Global and Philippine Market Update

Oct. 20 to Oct. 26, 2022

Global Markets  

Global Stocks rally due to possibility of lower rate hikes.

• The Federal Reserves’ (Fed) rate hikes are beginning to take effect. Slowing home price growth and weakening consumer confidence, ordinarily a negative for the market, are now taken as a positive by investors as these may lead to easing rate hikes. Analysts are split on whether the December rate hike will drop to 0.50% after several 0.75% increases this year.

• European banks posted good earnings, which helped lift the market. Deutsche Bank reported its strongest quarterly performance since before the financial crisis while HSBC, Standard Chartered and other major European banks beat analysts’ estimates. The higher interest environment was the main driver of higher profits.

• Corporate earnings from benchmark US companies like Coca-Cola, Mattel, GM, Hilton and American Express show some hope that a recession is not a given. Earnings were decent despite inflation, which goes against the doom and gloom scenario predicted by analysts.

Philippine Stocks

Philippine Stocks dipped slightly as investors pocketed gains.

• The economy is expected to receive a boost as consumers seek a return to normal during the holiday season according to a report by First Metro Investment Corp. (FMIC) and the University of Asia and the Pacific (UA&P). Hiring should be positive as businesses prepare for the Christmas season. 

• Fitch ratings affirm the Philippines’ “BBB” credit rating with a negative outlook. Gross domestic product (GDP) growth is forecast to hit 6.8% for 2022 and 5.5% in 2023, making the country one of the fastest growing economies in the ASEAN region. The negative outlook acknowledges the risks that are still prevalent in the economy due to the current high interest rate environment, weaker global demand and high commodity prices. Overall, the Philippines remains fundamentally strong as it moves beyond the pandemic. 

Philippine Bonds

Philippine Bond Yields increased by an average of 0.16% across the curve in line with the rise in global bonds.  

• The Bureau of Treasury (BTr) partially awarded the latest 13-year treasury bond auction at an average rate of 7.89%. There was decent demand for the paper with investors asking for higher rates given the continuation of aggressive rate hikes.

• The Bangko Sentral ng Pilipinas (BSP) is expected to raise rates by 0.75% in November to match the US Fed’s projected rate hike. If this happens, it would be the first time the BSP moves in the same way as the Fed. Analysts predict that the BSP will maintain a 1% differential with the Fed.

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/europe/futures-edge-lower-earnings-flood-2022-10-25/  (2) https://www.ft.com/content/2fb7f7f4-d2fc-427e-abcf-feb2ade20056 (3) https://edition.cnn.com/2022/10/26/business/nightcap-oct-26-apeers/index.html (4) https://www.bworldonline.com/economy/2022/10/25/482981/consumers-eager-to-normalize-seen-boosting-economy-towards-yearend/ (5) https://business.inquirer.net/369760/bsp-to-mimic-fed-moves-as-inflation-woes-linger (6) https://www.pna.gov.ph/articles/1187040

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.