The Market Call | October 2017

 

Macroeconomy

 

We expect PH GDP to expand by at least 6.5% in Q3 as domestic demand and external demand (exports) propel growth. Domestic demand will count on NG spending which in August soared over 10% for 4th successive month, and on consumer spending which banks on OFW peso remittances, already on 3rd month of above-12% gains. Exports—reflecting external demand--returned into the double-digit growth territory as advanced economies expand above expectations.      

 

Fixed Income Market

 

The upside for U.S bond yields appears limited despite the Fed’s announcing its plans of reducing its balance sheet starting October. Similarly, the rise in local bond yields would likely be muted given less-than-expected borrowing and government deficit. On the other hand, inflation is expected to reverse in Q4 as crude oil prices return to below-$50/barrel. Foreign investors, however, may focus more on Indonesian and Indian sovereign bonds and reduce ROPs attractiveness.

 

Equities Market

 

The PSEi has entered bull territory as it broke through resistance barriers with foreign net buying (P29 B) in Q3-2017, with the bulk place in September. With foreign fund managers finding U.S. stocks overvalued, they look towards emerging markets to capture better returns. Upcoming Q3 income reports should be above average for the uptrend to be sustained.

 

 

 

The Market Call | October 2017

 

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