PSEi hits 5-month high on rate cut hopes, remittances

The Philippine Stock Exchange index (PSEi) extended its gains for a third straight session on Tuesday, rising 27.69 points or 0.4 percent to close at 6,386.27 – its highest level since 10 January 2025. The index has now erased all its losses since former US President Donald Trump’s return to office in January, buoyed by investor optimism over an anticipated local interest rate cut and improving global risk sentiment.

The local benchmark followed the upbeat momentum in US equity markets, which neared record highs amid reports of easing geopolitical tensions in the Middle East and progress on international trade agreements during the G-7 summit in Alberta, Canada. Analysts say the PSEi’s steady ascent reflects growing confidence in the domestic economy’s fundamentals and the potential for lower borrowing costs.

Investor sentiment was lifted ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting on Thursday, 19 June, where markets are pricing in a 25-basis point rate cut. If realized, this would lower funding costs for listed companies and consumers, further supporting economic activity.

The rally also came on the heels of stronger overseas Filipino worker (OFW) remittance growth, which continues to underpin household spending and foreign exchange inflows — both crucial pillars of the Philippine economy.

“Philippine and US stocks rebounded as hopes grew that the Israel-Iran conflict would stay contained, easing oil price concerns. Weaker US manufacturing data also tempered rate cut expectations ahead of the Fed’s Wednesday decision, which markets expect to hold steady,” said Luis Limlingan, Head of Sales at Regina Capital Development Corporation.

“Meanwhile, Iran reportedly launched further strikes after Israel’s earlier attack on Tehran,” he added. “Oil prices retreated, snapping their recent upward streak, as signs emerged that Iran may be pushing for a ceasefire with Israel, calming fears of further supply disruptions. Brent traded at $73.23/bbl, down by -1.35 percent.”

Market breadth favored gainers, with 124 advancing issues against 82 decliners and 42 unchanged. Value turnover stood at P5.511 billion, net of extraordinary block sales.

Immediate resistance for the PSEi is seen at the 6,500 level, followed by 6,591.94 – the peak posted on 14 May 2025. Beyond that, major resistance sits between 6,705 and 6,915, with the psychological 7,000-mark and last year’s high of 7,604.91 in sight should momentum persist. On the downside, minor support remains at 6,290–6,300, with stronger support at 6,105–6,200, guarding against a potential re-test of the 5,804.56 low recorded on 7 April.

In currency markets, the peso weakened slightly, opening at 56.45 and closing at 56.70 versus the US dollar. The weighted average settled at 56.579, based on data from the Bankers Association of the Philippines.

Geopolitical headlines also continued to shape the global backdrop. Despite a fresh wave of Russian missile strikes on Kyiv – described by Ukrainian President Volodymyr Zelensky as “one of the most horrific attacks” on the capital – market reaction remained relatively muted, with analysts noting the limited impact of the ongoing Russia-Ukraine war on global oil and commodity prices in recent months.

“Direct impact on the markets if oil and world commodity prices go up, but Russia-Ukraine war not affecting much oil and other commodity prices in recent months or years,” said Michael Ricafort, Chief Economist at Rizal Commercial Banking Corporation.

Globally, risk assets climbed after Iran, through intermediaries, signaled a willingness to de-escalate its conflict with Israel and resume nuclear talks with the US. 

US and UK officials also finalized a trade deal during the G-7 summit, slashing tariffs and expanding agricultural quotas – moves seen as positive for trade-dependent economies.

Meanwhile, the US Federal Reserve is expected to hold rates steady on Wednesday, with Fed Fund Futures pricing in fewer rate cuts this year than previously expected.