Global and Philippine Market Update

May 4 to May 10, 2023

Global Markets

Global Stocks edged higher amid easing prices.

• US inflation stood at 4.9% in April, down from 5% in March, marking the tenth consecutive month of price declines. This drop comes after the US Federal Reserve (Fed) implemented significant rate hikes to tackle inflation. However, officials are reluctant to declare victory as the issue, initially confined to sectors such as energy and manufacturing, has spread to the broader economy. Core inflation, which excludes food and energy, remain stubbornly high with a 5.5% increase. The latest figures may persuade policymakers to consider pausing further rate hikes.

• According to the Bureau of Labor Statistics, nonfarm payrolls surged by 253,000 in April, surpassing Wall Street’s growth estimate of 180,000. The unemployment rate stood at 3.4%, below the estimated 3.6% and tied for the lowest level since 1969. This robust jobs report provides encouraging signs amid concerns of a recession, banking sector instability, and ongoing layoffs. However, persistent wage growth poses a challenge which may exert pressure on policy rates to remain elevated.

Philippine Stocks  

Philippine Stocks gained as growth stays within the government’s 6-7% target.

• The Philippine economy exceeded expectations in the first quarter, expanding by 6.4%, surpassing the projected 6.1% growth indicated by analysts in a Reuters poll. Secretary Arsenio Balisacan of the National Economic and Development Authority (NEDA) expressed that the Philippines is on track to reclaim its high-growth trajectory, even in the face of global challenges. Balisacan further emphasized that the government is prepared to endure shocks and risks to sustain growth.

• Foreign Direct Investments (FDI) net inflows surged by 13% in February, reaching their highest level in 14 months, driven by improving sentiment towards the country. Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla expressed optimism that the government’s policies and economic reforms will continue to attract more foreign investments. The Philippines’ strong economic growth serves as a catalyst to draw additional investments, which are expected to support productive projects which should contribute to job creation.

Philippine Bonds 

Philippine Bond Yields continued to invert with the 10-year trading below the 1-year government security.

• The Bureau of Treasury (BTr) fully awarded a reissued 10-year treasury bond with a remaining life of nine years and four months at an average rate of 5.732%. This was lower than the 6.142% average rate during its last auction in April. The lower rate reflects the expectation that inflation will continue to trend lower and signals the possibility of rate a cut as early as the third quarter. 

• According to data from the BSP, outstanding loans by big banks grew by 10.1% in March, halting three consecutive months of decelerating credit growth. This expansion occurred despite rising interest rates which highlights the economy’s resiliency. However, loan growth is anticipated to slow down given the BSP’s plan to maintain a relatively tight monetary policy.

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.bbc.com/news/business-65547974 (2) https://www.cnbc.com/2023/05/10/cpi-inflation-april-2023.html (3) https://www.bworldonline.com/breaking-news/2023/05/11/522251/philippines-q1-gdp-slows-to-6-4-but-faster-than-forecast/ (4) https://www.bworldonline.com/top-stories/2023/05/11/522134/february-fdi-inflows-highest-in-14-months/  (5) https://www.pna.gov.ph/articles/1201081 (6) https://www.bworldonline.com/top-stories/2023/05/09/521603/bank-lending-growth-steady-in-march/

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.