Investors are likely to pick up stocks battered by the recent selloff as market sentiment shifts from a bearish stance after the Philippine Stock Exchange tanked on Friday, pulling the market down more than 20 percent from its recent 52-week hig h.
Investors, likewise, are expected to continue parsing and try to make sense of US President Donald Trump’s decision to slap higher tariffs on Canadian, Mexican and Chinese imports.
On Saturday, the US said that effective Tuesday, there will be a 25 percent levy on imports from Canada and Mexico, an additional 10 percent tariff on China, and a 10 percent tariff on energy products from Canada.
On Friday the main PSEi closed at 5,862.59, dragging the market back into bearish territory. It was a 22.4 percent drop from its Oct. 7, 2024 close at 7,554.68.
Year-to-date the PSEi was down 10.2 percent from the end-2024 close of 6528.79.
Market observers were mostly crediting the stock market’s tanking on Friday on the continuing portfolio rebalancing of investors ahead of the new PSEi composite by Monday, Feb. 3, where real estate investment trust AREIT Inc., and China Banking Corp. will replace Nickel Asia Corp. and Wilcon Depot Inc. in the 30-company bellwether index.
Seth Pangan, trader at Diversified Securities Inc., said funds that previously were not allowed to invest in AREIT and ChinaBank are expected to drive a buy sentiment toward these stocks.
“When you are included in the index then you become part of the fund such as index stocks fund, blue chip fund etc.,” he said.
Fund managers are also seen reducing other stocks in their portfolios to include Chinabank and AREIT, Luis Limlingan, managing director at Regina Capital and Development Corp., said.
During a briefing with business reporters in Baguio City on Saturday, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona has downplayed the prospects of a hard landing for the Philippines.
Remolana highlighted the central bank’s initiatives to tame inflation and stimulate economic growth.
“The decline in the stock market was because of two things. One was because of the GDP number that came out, which was somewhat lower than expected. That was the news before this reaction of the stock market,” the BSP chief said.
“The other one was the news about the Fed. They seem to say that it will remain cautious.,” he added.
The stock market was expecting a more dovish trend, but the statements that came out were not actually dovish. “Those are the two things that seem to have caused a decline,” Remolana said.
Japhet Tantiangco, analyst at Philstocks Financial Inc., said bargain hunting is likely, given the four straight weeks declines.
“However, we may not see a complete turnaround yet as sentiment could remain bearish.,” he added.
The sentiment could still be driven by how the economy would perform this 2025 after its below-target results last year, according to the Philstocks analyst, who also sees that the BSP can help in light of the Fed’s policy slowing down.
But the market is also worried about the uncertainties surrounding US foreign policy, Tantiangco added.
On the other hand, Online stockbroker 2tradeasia.com is confident that valuations, income strategy and dividend yields are the main points of entry as multiples touched historic lows near the 2008 global financial crisis
The mix of slower easing by the Fed and a slower Philippine economy could mean a “protracted risk-off behavior across markets,” 2tradeasia said.
A break below 6,000 is critical for the PSEi as it may be a knee-jerk reaction to negative headlines, but a breach in the key trendline is a major event and warrants caution in short-term trades.
But 2tradeasia is not discounting the likelihood of potential attempts by the market at recovery, as oversold conditions could attract bargain hunters.
Juan Paolo Colet, managing director at Chinabank Capital and Development Corp., said investors will consider Philippine inflation, US jobs data and Trump’s trade policies as major market-moving developments. The Philippine government is scheduled to release its inflation report this week.
The peso on Friday closed at 58.36, down from 58.28 on Thursday. The currency opened at 58.43, hitting a high of 58.32 and a low of 58.44. Trading turnover reached $1.51 billion.