We believe that the rapid spending on infrastructure and the strong domestic demand will continue to buoy the economy. The continued improvement in exports, coupled with higher inflows from OFW remittances, should push further the country’s economic expansion such that the government’s full-year target of 6.5%-7.5% will easily be hit.
Fixed Income Market
Amid weak U.S. inflation data, market expectations that the Fed may raise policy rates this year have considerably dimmed. Moreover, the synchronized growth of EU, Japan, China, and the rest of the world may put a little upward pressure on inflation. Local risk appetite, however, has reawakened owing to an increase in domestic savings due to a depreciating peso as well as a surge in global investment funds moving back to emerging markets (EMs). Thus, we should see continued opportunities for yields to drop in the next two months.
With Dow Jones Industrial Average (DJIA) being overbought, foreign investors are looking into more profitable investments, and are eyeing emerging markets (EMs). Moreover, the conflict between North Korea and U.S. has the PSEi moving based on the sentiments in PH. Considering the PSEi has entered the ghost month, this may push the PSEi towards a more decisive consolidation in September and October.