Global and Philippine Market Update

May 19 to May 25, 2022

Global Markets 

Global Stocks gained as cheaper valuations provided an attractive buying opportunity. However, fear of recession and slower growth may temper any major rallies.

• US Federal Reserve (Fed) officials look to raise rates by 0.50% in June and July, according to minutes from their meeting earlier this month. The aggressive stance was expected as the central bank tries to curb the highest inflation rate in four decades. The high inflation rate impacts the purchasing power of businesses and consumers, leading to an inability of the equity markets to gather any kind of momentum.

• US retail sales grew in line with expectations for the month of April as consumers continue to spend even with a surge in prices. On a year-on-year basis, sales were up 8.2% with bar and restaurant sales growing by 19.8%. The sales data shows a growing economy despite inflationary pressures.

Philippine Stocks

Philippine Stocks retreat as foreign investors shift away from the Philippines towards developed markets.

• Month to date, as of May 25, US$355 million has left the Philippine market. Persistent high inflation, global monetary tightening and the war in Ukraine caused investors to move toward the relative safety of more developed markets.

• Priyanka Kishore of Oxford Economics revises Philippine growth from 6.7% to 7.3% for 2022. She expects inflationary pressures to remain but manageable. Economic growth will continue even amid the tighter monetary policies by the Bangko Sentral ng Pilipinas (BSP) and other major global central banks.

• The incoming administration announced that current BSP Governor Benjamin Diokno will become the new finance minister. This appointment shows continuity with the previous administration, which bodes well for the expansion of economic gains made during the Duterte administration.

Philippine Bonds

Philippine Bond Yields with maturity of 10 years and greater increased by an average of 0.17% after the latest 10-year government auction.  

• The Bureau of Treasury (BTr) awarded the latest 10-year bond auction at an average yield of 6.894%. Yields continue to rise as the BSP and the US Fed hike interest rates. The previous weeks saw yields spike as the BTr accepted the high bids by investors. The upward trend will likely continue until a rejected auction occurs.

• The BSP is likely to increase rates again by 0.25% in June, according to BSP Governor Benjamin Diokno. The better-than-expected first quarter growth rate gave the BSP the ability to shift focus towards fighting inflation. He stated that he is “comfortable” with the adjustments and considers inflation “transitory” rather than permanent.

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.usnews.com/news/business/articles/2022-05-25/asian-stock-markets-higher-after-wall-st-sinks-further (2https://www.cnbc.com/2022/05/17/retail-sales-april-2022-up-0point9percent-vs-1point0percent-estimate.html (3) https://www.bworldonline.com/top-stories/2022/05/26/450967/marcos-names-new-finance-chief-and-central-bank-governor/ (4)https://www.bworldonline.com/stock-market/2022/05/24/450559/psei-sinks-further-as-net-foreign-selling-surges/ (5) https://blinks.bloomberg.com/news/stories/RCBI3CT0G1KW (6)https://blinks.bloomberg.com/news/stories/RCF10EDWX2PX (7) https://blinks.bloomberg.com/news/stories/RCDGQCGEZ1FK

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.