Philippine Market Outlook May 3, 2019

MARKET OUTLOOK

Local equities firmed up on Thursday, as investors reacted positively to the country’s rating upgrade from S&P Global Ratings.

The spotlight focused on the Philippine market as the country got a boost from its credit rating courtesy of S&P.

S&P raised the Philippines’ long-term sovereign credit rating to “BBB+” from “BBB” on Tuesday, marking the first upgrade since 2013 as it cited the country’s strong economic growth supported by solid government fiscal accounts, low public indebtedness, and the economy’s sound external settings. The rating carries a stable outlook, which means it is unlikely to change in the next six months to two years.

It underscored, however, the importance of infrastructure development to sustain the Philippine economy’s expansion.

The main driver was the upgrade in the Philippines’ credit rating from BBB to BBB+ by S&P Global Ratings. The upgrade elevated confidence on the country’s macroeconomic fundamentals and opened more economic opportunities through easier debt access, something which cheered investors.

The rating upgrade is seen to strengthen the peso against the dollar in the near term, under the assumption that investors are likely to put more money in the Philippines.

The decision of the US Federal Reserve’s Federal Open Market Committee to keep interest rates unchanged may continue to help buoy market sentiment.

Wall Street edged higher overnight as a handful of positive earnings reports helped investors look past the Federal Reserve's policy decision that dented hopes of interest rate cuts.

Investors are going to dwell on the Powell's comments. He said there is no need to cut rates anytime soon or indicated that next move might not be a rate cut.

Markets are awaiting the April inflation and Q1 2019 gross domestic product (GDP) readings, as well as the central bank Monetary Board policy review. Corporate earnings results are also expected to provide guidance to the market.