Philippine stocks near bull market as end of tightening in sight

Bloomberg

Philippine’s stock benchmark entered a bull market, as the country’s central bank signalled an imminent end to its monetary tightening cycle and the outlook for corporate earnings brightens as China reopens its borders. The peso also strengthened along with most Asian currencies as traders eased off hawkish bets for the Federal Reserve.
The Philippine Stock Exchange Index rose 1.7% on Friday, led by Universal Robina Corp. and Bank of the Philippine Islands. The gauge, the best performer in the region, is up more than 21% from a September 30 low. Foreign flows for the Southeast Asian nation also kicked off positively this year.
“The Philippines and other emerging markets are off to a good start,” said Manny Cruz, strategist at Papa Securities. “China’s reopening and optimism on the US economy is supporting expectations of a global soft landing rather than a recession. The outlook for moderate rate increases is also firming up.”
Bangko Sentral ng Pilipinas, among the most aggressive in the region, has raised the key rate by a total 3.5 percentage points since May to temper inflation pressures. With prices seen to have peaked, the central bank will have scope to
go easy on rate hikes to
preserve domestic recovery.
The S&P Global purchasing managers index for the Philippines rose to 53.1 in December from 52.7, its highest reading since June 2022, raising prospects for strong earnings growth this year.
Philippine companies had delivered third-quarter earnings that were ahead of consensus, underscoring resilient consumer demand despite successive sharp rate hikes and elevated inflation. Some analysts expected this momentum to continue into the fourth quarter.
The stock index is up almost 5.9% so far this year, the best performer among Southeast Asia’s major
equities markets. Overseas funds bought $12.9 million in Philippine shares on a net basis on Friday, bringing this year’s inflow to about $19 million.
The country saw net outflows of $1.25 billion in 2022.

“The market rally is due to the weak US dollar and optimism on China reopening,” COL Financial Group chief market strategist April Lynn Lee-Tan said. “Slower inflation” could provide central banks and markets the potential to pivot, she added.
“It seems we will have a strong rally this quarter that could be followed by a correction in the second quarter depending on the actual direction of the US economy,” Cruz said. “Positive Philippine equities fundamentals should come through with easing inflation and falling risks of global recession.”