Global and Philippine Market Update

Jan. 23 to Jan. 29, 2025

Global Markets

Global Stocks tumbled amid launch of China’s AI model.

• The US Federal Reserve (Fed) is not in a rush to adjust interest rates again, according to Chair Jerome Powell. Policymakers unanimously decided to pause rate cuts, keeping the benchmark lending rate at 4.25% to 4.50%. Powell noted that with a less restrictive policy stance and a strong economy, there is no need for immediate changes. The Fed highlighted that the unemployment rate remains low, and the labor market is solid, though inflation is still somewhat elevated, omitting previous references to progress towards the 2% target.
  
  
• Global investors sold off tech stocks this week, driven by concerns over a new low-cost Chinese AI model from DeepSeek. This led to a significant market impact, with Nvidia experiencing a record one-day loss of $593 billion in market value. The tech-heavy Nasdaq fell by 3.1%, with Nvidia, Broadcom, Microsoft, and Alphabet being the biggest contributors to the decline. DeepSeek, a Chinese startup, launched a free AI assistant that uses less data and costs significantly less than existing services. This new assistant quickly surpassed ChatGPT in downloads from Apple's app store. DeepSeek's models, DeepSeek-V3 and DeepSeek-R1, have been praised for their quality and cost-efficiency, marking a potential shift in the AI market dynamics.

Philippine Stock Market 

Philippine Stocks continued downward trend due to lack of positive catalysts.

• The local stock market fell, hitting a 14-month low as investors continued to seek new catalysts expected later this week. According to AP Securities research head Alfred Benjamin Garcia, there is an ongoing sell-off in large-cap stocks ahead of the index rebalancing at the end of the month, which will see a reduction in weight for existing index issues to accommodate the inclusion of AREIT and China Banking Corp.
  
  
• Philippine shares may rebound on expectations of improved economic growth in the fourth quarter of 2024. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that GDP growth for Q4 2024 is expected to slightly increase from 5.2% in Q3, potentially boosting the local stock market. Additionally, a recovery on Wall Street after a tech-led selloff could support the local market. However, concerns over disappointing GDP data may keep the market in a bearish mode.

Philippine Bonds

Philippine Bond yields declined as the central bank signal continued policy easing.

• The Bureau of the Treasury (BTr) raised PHP35 billion through a dual-tranche Treasury bonds (T-bonds) offer. The Auction Committee fully awarded both the reissued three-year and the new 25-year T-bonds. The reissued T-bond, with a remaining term of three years and two months, achieved an average rate of 5.894%, which is lower than the current rates seen in the secondary market. The auction saw strong demand, being nearly 5 times oversubscribed with total tenders reaching PHP74.6 billion.
  
  
• The Bangko Sentral ng Pilipinas (BSP) has indicated that there is room for continued policy easing amid firm but subdued economic growth. The BSP expects that lower oil prices, monetary policy easing, and a reduction in bank reserve requirements will support the domestic economy, although demand will remain subdued. The central bank noted that there is scope for measured monetary policy easing given the within-target inflation, manageable underlying price pressures, and well-anchored inflation expectations.

WD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://business.inquirer.net/503918/powell-says-us-fed-in-no-hurry-to-cut-rates-after-pause  (2) https://www.reuters.com/technology/chinas-deepseek-sets-off-ai-market-rout-2025-01-27/ (3) https://www.philstar.com/business/2025/01/29/2417557/market-plunges-14-month-low-investors-await-fresh-leads (4) https://www.bworldonline.com/stock-market/2025/01/29/649732/phl-shares-may-rebound-on-key-economic-data/ (5) https://www.pna.gov.ph/articles/1242846 (6) https://www.manilatimes.net/2025/01/30/business/top-business/bsp-expects-to-keep-lowering-interest-rates/2046656

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.