metal-driven rallies in local resource counters for short-term gains and keeping cash reserves ready for clearer market signals following the August 27 decision. The market will be closed on Friday, August 21, in commemoration of Ninoy Aquino Day.