Global and Philippine Market Update

Nov. 16 to Nov. 22, 2023

Global Markets

Global Stocks rallied as inflation appears to be under control.

• During the last policy meeting held at the end of October, Federal Reserve (Fed) officials agreed to proceed “carefully” and only consider raising rates if progress in controlling inflation waned, according to the released minutes of the meeting. The baseline of the Fed’s monetary policy appears to have shifted toward keeping rates stable unless there is a bad inflation surprise. In contrast to the September meeting, where a majority saw the need for another rate hike, the latest statement indicates that maintaining the current policy rate is deemed more appropriate.

• US retailers have disclosed softer sales and expressed caution regarding the holiday season. Nordstrom anticipates a decline in full-year sales revenue compared to the previous year. Both Best Buy and Lowe’s have revised down their fiscal fourth quarter sales forecasts. Additionally, American Eagle Outfitters and Abercrombie & Fitch disappointed investors with their holiday outlooks. Nordstrom CEO Erik Nordstrom mentioned in an earnings call that customer traffic has been sluggish, while CFO Cathy Smith noted a more cautious consumer.

• Geopolitical risks are expected to be the primary threat to the economic outlook for 2024, with large-scale wars coinciding with pivotal elections across major global powers. In a global risk survey conducted among 130 businesses by Oxford Economics, 62% cited geopolitics as a highly significant risk to the global economy in the near and middle term. Concerns over the Israel-Hamas war and tensions between China and Taiwan, as well as Russia and NATO, were widespread. Growing tensions are likely to lead to increased economic fragmentation and “re-shoring” of critical supply chains, such as semiconductors.      

Philippine Stocks

Philippine Stocks broke above the 6,200-index level driven by positive sentiment.

• Philippine Stocks gained, influenced by the deceleration in US October inflation and the anticipated monetary policy pause by the Bangko Sentral ng Pilipinas (BSP). Additionally, the Philippine peso is strengthening against the US dollar, and the easing of oil prices is contributing to positive developments that should lend support to the local market in the final month of the year.

• The Asian Development Bank predicts that the Philippines will be the fastest-growing economy in Southeast Asia, with a growth rate of 6.2% expected for 2024. Despite global uncertainties, geopolitical tensions, and inflation, the economy has demonstrated resiliency. This growth is underpinned by robust domestic demand, including household and fixed investments in both public and private construction. Nevertheless, there is a call for improved infrastructure development to enhance competitiveness against neighboring countries.  

Philippine Bonds

Philippine Bond yields trended lower amid expectations of a policy rate pause.

• The Bureau of Treasury (BTr) fully awarded a re-issued 20-year treasury bond with a remaining term of fifteen years at an average rate of 6.593%. The yield was lower compared to the 6.927% seen during its last auction on August 23, when the government rejected all bids. Yields fell due to the high demand for longer tenors and the recent moves by global central banks to pause interest rate hikes.

• Private sector economists have slightly lowered their inflation expectations, projecting 2024 inflation to settle at the upper end of the BSPs 2-4% target band. Analysts anticipate inflation to stay elevated but gradually move towards the target range, with potential upside risks primarily attributed to supply-side shocks. The majority of analysts now anticipate the BSP to maintain their current policy rate until the first quarter of 2024.      

FWD Guidance: Uncertainty leads to downside risks, but diversification and a long-term investment horizon still provide the best chance for financial success.

Sources: (1) https://www.cnbc.com/2023/11/21/fed-minutes-november-2023.html (2) https://www.cnbc.com/2023/11/21/nordstrom-jwn-earnings-q3-2023.html  (3) https://www.cnbc.com/2023/11/21/geopolitical-instability-and-a-packed-election-calendar-have-strategists-wary-of-2024.html (4) https://www.bworldonline.com/stock-market/2023/11/19/558366/psei-may-go-up-on-pesos-rise-investor-optimism/ (5) https://www.bworldonline.com/top-stories/2023/11/23/559157/multilateral-lenders-optimistic-on-philippine-growth-despite-headwinds/ (6) https://business.inquirer.net/433148/govt-makes-full-award-of-re-issued-treasury-bonds-raises-p20b (7) https://www.bworldonline.com/top-stories/2023/11/20/558421/inflation-expectations-decline-slightly/

Disclaimer: The purpose of this article is to inform and should not be taken as an advice or offer to purchase securities. Seek professional advice before making a decision based on this presentation. Information given does not represent the views of FWD and its agents and employees.