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Macroeconomy

Positive prints from the increase in employed persons, expansionary PMI, higher NG spending, rebound in capital goods, and surge in remittances should alleviate market sentiment previously dampened by the re-imposition of Modified Enhanced Community Quarantine (MECQ from ECQ). Moreover, with the NG cash hoard, we see borrowing headspace as debt-to-GDP ratio came from low levels. In addition, economic growth from other countries would produce “positive spillover effects”, beneficial to OFWs and exports.

Fixed Income Outlook

Local 10-year bond yields retracted from its 11-month high of 4.66% by end-March as the market corrected from domestic inflation concerns and rapid U.S. economic recovery. Yield curve will remain steep unless inflation print plunges below 4.0% in Q2, which is highly unlikely. Meanwhile, only the release of more positive economic news will prompt U.S. 10-year Treasuries to rise above its ceiling at 1.74% in March.

Equities Outlook

ASEAN equity markets, except Thailand, underperformed in March in comparison to DJIA and other advanced markets. PSEi ended the month below 6,500, but has stayed above that level since April 5. Although Q4-2020 earnings of consumer-oriented firms generally improved, FY 2020 came slightly below consensus. While Moody’s outlook on the Philippines’ credit rating faces risk from the surge of COVID-19 cases, infrastructure-related stocks may seem a bit more attractive amidst cautious and volatile markets, given global uncertainties, and the local COVID-19 situation.

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