Global and Philippine Market Update

April 13 to April 20, 2022

Global Markets

Global Stocks slumped as a 0.50% rate hike is officially on the table, according to US Federal Reserve (Fed) Chairman Jerome H. Powell.

• Chairman Powell believes that an aggressive hike is an appropriate response given the current inflation levels. The war in Ukraine and the lingering effects of the pandemic continue to put upward pressure on energy and food costs. However, economists believe that inflation already peaked in the first few months of the year.

• Good corporate earnings failed to lift equity prices as Chairman Powell’s comments weighed in on market sentiment. According to FactSet, 79% of S&P 500 companies that have reported results delivered an upside earnings per share (EPS) surprise. The sell-off is likely overdone given strong corporate earnings. It’s only a matter of time before investors become comfortable with the Fed’s tighter monetary policy.

• Russia delivered on its threat to turn off the supply of natural gas to Europe. Russian energy giant Gazprom suspended delivery of gas supplies to Bulgaria and Poland after both countries refused to pay in rubles. This marks a significant escalation in the conflict and Russia’s most serious response against European sanctions.

Philippine Stocks

Philippine Stocks fell due to concerns over a global economic slowdown.

• The move by global central banks toward a tight monetary policy led to negative investor sentiment. There are deliberate efforts to slow down the global economy to help ease high inflation rates. The continued lockdown in Shanghai, which may spread to other Chinese cities like Beijing, also added to concerns over global growth.

• Local stocks may trade sideways ahead of the national elections. The high level of uncertainty prevents local investors from taking any major positions. Any significant catalyst will likely be seen after the results of the May 9 elections.

Philippine Bonds

Philippine Bond Yields continue to move higher as rates for bonds with a maturity of 6 months and longer increased by an average of 0.9%.

• The Bureau of Treasury (BTr) partially awarded a re-issued 10-year bond with a remaining life of nine year and eight months at an average yield of 6.313%. This was 0.22% higher than the previous auction last March 29. The higher bids were a reaction by investors toward the aggressive rate hikes planned by the US Fed.

• The BangkoSentral ng Pilipinas (BSP) may consider a rate hike in June if the first quarter growth rate hits 6-7%. This is a departure from previous signals wherein the BSP said that rate hikes will begin in the second half of the year.

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

Sources: (1) https://fortune.com/2022/04/25/q1-earnings-season-eps-surprise-stocks-correction/ (2) https://edition.cnn.com/2022/04/21/economy/federal-reserve-jerome-powell/index.html (3) https://edition.cnn.com/2022/04/27/energy/russia-europe-gas-supply/index.html (4) https://www.bworldonline.com/stock-market/2022/04/26/444690/psei-drops-on-higher-oil-prices-china-lockdown/ (5) https://www.bworldonline.com/stock-market/2022/04/25/444103/phl-stocks-may-move-sideways-as-elections-near/ (6) https://www.bworldonline.com/banking-finance/2022/04/27/444694/btr-makes-partial-award-of-bonds-at-higher-rate/ (7) https://www.bworldonline.com/top-stories/2022/04/27/444787/bsp-may-consider-rate-hike-in-june/

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.