We expect faster growth in H2 anchored on speedier NG disbursements and higher peso equivalent of the remittances. Robust capital investments and stronger infrastructure and capital outlay and better exports should, likewise, push further the expansion significantly better than growth in H1.
The local bond market shall focus on the domestic front—inflation, exchange rates, and BSP policy rate hikes. While inflation may again rise faster in August given the recent heavy rains, but should peak that month due to easing of food (especially rice, due to September harvests and larger importations) and crude oil prices. BSP may still hike policy rates by another 25 bps in H2 to keep inflationary expectations in check and the peso-dollar rate more stable.
PSEi’s rally in July appears to be transitory as disappointing Q2 GDP growth and faster inflation in July are seen to mute healthy corporate earnings as to cause a weakening in the local bourse during the ghost month. Meeting the 7,900-8,200 target would thus require definitive easing of inflation and exchange rates, backed by better Q3 earnings.