Global and Philippine Market Update

Nov. 10 to Nov. 16, 2022

Global Markets  

Global Stocks moved higher as inflation trends lower. 

• October inflation came in at 7.7%, the smallest 12-month increase since January. It was driven by consistent price increases in food, energy, and housing. However, this was slower than expected and a good sign than inflation may have peaked. The rate is still high but heading in the right direction as it is down from the peak rate of 9.1% in June.

• Federal Reserve (Fed) Governor Christopher Waller stated that he is open to hike rate by only 0.50% compared to 0.75% hike the past four times. He is comfortable to reduce the pace of the hikes due to latest batch of economic data which includes inflation easing. However, he also emphasized that one report does not make a trend and would particularly monitor core good prices, housing and non-housing services.

• Russian-made rockets killed two people in Poland on the same day that Russian forces fired missiles against Ukrainian energy and other infrastructure. Russian forces denied it had aimed missiles at targets near the Ukrainian border. It is possible that the missile missed or was knocked off course by Ukrainian countermeasures. US President Joe Biden said the rocket that hit Poland is unlikely to have been fired from Russia.

Philippine Stocks  

Philippine Stocks gained as increasing positive sentiment lifts the market.

• The PSE index sustained its upward trend following positive economic news. Philippine Gross domestic product (GDP) grew better than expected. US inflation continues to cool, and China plans to ease COVID restrictions. The improving economic conditions are sustaining the upward momentum of the index.

• OFW remittances increased by 3.8% to USD 2.84 billion in September from USD 2.74 billion in the same period last year. The higher remittance should translate into higher consumption and support the peso in the 4th quarter.

• Vehicle sales for October increased by 42.4% driven by commercial vehicles. The acceleration is another sign that the economic recovery is in full swing. This boosted optimism for the automotive industry and the overall economy. 

Philippine Bonds

Philippine Bond Yields increase as new bond auctions get issued at a premium.

• The Bureau of Treasury (BTr) fully awarded a reissued bond with a remaining life of 11 years and 11 months at an average rate of 8.168%. The rate was 0.29% higher than a similar bond in the secondary market. National Treasurer Rosalia de Leon stated that the awarded rate was a reasonable increase given that the Bangko Sentral ng Pilipinas (BSP) plans to increase rates in its upcoming meeting.

• According to AIA Group Market Economist Herve Lievore, the BSP is “extremely reactive” to global factors. The BSP has few options but to tighten monetary policy to rein in inflation and support the currency. BSP Governor Felipe Medalla indicated that the BSP would “match” the US Fed’s 0.75% hike early this month.

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/2022/11/10/heres-the-inflation-breakdown-for-october-2022-in-one-chart.html (2) lhttps://www.cnbc.com/2022/11/16/feds-waller-says-hes-open-to-a-half-point-rate-hike-at-december-meeting.html (3) https://www.bloomberg.com/news/articles/2022-11-15/poland-holds-emergency-meeting-on-report-of-stray-russia-rockets (4) https://www.bworldonline.com/stock-market/2022/11/14/487040/philippine-shares-climb-on-improved-sentiment/ (5) https://www.bworldonline.com/stock-market/2022/11/15/487330/stocks-extend-climb-on-sept-remittance-data/ (6) https://www.bworldonline.com/top-stories/2022/11/16/487450/car-sales-surge-42-in-october/ (7) https://www.bworldonline.com/banking-finance/2022/11/16/487327/govt-makes-full-award-of-reissued-25-year-bonds/ (8) https://news.abs-cbn.com/business/11/16/22/crucial-for-bsp-to-hike-rate-to-curb-inflation-

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.