Cautious optimism seen after new US-China deal

PHILIPPINE MARKETS could post some gains after the United States and China agreed to extend their tariff truce, but the optimism may be short-lived as investors remain cautious due to the ever-shifting trade dynamics between the world's two largest economies.

-  - Aaron Michael C. Sy with Reuters

"It's (this week's deal) a positive development, but investors will wait and see whether it holds and actually becomes a definitive agreement. Alot of the deeper and more fundamental trade issues also remain unresolved, so it's too early to expect any material and durable change in investor sentiment," China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

"In the short term, a second attempt at a US-China trade truce could bring mild optimism to financial markets but unlike earlier rounds, markets may respond more cautiously this time. Markets have become more measured and wary. They have seen similar truce attempts fail before, so confidence will depend on whether structural commitments (tariff rollbacks or tech transfers) are made," Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said in a Viber message.

Mr. Rivera said Philippine stocks could rise when the market reopens on Friday as a reaction to the latest US-China deal. Philippine financial markets were closed on June 12 (Thursday) for the Independence Day holiday.

"The PSEi (Philippine Stock Exchange index) may see short-lived gains, especially in export-related and logistics stocks, as easing trade tensions can boost global demand. However, investors are likely more skeptical now and may wait for concrete progress," he said.

The peso could likewise strengthen "due to improved sentiment and potential dollar weakness."

"But the peso's trajectory will still be shaped more by local inflation and BSP (Bangko Sentral ng Pilipinas) rate expectations," Mr. Rivera said. "GS (government securities) yields may hold steady or slightly decline if global risk sentiment improves and capital flows into emerging market bonds, but local inflation data and fiscal outlook remain the dominant drivers."