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The Philippine economy continued to emit positive signals for Q4 and beyond. Underemployment rate plummeted to a record low of 13.3% by October, while National Government’s (NG) infrastructure & capital outlays and capital goods imports retained their elevated growth paths. In addition, headline inflation dropped to 6% in November from 6.7% a month ago, signaling deceleration to fall within Bangko Sentral ng Pilipinas’ (BSP) inflation target by H2-2019. Despite a minor slowdown in exports, the peso appreciated significantly in November as the US dollar faltered and inflation appeared contained. Both the bond and stock markets recovered during the month, as emerging market assets looked attractive.



Slower-than-expected Q3 GDP growth of 6.1% still meant the 3rd fastest in East & Southeast Asia. This came as a result of poor, typhoon-dampened agricultural output, and weaker consumer spending due to elevated inflation. Nonetheless, infrastructure and capital outlays and capital goods imports remained elevated and should drive faster growth in Q4 and beyond, with some support from improving exports. Bond markets returned to life in October and after the Monetary Board (MB) raise policy rates by 25 bps to 4.75%. PSEi showed the least decline in October in the region, and recovered above bear market threshold by mid-November.



The economy likely expanded faster in Q3 than the 6% posted for Q2, as red-hot investment spending and robust manufacturing sector stepped up on the accelerator. Capital goods imports soared by 39% in July, while National Government (NG) spending added fuel to growth with a 29% uptick, likely driven by infrastructure and capital outlays. Exports had its third consecutive month of growth, albeit still at a mild pace. Accelerating inflation in September to 6.7%, highest in the region, will put some brakes on consumer spending as it has done for the bond and stock markets.









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Strategy report: Tighter

September 21, 2018


Corporates are seeing higher rates in the horizon and borrowing now through bonds, commercial papers and long-term deposits. It will be a tighter monetary system because inflation is not peaking anytime soon due to the typhoon devastation and thus the likelihood of BSP’s stronger inflation countermeasure; 50 to 75 basis point policy hike for the rest of the year.

Awaiting Policy Rate Hike

Awaiting Policy Rate Hike

September 14, 2018


We expect the PSEi to continue its downward bias as global trade tension re-emerged after Pres. Trump approved new tariffs worth $200bn of Chinese exports and threatened tariffs on $267bn more Chinese goods. On the domestic front, investors will await the Monetary Board (MB) meeting on Sept. 27 which is expected to raise policy rates by another 50 bps following BSP Gov. Espenilla’s pronouncement of another strong monetary action to support the peso which slumped to a 13-year low of P54.11/$ on Sept. 17 and ensure that inflation will return to BSP’s target of 2-4% by 2019.

Rate hikes ahead

Rate Hikes Ahead

September 14, 2018


Indications in the bid rates of the Bureau of the Treasury’s (BTr) auctions and in the secondary market show that the market is already pricing in a 50-bp hike next week. The latest 10-yr auction, which was fully-rejected, had an average bid rate of 7.64%, almost a full percentage point higher than the last done rate of 6.725%. Furthermore, BSP Governor Espenilla recent statement that the bank will take “strong monetary action” amid rising inflation and uncertainty over impact of recent Typhoon Mangkhut on local prices of goods.











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