Fund Manager’s Corner

NOTES FROM THE FUND MANAGER – July 4, 2022

Fixed Income update

Philippine June inflation accelerated to 6.1% from the 5.4% recorded in June, marking the third consecutive month inflation breached the official 2-4% target band due to higher food prices, and transport and utilities costs. Early in the week, the new BSP Gov. Felipe Medalla said that the central bank may consider a more aggressive hike at its August 18 meeting if inflation sustain its upward momentum, but noted that the decision will remain dependent on data. Week-on-week, yields on the government securities ended lower except for the 1-year. The 1-year yield rose by about 15 basis points to 2.70% while the 10-year fell about 19 basis points to 6.95%; the rest of the curve fell by about 9 basis points on average. For this week, yields would likely trend higher on expectations of further monetary
tightening. For the fund’s strategy, we will keep reinvesting the funds maturities in short term placements while taking advantage of the higher yields in the market

USDPHP rose by about 25 centavos to close at 55.03 (7.92% YTD) on July 4.

Equities update

The Philippine Stock Exchange (PSEi) closed at 6,309.99 (’22 est. PE of 15.34x) on July 5, down by 0.56% week-on-week (-11.41% YTD) as the market tracked the decline in regional bourses following the slump in Wall Street due to recession concerns. Weekon-week, URC +12.32%) was the best-performing due to declining soft commodity prices, while WLCON (-7.58%) was the worst performer due to higher inflation and less inclination to buy high-ticket items. The average daily turnover for the week stood at Php3.8Bn, while net foreign selling amounted to USD45Mn. For this week, the index could trade between 6,000 and 6,400 level. Meanwhile, due to the presence of significant market headwinds, the Fund will look to lighten up on market rallies while continue accumulating select names that
could benefit from a higher interest rate environment.