Equities maintain upward trend as inflation eases

Global Markets

Global Stocks were given a boost by statements from the Federal Reserve (Fed).

• Fed Chairman Jerome Powell confirmed that smaller rate hikes are likely in its coming meetings. However, he also indicated that price stability has a long way to go, and monetary policy will likely remain restrictive. This was taken positively by investors and pushed markets higher.

• Eurozone inflation eases to 10% for November, 0.6% lower than October and its first decline since June 2021. This decline highlights the cost-of-living crisis the bloc is experiencing as energy costs rose at an annual rate of 34.9%. It will not be surprising if inflation rises again in December and January, but next year’s rate will likely fall rapidly.

• Major Chinese cities including Shanghai, Zhengzhou and Guangzhou plan to lift lockdowns. The relaxation of restrictions comes after protesters clashed with police earlier this week. Foxxconn, one of Apple’s main suppliers, would have been significantly affected by a prolonged lockdown. The recent trouble with China is speeding up the process of diversifying supply chains away from China. 

Philippine Stocks

Philippine Stocks surged as the economy showed signs of growth amid negative global headwinds.

• The Philippine economy is expected to hit its growth target this year and 2023. According to Finance Secretary Diokno, growth will exceed 7% this year and likely 6.5% next year. In order to meet this year’s target, the economy only needs to grow 3.3% in the fourth quarter.

• Outstanding loans by large banks rose by 13.9%, year on year, the fastest expansion in nearly 4 years. Loans for production activities rose by 12.5% to Php 9.23 trillion while consumer loans to residents were up by 22.6% to Php 987.11 billion. The continued growth of credit helps support the recovery of the economy.

Philippine Bonds

Philippine Bond Yields fell in line as global central banks indicated a slowdown in rate hikes.

• The Bureau of Treasury (BTr) partially awarded a 20-year bond with a remaining life of four years and nine months at an average rate of 6.568%. This was 0.56% lower than the previous auction last November 8. National Treasurer Rosalia de Leon stated that the lower rate was due to ample liquidity in the market which the government took advantage of to pull yields lower.

• Headline inflation may have settled within 7.4% to 8.2% for November according to The Bangko Sentral ng Pilipinas (BSP). Higher prices for electricity and agricultural products will likely be the main contributors to the inflation rate. BSP Governor Felipe M. Medalla is optimistic that “the worst is over” as inflation may have peaked in November or will peak this December.

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/2022/11/30/fed-chair-jerome-powell-says-smaller-rate-hikes-could-come-in-december.html (2) https://www.cnbc.com/2022/11/30/euro-zone-inflation-rate-eases-to-10percent-in-november-as-energy-prices-slow.html (3) https://edition.cnn.com/2022/11/30/tech/china-apple-foxconn-zhengzhou-lifts-lockdown-hnk-intl/index.html (4) https://www.bworldonline.com/top-stories/2022/11/30/490201/phl-likely-to-achieve-growth-targets/ (5) https://www.bworldonline.com/top-stories/2022/12/01/490393/lending-growth-in-october-fastest-in-nearly-4-years/ (6) https://business.inquirer.net/375329/btr-borrows-p22-9b-as-rates-decline (7) https://www.bworldonline.com/top-stories/2022/12/01/490395/bsp-sees-nov-inflation-at-7-4-8-2/

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.