Business confidence improved pre-oil price surge; macro risk looms
From AB Capital's The Opening Bell: Three Moves
Event
BSP’s February BES showed business confidence rising to 8.2% from 0.9% in January, supported by stronger demand and improving conditions. Forward expectations also strengthened, while inflation expectations remained anchored within target despite emerging external risks.
View
In our view, the rebound reflects improving domestic demand momentum but remains fragile. Survey timing predates the Middle East shock, suggesting current optimism may overstate conditions. Tighter credit access and lower capacity utilization point to underlying constraints despite stronger sentiment indicators.
Catalyst
Key drivers include oil prices, inflation trajectory, and credit conditions. A sustained oil shock could weaken sentiment through higher costs and tighter financial conditions. On the flipside, stable inflation expectations and infrastructure spending could support demand and confidence over the next two quarters.
Action
We think the data supports a cautious stance on cyclicals. While sentiment improved, risks from oil, FX, and rates remain elevated. Favor companies with pricing power and strong balance sheets, while monitoring credit conditions and inflation expectations as leading indicators of demand sustainability.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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