Philippine Market Outlook Sept 21, 2018

MARKET OUTLOOK

The main index sank deeper into bear territory on Thursday, as investors favored international markets versus placing their investments in the country.

There seems to be no end in sight for the sell-down as the Philippines is still viewed as a riskier asset class versus the more developed US economy. In fact, US stocks closed higher overnight as investors took escalating trade tensions in stride to instead focus on improving economic fundamentals.

Analysts also warned of the inflationary pressures seen from the effects of typhoon Ompong, which ravaged parts of Northern Luzon last weekend. Agricultural damage reportedly now reached P14-bil, which may hamper economic managers’ expectations of inflation slowing in Q4.

The balance of payments (BOP) surplus data which came in Wednesday afternoon is clearly not enough to calm investors into buying back into the market.

The country’s BOP position reverted to a huge surplus in August as the Philippines raised fresh funds from yen-denominated bonds, although the eight-month tally still remained negative.

The Philippines’ external position settled at a $1.272-bil surplus last month, turning around from the $455-mil deficit in July and the $7-mil deficit logged in August 2017, the central bank reported on Wednesday.

Despite the positive print last month, the year-to-date BOP tally still ended at a $2.44-bil deficit. This is wider than the $1.391-bil shortfall posted as of August 2017, and is still wider than the $1.5-bil deficit expected for the entire 2018.

Wall Street gained overnight as continued relief that fresh U.S. and China tariffs were less damaging than feared.

After having slapped new tariffs on each other's goods this week, China now hopes that Washington will show sincerity and take steps to correct its behavior. This, in turn, is hoped to provide local stocks some respite from further sell-offs.