THE Philippines’ stock market is seen to benefit from the anticipated cut in banks’ reserve requirement ratio (RRR) as this fuel more liquidity in the financial system.
In a media roundtable in Makati City on Wednesday, Philippine National Bank (PNB) Securities president and CEO Manuel Lisbona said Philippine shares have more room to go up.
However, Lisbona said limited liquidity or money supply is constraining the equities market’s potential to go up further.
“Without that liquidity, without that gasoline to the fire mahirap i-push ang market paakyat,” he said.
Reducing the RRR – the amount of cash a bank must hold in its reserves against deposits made by customers – which is currently 18, among the highest in the region, would free up more liquidity in the financial system thus benefiting investments such as in securities.
“We think the market could potentially go up 8,400 to 8,600 at least for the year if we have all have this catalyst in place,” Lisbona said.
The BSP’s Monetary Board is scheduled to meet on Thursday, May 9, to decide on key monetary measures including interest rates and RRR.
For his part, PNB economist Jun Trinidad said he is expecting a 1 to 2 percent cut in RRR.
Trinidad said the timing for this move is very appropriate given the easing inflation environment experienced in the first four months of the year.
In the first quarter of 2019, inflation or the rate of increase in consumer prices decelerated to 3.8 percent from 5.9 percent in the last quarter of 2018.
Meanwhile, for the month of April inflation clocked in at 3.0 percent — the slowest in 16 months.
Lisbona said that if the RRR won’t be cut this year, the PSE’s main index PSEi could hit between 7,800 and 8,200.
He said that a reserve requirement cut will be positive and spillover to the market. (GMA News)
