The Market Call | November 2020

Macroeconomy

The Philippine economy will likely perform better starting Q4 as industrial production and exports have slowly improved. The robust recovery of China, other ASEAN countries and the U.S. economy should support exports moving forward. National Government (NG) spending should accelerate by Q4 despite the negative print for its growth in September as it is above the May to November 2019 average. As money growth (M3) continued to decelerate while GDP fell by another 11.5% in Q3, the Bangko Sentral ng Pilipinas (BSP) cut policy rates by another 25 bps to 2% as we expected. This would prod banks to lend more to support the recovery efforts.

Fixed-Income Market

While fears of higher interest rates returned to market players, the likely easing of policy rate will help change the minds of the investors. We do not expect further extraordinary NG borrowing from the money market, as it already pre-funded its deficit until Q1-2021. Even though the International Monetary Fund (IMF) slightly raised its forecast for the global economy, there will be no dramatic changes on the global interest rates.

Equities Market

The Philippine stock market roared back to life as it led the rebound among Asian equities in October. However, sustaining this newfound path toward recovery requires more favorable news such as accelerating growth, job creation, positive earnings of listed firms, free movement for workers and sufficient liquidity among firms. Besides, the passage of crucial recovery bills to assist firms, specially, MSMEs should add to this impetus.