The Philippine Stock Exchange index (PSEi) fell below the 6,000 level on Thursday, closing at 5,984.20, down 0.99 percent, as the market pulled back after two straight days of gains, with investors taking profits and digesting the latest developments in the Middle East.
The previous day’s rally was largely driven by optimism that diplomatic efforts between the United States and Iran could ease tensions. However, Iran’s statement rejecting talks quickly undermined that narrative. This shift removed a key support for risk appetite, prompting investors to lock in gains rather than extend positions.
Trading subdued
Trading activity remained subdued at P4.23 billion, signaling a lack of strong conviction among market participants, as investors stayed defensive and waited for clearer direction on global risks before deploying capital.
Continued net foreign selling of P135.29 million reinforced this cautious stance, as offshore funds tend to react more quickly to geopolitical uncertainty and currency pressures, often reducing exposure to emerging markets like the Philippines during periods of heightened risk.
Sector performance further underscored the defensive tone. Mining & Oil, up 1.14 percent, was the lone gainer, benefiting from elevated oil prices linked to Middle East tensions, which tend to support energy-related stocks. In contrast, banks, down 1.36 percent, led the declines, reflecting concerns over slower economic momentum, higher inflation risks and potential pressure on margins in a volatile rate environment. Weak market breadth — with 100 decliners against 78 advancers — indicated that selling was broad-based rather than isolated.
At the stock level, gains in Monde Nissin, up 3.02 percent, suggested selective buying in consumer defensives, while the sharp drop in DigiPlus, down 4.60 percent, pointed to continued rotation away from higher-beta or previously strong performers.
Peso hovered near record lows
Meanwhile, the peso hovered near record lows, weakening to P60.23 per dollar from P60.10 previously, reflecting a renewed shift toward risk aversion in global currency markets despite the modest move.
The US dollar regained strength after Iran signaled it was not open to negotiations with the United States, reversing earlier optimism tied to proposed peace initiatives. This development heightened uncertainty in the Middle East, particularly over the security of oil flows through the Strait of Hormuz, a critical artery for global crude supply. As a result, investors moved back into traditional safe-haven assets, including the US dollar, lifting the greenback against most emerging-market currencies.
At the same time, oil prices remained elevated and volatile, sustaining pressure on net oil-importing economies like the Philippines.
Higher crude prices translate into increased import costs and wider trade deficits, which in turn boost demand for dollars locally — adding further downward pressure on the peso.
Vulnerability more pronounced
This vulnerability becomes more pronounced during periods of geopolitical stress, when energy markets react quickly to new developments.
Compounding these pressures, the US dollar continued to draw support from relatively high US Treasury yields, which remain attractive to global investors compared with emerging-market assets. This yield differential encourages capital to flow into dollar-denominated instruments, reinforcing dollar strength.
While some Asian currencies saw limited movement, the peso remained more sensitive due to its exposure to oil prices and foreign fund flows, explaining its drift toward the 60 level despite only incremental shifts in global sentiment.