The Market Call | February 2022

Macroeconomy The massive 2.7-M increase in employment in Q4 should offset most of the negative impact of the mobility restrictions due to a sharp rise in Covid-19 Omicron variant cases. Infrastructure and related election spending and GDP/job growth momentum should propel H1 GDP growth, since seasonally adjusted Q-o-Q growth accelerated in Q4 to reach 3.1%.  Even with the usual H2 easing during a Presidential election year, GDP growth for 2022 should take a faster pace of 6% to 7%, from 5.6% in 2021. We think BSP will keep policy rates unchanged until well into Q4-2022, while the peso remains on a mild depreciation mode.   Fixed Income Outlook Concerns over a more aggressive Fed tightening (both in terms of frequency and magnitude) sparked a global selloff with 10-year U.S. Treasuries spiking by close to 50 bps from end-2021 to mid-February amid strong Q4 U.S. GDP print and January inflation at a 40-year high. Local 10-year T-bond yields followed suit and may trade sideways with a slight upside for the rest of Q1. Meanwhile, ROPs spread over equivalent U.S. Treasuries may widen a bit more as DBS and Fitch reported their downbeat views on the economy.   Equities Outlook PSEi started 2022 with the best performance among stock indices that we cover rising by 3.4% MoM to end January at 7,361.65. Five out of the six sectors posted gains, led by the Mining & Oil sector (+7.1%) and the Services sector as the only losing sector (-1.7%). We expect PSEi to break through the 7,500 resistance by Q2 as PH economic recovery marches on and corporate earnings improve. However, investors should expect much volatility amidst concerns on the size and timing of Fed’s policy rate cuts starting March, on 8-year high crude oil prices, and on the threat of a Russian invasion of Ukraine.   For the full details of The Market Call, please click the link https://firstmetro.com.ph/the-market-call/2022TMC02.