Investors are bracing for another volatile trading week ahead after US President Donald Trump doubled down on his tariff policy, this time training his sights on the European Union and smartphone makers.
On the domestic front, investors are still trying to make “heads or tails” about the ongoing revamp of President Marcos’ cabinet and the central bank’s hints of new interest rate cuts.
Jonathan Ravelas, managing director at eManagement for Business and Marketing Services (eMBM), said Trump’s latest tirade “adds to the uncertainty” in the market when he recommended 50 percent tariffs on European goods, citing a slow pace of negotiation.
Trump in a social media post also warned smartphone makers they could face potential 25 percent tariffs on phones sold to US customers but not manufactured in the country.
The PSEi closed last week’s trade down 0.81 percent at 6,413.10 from 6,465.53 the prior week, ending the benchmark index’s five-week run.
This brought the PSEi down 1.8 percent on a year-to-date basis. It closed 2024 at 6,528.79.
From its record close of 9,058.62 on Jan. 20, 2018, the PSEi on Friday was down by 29.2 percent.
Data from the Philippine Stock Exchange showed that foreign funds were net sellers of P20.7 billion on a year-to-date basis.
“The local market broke its five-week winning streak last week as it fell amid a mix of negative factors, from fiscal worries in the US to concerns over President Ferdinand Marcos’ sudden move to revamp the government. On a positive note, the market was still able to close above the 6,400 level,” Japhet Tantiangco, analyst at Philstocks Financial Inc., said.
“Next week, investors are expected to digest factors that could improve sentiment. President Marcos’ decision to keep his economic team intact may ease concerns over the uncertainties of the Philippines’ economic policies. Signals from BSP Governor Eli Remolona, Jr. of two more possible rate cuts this year may also strengthen market confidence,” he added.
Tantiangco said that concerns over the outlook of the US’ fiscal position amid risks of increasing debt may continue to weigh on the bourse.
On the EU tariff threat, Luis Limlingan, managing director at Regina Capital and Development Corp., said investors will be watching if Trump will follow through on his threat and whether there is still room for negotiations.
Online stock trading platform 2tradeasia.com said investors are now becoming more focused on the prospects of growth for the global economy.
“Recent data continues to paint a murky global picture as cooling consumption, softened corporate sentiment, and the lagged effects of tighter policy and trade frictions are starting to trickle to corporate earnings,” it said.
2tradeasia.com also said recession odds in the US continue to rise, which, coupled with the US losing its Aaa credit rating recently “reinforces the sense that economic vulnerability is broadening and becoming harder to hedge, with potential contagion effect from developed to emerging market.”
“That, paired with heavy fiscal and monetary constraints heading into the second half of the year, could lead to more volatility in how markets price growth optimism versus fragility,” it said.
2tradeasia.com added that it continues to see a divergence in sector strength — consumer names are still digesting post-election demand normalization, but infra-linked, utilities, and select industrials are likely to enjoy improved forward visibility.
“Financials plus defensives may ride this fiscal upswing, especially those with clean balance sheets and strong pipelines. With macro tailwinds tentative (especially offshore) it may be sector gradients that shape returns in the second half,” it said.
“With risks leaning asymmetrical, mid-year outlook will be about finding balance amid macro and micro tensions. Gradual unfolding of the rate path plus fiscal policy will direct flows in the second half, on top of monitoring in margin and cash flow behavior at the corporate level amid elevated uncertainty on the ground,” it added.
