VAT on digital transactions will put online merchants on equal footing with in-store retailers.

The Experts

Corporate earnings provide support to global markets

Two tech giants—Microsoft and Alphabet—reported lower earnings but still pushed markets higher.

FWD Investment Team

Global and Philippine Market Update

July 21 to July 27, 2022


Global Markets 

Global Stocks rise as corporate earnings lifted market sentiment.

  • The US Federal Reserve (Fed) raised interest rates by 0.75%. The Fed is determined to battle inflation even if it means a “sustained period” of economic weakness and a slower job market. The overnight rate is now between 2.25% and 2.5% from near 0% earlier this year. This is the fastest tightening of monetary policy in 40 years. Fed Chairman Jerome Powell stated that the economy needs to slow down more to ease prices, but a recession would not be needed to fix the problem.
  • Microsoft and Alphabet reported lower earnings but still pushed markets higher, as the report was still better than feared, given the current environment. Microsoft still provided double digit revenue growth guidance moving forward while Alphabet posted advertising revenues in line with consensus. Investors took the earnings report from the two tech giants as a positive after disappointing earnings calls from Snap and Walmart.
  • Gazprom, Russia’s state-owned gas company, stated that it would reduce gas flows through Nord Stream 1 pipeline to just 20% of its capacity. The latest move is Russia’s way to continue pressuring Europe to withdraw its support for Ukraine. Europe now faces a gas shortage going into winter, which may severely impact the European economy.


Philippine Stocks

Philippine Stocks ended slightly lower this week but are beginning to recover on the back of positive news from local and global markets.

  • Negative sentiment pulled the local market lower after BDO and a consortium of banks sent a declaration of default notice to Dennis Uy’s Udenna Corp. This caused market jitters, which saw BDO shares sink, and caused concern of how a default would affect other companies. However, Udenna stated that they have settled the debt issue last Monday “to the satisfaction of the majority lender.
  • Local business groups welcomed the government’s plan to impose value added tax (VAT) on digital transactions. This is expected to generate an additional P11.7 billion in revenue if implemented in 2023. This was applauded by the Philippine Retailers Association as it will increase the government’s revenue and put online merchants on equal footing with in-store retailers.


Philippine Bonds

Philippine Bond Yields ended with mixed results. Bonds with a maturity of one year or lower saw yields rise while longer dated bonds generally moved lower.            

  • The Bureau of Treasury (BTr) fully awarded a reissued twenty-five-year bond with a remaining life of 13 years and 4 months at an average rate of 6.89%. This auction was well supported and was 2.7x oversubscribed. The strong demand for long dated bonds during the last two auction may keep rates capped below 7%.
  • The Bangko Sentral ng Pilipinas (BSP) signaled a rate hike of less than 0.75% at its next meeting in August. BSP Governor Felipe Medalla ruled out anymore surprise off-cycle adjustments in the future. He indicated that future rate hikes would be very data dependent. He acknowledged that the challenge for the BSP is to balance the hike in rates to combat inflation against the risk of weakening the economy.


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) (2) (3) (4)  (5) (6) (7) (8)

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.

The information here is compiled from various credible sources and is a summary of a particular period only. Though we strive to provide accurate and complete information, we cannot guarantee that this article will be error-free.