Philippine Market Outlook March 21, 2019

MARKET OUTLOOK

Local shares recovered on Wednesday even as investors remained on the sidelines as they waited for more developments on the US-China trade talks and the Federal Reserve’s policy review.

With the trade talks stalling on differences and the Federal Reserve watch continuing, investors bought into Philippine shares as refuge.

Negotiators for the US and China are reported to meet in Beijing next week for another round of high-level trade talks, after which they will then have another meeting in Washington for more negotiations.

Both sides are seen to come up with a final deal by April or a month later than originally expected.

Investors are also waiting for results of the Federal Reserve’s two-day policy meeting, where the US central bank is seen to set a more dovish tone for the year.

The central bank Monetary Board is also scheduled to meet today, prompting the market to maintain a wait-and-see mode.

Consensus largely expects policy rates to remain steady, but investors might see a cut in the Reserve Requirement in line with central bank Governor Benjamin E. Diokno’s recent statements that there could be one cut every quarter for the next four quarters.

Meanwhile, Wall Street ended lower overnight as interest rate-sensitive financial stocks dragged down the indexes after the US Federal Reserve affirmed a dovish monetary policy stance.

At the conclusion of its two-day monetary policy meeting, the US central bank indicated it sees no further rate hikes this year, and released details of a plan to end the monthly reduction of its balance sheet.

The stock market has rallied since the beginning of the year, when Fed chair John Powell said the Fed would take a "patient" approach to monetary policy.

Powell affirmed that sentiment at a press conference following the release, citing mixed economic data and risks associated with Brexit and trade negotiations as reasons for caution.

Indeed, Federal funds futures now see nearly even chances that the US central bank will cut interest rates in early 2020.