The stock market on Thursday posted a strong finish as investors responded enthusiastically to the country’s robust manufacturing data and higher inflation in China, as well as prospects of further stimulus from the European Central Bank, a surprise rate cut in New Zealand, and a minor rally for oil prices, analysts said.
The benchmark Philippine Stock Exchange Index (PSEi) gained 1.44 percent or 99.90 points to end the trading day at 7,048.08, while the wider All Shares likewise advanced by 1.18 percent or 47.50 points to finish at 4,069.87.
Alexander Adrian Tiu, senior stock analyst at AB Capital Securities Inc., in a phone interview, attributed the strong performance of the local bourse to a wide array of good news.
“Locally, investors are happy about our strong manufacturing data. This means the Philippines’ economic fundamentals remain intact,” Tiu said.
Data released by the Philippine Statistical Authority (PSA) on Thursday showed that factory output in January surged by more than 34 percent in volume terms and 26 percent in value.
“The stock market is also up because many investors are expecting further stimulus announcements from the ECB [European Central Bank]. Such a further stimulus package is expected to prop up the global economy,” he added.
Tiu also noted that another factor that boosted the country’s stock market is China’s higher consumer inflation rate of 2.3 percent in February, which was higher than the consensus.
“This higher consumer inflation rate has offset China’s disappointing February exports data, which fell by 25.4 percent in dollar terms year-on-year. Such inflation result showed that domestic consumption in China is still strong,” Tiu said.
Further, he pointed out that a surprise rate cut from New Zealand’s central bank further lifted the stock market not only in the Philippines but in the entire region as well.
“New Zealand’s reduction of its benchmark interest rate by 25 basis points to 2.25 percent is also a great boost. Any central bank that opts to reduce interest rates has the effect of telling the consumers not to deposit their money in the banks. Hence, it encourages people to spend or invest it in the equities markets as yields are higher,” he said.
Further, he explained that reduction of interest rates likewise encourages companies and businesses to take out loan from the banks because of lower borrowing cost.
Joseph Roxas, president of Eagle Equities Inc., agreed with Tiu, but adding that the positive stock market’s performance could also be attributed to the increasing likelihood that the US Federal Reserve will not raise its key rates.
“There are already expectations that the US Federal Reserve will not raise its key interest rates. Equities investors are allergic to any upward adjustment in the interest rates,” Roxas said.
In addition, Roxas said that the stronger oil prices added to the strong appetite of investors for buying shares rather than selling.
“The oil prices have seemed to be coming back up, so all of these factors added to the stock market’s better performance today [Thursday],” Roxas said.
Total value turnover was strong at P7.424 billion, with winners upstaging losers, 130 to 52, with 39 issues unchanged.
All the sub-indices posted gains for the day, except for the mining and oil sector, which shed 0.49 percent.