Manila, Philippines – Nomura sees four interest rate hikes in 2018. This will result in higher yields for bonds and higher borrowing cost for companies but this will have a deflationary effect.
This act of the Bangko Sentral ng Pilipinas (BSP) is to combat inflation which will be caused by the recent Tax Reform Bill.
Note that 100 basis points or 1 percent increase in rates is expected next year or 0.25% per quarter.
The local stock market may decline since the borrowing cost of companies will go up although it may be tempered if there is a reduction in taxes.
You may want to have a conservative appetite for bonds for now. Though yields would increase next year because of the rate hike, bond prices will surely take a hit and the gains from yields would be offset by the decrease in prices.
The Philippine peso may gain traction since foreign investors may start buying T-bills in the Philippines.
For those wanting to borrow money for the purchase of a car, or take out a loan for business, it would be more prudent to borrow now, before BSP raises rates.
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