PSEi, peso climb on rate cut expectations

The Philippine Stock Exchange index (PSEi) and the peso closed higher on Thursday, February 6, 2020, driven by improved investor sentiment and expectations of a policy rate cut.

The PSEi increased by 2.09 percent, or 153.66 points, to reach 7,506.51 points.

The Bangko Sentral ng Pilipinas (BSP) announced a pre-emptive 25 basis point reduction in its key policy rates, citing benign inflation and the need to support domestic expansion.

For the week, the PSEi displayed relative resilience, adding a total of 306.41 points or 4.25 percent, climbing out of bear territory as foreign buying resumed.

ING Philippines economist Nicholas Antonio Mapa suggested that BSP Governor Benjamin Diokno is likely to carry out a second rate cut within the first half of the year, possibly as early as the May meeting.

The BSP would likely shelve plans to adjust the reserve requirement, as recent cuts had not translated directly into bank lending activity.