The Market Call | August 2017

 

Macroeconomy

 

We believe that economic expansion in Q2 will record faster than Q1 on the back of a robust investment spending and a resurgence in manufacturing. The double-digit growth in exports and vigorous capital goods imports, likewise, support our view of a faster growth in Q2. The speedier NG disbursements should moreover push further the country’s growth.   

 

Fixed Income Market

 

Despite strong U.S. employment data for the months of June and July, the market senses that the Fed may not raise policy rates for a third time in December on softer-than-target U.S. inflation rates for the past three months. Moreover, recent geopolitical tensions between the U.S. and North Korea have fostered a risk-off investor sentiment, pushing up demand for U.S. Treasuries. Local bond yields are expected to trade within a narrow range as the domestic inflation continues to fall below market expectations. ROPs may suffer from the “safe haven” effect and their spreads over US Treasuries may rise until uncertainties in the external environment start to clear.

 

Equities Market

 

With the ghost month of August approaching, both DJIA and PSEi show remarkable performance breaching the 22,000 and 8,000 resistance level, respectively. The PSEi will likely follow the movements of DJIA. Moreover, it gained solid support between the 7,700 and 7,800 levels after the Q2-2017 results were better than expected. In any case, it would be best to wait for the PSEi correction before taking in more risks.

 

 

 

The Market Call | August 2017

 

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