Economic fundamentals provide support to the market

Global Markets

Global Stocks are expected to remain volatile with inflation remaining a top concern. 

• US Nonfarm payrolls grew in October despite the Federal Reserve’s (Fed) rate hikes. However, this is the lowest rate of increase since December 2020. The Fed aims to slow down the economy to combat inflation and the latest numbers do provide some hope that their policies are having an impact.
• Regional Fed presidents Thomas Barkin and Susan Collins indicated that increases are still needed but may slow down the pace of increase. Barkin believes that the benchmark rate may move beyond 5% from the current 3.75% to 4% range. Collins stressed that there is more work to be done but the focus has shifted from rapidly hiking rates to determining the right level to keep the economy strong without high inflation.
• The cryptocurrency market tumbled after FTX, one of the world’s biggest crypto exchanges, experienced a “liquidity crunch.” The decline led to concerns that the issues with crypto may spread to the rest of the equity market. This halted a recent equity market rally as sentiment turned negative.

Philippine Stocks

Philippine Stocks trended higher as data portrays a fundamentally strong economy.

• Gross domestic product (GDP) grew by 7.6% in the third quarter, higher than the median estimate of 6.1% by analysts polled by BusinessWorld. The growth was driven by the services sector. Socioeconomic Planning Secretary Arsenio Balisacan said that the government is likely to hit the 6.5% to 7.5% GDP target for the year.
• September nonperforming loans (NPL) hit their lowest level in 25 months as the economy continues to reopen. Businesses are returning to pre-pandemic levels allowing for more growth and less delays in loan payments. While the NPL ratio is moving down, the gross loan portfolio of banks climbed higher. According to Bangko Sentral ng Pilipinas (BSP) data, gross loan increased to Php 12.09 trillion in September from Php 10.96 trillion last year. This another positive sign of the overall strength of the economy.
• Ayala Land saw its net income rise by 55.3% to Php 13.34 billion during the first nine months of the year. The significant growth was due to increased consumer activity as the country reopens. Ayala Land is one of the bellwether companies of the Philippines and its strong performance bodes well for the Philippine economy.

Philippine Bonds

Philippine Bond Yields spiked as inflation remains elevated.

• The Bureau of Treasury (BTr) partially awarded a reissued bond with a remaining life of four years and ten-months at average rate of 7.131%. The rate was 0.28% higher than a similar bond in the secondary market. National Treasurer Rosalia de Leon stated that the awarded rate was “still within secondary level, with a modest premium for illiquidity.”
• Inflation quickened to 7.7%, its fastest pace in 14 years. Food and non-alcoholic beverage, which account for nearly 38% of the inflation basket, was the main driver of higher prices. The recent typhoons caused significant agricultural damage which cost more than Php 3.5 billion.

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/2022/11/04/jobs-report-october-2022-.html (2) https://www.cnbc.com/2022/11/04/fed-officials-barkin-and-collins-see-possibility-for-slower-rate-hikes-ahead.html (3) https://www.cnbc.com/2022/11/08/cryptocurrencies-slide-as-worries-about-ftx-fester-in-latest-crypto-liquidity-scare.html (4) https://www.bworldonline.com/top-stories/2022/11/09/485991/npl-ratio-further-eases-in-september/ (5) https://www.bworldonline.com/corporate/2022/11/09/485938/ayala-land-doubles-income-to-p5b-as-economy-reopens/ (6) https://www.bworldonline.com/top-stories/2022/11/07/485334/q3-gdp-growth-likely-slowed-poll-2/ (7) https://www.bworldonline.com/banking-finance/2022/11/09/485898/treasury-partially-awards-reissued-20-year-bonds/ (8) https://www.bworldonline.com/infographics/2022/11/06/485325/headline-inflation-rates-in-the-philippines-13/

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.