How the Philippine Treasuries, the Peso and the Philippine Stock Exchange Performed in 2023

The past is a source of knowledge, and the future is a source of hope. Love of the past implies faith in the future—Stephen Ambrose 

 

How the Philippine Treasuries, the Peso and the Philippine Stock Exchange Performed in 2023 

 

A snapshot of how Philippine assets performed in 2023. 

 

I.  As Inflation Fell, Philippines Bonds Rallied in 2023 

 

The zeitgeist of 2023: The countercyclical slowdown in inflation. 

 

Philippine statistical inflation peaked in February 2018 at 8.6% and has hurtled lower through the yearend.   

 

The Philippines followed global inflation down. 

 

Against this global backdrop, the US dollar fell (2%), and domestic and world fixed-income and equity markets rallied hard.  

 

Figure 1 

As a proxy, yields of ASEAN 10-year bonds were generally down in 2023. (Figure 1, topmost chart) 

 

Despite a significant drop in yields in the 4Q, Philippine T-bills yields rose YoY in 2023 as notes and bonds fell, flattening the Treasury curve. (Figure 1, middle and lower windows) 

 

Aside from the CPI, Treasury markets have indicated a slowdown in the GDP. 

 

II.  The Philippine Peso Rebounded by .7% in 2023

Figure 2 

 

Along with the CPI and lower bond yields, the Philippine peso reversed earlier losses and rebounded.  (Figure 2, topmost graph) 

 

The USD-PHP closed the year down by .7% to cut the two-year streak of losses.  (Figure 2, middle window) 

 

In any case, the returns of the USD-PHP appear tilted to the upside, supported by "twin deficits" and its long-term trend. (Figure 2, lowest chart)   

 

Though the mainstream associates the CPI with the performance of the USD-PHP, its 53-year uptrend has occurred even during the disinflationary era.  

 

Nonetheless, the annualized CPI seems to be forging a rounded bottom, which should support the USD-PHP in 2024. 

 

III.  2023: PSEi 30 Fell by 1.8% on Falling Volume, Continuing Trend of Diminishing Returns  

 

Now to the Philippine Stock Exchange.  

Figure 3  

As noted above, the PSEi 30 staged a furious rally in Q4, mainly from November and December's 4.2% and 3.6%, to settle with a 2.04% gain. (Figure 3, topmost chart) 

 

The thing is, this rally was barely enough to reverse the early-year loss.  The PSEi 30 generated nominal and real (inflation-adjusted) returns of -1.8% and -7.8%, respectively.  (Figure 3, middle and lowest graph)  

Figure 4  

The PSEi 30 has endured diminishing returns since 2009 (or 1993), regardless of the CPI's performance. (Figure 4, topmost window) 

 

The PSEi 30's continuing dismal performance is a function of capital and savings consumption, manifested by the 17.6% decrease in gross peso volume (including special block sales).  (Figure 4, middle graph) 

 

Even with the bulls in charge, the PSEi 30 was one of Asia's laggards in 2023.  

 

13 of 19 bourses were up with an average return of 11.9%.  Pakistan, Laos, and Japan led the winners.  Meanwhile, Thailand, Hong Kong, and China were the top (minority) decliners. (Figure 4, lowest chart) 

IV. Financials led by BDO Cushioned the Bear Market; The January Effect 

Figure 5 

By sector, Financials, which returned with a +5.7%, was the rose among the thorns.   As all other sectoral indices endured deficits, financials, primarily led by BDO (+23.5%), provided a cushion to the PSEi 30. (Figure 5, topmost graph) 

 

By members, one-third of the elite firms defied the bear market forces. Three of them carved record highs in December, in particular, CNPF, ICT, and MER.  But the average change was -3.8%. (Figure 5, middle window) 

 

Finally, though January tends to be favorable for the PSE, via the "January effect," annual returns aren't secured.  January 2023 finished up 3.45% yet closed the year down -1.77%.   January's had positive returns in eight of the last 11 years but had negative annual returns in seven. (Figure 5, lowest chart) 

 

While past performance does not guarantee future results, it could provide a useful roadmap to the future.