Market rallies on trade deal, rate cut signals

The local bourse rallied on Wednesday, with the benchmark Philippine Stock Exchange index (PSEi) closing at 6,462.25 – up by 1.68 percent – as investors reacted positively to the recently concluded trade deal between the United States and the Philippines.

The market welcomed the marginal reduction of US tariffs on Philippine exports, from 20 percent to 19 percent, as announced by US President Donald Trump. The peso’s appreciation against the US dollar also buoyed investor sentiment.

Net value turnover rose to P5.98 billion, slightly above the year-to-date average of P5.83 billion. Foreign investors were net buyers for the day, with net inflows reaching P181.16 million.

All sectors finished in the green, led by the services sector, which surged 5.84 percent. Market breadth was positive, with 128 advancers edging out 71 decliners, while 49 stocks were unchanged.

Luis Limlingan, Head of Sales at Regina Capital Development Corporation, said the PSEi ended with a strong showing following the US-Philippines trade agreement, despite the minimal tariff cut.

“Moreover, investors likely took the remarks of (Finance) Secretary Recto positively, particularly his hint at two more potential rate cuts from the Bangko Sentral ng Pilipinas (BSP) within the year amid easing inflation rates,” Limlingan said.

Michael Ricafort, Chief Economist at Rizal Commercial Banking Corporation, cited dovish signals from BSP Governor Eli Remolona as another key driver of the day’s rally.

“Governor Remolona has signaled the possibility of two more 25-basis-point rate cuts before year-end, in response to benign inflation and global uncertainties that may dampen local growth,” Ricafort said.

He noted that the BSP’s most recent rate cut on 19 June, which brought the policy rate down to 5.25 percent – its lowest since November 2022 – reflects a policy tilt toward stimulating growth. Inflation has remained below the BSP’s 2 to 4 percent target range for four consecutive months.

Ricafort added that a potential narrowing of the interest rate gap with the US Federal Reserve, from the current 0.75 percentage point to just 0.50, would be the lowest on record and supportive of local economic momentum.

Meanwhile, the peso closed at 56.881 against the US dollar on Wednesday, firmer than the previous day’s 57.05, according to data from the Bankers Association of the Philippines.