Equity markets may have hit bottom as prices move well off their May lows

Global Markets 

Global Stocks continue to be supported by consumer spending but concerns over the economy limit any major rally.

• Major US retailers delivered mixed results and outlooks in the past few weeks, which led to volatility. However, this may be a sign of a shift in consumer spending rather than a stop to it. The pandemic saw more spending on goods over services but as we move beyond the pandemic spending looks to be shifting back toward services.

• US nonfarm payrolls increased by 390,000 in May despite high inflation and concerns over an economic slowdown. The unemployment rate held at 3.6%, just above the lowest level since 1969. Wages have increased year-on-year by 5.2%, in line with expectations. The job markets continue to be healthy and competitive with no sign of slowing down.

• The Chinese government is said to be finishing their probe into DIDI, a Chinese ride sharing giant. This is a clear sign that the government looks to be easing its crackdown on the tech industry. Chinese policy makers have been softening their stance as economic growth slowed.

Philippine Stocks

Philippine Stocks edged higher as the incoming administration’s economic agenda takes shape.

• World Bank senior economist Kevin C. Chua states that the Philippine’s debt level is still manageable despite breaching the 60% threshold considered as manageable for developing economies. The Philippine’s debt to gross domestic product (GDP) ratio reached 63.5% as of end of first quarter 2022. He recommends improved revenue collection, digitalization, and more efficient spending to address the debt level.

• Incoming Department of Finance Secretary Benjamin Diokno does not see the debt to GDP ratio as worrisome. He mentioned that, based on their projections, if the Philippine economy grows at 7% this year, then grows 6% in the next six years, the debt to GDP ratio will go back to levels prior to the pandemic, which was at 39.6%.

Philippine Bonds

Philippine Bond Yields moved higher by an average of 0.04%. Rates continued to trend upwards but at a much slower pace than the previous months.  

• The Bureau of Treasury (BTr) partially awarded the latest 5-year bond auction at an average yield of 5.514%. The BTr awarded Php 25.2 billion out of the Php 35 billion offered. The partial issuance is a way for the BTr to temper the rise in rates.

• May inflation hit a three and a half year high at 5.4%, year-on-year. The ongoing Russia-Ukraine war pushed prices above $100 a barrel, leading to a 14.6% spike in transport costs. Gasoline and diesel surged at  47.2% and 86.2%, respectively.

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/2022/06/06/stock-market-futures-open-to-close-news.html (2) https://www.cnbc.com/2022/06/03/jobs-report-may-2022-.html (3)https://www.bloomberg.com/news/articles/2022-06-06/alibaba-us-listed-china-stocks-soar-with-crackdown-fears-easing (4) https://www.bworldonline.com/top-stories/2022/06/09/453719/phl-debt-is-still-manageable-wb/ (5) https://www.cnnphilippines.com/business/2022/6/7/Diokno-defends-PH-debt-Marcos-admin.html (6) https://www.bworldonline.com/top-stories/2022/06/08/453460/may-inflation-sizzles-to-3-1-2-year-high/ (7) https://www.pna.gov.ph/articles/1176071

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.