Steady stocks reflect improving sentiment

Global and Philippine Market Update
Nov. 30 to Dec. 6, 2023

Global Markets

Global Stocks edged higher as economic data continues to improve.

• Oil hits its lowest point since June, with Brent Crude at USD 74.30 per barrel and West Texas Intermediate at USD 69.38. The decline was fueled by increased non-OPEC+ production, notably from the US, and concerns over the Chinese economy. Oil traders remain skeptical about OPEC+ commitment to supply cuts in the first quarter of 2024.

• Job openings totaled 8.73 million for the month, marking the lowest since March 2021, bringing the openings-to-workers ratio down to 1.3 to 1. This ratio was around 2 to 1 a few months ago and it now closely aligns with the pre-pandemic level of 1.2 to 1. The decline in job openings may be welcomed by policymakers as it could signal reduced labor demand, potentially helping align the job market with supply after a significant mismatch.

Philippine Stocks

Philippine Stocks got a lift from easing inflation.

• Local equities received a boost from decelerating inflation, as headline inflation eased to 4.1% in November from October 4.9%, reaching the lowest rate since March 2022. This figure aligns with the lower end of the Bangko Sentral ng Pilipinas (BSP) target of 4-4.8% estimate and also below the 4.4% median estimate of 15 economists polled by BusinessWorld. The decline is attributed to the decrease in food and transportation costs.

• The S&P Global Philippines Manufacturing Purchasing Manager’s Index increased to 52.7 in November, up from October’s 52.4, driven by robust demand, growth in new orders, and production. A reading above 50 denotes an improvement. These figures indicate continued strengthening of the manufacturing sector, with confidence on the rise due to expectations of sustained demand improvement. Notably, the Philippines’ manufacturing performance outpaced that of any ASEAN neighbor and even surpassed China.

Philippine Bonds

Philippine Bond yields maintained their downward trend.

• The Bureau of Treasury (BTr) fully awarded a re-issued 10-year treasury bond with a remaining term of nine years and 8 months at an average rate of 6.224%. The yield was lower than the 6.781% when it was last re-issued on November 14. Yields will likely continue to move lower, influence by falling inflation and declining global bond yields.

• The World Bank anticipated that the Philippine debt levels will remain sustainable in the medium term. The projections indicate a decline in the national government debt ratio to 60% of GDP by 2025. Multilateral lenders consider the 60% threshold to be manageable for developing economies. The country’s financial system is deemed sufficiently deep to accommodate its substantial financing requirements.

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/2023/12/06/us-crude-drops-below-70-per-barrel-gas-prices-fall-to-11-month-low.html (2) https://www.cnbc.com/2023/12/05/job-openings-slide-to-8point7-million-in-october-well-below-estimate.html (3) https://www.bworldonline.com/stock-market/2023/12/04/561475/psei-up-after-strong-manufacturing-data-wall-st/ (4) https://www.bworldonline.com/stock-market/2023/12/05/561722/phl-stocks-climb-as-inflation-slows-in-november/ (5) https://www.bworldonline.com/top-stories/2023/12/07/562025/phl-debt-level-to-remain-sustainable-world-bank/ (6) https://www.pna.gov.ph/articles/1214910

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.