Local stocks are expected to move sideways in the first trading week of 2023 amid the lack of fresh leads and lingering concerns over macroeconomic problems.
Analysts said while investors may have already priced in the planned interest rate in the first few months of 2023, worries over central banks’ monetary tightening could hurt the global economy.
The surge in COVID-19 cases in many countries also added to investors’ woes.
“In the face of uncertainties over the macro picture for 2023, the strategy remains intact. That is prioritizing quality over market impulses as balance sheets have yet to fully adjust to the impact of less forgiving cost of capital, plus consumer confidence is expected to fall year-on-year thanks to a cooling global economy,” online brokerage firm 2TradeAsia.com said.
Investors will watch this week the release of December inflation rate as this will provide clues on Bangko Sentral ng Pilipinas’ next policy move.
The Philippine Stock Exchange index ended 2022 at 6,566.39, down by 7.8 percent from a year ago. Despite the market’s decline last year, PSE president Ramon Monzon expressed optimism the stock market would bounce back in 2023 as the global economy continue to open up and corporate earnings returned to pre-pandemic growth levels.
“While risks from geopolitical tensions, higher inflation and increasing interest rates remain, the Philippines has shown its resiliency through better-than-expected GDP growth during the previous quarter, which we hope will carry over for the fourth quarter and in 2023,” Monzon said.
Stock markets wrapped up their worst performances in years on Friday before heading into 2023 under recession fears following Russia’s invasion of Ukraine, high inflation and rising interest rates.
Both US and European indices closed their final sessions of the year in the red. For the year, Frankfurt was down more than 12 percent, and Paris lost 9.5 percent for their worst performances since 2018. London, however, was up 0.9 percent in 2022, as the energy sector was buoyed by soaring energy prices.
Wall Street saw its worst annual drop since 2008, with the S&P 500 index down around 20 percent and the tech-heavy Nasdaq losing about 30 percent for the year.
Equities were slammed as the US Federal Reserve, European Central Bank and Bank of England aggressively lifted interest rates in a bid to tackle rampant consumer price rises. The move carries the risk of sparking recession as higher borrowing costs slow economic activity.
US tech companies were hit particularly hard as they are usually boosted by lower interest rates.
The MCSI World Equity Index has lost almost a fifth in its worst annual performance since 2008, when markets were ravaged by the global financial crisis.
Asia-Pacific markets finished their last sessions mostly in the green on Friday.
But for the year, Hong Kong tanked 15.5 percent, and Shanghai dived 15.1 percent in the biggest annual slumps since 2011 and 2018, respectively.
Covid spiked once more in China in December, after Beijing relaxed its strict curbs in the face of rare public outcry. The surge has also prompted worries about the impact on stretched global supply chains.
Tokyo plunged 9.4 percent in the first annual fall since 2018 but the Bank of Japan maintained its ultra-easy monetary policy, in contrast with other central banks, to help its fragile economy.
“It’s shaping up to be a pitiful end to a miserable year in stock markets,” OANDA trading platform analyst Craig Erlam told AFP.
He said 2022 had “brought an end to an era” of low interest rates that fueled tech and crypto booms.
“That’s been replaced with soaring inflation and interest rates, immense economic uncertainty and the reshaping of energy markets in the aftermath of the Russian invasion of Ukraine,” Erlam said.
In commodities, oil prices rallied in 2022 with Brent gaining about 10 percent and the West Texas Intermediate adding around seven percent.
However, they remain significantly below peaks struck in March on supply woes after key producer Russia invaded its neighbor, sending natural gas prices also spiking.
Britain and other major economies now face the likely prospect of grim recessions next year, as consumers and businesses battle rampant inflation and rising rates after years of ultra-low borrowing costs.
“The most important take of the year is: the era of easy money ended, and ended for good,” noted SwissQuote analyst Ipek Ozkardeskaya.
“And given that there is still plenty of cheap central bank liquidity waiting to be pulled back, the situation may not get better before it gets worse,” she said. With AFP