Financial markets mixed on Trump, Duterte fiscal policies
November 14, 2016 | 4:45pm
Analysts noted that although it is too early to gauge the impact of a Donald Trump presidency on the Philippines, there are similarities between the US president-elect's and Philippine President Rodrigo Duterte's fiscal policies.
AP
MANILA, Philippines — New governments taking the cudgels from central banks here and the US to promote growth is creating mixed results in the financial markets, officials and analysts said.
On one hand, the incoming Trump administration's promise of higher government spending in the US, while lowering taxes, is raising bond rates, but on the other, could benefit the stock market.
"People are expecting that the US inflation would improve next year because of more fiscal spending," Deputy Treasurer Sharon Almanza told reporters.
At Monday's bond auction, the government was even forced to reject all bids for the 364-day Treasury bill in offer after rate rose 58.8 basis points to 2.468 percent.
The issue was undersubscribed, with only P4.46 billion in tenders for the P8-billion offer.
Rates also rose for 91- and 182-day T-bills at 20.3 and 30.4 basis points ending at 1.484 and 1.809 percent, respectively.
In a statement, the Bureau of the Treasury said the election of Republican Donald Trump has created "policy uncertainty" that could eventually lead to the US Federal Reserve hiking rates.
"The market cannot really price it... that's why it (rates) went up," Almanza said.
For his part, Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said higher spending plans in the US mimics that of the Duterte administration's own program.
This, in turn, is prompting bond yields to go up, but on the flip side, could also support the local bourse in the long run. "There are similarities on them (Duterte and Trump)," he said.
"In the US, investors are already cashing in expected better economic performance that could come with higher fiscal spending," Neri said in a phone interview.
A day after Trump's victory, the Philippine Stock Exchange index (PSEi) followed the uptrend at US' Dow Jones to recover 0.88 percent and close at 7,181.87.
It, however, erased all gains so far this year, closing 103.61 points or 1.49 percent at 6,871.48 at 3:15 p.m. on Monday. The PSEi ended 2015 at 6,952.08 on Dec. 29.
"There is a realization that there is a change in priority to fiscal stimulus in the local and global scenario," a bond trader at a local bank said in a separate phone interview.
"The new administration in the US has a similar fiscal policy to us," she said.
Still, Neri said it is still too early to gauge the full impact of a Trump presidency to the Philippines, especially with the new president's protectionist tendencies that threaten our business process outsourcing industry.
This, in turn, is making the peso slide against the dollar in recent days. It opened at a new seven-year-low of 49.01 on Monday and weakened to 49.078 on the morning trade.
"It's very difficult to call a bottom. We just started assessing the implication of this new development," she said.
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