Global and Philippine Market Update

Oct. 17 to Oct. 23, 2024

Global Markets

Global Stocks were rangebound as the US elections draw near.

• U.S. economic activity remained relatively stable from September to early October, with a slight increase in hiring, continuing recent trends. This has strengthened expectations that the Federal Reserve will opt for a smaller 25-basis-point reduction in borrowing costs in two weeks. The latest assessment from the U.S. central bank indicated that inflation pressures continued to ease, although input prices generally rose faster than selling prices, impacting firms’ profit margins. The economy, particularly inflation, remains a significant concern for voters as the Nov. 5 U.S. presidential election approaches.
• China’s currency, the yuan, is under pressure due to the potential return of Donald Trump as president. This pressure comes not only from speculators shorting the currency but also from mainland exporters hoarding dollars. The yuan has been weak since early 2023, impacted by China’s sluggish economy and low yields. For the past 17 months, it has remained on the weaker side of the 7-per-dollar level, declining by about 2%. Despite the positive reaction of mainland stock markets to Beijing’s extensive stimulus plans and the influx of investors, the possibility of Trump winning the November presidential election and imposing larger trade tariffs on China is adding further strain on the yuan.

Philippine Stocks

Philippine Stocks remained steady, awaiting fresh catalysts.

• Despite the local central banks rate cut, local equities were rangebound as the third-quarter earnings season began. The rate cut decision was largely anticipated and did not prompt significant market movements, highlighting that prices often move in anticipation as well as in reaction.
• Investors stayed on the sidelines, adopting a cautious approach as they awaited fresh catalysts, particularly third-quarter corporate earnings. Trading activity was sluggish, according to Japhet Louis O. Tantiangco, Senior Research Analyst at Philstocks Financial, Inc. The third-quarter earnings season began well, with both the Bank of the Philippine Islands and Asia United Bank Corp. reporting record profits for the period.
  
  
• The International Monetary Fund (IMF) has stated that domestic demand and gradual monetary easing will drive Philippine economic growth for the rest of the year and next. However, the IMF recently lowered its 2024 GDP growth forecast for the Philippines to 5.8% from 6.0% in July, citing a slowdown in private consumption in the first half of the year.

Philippine Bonds

Philippine Bond yields traded within range but still expected to trend lower amid potential rate cuts. 

• The Bangko Sentral ng Pilipinas (BSP) has reduced borrowing costs by a total of 50 basis points (bps) this year since initiating its easing cycle in August. BSP Governor Eli M. Remolona, Jr. has indicated a further 25-bp cut at the Monetary Board’s final policy review of the year on Dec. 19. Looser monetary policy is expected to stimulate household spending and business activity, enabling companies to secure funding for expansion at lower costs.
  
  
• The Department of Agriculture (DA) announced that palay (unmilled rice) production is projected to decrease by 3.24% in 2024 due to crop losses from tropical cyclones. “With an anticipated loss of 358,000 metric tons, based on historical damage and current risks this quarter, the total annual palay production is expected to reach 19.41 million metric tons (MMT),” stated Agriculture Undersecretary for Rice Industry Development Christopher V. Morales. If this forecast holds true, it will mark the lowest production level since 2020, when grain output was 19.29 MMT.

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.reuters.com/markets/us/us-economic-activity-little-changed-recent-weeks-fed-survey-shows-2024-10-23/ (2) https://www.reuters.com/markets/currencies/bears-circle-chinas-yuan-gearing-trump-win-2024-10-24/ (3) https://www.bworldonline.com/stock-market/2024/10/20/629226/rate-cut-bets-corporate-results-to-lift-phl-stocks/ (4) https://www.bworldonline.com/stock-market/2024/10/21/629606/shares-inch-lower-as-market-waits-for-fresh-leads/ (5) https://www.bworldonline.com/top-stories/2024/10/24/630279/bsp-rate-cuts-to-boost-consumption-spur-business-expansion-metrobank/ (6) https://www.manilatimes.net/2024/10/24/business/top-business/imf-retains-ph-growth-forecasts/1990146 (7) https://www.bworldonline.com/economy/2024/10/23/630295/palay-output-officially-estimated-at-19-41-mmt-in-2024-down-3-24/

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.