Quick Take: BSP reminds rate hikes coming and 2 more market updates
Bangko Sentral ng Pilipinas (BSP) [link] Governor Felipe Medalla said the question on the next interest rate hike is just “whether it is 50 or 75 basis points”. The BSP has meetings scheduled for mid-November and mid-December, and rate hikes from both meetings are possible.
MB Quick Take: As noted by the Governor, a 75bp move would help fortify the peso against a massively strong US Dollar, and would help ease the parts of the inflationary soup that are being caused by an oversupply of money in the domestic financial system. It would also unfortunately “drag” on the economic recovery. Every action at the central bank level picks winners and losers, and the current Governor sounds like he’s willing to be more aggressive to fight inflation and reduce the rate of the peso’s devaluation relative to the Dollar.
Metrobank [MBT 50.05 1.83%] [link] shortens the offer period for its P10 billion bond sale because of high demand. The original end of the offer was scheduled to be October 19th, but MBT moved that up to October 17th. The bonds pay 5% per year, and have a tenor of 1.5 years. MBT plans to use the proceeds for “general working capital needs.”
MB Quick Take: They haven’t sold out yet, so this is more of a marketing press release than it is anything else. There was never any doubt the bonds would sell, and moving the offer period end up a couple of days doesn’t really matter in the long run. It would matter if they extended the offer period, because they didn’t sell all the bonds, or if they decided to sell additional bonds from their P200 billion board-approved plan, but that’s not the case. It’s just a (well-executed) feel good post.
Department of Finance (DoF) [link] is backing a move to extend the lower tariffs on certain commodities like corn, coal, pork, and rice. DoF is hoping this will help prevent “price shocks” should the executive orders lapse without renewal.
MB Quick Take: Tariffs are a tax that our government imposes on certain imported goods, and these tax levels are incredibly important to food producers that are in industries that have really thin margins. Companies and producers can only eat higher input costs for so long before it becomes more profitable to shut down than to keep producing, especially in low-margin industries that didn’t have a lot of cushion to begin with. Extending the lowered tariffs doesn’t decrease the price of these basic commodities. The government is in complete control of these tax levels. There’s nothing inevitable about any of it. If the government wants to double the cost of pork, it can, and if it wants to reduce the amount that it taxes imported coal, it can. Any raise in these taxes will eventually make their way through the system to the consumer. It’s always the consumer that pays in the end.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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