Rate hikes boost market yields — AUB

Listed Asia United Bank (AUB) said the series of monetary policy tightening by the Bangko Sentral ng Pilipinas (BSP) to curb rising inflationary pressures is providing much-needed boost to money market fund yields.

Andrew Chua, senior vice president and head of trust and investments group at AUB, said investors could still maximize profits amid the volatile global and domestic markets.

“While volatility is expected to prevail in the domestic and global markets, this is not a reason to avoid investing in the capital markets. Volatility is, in fact, a trader’s best friend. Given the right tools and insights, a smart investor should be able to capitalize on these volatilities, maximizing profits with minimal risk,” he said.

The BSP’s Monetary Board has raised interest rates by 100 basis points so far this year to rein in inflationary expectations and continues to leave the door open for more rate hikes.

It lifted benchmark rates by 25 basis points for the first time in more that three years last May 10, followed by another 25 basis points last June 20, and by 50 basis points – the biggest in 10 years – last Aug. 9.

Inflation leapt to a fresh five-year high of 5.7 percent in July from 5.6 percent in June due to higher oil and food prices, weak peso, and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

This brought the average to 4.5 percent in the first seven months of the year, exceeding the BSP’s two to four percent target. The central bank raised its inflation forecasts to 4.9 instead of 4.5 percent this year and 3.7 instead of 3.3 percent next year.

AUB bagged three awards at the Best Managed Fund of the Year Awards given by the CFA Society Philippines. It won in three out of the seven categories in which 82 funds (unit investment trust funds and mutual funds) competed.

The AUB Peso Investment Fund, which offered a five-year return of 20 percent, won in the Peso Medium Term Bond category; the AUB Gold Dollar Fund, which offered a fiveyear return of 21.73 percent, was adjudged best in the US Dollar Medium Term Bond category; while the AUB Equity Investment Fund, which offered the most attractive five-year yield of 38.74 percent, won in the Peso Equity category.

Chua urged clients to “invest in short duration for now, with the expectation of being able to reinvest at a higher rate, pointing out AUB’s PHP and USD fixed income funds are well positioned for market volatility.

“Investments of the funds have been skewed to the shorter end of the yield curve and we should be able to maximize our reinvestments as interest rates rise,” he said.