Is it time to add more equities to your portfolio? 

Are the bulls back in the stock market? The Philippine Stock Exchange Index (PSEi) has charged past the 7,400 mark, leaving investors to ponder whether to ride the trend or watch from the sidelines. This surge comes as global economic winds shift, with the US Federal Reserve trimming interest rates and the Bangko Sentral ng Pilipinas (BSP) easing monetary policies, too.

The BSP’s recent decision to slash the Reserve Requirement Ratio from 9.5% to 7% effective October 25, 2024 will pour an estimated PHP 400 billion liquidity into the financial system. This is expected to fuel lending and investment, potentially boosting economic growth and corporate earnings.

With the weakening US dollar, relative strengthening of the Philippine peso, and attractive equity valuations, foreign investors who have long been wary of Philippine stocks have taken notice. Daily trading volumes have nearly doubled from the year-to-date average of PHP 5 billion to around PHP 9 billion. More importantly, the market is witnessing net foreign inflows for the first time in five years, a strong vote of confidence in the Philippine economy.

This optimism has spread in the fixed income market, too. Yields have dropped significantly across the curve, with reference rates of some benchmark tenors reaching new year-to-date lows. For instance, the 10-year benchmark yield has broken the psychologically important 6% level. Auctions of government security offerings have seen strong participation, with market participants locking in yields amid anticipation of further decline moving forward.

So where do we go from here?

For those with an aggressive risk profile, we recommend adding exposure in equities, preferably high-dividend stocks (check Metro High Dividend Yield Fund), which offer both potential capital gains and a steady income stream.

Still, with ongoing geopolitical tensions in the West Philippine Sea and the Middle East, investors should assess the current rally with measured optimism. It is best to consult a financial advisor and consider individual risk tolerance and long-term goals.

(If you are a Metrobank client, please get in touch with your relationship manager, account manager, or investment specialist for more information. Not a client yet? Please sign up here so you can begin your wealth journey with us.)