The Market Call | March 2022

Macroeconomy The Russian invasion of Ukraine has exacerbated the crude oil and commodity price spiral and will likely bring domestic inflation above the 2-4% target of BSP. However, its impact on the economy will likely turn out mild amidst heavy election spending in H1 and growing business confidence and robust earnings.  Despite an acceleration in M3 growth, BSP has reiterated, and we think so too, their determination to keep policy rates unchanged for most of 2022.   Fixed Income Outlook Peso bonds, especially longer tenors, appear increasingly unattractive for the rest of H1 amid inflationary fears due to soaring oil and key commodity prices and Fed’s tighter monetary policy. Only some reasonable resolution of the Russia-Ukraine conflict can stop oil and commodity price escalation and ease the expected rise in domestic inflation.   Equities Outlook PSEi ended February mildly down by -0.7% to 7,311.01 due to the Russian invasion of Ukraine. Only two sectors -- Property and Mining & Oil -- landed in positive territory. With higher inflation expected due to the Russian invasion of Ukraine, volatility should characterize PSEi probably into Q2-2022. There may be momentary drop of PSEi to below 7,000 in early March. However, we see election spending to provide the partially offsetting factor for the economy and PSEi. Despite cautious foreign investors, local investors appear ready to take up any slack as seen in the past months, bolstered by strong earnings growth in Q1-2022. Thus, we remain cautiously optimistic and keep on the lookout for undervalued stocks.   For the full details of The Market Call, please click the link https://www.firstmetro.com.ph/the-market-call/2022TMC03.