Lower oil prices, Fed policy to drive PH markets–Manulife

MANILA, Philippines – Lower global oil prices could support Philippine financial markets in the second half of the year by helping the peso and boosting bond performance, according to Manulife Investment Management.

Murray Collis, head of Asia fixed income at Manulife Investment Management, said Philippine markets remain influenced by global oil prices and the US Federal Reserve’s policy path.

READ: IMF, ADB slash PH growth forecast

“Our base case is for the Fed policy, as well as oil prices, to remain key drivers for many local markets, including the Philippines,” Collis said during a media briefing on Manulife’s second-half Asia market outlook.

Collis said the Fed is expected to move gradually on policy after holding its benchmark rate at 3.50 to 3.75 percent in June. Should global oil prices stabilize or ease, this would be “supportive” of Philippine bonds, the peso and overall financial conditions.

“Lower inflation would help in terms of policy concerns. If we did see oil prices start to roll over, it would give the Bangko Sentral ng Pilipinas (BSP) a little bit more ability to move to a more neutral stance,” he said.

READ: S&P cuts PH growth outlook to 4.1%

However, he warned that a renewed rise in oil prices would likely keep the BSP on a hawkish footing.

Philippine inflation eased for a second straight month as a tentative US-Iran peace deal lowered crude prices toward pre-war levels. Still, inflation remains above the BSP’s target range and is hovering near its highest level in three years.

This prompted the BSP to raise its benchmark interest rate by another 25 basis points to 4.75 percent in June. Markets expect further rate hikes this year, with BSP Governor Eli Remolona Jr. saying the economy can take one more increase.

Meanwhile, the peso has remained under pressure against the US dollar amid global uncertainty, prompting the Development Budget Coordination Committee (DBCC) to project an average exchange rate of P60 to P62 per dollar through 2030.

The bond market has likewise reflected investor caution. On Tuesday, the Bureau of the Treasury rejected all bids for its seven-year bond offering after investors sought higher yields. The average rate rose to 7.575 percent from 7.16 percent in the previous auction, while bids reached only P18 billion, lower than the government’s P30-billion offer.

Zooming out, Manulife said Asia’s fixed-income market remains well positioned due to higher yields and shorter-duration bonds that are more resilient to interest-rate swings than many global peers.

“We see opportunities across both Asia dollar credits and selective local currency bond markets, where supportive policy and solid fundamentals can help anchor returns,” Collis said.

“Within credit, Asia high yield stands out for its compelling carry and improving fundamentals, while investment grade remains supported by healthy regional growth,” he added. INQ