Global and Philippine Market Update

Jan. 30 to Feb. 5, 2025

Global Markets

Global Stocks were steady amid a pause on tariffs for Canada and Mexico.

• Federal Reserve officials are increasingly commenting on fiscal policy due to the threat of tariffs proposed by President Trump. These tariffs on products from Canada, Mexico, China, and possibly the European Union could impact inflation. Chicago Fed President Austan Goolsbee highlighted the need to distinguish whether inflation is due to economic overheating or tariffs. The Federal Open Market Committee recently decided to keep interest rates steady while assessing economic conditions. Economists generally see tariffs as having one-time price impacts, but Trump's broad tariffs could lead to underlying inflation. Fed Chair Jerome Powell and other officials are cautious, noting it's too early to judge the full impact of these tariffs on the economy.
  
  
• China announced retaliatory measures against the U.S. following the imposition of U.S. tariffs on Chinese goods, raising fears of a broader trade war. Starting February 10, China will impose additional tariffs of 15% on U.S. coal and liquefied natural gas, and 10% on American crude oil, agricultural machinery, and certain cars. China also plans to implement export controls on critical minerals. Economists view these tariffs as symbolic for now but warn of a potential escalation in the trade conflict. Meanwhile, U.S. President Trump agreed to a 30-day pause on tariffs for Canada and Mexico, but no such reprieve was given to China. Economists predict that the additional duties could reduce China's GDP growth and increase domestic consumer inflation.

Philippine Stocks

Philippine Stocks returned above 6,000 after the PSEi rebalancing.

• Philippine shares surged, with the benchmark index reaching the 6,200 level, driven by continued bargain hunting and stable January inflation, which supports further rate cuts by the Bangko Sentral ng Pilipinas (BSP). According to Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco, the local market extended its rally as investors continued their bargain hunting. Investors also welcomed the January inflation figure of 2.9%, which raises expectations that the BSP will maintain its monetary policy easing.
  
  
• The Philippine economy grew by a lower-than-expected 5.2% in the fourth quarter compared to the previous year. This slower growth was attributed to weaker consumption and weather disruptions that affected agricultural output. Economic Planning Undersecretary Rosemarie Edillon cited challenges such as extreme weather events, geopolitical tensions, and subdued global demand. The agriculture sector contracted for the third consecutive quarter, while household consumption growth slowed to 4.7%. The government has adjusted its growth target for 2025-2028 to 6.0% to 8.0% due to evolving global uncertainties.

Philippine Bonds

Philippine Bond yields declined amid strong demand.

• The government fully awarded the recent Treasury bond auction at a lower average rate due to strong demand, driven by expectations of a potential rate cut from the Bangko Sentral ng Pilipinas (BSP) next week. The Bureau of the Treasury (BTr) raised P30 billion as planned through the reissued seven-year bonds, with total bids reaching P98.633 billion, over three times the offered amount. This increased the total outstanding volume for the bond series to P184.7 billion. The bonds, with a remaining term of five years and five months, were awarded at an average rate of 5.968%, with accepted bid yields ranging from 5.945% to 5.98%.
  
  
• The Department of Agriculture (DA) announced that the maximum suggested retail price (MSRP) scheme for imported rice will be implemented nationwide starting February 15. Assistant Secretary Arnel V. de Mesa stated that the MSRP will be reduced to P55 per kilo for rice with 5% broken-grain content. The DA plans further reductions in the coming weeks. Agriculture Secretary Francisco P. Tiu Laurel, Jr. mentioned that the MSRP could drop below P50 per kilo by early March, with additional cuts to P52 per kilo by mid-February and P49 per kilo two weeks later, reflecting lower global rice prices and reduced tariffs.

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://www.cnbc.com/2025/02/05/fed-officials-are-raising-concerns-about-trumps-tariffs-and-inflation.html (2) https://www.cnbc.com/2025/02/04/china-levies-tariffs-on-select-us-imports-starting-feb-10.html  (3) https://www.bworldonline.com/stock-market/2025/02/05/651440/stocks-extend-rally-as-cpi-data-boost-bsp-cut-bets/ (4) https://www.reuters.com/markets/asia/philippines-q4-gdp-grows-52-yy-below-expectations-2025-01-30/  (5) https://www.bworldonline.com/economy/2025/02/04/651149/price-cap-on-imported-rice-to-take-effect-nationwide/ (6) https://www.bworldonline.com/banking-finance/2025/02/05/651095/treasury-fully-awards-reissued-seven-year-bonds-as-rates-drop/

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.