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In the Know – November 25, 2022


Overseas news

The dollar weakened to a 3-month low on better risk sentiment after the minutes of the US Federal Reserve’s (the Fed) latest policy meeting indicated that most Fed policymakers support a slower pace of hikes. Asia and Europe stocks closed higher, while the US market was on Thanksgiving holiday.


The dollar can lose some strength when increases in the key rate start tapering off and investors would look into other assets abroad (like emerging markets) for higher returns.


Chinese property stocks also stormed nearly 7% higher, after banks there pledged at least $162 billion in fresh credit lines to cash-strapped developers, although the Shanghai Composite Index lost 0.25% as the country’s COVID cases continued to surge.


The new credit lines will allow the developers to do things like continue stalled projects and begin new ones, which will help them create more value for their investors.


Local developments

Foreign investments registered with the Bangko Sentral ng Pilipinas (BSP) or “hot money” posted a net inflow of $83 billion in October. This was due to positive market sentiment as fears of aggressive tightening by the US Fed have eased and is a reversal of September’s $367-million outflow.


Hot money moves quickly, and usually follows the path of higher profits. When it enters a country, it usually shows that foreign investors are seeing potential for growth there.


The National Economic and Development Authority (NEDA) Board has endorsed an executive order modifying tariff rates on electric vehicles and EV parts to incite demand amid high fuel prices.


This step could make such vehicles more appealing to consumers, although it may be too early to conclude that this would have a substantial impact on the overall sales of the automotive industry.


The National Government (NG) plans to borrow P135 billion from the domestic market in December, 37.21% less than the P215-billion program in November. The Bureau of the Treasury (BTr) said it would borrow P30 billion in Treasury bills (T-bills) and P105 billion in Treasury bonds (T-bonds).


Reducing domestic borrowing may mean that the government will tap into other sources of revenue or reduce its spending in order to keep ahead of its budget deficit.


There’s quite a bit of positivity in the latest news, but this doesn’t mean that the situation will be heading up from now on. For now, you might still want to avoid big changes to your portfolio.

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