Global and Philippine Market Update

Feb. 13 to Feb. 19, 2025

Global Markets

Global Stocks rose despite uncertainties surrounding future US policy.

• Federal Reserve officials agreed that more progress on reducing inflation was necessary before considering further interest rate cuts. They expressed concerns about the potential impact of President Donald Trump's tariffs. The Federal Open Market Committee (FOMC) unanimously decided to keep the key policy rate steady after three cuts in 2024. Members discussed the effects of the new administration's policies, including tariffs, reduced regulations, and taxes. The committee noted that the current policy is now much less restrictive, allowing time to assess conditions before making further changes.
  
  
• President Donald Trump's initial policy proposals raised concerns at the Federal Reserve about higher inflation. Firms indicated they expected to raise prices to offset the cost of import tariffs. At the January 28-29 meeting, Fed participants highlighted the upside risks to inflation, citing potential changes in trade and immigration policy, geopolitical disruptions to supply chains, and stronger-than-expected household spending. While they believed price pressures would ease in the coming months, they noted that higher input costs from tariffs could hinder the disinflation process.
  
  
• President Donald Trump announced plans to impose 25% tariffs on auto imports, semiconductors, and pharmaceuticals starting April 2. He recently enacted a 10% tariff on Chinese goods and 25% tariffs on steel and aluminum imports. Trump indicated that tariffs on semiconductor chips and drugs could increase further over the next year. He emphasized giving companies time to relocate factories to the U.S. to avoid tariffs. This announcement follows an investigation into other nations' tax and tariff policies, paving the way for reciprocal tariffs. Economists warn that these tariffs could raise consumer prices and increase business costs.

Philippine Stocks 

Philippine Stocks found support through bargain hunting and strong corporate earnings.

• Philippine stocks remained above the 6,000 level, buoyed by strong corporate earnings. Optimistic fourth-quarter and full-year 2024 results from major companies — like Bank of the Philippine Islands, Asia United Bank Corp., and SM Prime Holdings, Inc. — fueled positive sentiment. Investors were encouraged by the sound financial performance of these corporations, which contributed to the overall market recovery after the recent decline.
  
  
• Economic managers in the Philippines expect strong ties with the US to continue despite tariff threats from the Trump administration. Finance Secretary Ralph G. Recto emphasized the resilience of economic and investment relations between the two countries. During their monthly meeting, officials discussed macroeconomic and trade policies, including the CREATE MORE Act, which aims to attract investors. US Ambassador MaryKay L. Carlson reaffirmed the positive bilateral trade relationship and investor interest in the Philippines. However, the semiconductor industry may face challenges if the US imposes 25% tariffs on imports. Economists warn that higher tariffs could slow trade and increase costs for Philippine exports to the US.

Philippine Bonds

Philippine Bond yields trended lower due to sustained demand for fixed-income securities.

• The government successfully awarded a reissued 10-year Treasury bond at a lower average rate in the latest auction, driven by strong demand for higher-yielding longer tenors. Despite last week's unexpected pause, the Bangko Sentral ng Pilipinas (BSP) is still anticipated to continue its easing cycle. The Bureau of Treasury (BTr) raised the planned P30 billion, with total bids amounting to P60.212 billion, more than double the offered amount.
  
  
• Inflation remains the biggest risk to the Philippines' economic outlook, potentially affecting the central bank's easing cycle, according to Moody's Analytics economist Sarah Tan. Domestic factors, such as elevated food inflation due to weather disruptions, and external factors, like US tariffs, contribute to this risk. Despite the minimal direct impact of US tariffs on the Philippines, reciprocal tariffs could make Philippine goods less competitive. Inflationary pressures could delay further easing by BSP. The BSP left the benchmark rate unchanged at 5.75% in February, but a rate cut is still possible in April. The upcoming midterm elections in May could boost spending but also pose inflationary risks.

FWD 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://www.cnbc.com/2025/02/19/fed-minutes-january-2025-.html (2) https://www.bworldonline.com/banking-finance//potential-impact-of-trump-policies-stirring-inflation-concerns-at-fed-minutes-show/ (3) https://edition.cnn.com/2025/02/19/economy/us-new-tariff-plans-trump-intl-hnk/index.html (4) https://www.bworldonline.com/top-stories/2025/02/20/654426/recto-expects-phl-us-investment-ties-to-stay-strong-amid-tariff-threats/ (5) https://www.bworldonline.com/stock-market/2025/02/18/654043/psei-advances-as-strong-earnings-boost-sentiment/ (6) https://www.bworldonline.com/banking-finance/2025/02/19/654047/govt-fully-awards-10-year-bonds-at-lower-rates/ (7) https://www.bworldonline.com/top-stories/2025/02/20/654428/inflation-still-top-risk-to-phl-growth/

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.