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Macroeconomy

Investment-led spending, driven by heightened infrastructure work, major Public-Private Partnership (PPP) projects in full swing, plus renewed consumer spending should propel PH growth faster to 6.8%-7.2% in 2019. We expect consumer demand to pick-up, bolstered by further fall in headline inflation (to 3.1% per BSP) and election-related spending, which in turn will generate more employment, should further boost domestic demand.

Fixed-Income Market

Despite strong job gains, the US labor market remains loose as wage growth eased in January and with Fed pausing its policy rate hikes, US long-term yields will remain relatively low and in a trading range. Local bonds should decline as domestic inflation eases further and the liquidity need of banks is addressed by Bangko Sentral ng Pilipinas (BSP) and additional domestic savings. Corporate bond issuances should rise in H2-2019 when inflation has settled below-3% (y-o-y). ROPs should track US Treasuries’ yields.

Equities Market

With the Philippines experiencing a major drop in inflation rate, faster economic growth, lower long-term interest rates, large PPP projects commenced, positive corporate earnings, and an expected inflow of investments into selected emerging markets, we project the PSEi to reach 8,400-8,800 sometime within the year.

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