Global and Philippine Market Update

October 10 to October 16, 2024

Global Markets

Global Stocks stayed steady as investors remained confidence in the market.

• Stocks reached new all-time highs as investors anticipated positive earnings reports from Corporate America, supporting soft-landing bets. With little economic data this week, Wall Street’s focus is on earnings. The S&P 500 rose nearly 1%, marking its 46th record this year, indicating investor confidence despite lower third-quarter forecasts. Strategists expect the weakest results in four quarters, with a 4.3% year-over-year increase, according to Bloomberg Intelligence. However, corporate guidance suggests a 16% jump, indicating companies might surpass market expectations. 

• CNBC’s Jim Cramer stated that the bull market could continue to rise if the tech sector, particularly Nvidia, maintains its strong performance. According to charts interpreted by Jessica Inskip, the outlook for the S&P and Nasdaq-100 is positive, with Nvidia playing a key role. Cramer emphasized that while tech doesn’t need to lead, it must at least keep pace with the leaders. He noted that the sector’s performance should not mirror Tuesday’s decline, which was triggered by a poor earnings report from ASML, resulting in a $50 billion loss in market cap for the semiconductor company.

• China’s sudden and intense stock market rally has hit some of the country’s largest hedge funds hard, compelling them to quickly cover short positions and incur losses in the tightly regulated derivatives market. Among the affected funds are Beijing X Asset Management, Techsharpe Quant (Beijing) Capital Management, and Shenzhen Chengqi Funds. These funds were caught off guard when China’s struggling stocks regained a quarter of their value in less than a week in late September, following a series of stimulus measures.

Philippine Stocks

Philippine Stocks set to rebound amid rate cut optimism.

• Philippine shares could retest the 7,400 mark this week as the market anticipates a rate cut from the Bangko Sentral ng Pilipinas (BSP) during their policy meeting. Over the week, the PSEi declined by 2.11%. The market experienced negative developments last week, pulling back after five weeks of rallying, with reduced trading activity and foreign investors turning net sellers.

• Despite expectations of a rate cut, traders locking in gains after a significant climb caused the local bourse to decline. The 25-basis-point reduction in the benchmark interest rate by big banks, announced by the Monetary Board after the stock market closed, had not yet been factored into prices. Alfred Benjamin Garcia, research head at AP Securities Inc., noted that while a rate cut was widely anticipated, it wasn’t guaranteed, prompting investors to secure their gains in case of an unexpected outcome

Philippine Bonds

Philippine Bond experienced strong demand amid expectations of yield and rate cuts.

• The Bangko Sentral ng Pilipinas (BSP) has continued its easing cycle by implementing a 25-basis-point (bp) rate cut for the second consecutive meeting, with indications of more cuts to come. On Wednesday, the Monetary Board reduced the target reverse repurchase (RRP) rate by 25 bps, lowering the key rate from 6.25% to 6%. BSP Governor Eli M. Remolona, Jr. stated that the decision was based on the Board’s assessment that “price pressures remain manageable.” 

• Strong demand led to a decrease in Treasury bond (T-bond) yields at Tuesday’s auction, as lenders secured rates in anticipation of further interest rate cuts by the local central bank this year. The Bureau of Treasury fully awarded P15 billion in reissued T-bonds, which have a remaining maturity of six years and nine months. 

• Analysts have warned that further volatility in oil prices and potential price adjustments could jeopardize the inflation downtrend and disrupt the Bangko Sentral ng Pilipinas’ (BSP) easing cycle. Diwa C. Guinigundo, a country analyst at GlobalSource Research, noted that ongoing fuel price volatility, influenced by events in Gaza and the Middle East, could lead to significant oil price adjustments. Oil prices surged following Iran’s missile attack on Israel in early October but have since declined after Israel indicated it would not target Iranian nuclear or oil facilities.

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://finance.yahoo.com/news/asian-investors-wary-china-briefing-222159266.html  (2https://www.cnbc.com/2024/10/16/cramer-charts-suggest-bull-market-can-continue-if-tech-sector-performs.html (3) https://www.reuters.com/markets/asia/china-hedge-funds-caught-out-by-abrupt-market-surge-2024-10-17/ (4) https://www.bworldonline.com/stock-market/2024/10/13/627397/index-may-retest-7400-before-bsp-policy-meet/ (5) https://business.inquirer.net/485220/psei-win-streak-breaks-over-profit-taking (6) https://www.bworldonline.com/top-stories/2024/10/17/628412/bsp-cuts-rates-for-a-2nd-straight-meeting/ (7) https://business.inquirer.net/485110/t-bond-yield-eases-ahead-of-expected-rate-cuts (8) https://www.bworldonline.com/top-stories/2024/10/16/628030/oil-price-shocks-could-fuel-inflation-anew/

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.