The Market Call | October 2024

Macroeconomy

We expect a strong rebound in GDP growth in Q4 as consumers have regained confidence, supported by BSP’s latest Consumer Expectations Survey (CES) given slower inflation, more employment from Manufacturing and Construction as suggested by PMI, and 250 bps slash in reserve requirements of banks by October 25 and the 25 bps policy rate cut of October 16.  Despite record Gross International Reserves at $112.7-B in September, the peso-dollar rates will remain challenged but with temporary respite in November-December due to OFW remittances.

Fixed Income Outlook

The “Trump tantrum” (or fears of higher budget deficits in a Trump victory and delays in Fed policy rate cuts) caused a renewed upswing in bond yields to above 4.0%. However, this will likely fade after the November elections and the Fed will proceed to cut policy rates by 25 bps each in its last two meetings in 2024. Lower-than-expected NG borrowing program for Q4 means little impact on GS yields. The continued drop in inflation to average at 2.5% in Q4 from 3.2% in Q3 should eventually bring down yields, as real yields would otherwise move much above beyond the 2010-2019 average.

Equities Outlook

The PSEi continues to keep above 7,300 so far in October. Investors will retain positive sentiment about the local market even with net foreign selling in the second week of October. Early Q3 earnings calls are within expectations despite the flooding in Metro Manila in July. The BSP’s 250 bps reserve requirement ratio cut should bolster investor confidence as it takes effect in late October. Besides, the 25 bps policy rate cut on October 16 should also shore up the PSEi.