Investors in the local stock market will be watching out for the release of June inflation numbers for cues this week although follow through buying may keep stocks buoyant after the Bangko Sentral’s statements gave sentiment a boost.

“This week, investors are expected to watch out for the Philippines’ June inflation data as this would also provide clues on our country’s monetary policy outlook,” said Philstocks Financial Research Manager Japhet Tantiangco.

He noted that, “We see the possibility of the market extending its climb next week. This is due to the dovish signals that the Bangko Sentral ng Pilipinas has given in its latest policy meeting. 

“The BSP has downgraded its risk-adjusted inflation forecast for 2024 and 2025. At the same time, BSP Governor Eli Remolona has signaled the possibility of a rate cut in their August meeting.”

He explained that, prospects of monetary easing are expected to boost confidence in the market given its positive impact on the general economy as well as on the corporate sector. 

Online brokerage firm 2TradeAsia.com said that, aside from the BSP signaling a potential first cut in August, the balance of rate cuts are expected sometime in the fourth quarter. 

“More interesting is the BSP's much more optimistic baseline inflation forecast, coming down to just 3.3 percent (from 3.5 percent) in 2024, and 3.1 percent (from 3.3 percent) in 2025. 

“In an ideal world, now-comfortable CPI projections especially extending towards the next 12-24 months would have prompted downward adjustments to rates; external factors are understandably affecting the visibility of risks-these factors include choreography with the US Fed and geopolitical tensions in the region, among others,” the brokerage noted. 

While corporate earnings have been generally positive, 2TradeAsia.com noted that, “participants have not decoupled yet from inflation-interest rate cycle changes, which might make it difficult for earnings to be reflected properly in prices in the short-run.”