Given the growing hawkishness of the U.S. Fed, signified by their higher-than-expected interest rate outlook for next year (4.5% for the most part of 2023 while the rate could still peak by 4.9%), USD has now grown stronger.<\/p>\n\n\n\n
Dollar index spot (DXY) has climbed above 114 yesterday, nearing its all-time-high of 121 in 2001. This pulled down the values of other currencies, particularly those of the emerging countries, such as PHP which has just weakened further (now above P59-level). Albay Representative Joey Salceda said last Saturday that the value of the Philippine peso could further sink in the coming days to P65-68 as against the USD.<\/p>\n\n\n\n
This downbeat near-term outlook for the Peso could lead to expectations of potential off-cycle rate hike for the BSP or much higher rate hikes (more than 50bps) towards the end of the year. Moreover, an expected short-term downtrend in Peso is likely to drive foreign outflows as well, adding further selling pressure on the PSEi.<\/p>\n\n\n\n
Considering the sticky impact of a hawkish Fed on the index through the depreciation of Peso, PSEi is likely to break down below 6,000-level. We would therefore advise investors to trim down positions in the meantime and wait for critical support level to enter but buy slowly as downside risk below this remains.<\/p>\n\n\n\n
While banks: BPI (Target Price: P111.00), BDO (Target Price: P159.00), SECB (Target Price: P140.00), and MBT (Target Price: P62.00) remain our preferred picks amidst this surging interest rates and depreciating peso, we note that potentially lower loan growth due to higher rates could offset the positive impact of NIM expansion, making them vulnerable to the expected sell-off in the market. DMC (Target Price: P12.50), on the other hand, given its likely special dividend declaration next week could be one of the plays that investors may consider in the meantime.<\/p>\n","protected":false},"excerpt":{"rendered":"
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