Rate cuts, US tariffs, corruption mess steer markets in Q3

POLICY EASING by the Bangko Sentral ng Pilipinas (BSP), tariffs imposed by the United States, and the ongoing flood control corruption scandal shaped the country's financial markets in the third quarter, analysts said.

- By Isa Jane D. Acabal

The Philippine Stock Exchange index (PSEi), the country's barometer for the stock market, closed at 5,953.46 in the third quarter, down by 18.1% from 7,272.65 in the same quarter last year.

On the other hand, the peso appreciated by 3.9% to P58.20 against the dollar as of end-September from P56.03 a year ago, according to data from the Bankers Association of the Philippines.

Yields on government securities rose by an average of 2.59 basis points (bps) year on year, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System's website as of Sept. 30.

The BSP's shift to a more dovish stance reflected in its consecutive rate cuts influenced the performance of domestic markets during the period, according to analysts.

Just last week, the central bank slashed again its policy rate by another 25 bps, bringing the key rate to over three-year low of 4.5%. It also signaled that the easing cycle nears its end.

It has so far trimmed borrowing costs by two full percentage points since it began its easing cycle in August last year.

"Reduced borrowing costs incentivized capital formation and supported investment momentum and economic activity, despite external headwinds and domestic governance concerns," the central bank said in an emailed reply to questions.

According to the BSP, the present interest rate environment helped in credit expansion and in maintaining stability in the domestic financial markets.