Policy watch amid oil shock
From AB Capital's The Opening Bell: Three Moves
Event
The BSP signaled heightened vigilance ahead of its April 23 meeting, assessing oil-driven risks to inflation, the external account, and financial markets. We think the focus has shifted toward second-round effects, including transport costs, fertilizer prices, and peso pass-through dynamics.
View
In our view, risks are skewed to the upside if oil sustains above US$100. DEPDev’s scenario suggests inflation could reach 6-7.5%, implying a material deviation from target. We think Php weakness compounds this, with every 1% depreciation adding roughly 0.03-0.04pp inflation.
Catalyst
Near-term direction hinges on oil and FX stability. If Brent holds near US$80, inflation may stay manageable within 4-5%. However, a move toward US$100-US$120 could push BSP to pause easing or consider tightening, particularly if expectations and wage pressures build.
Action
We think positioning should turn more defensive. Favor utilities with pass-through mechanisms and REITs with stable cash flows. Underweight discretionary and transport-sensitive names, where margin compression and demand softening risks are rising.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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