The Morning View

Finance Secretary Recto noted that economic losses from anomalous flood control projects between 2023 to 2025 may have reached as much as PHP 118.5 billion. The estimates suggest that 25% to 70% of the total project cost was lost to corruption. He added the funds could have created up to 266,000 jobs and raised gross domestic product (GDP) to 6% in 2024.

Manila Electric Co. (PSE Ticker: MER) said that its unit, Meralco Industrial Engineering Services Corp., has acquired 400,000 common shares of Customer Frontline Services Corp. (CFS) for PHP 74.0 million. CFS, a subsidiary of Bayad Center, offers outsourced teller and customer services. 

Local equities fell amid a lack of positive catalysts and ahead of the August local inflation data release this Friday. Meanwhile, local fixed income yields ended mixed, and the Philippine peso weakened as investors digested Finance Secretary Recto’s signal of another possible rate cut by year-end. The local currency was also weighed down by a stronger US dollar amid concerns over the United Kingdom’s fiscal position.

The PSEi closed at 6,128.89 (-0.19% DoD).

On average, yields fell by 0.42 bps, with the 2Y closing at 5.62% (-0.03 bps) and the 10Y closing at 6.02% (+0.03 bps).

The USD/PHP pair closed at 57.51 (+0.61% DoD). 

US ISM Manufacturing Purchasing Managers’ Index (PMI) rose to 48.7 in August (July: 48.0, Consensus: 49.0). This remained below the 50.0 expansionary threshold for the sixth straight month. While new orders rebounded, supply constraints and uncertainty over US tariffs continued to weigh on the manufacturing sector.

US construction spending fell by 0.1% MoM in July (June: -0.4%), in line with consensus estimates.  The modest decline came from lower spending in private construction amid high mortgage rates and a slowing job market. This was partially offset by higher outlays on public construction.

US equities fell and US Treasury yields rose after the federal appeals court’s ruling that most of Trump’s tariffs are illegal sparked concerns about the fiscal implications for the US. Investors also looked ahead to key US labor data releases this week. 

The S&P 500 closed at 6,415.54 (-0.69% DoD), while the DJIA ended at 45,295.81 (-0.55% DoD). 

On average, yields rose by 1.65 bps, with the 2Y closing at 3.64% (+2.20 bps) and the 10Y closing at 4.26% (+3.10 bps).

The US dollar strengthened as the sterling and yen were weighed by concerns over Britain’s fiscal outlook and Japan’s political uncertainty. The DXY closed at 98.40 (+0.64% DoD).

Sources: BusinessWorld, Inquirer, Philippine Star, Manila Bulletin, Businessmirror, PSE Edge, Bloomberg, CNBC, Reuters, CNN, Wall Street Journal, Financial Times, Market Watch

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