Investors will enter the trading week on edge as escalating tensions in the Middle East threaten to deepen global risk aversion, with the Philippine market likely to remain on the defensive.
The geopolitical spotlight has shifted sharply to the US-Iran-Israel triangle, after Washington reportedly bombed three Iranian nuclear sites — the latest potential flashpoint in the already volatile region.
“This raises fears of retaliation against US assets in the Middle East, which could drive early profit-taking and a tilt toward risk-off positioning,” Jonathan Ravelas, managing director at eManagement for Business and Marketing Services, said.
The benchmark PSEi ended last week at 6,339.77, down 0.87 percent from the prior week’s close of 6,395.59. The broader All Shares index slipped 0.65 percent to 3,760.56. Year-to-date, the PSEi is now down 2.9 percent, having ended 2024 at 6,528.79.
Foreign funds pulled out a net P3.49 billion last week, bringing total net foreign selling to P39.86 billion since the start of the year — a reflection of sustained caution from global investors.
Juan Paolo Colet, managing director at China Bank Capital, said market direction this week may hinge on how Iran responds.
“If Iran retaliates by disrupting oil flows through the Strait of Hormuz, the implications for oil prices and OFW remittances could be significant,” he said. “That would be bearish for the local market. But any move toward de-escalation or a ceasefire could spark a rebound.”
By Sunday afternoon Manila time, Reuters reported Iran has intensified its missile attacks on Israel in response to the sudden, deep US involvement in the conflict.
The UK-based The Guardian earlier reported Iranian missiles had hit Israel in retaliatory strikes, while CNN also earlier on Sunday said an apartment block in Tel Aviv was ripped apart by Iranian missiles.
Oil prices and the peso’s performance will also be key variables, Japhet Tantiangco, research manager at Philstocks Financial, said.
“If oil keeps climbing and the peso weakens further, that could drag the market lower,” he said, noting that sentiment last week was already subdued.
“Market confidence remains soft. Trading has been lethargic, and many investors are staying on the sidelines amid persistent macro and geopolitical risks.”
From a valuation perspective, however, the PSEi remains compelling.
“The index ended the week with a price-to-earnings ratio of 11.4x — well below its five-year historical average of 17.3x and the regional average of 16.1x,” Tantiangco added.
Technically, the market remains on a sideways track channel with a bearish tilt.
“The PSEi continues to trade below its 10-day exponential moving average. If the 50-day EMA is breached this week, it could trigger further downside,” he warned.
Meanwhile, trading platform 2TradeAsia.com flagged simmering trade tensions ahead of the July 9 expiration of the US pause on Liberation Day tariffs.
“With companies pulling back from proactive inventory builds, even minor disruptions can now have an outsized effect on margins and visibility,” it said.
With risk sentiment likely to remain fragile, traders may stay cautious until the geopolitical smoke clears or a new catalyst emerges.
