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Macroeconomy

Some recent economic indicators paint an optimistic recovery, shoring confidence that we would end the year with a decent growth. Manufacturing and export outputs kept their torrid triple and double-digit growths, respectively. NG disbursements slightly inched up. Employment print, likewise, showed lower unemployment rates, although some negatives also appeared. The uncertainties caused by elevated Covid cases and strict lockdowns have pushed the National Economic Development Authority (NEDA) to slash lower the full-year’s growth projection to 4% to 5%.

Fixed Income Outlook

In the local bond market, market appetite for long tenors dwindled despite domestic inflation easing to 4% in August (slowest reading in 2021). Investors responded more to U.S. data– stronger employment numbers for July and Fed’s signal at possibly reducing bond purchases later this year. With new economic data showing clear signs of deceleration of the U.S. economy and inflation continuing to ease there, our initial call for a late-2021 or early-2022 move seems justified. Signs that the inflation spike in August would prove transitory will boost the local bond markets.

Equities Outlook

Investors drove up the PSEi by 9.3% in August to 6,855.44, beating ASEAN and East Asian stock markets. Foreign investors joined optimistic local investors who witnessed triple-digit Q2 earnings and GDP growth. PSEi continued to gain in early September, challenging the resistance level of 7,000, with a positive outlook hinged on the surge in core net income for Q2-2021 of PSEi constituent stocks. Thus, we expect an upward trend, albeit quite volatile since uncertain quarantine restrictions, despite speedier vaccine rollouts, may sideline some investors. With the strong emergence of the new asset class—Real Estate Investment Trusts (REITs)—we provide a feature article on REITs and the performance of listed ones, its basic information, and those about to be/newly issued.

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