Global and Philippine Market Update

Nov. 17 to Nov. 23, 2022

Global Markets  

Global Stocks gained as the US economy shows signs of slowing down.

• Cleveland Federal Reserve (Fed) President Loretta Mester stated that she needs to see more signs of progress in the fight against inflation before she advocates a stop to hiking rates. However, she is onboard reducing the pace of the hikes. Other Fed officials have voiced similar sentiments. The market expects the Fed to hike rates by 0.5% in December compared to 0.75% increase the past four times.

• The latest weekly jobless claims jumped to 240,000. It’s the highest total since August. The labor market remained tight even as workers returned to the labor force after the pandemic-era lockdowns. However, the labor environment may finally be changing. Large companies, particularly tech, have started layoffs. In normal times this would have been a negative but given the goal of the Fed to slow down the economy, this is a sign that the tight monetary policy is working.

• China imposed new lockdowns following rising cases in Beijing, which reported its first Covid death in six months. There are rising fears that cities would again come to a standstill as surging cases forced local governments to step up lockdowns in the last few days. The latest outbreak could make it harder for China to break from its zero-Covid policy after initial attempts to ease restrictions.

Philippine Stocks  

Philippine Stocks moved higher in line with regional peers.

• The PSE index broke through the key resistance level of 6,500. The possibility of lower rate hikes among global central banks improved sentiment and increased risk appetite among investors.

• Net foreign buying for the month hit USD95 million as of November 23. Foreign investors are increasing their exposure in the region as they try to search for fresh leads.

• The Philippine peso improved to its strongest level in over 2 months. The government signaled that they may defend the peso to help stabilize the exchange rate and inflation. Economists from Goldman Sachs believe that efforts to stabilize the currency may require larger cut to public spending given the elevated current account deficit. The recent strength of the peso may prove to be short-lived if the deficit is not addressed.  

Philippine Bonds  

Philippine Bond Yields increased in the short and long end of the curve while the belly drops.

• The Bureau of Treasury (BTr) partially awarded a fresh 20-year bond with a coupon rate of 8.125%. The rate was 0.315% higher than a similar bond in the secondary market. The BTr aimed to cap rates as investors asked for a higher premium.

• The Bangko Sentral ng Pilipinas (BSP) does not expect another jumbo rate hike of 0.75%. However, BSP Governor Felipe M. Medalla stated that the BSP cannot afford to keep rates unchanged if the Fed hikes by 0.50% in December. He also mentioned that it is too early to tell if there will be a pause in tightening for 2023 as inflation may remain elevated.

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/2022/11/21/feds-mester-wants-more-progress-on-inflation-before-ending-interest-rate-hikes.html (2) https://edition.cnn.com/2022/11/21/economy/guangzhou-china-renewed-lockdowns-guangzhou-markets-intl-hnk/index.html (3) https://edition.cnn.com/2022/11/23/economy/weekly-jobless-claims-november/index.html (4) https://www.bworldonline.com/editors-picks/2022/11/23/489002/shares-rise-on-hopes-of-less-aggressive-rate-hikes/ (5) https://www.bworldonline.com/stock-market/2022/11/22/488726/stocks-inch-higher-as-net-foreign-buying-rises/ (6) https://business.inquirer.net/374440/peso-rises-to-strongest-level-in-over-2-months (7) https://www.bworldonline.com/banking-finance/2022/11/23/488742/govt-partially-awards-fresh-20-year-t-bonds/ (8) https://www.bworldonline.com/top-stories/2022/11/23/488849/no-more-jumbo-rate-hikes-medalla/

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.