Foreign funds were net buyers in the PSE for 11 out of the first 16 trading days this 2023. This has pulled the PSE index back to bull market territory after it hit a fresh 9-month intra-day high of 7,132.62. <\/p>\n\n\n\n
Local currency and local money markets have also benefitted from hot money flows. The local currency, meanwhile, has appreciated to its highest level against the US Dollar since June 2022. Also, the Philippine 10-year treasury yields have dropped to a five-month low of 6.032%. The local market continues to benefit from strong foreign appetite for emerging market stocks. This is further supported by the positive fundamental outlook for the Philippine economy, which is a prospective outperformer this year.<\/p>\n\n\n\n
We remain cautious, however, that while the peak in local inflation and interest rates may be in sights, these are likely to remain elevated for most of the year. Higher cost of debt and goods will eat at the purchasing power of consumers and put pressure on corporate margins. <\/p>\n\n\n\n
We believe that the current market rally will only endure if expectations of strong corporate earnings for 2023 will hold up. While demand seems strong so far, lingering inflation and high interest rates will continue to put pressure on corporate margins and, without the offsetting factor of revenge spending to help mitigate these risks, could lead to a downgrade in growth expectations.<\/p>\n\n\n\n