Investors look to BSP buffer after anticlimactic economic growth

Stock market investors will be bracing for the Bangko Sentral ng Pilipinas’ (BSP) next policy meeting on Thursday while digesting a steady stream of second quarter corporate earnings.

This comes as the benchmark Philippine Stock Exchange index (PSEi) continued its downtrend after the government released last week disappointing economic growth data for the second quarter. The PSEi lost 0.7 percent to 6,405.91 from the previous week.

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the PSEi was resting just above the major support zone of 6,400 to 6,250. He pegged the key resistance areas for the PSEi at 6,730 to 6,830.

The BSP Monetary Board will have several data points to consider in the upcoming interest rate setting meeting.

The chief consideration among these was the recent July inflation report showing inflation cooling for six straight months to 4.7 percent.

HSBC Asean economist Aris Dacanay maintained their expectation that the BSP would keep its policy rate stable at 6.25 percent on Aug. 17.

“Although [the second quarter Philippine economic] growth surprised to the downside, we think risks to the inflation and policy rate outlooks are to the upside,” Dacanay said.

“To some extent, growth cooling may also support macroeconomic stability and domestic balance … Although marginally improving, the national saving rate has not normalized to prepandemic levels while investment continues to be robust,” he said.

  “This imbalance may then require a tight monetary stance to help rein in demand, incentivize saving and bring the domestic economy back to balance,” he added.