Risk aversion hit the stock market for the third straight trading day on Tuesday, dragging the main PSEi to a fresh seven-month low.
The market made some gains at the opening session as it tracked the overnight close on Wall Street, but caved in to selling pressure after receiving news that US President Donald Trump’s economic team intends to gradually raise tariffs once in office.
The Philippine Stock Exchange index (PSEi) lost 43.43 points or 0.68 percent to 6,299.67, a fresh seven-month low since it closed at 6,299.05 on June 25, 2024.
The broader All Shares dropped 17.05 points or 0.46 percent to 3,687.86.
Losers surpassed gainers 114 to 68 while 60 stocks traded unchanged. Trading turnover was valued at P5.75 billion.
Trump’s team is also looking at hiking rates on a monthly basis, “at about 2 to 5 percent per month, under the International Economic Powers Act,” said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.
Investors remain keen on the incoming Trump administration, set to take office on January 20, since its policies may “lead to protectionist policies and measures that could result in higher US inflation, fewer Fed rate cuts, slower global trade and overall GDP growth,”
First Metro Securities Brokerage Corp. also cited concerns over the pace of future yield rates in the US, weighing on market sentiment as investors await the US December inflation report.
The US Consumer Price Index will be released by the Bureau of Labor Statistics on Wednesday at 8:30 am EDT (9:30 p.m. Wednesday in Manila.)
The peso closed at 58.62 to the dollar, up from 58.70 on Monday. The currency opened at 58.60, hitting a high of 58.47 and a low of 58.62. Trading turnover reached $1.42 billion.
Currencies in emerging Asian markets edged higher on Tuesday, although gains were capped by a strong dollar — buoyed by rising bets that strong US economic data will lead to an early end to the Federal Reserve’s easing cycle.
South Korea’s won advanced as much as 0.5 percent before erasing some of the gains to finish 0.3 percent higher. Malaysia’s ringgit and the Philippine peso each nudged 0.2 percent higher, while China’s yuan rebounded slightly but remained near 16-month lows.
A strong US jobs report last week reinforced confidence in the Fed’s cautious approach to further monetary policy easing, leading traders to reduce their bets for rate cuts this year.
This helped the dollar, which is trading a few pips shy of its 26-month high of 110.17 touched on Monday.
Traders are pricing in 29 basis points of easing this year, less than the 50 basis points of reductions the Fed projected in December.
A stronger dollar reduces the appeal of risk-sensitive emerging-market assets, leading to capital outflows which pressure the local currencies. This could prompt a reassessment of monetary policy by the central banks in emerging economies.
“With the strong dollar story, Asian central banks are well cognizant about where their currency is currently holding, and they will be very reticent in terms of adding volatility by cutting interest rates too much,” United Overseas Bank’s interest rate strategist, Victor Yong, said at a forum in Singapore.
Globally, investors are now focusing on the US inflation report, due on Wednesday, where a rise in the core measure could threaten to close the door on easing altogether.
Sticky annual inflation of around 3 percent would mean “there would no longer be any narrative for the Fed to cut rates,” said Eugene Leow, senior rates strategist at DBS.
In South Korea, the central bank is expected to deliver a quarter-point rate rate cut on Thursday, a month earlier than initially anticipated, as the Bank of Korea focuses on supporting a faltering economy at a time of rising political uncertainties.
Analysts at Citi predict a quarter-point rate cut in their base case scenario. They believe a rate cut will have a “limited impact” on the weak won, which faces headwinds from the dollar’s broad-based strength and potential weakness in China’s yuan.
PH shares
Most actively traded Universal Robina Corp. was down P5.20 to P69.80. Ayala Land Inc. gained P0.25 to P25.50. International Container Terminal Services Inc. dropped P3 to P389.20. Metropolitan Bank and Trust Co. lost P0.10 to P71. SM Investments Corp. rose by P4 to P838. SM Prime Holdings Inc. closed unchanged at P23.80. Bank of the Philippine Islands slipped P0.10 to P118. Ayala Corp. fell P3.50 to P579.50. BDO Unibank Inc. declined by P2.70 to P144. Synergy Grid Corp. of the Philippines added P1.26 to P12.04.