Note also that the MONDE PSEi rebalancing will create some volatility at the close of trading.
Although the GDP numbers was strong, it wasn't enough to improve economic fundamentals the country's Debt to GDP ratio has ballooned to 63.5%, the highest in 17 years. This puts the Philippines in a susceptible position to possible ratings actions.
We must consider that the high growth was also due to a low 1Q 2021 base, which saw a 3.8% contraction. Moreover, the high growth level also raised concerns that the BSP may hike rates earlier than expected. The BSP will be meeting on May 19.
The market largely ignored the 1Q GDP report, which saw a better-than-expected 8.3% growth. With that the Q1 GDP has surpassed pre-pandemic levels as household spending surged amid the easing of coronavirus curbs.
Local stocks could have a technical rebound today but medium term trends remain bearish. The PSEi's oscillators are at extreme oversold levels with the RSI at 31.03, its lowest since July 26, 2021. The PSEi is also at its support level of its 3 month old downtrend channel.
The yield on the 10-year Treasury note punched above 3.17%. Meanwhile, Philippine 10-year yields reach 6.18%. PSEi initial support is at 6,720, followed by 6630.
while the S&P 500 tumbles below 4,000 to the lowest level in a year. Worse is the Dow Jones made a new technical low last night. Interest rates will continue to be a deterrent. US 10-year Treasury yield rose to its highest level since November 2018,
Philippine stocks are expected to treck lower due to the continued volatility in the global markets. The positive impact of the peaceful exercise of the national elections yesterday will be offset by weaker global equity markets. The Dow fell more than 600 points
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