The Philippine Stock Exchange Index (PSEi) has plunged into bear market territory, closing at 5,862.59 on February 2, 2025, after a significant drop of 4.01% or 245.07 points. This marks the index's worst close in 27 months and reflects a decline of over 20% from its peak of 7,604.61 on October 7, 2024. Over the past week, the PSEi has seen a cumulative decline of 6.89% or 433.61 points, raising concerns among investors [8c0b9475].
This downturn follows a disappointing economic performance, with the Philippine GDP growing by only 5.6% in 2024, falling short of the government's target of 6-6.5%. As the market reacts to these developments, analysts anticipate potential bargain hunting, although they caution that overall sentiment may remain bearish [8c0b9475].
In the backdrop of these market fluctuations, the U.S. Federal Reserve has maintained its target interest rate at 4.25%-4.5%, with Fed Chair Jerome H. Powell indicating a cautious approach to policy easing. This decision has implications for global markets, including the Philippines, as investors weigh the potential for further rate hikes [8c0b9475].
On the local front, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. has suggested that rate cuts of 50 basis points could be on the table this year, with a decision expected at the upcoming February 13 meeting. This potential easing could provide some relief to the market [8c0b9475].
Despite the current volatility, April Lee Tan, vice president of COL Financial, previously expressed optimism about the PSEi's recovery, particularly in light of the upcoming 2025 elections which are expected to stimulate economic growth through increased government spending. The CREATE MORE Act is also anticipated to improve the business climate and attract foreign direct investments [ce215b88].
As investors navigate this uncertain landscape, they are advised to focus on defensive stocks and maintain cash reserves for potential bargain opportunities. The PSE's trading range for the week is projected to be between 5,700 and 6,000, reflecting the ongoing market volatility [8c0b9475].