The Philippine Stock Exchange index (PSEi) plunged as investors sold down shares in panic due to fears of a global trade war as countries are taking retaliatory measures slapped harsh tariff rates by the US.
The Philippine benchmark fell by 261.34 points or 4.3 percent to close at 5,822.85 on Monday, April 7, as Mining stocks led the slide across the board. Volume jumped to 1.36 billion shares worth P13.23 billion as losers swamped gainers 201 to 32, with 33 unchanged.
“Philippine shares were heavily sold as the escalation of the tariffs rattled markets across the globe. Many are now looking as to whether other countries will continue to retaliate in a back and forth increase,” said Regina Capital Development Corporation Managing Director Luis Limlingan.
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said “This was anticipated after Friday’s Meltdown. So far the 5,800 held as a strong support as market expects the Bangko Sentral ng Pilipinas to cut rates by 25 bps. Failure to cut could trigger losses towards the 5,300/5,500 levels.”
“The PSEi is down over four percent and is now trading at the 5,800 level due to bearish sentiment amid geopolitical tensions arising from the recently imposed tariffs by U.S. President Donald Trump,” said Unicapital Securities Research Head Wendy Estacio Cruz.
She noted though that, “we believe that this sell-off is largely sentiment-driven. In our view, as long as the underlying value of businesses and economies remains intact and undamaged by a physical war, the market will eventually stabilize, and stocks will bounce back.”
Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said the PSEi declined for the third consecutive day “to close at new 2.5-year lows or since October 3, 2022; amid the bigger daily declines in other major Asian markets; after US stock market futures again declined largely due to the continuing effects of Trump’s higher US import tariffs and reciprocal tariffs announced on April 2, 2025 that could slow down the US and global economy (with risk of US recession).”
China retaliated against the new US tariffs, announcing a 34 percent levy on US imports starting April 10, 2025, and China export controls on rare earths. Trump blasted China for retaliating against his sweeping tariff plan and vowed his economic policies will never change.
Trump called on the Fed to cut interest rates and stop playing politics. Federal Reserve Chairman Jerome Powell: Signaled that the trade war's damage will be bigger than anticipated; reiterated a wait-and-see approach on Fed rates; the Fed can wait for more clarity before adjusting; stressed the need for the Fed to keep its inflation expectations anchored, which would indicate that Fed rate hikes may not be imminent.
Ricafort noted that, amid this gloom, there are offsetting positive factors such as the easing of the benchmark 10-year US Treasury yield to new 6-month lows, which partly led to the weaker US dollar vs. major global currencies.
There is also a possible 0.25 local policy rate cut on the next BSP rate-setting meeting on April 10, 2025 and total possible local rate cuts of 0.50 or 0.75 for 2025, as signaled/reiterated by local monetary officials recently.
Global crude oil prices declined to new 4-year lows that could still help further ease prices/inflationary pressures, support more benign inflation, and help justify possible monetary easing/rate cuts, moving forward.
Ricafort sees the next support levels at 5,820 levels (or midpoint between the post pandemic high of 7,604.61 posted on Oct. 7, 2024 and the pandemic low of 4,039.15 posted on March 19, 2020) and then the 5,699.30 low posted on Oct. 3, 2022.