Philippines Stock Market Bounces Back as Inflation Cools Below Expectations

The Turning Point: What Slower Inflation Means for Markets

On Friday, Philippine equities staged a meaningful recovery as November’s inflation data came in significantly cooler than projected. The Philippine Stock Exchange index (PSEi) climbed 1.04% or 61.64 points to settle at 5,949.22, while the broader all shares index gained 0.55% or 19.03 points to end at 3,477.68. This rebound marks an important psychological return to the 5,900 threshold, though the index remains down 73.02 points from its November 28 close of 6,022.24.

Why the Market Reacted Positively

The catalyst behind Friday’s rally was clear: November’s consumer price index rose just 1.5% year-over-year, a meaningful decline from October’s 1.7% and well below the 1.6% consensus forecast. This marked the third consecutive month of moderating price pressures, with the year-to-date average now sitting at 1.6%—comfortably below the central bank’s 2% to 4% target band.

According to market analysis, the softer inflation print provided two critical benefits for investors. First, lower price growth suggests household purchasing power may strengthen, supporting domestic consumption. Second, and perhaps more immediately relevant for markets, it creates policy flexibility for the Bangko Sentral ng Pilipinas (BSP) to pursue additional interest rate cuts.

Central Bank Signals More Rate Relief Ahead

The inflation moderation came primarily from declining food prices, which fell 0.3% on a month-over-month basis. This development appears to have shifted central bank calculations regarding further monetary easing. BSP Governor Eli M. Remolana, Jr. indicated on December 3 that the probability of another rate cut at the December 11 policy meeting had increased, noting that growth this year was tracking toward the lower end of projections at 4% to 5%, below the original 5.5% to 6.5% target.

The BSP has already cut its policy rate at four consecutive meetings, bringing the benchmark to a three-year low of 4.75%. With inflation now clearly under control and growth concerns mounting, additional cuts appear increasingly likely as policymakers attempt to support economic activity.

Sector Performance Reflects Mixed Sentiment

While the headline index gains suggest broad optimism, sector movements revealed more nuanced positioning. Services sector stocks led gainers, surging 3.93% or 93.71 points to 2,476.34, followed by the property sector, which rose 0.82% or 17.93 points to 2,202.49. Mining and oil stocks also advanced, climbing 0.47% or 66.39 points to 14,172.11.

Defensively oriented sectors showed weakness. Holding companies slipped 0.45% or 21.07 points to 4,651.04, financials retreated 0.15% or 2.99 points to 1,944.21, and industrials edged down 0.07% or 6.72 points to 8,474.02. Decliners outnumbered advancers 95 to 83, with 69 names closing unchanged—a metric suggesting traders remained selective despite the overall positive bias.

Market Mechanics: Volume and Foreign Activity

Trading value expanded to P1.08 billion on Friday, with 5.8 billion shares changing hands, up from Thursday’s P843.91 million turnover involving 6.54 billion shares. Notably, net foreign selling declined to P598.26 million from P967.02 million the previous session, suggesting that international investors may have reduced selling pressure as market sentiment improved.

The Week in Context

Throughout the week, caution had generally dominated trading floors. However, analyst commentary from platforms like 2TradeAsia.com noted that Friday’s session provided “a slight reprieve” from the cautious tone that had prevailed. The shift reflected confidence that cooler inflation data would translate into tangible policy support for equities heading into year-end.

As Philstocks Financial Research Manager Japhet Louis O. Tantiangco observed in his Friday assessment, the inflation slowdown combined with potential monetary easing could establish conditions favorable for household spending and business investment, creating constructive momentum for Philippine equities going forward.