The Philippine equities market made a remarkable recovery in July, as investors looked forward to better inflation and economic growth figures, and the Bangko Sentral ng Pilipinas (BSP) and US Federal Agency reducing policy rates.
Listed companies also started reporting their January to June net incomes at the latter part of July, with a bigger number of them recording better incomes for the period.
This also gave bargain hunters the incentive to acquire stocks whose prices have gone down to discount levels.
Critical Point In June
Furthermore, the Philippine Stock Exchange index (PSEi) also benefited in July from the rally it staged in the last week of June. This prevented the stock index from falling below the critical 6,000-point level at the end of June.
Worries over the local currency continues to linger, as it continued to trade at above P58 to a US dollar for the whole of July.
In July 1, the PSEi opened at 6,398.77 points and closed at 6,619.09 points, increasing by 3.44 percent.
The PSEi also traded at a wider band in July, as it went over 6,700-point level five times during the month, almost breaching 6,800 points when it closed at 6,753.12 points on July 23.
Meanwhile, the lowest close of the PSEi was on July 2 at 6,358.96 points, clearly indicating the market had left behind the 6,300-point territory as July progressed.
Major Factors
The first good news that lifted investor sentiment in July was the country's headline inflation decelerating to 3.7 percent in June from 3.9 percent in May, which was well within the government’s 2-percent to 4-percent target for the current year. This marked the first time in five months that the inflation rate went down.
Philstocks Financials Inc. research associate Claire Alviar said the slightly lower inflation rate for June boosted investor sentiment and fueled hopes that the BSP or the US Fed will finally reduce policy rates.
“The local bourse gained as hopes for an interest rate cut by August continued to boost the sentiment, following the easing of the June inflation rate,” she said after the July inflation rate was announced.
This was echoed by Regina Capital Development Corp. Managing Director Luis Limlingan, noting that the PSEi started to hover at the 6,400-point to 6,500-point level after the June inflation announcement.
“Philippine shares continued their upward trajectory as the main index closed above 6,500 as investors brace themselves for another week that could give hints to the timing of the Fed's rate cut,” he said.
ADB On The Lead
On July 18, the PSEi entered the 6,700-point territory anew amid the Asian Development Bank (ADB) projecting the Philippine economy will lead Southeast Asia in growth along with Vietnam. The last time the PSEi closed above 6,700 points was on April 30 or at 6,700.49 points.
“Also, the Asian Development Bank’s projection of the Philippines’ leading the Asean (Association of Southeast Asian Nations) region together with Vietnam in terms of economic growth for 2024 and 2025 cheered investors,” Philstocks Financial, Inc. research and engagement officer Mikhail Plopenio said.
The ADB, in a report released on July 17, said that Philippines is poised to grow by 6 percent in 2024 and 6.2 percent in 2025. This means that the ADB sees a better gross domestic product (GDP) growth in the next quarters, or better than the 5.7 percent in the first quarter.
"Domestic demand, along with a recovery in merchandise exports, drove the 5.7 percent GDP growth in Q1 (first quarter) 2024. Household consumption growth, while below last year’s level, remained the main contributor supported by low unemployment and remittances from overseas workers," the ADB said in its Asian Development Outlook report.
Impact Of SONA
The third State of the Nation Address (SONA) of President Ferdinand Marcos Jr. on July 22 also had an impact on investor sentiment, pushing the PSEi to 6,753.12 points on July 23, or the fourth time the stock index closed above 6,700 points in the month.
Also, the announcement by the National Economic and Development Authority (NEDA) on July 22 that the country’s poverty rate declined to 15.5 percent in 2023 boosted investor sentiment.
“The improvement of the country’s poverty incidence level, coming in at 15.5 percent in 2023, lower than 2021’s 18.1 percent was cheered by many,” said Plopenio.
Typhoon Carina
Meanwhile, the devastation caused by Supertyphoon Carina hardly affected investor sentiment, as the PSEi manage to stay above the 6,600 points after July 25.
While the PSEi dropped by 1.23 percent to 6,670.27 points on July 25 from 6,753.12 on July 23, the stock index still stayed above 6,600 points in the succeeding trading days of the month. Stock trading was suspended on July 24 or the day the Carina made landfall.
Boosting investor sentiment towards the end of the month were a number of listed companies reporting better income growths for first six months of the year. Among them are.
- Atlas Mining and Development Corporation (Atlas) reported on July 22 a P2.07-billion net income for the first half of the year, which is 158-percent higher than the previous year’s P803 million
- Aboitiz Equity Ventures Inc. (AEV) said on July 25 that its net income for the first six months of 2024 grew by 10 percent to P11.5 billion from P10.5 billion in the same period last year
- BDO Unibank reported on July 28 that its net income in the first half reached a record P39.4 billion, or 12-percent higher compared to the P35.2 billion a year ago,
- Philippine National Bank (PNB) led by Lucio Tan reported on July 29 a consolidated net income of P10.3 billion for the first half of 2024, which is 6.2-percent higher from the P9.7 billion a year ago.
- Asia United Bank (AUB) said on July 31 that it booked an P5.2 billion in the first six months of the year, up 27 percent from the same period last year.
Investors Monitor
For the next months, investors will continue to monitor the first-half income reports of listed companies, and anticipate the rate cuts by the BSP and US Fed.
And while there were upward pressures on inflation in July month like higher electricity and food prices, the current inflation environment is still much improved compared to the same period last year. In the first six months of this year, the average inflation rate was 3.55 percent, hitting a high of 3.9 percent in May. On the other hand, the average inflation rate for the January-June period last year was 7.17 percent, hitting a high of 8.7 percent in January 2023.
As for the second-quarter GDP growth, it is worth noting that the Asean+3 Regional Economic Outlook (AREO) released by the Aseab+3 Macroeconomic Research Office (AMRO) on July 16 stated that the country GDP is projected to grow by 6.1 percent this year, and to 6.3 percent next year.
AMRO's latest forecast for Philippine GDP was lower than the earlier projections of 6.3 percent and 6.5 percent for 2024 and 2025, respectively.
The AREO, however, showed that the GDP growth projection for the Philippines is the the second highest in Southeast Asia, or next to Vietnam's 6.3 percent and 6.5 percent forecast for 2024 and 2025.
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