Markets gain amid positive outlook

Global and Philippine Market Update
January 18 to January 24, 2024

Global Markets

Global Stocks moved higher on improving sentiment.

• The University of Michigan’s Survey of Consumers reported a reading of 78.8 in January, the highest since July 2021. This positive outlook comes despite ongoing concerns about a potential economic slowdown. Consumers’ optimism is supported by the belief that inflation is improving and expectations of higher incomes. The positive shift is also influenced by lower gasoline prices, which are about 30 cents lower per gallon than a year ago. The positive survey result is a good indication that the economy is on track for a "soft landing."

• Steven Writing, Chief Investment Strategist and Chief Economist at Citi Global Wealth, holds an optimistic view that addressing inflation does not necessitate a global economic collapse. He notes that manufacturing and trade declines are currently occurring worldwide but are expected to reach their lowest point within the year. Despite the current slowdown in growth and employment in the United States, he believes this phase will pass, paving the way for a healthier economic period next year and beyond.

• The People’s Bank of China (PBOC) has reduced its reserve ratio requirement for banks by 50 basis points, injecting approximately USD 140 billion in long-term capital. This is the first reduction this year, but the PBOC has indicated the potential for additional monetary policy easing. The move is expected to enhance lenders’ ability to provide loans, stimulating spending in the broader economy. China’s economic recovery post-COVID has been modest, prompting officials to take measures to enhance conditions for financial markets.

Philippine Stocks

Philippine Stocks got interest from foreign investors.

• The local market built some positive momentum amid a strong outlook for overseas Filipino remittances this year, potentially bolstering the economy. Data from the Bangko Sentral ng Pilipinas (BSP) indicate a 2.8% rise in cash remittances as of November, with anticipated growth of 3% in 2024. Remittances, constituting 10% of the Philippines’ gross domestic product (GDP) according to the World Bank, play a significant role in the country’s economic growth.

• Foreign investors have shown increased interest in the Philippine market this year, resulting in a net inflow of USD 63 million as of January 24. This is a positive development for the Philippines, as foreign capital inflows tend to significantly uplift equity prices. The recent trend marks a potential turning point for the local equity market, which has experienced notable outflows in the past few years. 

Philippine Bonds

Philippine Bond yields remained steady as investors anticipate forthcoming policy action.

• The Bureau of Treasury (BTr) fully awarded a new 10-year treasury bond at a coupon rate of 6.25%. The rate was broadly in line with secondary market levels. The auction received strong demand as investors continue to take advantage of the relatively high yields.

• New Finance Secretary, Ralph G. Recto, highlights the ongoing need to address inflation concerns. Although headline inflation has returned to target at 3.9%, the average inflation for 2023 stood at 6%, well above the central bank’s 2% to 4% target. Recto expresses support for the data-driven actions of the central bank. He also notes the potential increase in oil prices and transport costs due rising geopolitical tensions, which the central bank will consider in making informed decisions. BSP Governor Eli M. Remolona Jr. does not anticipate a rate cut in the upcoming February meeting, emphasizing the need for tight monetary policy given the inflation numbers.

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/2024/01/19/consumer-sentiment-surges-while-inflation-outlook-dips-university-of-michigan-survey-shows.html (2) https://www.cnbc.com/2024/01/22/no-economic-collapse-top-citi-strategist-says-healthier-economic-growth-is-coming.html 3) https://www.cnbc.com/2024/01/24/china-to-cut-banks-reserve-ratio-by-50-basis-points-from-feb-5.html (4) https://business.inquirer.net/442377/psei-up-yet-again-amid-foreign-buildup (5) https://www.bworldonline.com/stock-market/2024/01/24/571029/stocks-extend-rally-on-strong-remittance-outlook/ (6) https://www.bworldonline.com/top-stories/2024/01/24/570959/philippines-inflation-remains-an-urgent-concern-finance-minister/ (7) https://www.pna.gov.ph/articles/1217475

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.