With only two trading days in the opening week of 2025, the local stock market is expected to see less activity as investors remain cautious and some traders are still on vacation.
“In its first week for 2025, a shortened one, we expect trading to remain lethargic,” said Philstocks Financial Research Manager Japhet Tantiangco.
He noted that “investors are still expected to maintain the cautious tone as they contend with the uncertainties and downside risks for 2025 including the pace of the Federal Reserve and the Bangko Sentral ng Pilipinas’ policy easing, and the prospect of a protectionist US under President-elect Donald Trump’s leadership.”
"The movement of the peso is also expected to affect the local bourse. Further appreciation of the local currency is expected to give the market a boost, while depreciation is expected to lead to the opposite," Tantiangco added.
He also warned that "a rise in the long term government bond yields is also noticed. A continuation of this may weigh on the local bourse."
Heading into 2025, 2TradeAsia.com said investors need to shift their mental models as apparent challenges in the macro environment are likely to keep any broad-based rallies to a minimum.
"Downside risks include inflationary impacts from Trumpism, weaker China, expensive greenback, and generally more hawkish central banking; in fact, consensus expectations for rate cuts have further softened in the past weeks prior to the holiday break (from four to two cuts at midpoint), with still-rising long-term yields," it noted.
The brokerage said investors should brace for a slowdown in deployment relative to past first quarters as pessimism continues to be baked into security prices.
Potential local decision-makers may opt to stay sidelined until the politico-economic scene clears up after the crucial midterm elections in May this year.
As a consequence of medium-term headwinds, 2TradeAsia.com advises investors to look at individual companies' merits and work at calculating intrinsic value relative to price. Portfolio selection should be tilted towards stock-specific stories versus riding market cycles, which was a theme in early 2024.
"Value plays in key industries (property, banking, among others) are still underscored, but there might be windows for short-run trading gains by 'beating the beta' once volatility returns next month, anchored by market events (Fed meeting on the 29th, Philippine GDP on the 31st)," 2TradeAsia.com said.