PhillipCapital DIFC Research Team

February 20 – Daily Market Update

20 February 2026 – Daily Market Updates Markets Daily — Broad Market Update Market Snapshot (as of 06:09 am ET; pricing may be delayed) S&P 500 Futures: 6884.5 (+0.11%) Stoxx Europe 600: 628.37 (+0.49%) Hang Seng: 26413.35 (-1.10%) WTI Crude (front-month): 66.06 (-0.56%) Bitcoin: 67914.55 (+1.54%) Global overview US: Equity futures are steady as investors await fresh economic readings and weigh ongoing geopolitical risks. The debate around the pace and scale of Federal Reserve easing continues, with firmer growth and resilient hiring tempering expectations for multiple cuts. Treasury yields are little changed to slightly higher and the US dollar remains broadly firm as rate differentials support the greenback. Europe: Stocks advanced after stronger-than-expected activity surveys pointed to improving momentum, led by a rebound in manufacturing. While sentiment has improved, the region’s benchmark has rallied for months and aggregate valuations have crept higher, leaving performance more sensitive to earnings delivery and guidance. Asia: Trading was mixed. Hong Kong lagged amid weakness in select growth and technology names, while other regional markets were more balanced as investors assessed the global interest-rate path and local earnings updates. Rates and currencies Government bonds: Core yields are edging up as investors scale back aggressive easing timelines, with attention on incoming inflation and activity data to confirm disinflation’s durability. Foreign exchange: The dollar is firmer on the week as markets reassess the odds of near-term rate cuts. Cyclical currencies are range-bound; the euro is supported by improving survey data but capped by relative rate dynamics. Commodities and digital assets Energy: Crude prices softened as supply dynamics and demand concerns offset geopolitical risk premiums. Refining margins and inventory trends remain in focus into month-end. Metals: Industrial metals were mixed alongside shifting global growth signals. Crypto: Bitcoin advanced toward the high-$60,000s, with broader digital assets steady on constructive risk sentiment. Corporate highlights Technology and software: Select names came under pressure after conservative outlooks raised questions about near-term growth trajectories and spending priorities. Health care and biotech: Clinical news flow sparked notable single-name volatility, highlighting trial and regulatory risk in the sector. Consumer and luxury: European luxury leaders outperformed following robust results from a marquee outerwear brand, underscoring resilient high-end demand. Earnings cadence: The reporting season is past its peak; further updates from utilities, payments, and communications services companies are due, with guidance and cashflow discipline in focus. Key themes we’re watching Policy path: Markets are balancing solid growth and sticky services inflation against the Fed’s desire to normalize policy. Fewer cuts priced for this year support the dollar and weigh on duration. Profit cycle: After a strong run, equity multiples leave less room for error. Delivery on earnings, AI-related capex payoffs, and margin resilience are crucial swing factors. Positioning and flows: Elevated cash yields continue to anchor short-duration allocations, while any sign of durable disinflation could extend risk appetite into cyclicals and small/mid caps. Geopolitics: Ongoing tensions in the Middle East and election-year policy noise may periodically lift volatility across energy, rates, and FX. Today’s watch list US: Preliminary business activity surveys, housing indicators, and regional manufacturing readings Europe: Follow-through from PMI surprises and any guidance from central bank speakers Commodities: Weekly inventory data and refinery utilization trends Corporate: Updates on capex plans, AI spend, and buyback intentions as management teams refine 2026 outlooks Risk considerations Upside risks: Faster productivity gains tied to technology investment, positive earnings revisions, and orderly disinflation. Downside risks: Stickier inflation prompting a slower easing path, growth disappointments in China or Europe, and escalation in geopolitical hotspots. Disclosure This material is provided for general information only and does not constitute investment advice or a recommendation to buy or sell any security, sector, or strategy. Market levels are as noted above and may have changed since the time of publication. Investors should consider their individual circumstances and risk tolerance before making investment decisions. Disclaimer: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. The content of the Website must not be construed as personal advice. For retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. Rolling Spot Contracts and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of our retail client accounts lose money while trading with us. You should consider whether you understand how Rolling Spot Contracts and CFDs work, and whether you can afford to take the high risk of losing your money. February 20 – Daily Market Update February 20, 2026 20 February 2026 – Daily Market Updates Markets Daily —… Read More February 19 – Daily Market Update February 19, 2026 19 February 2026 – Daily Market Updates Markets Daily —… Read More February 18 – Daily Market Update February 18, 2026 18 February 2026 – Daily Market Updates Markets Daily A… Read More February 17 – Daily Market Update February 17, 2026 17 February 2026 – Daily Market Updates Markets Daily |… Read More February 16 – Daily Market Update February 16, 2026 16 February 2026 – Daily Market Updates Markets Daily —… Read More February 13 – Daily Market Update February 13, 2026 13 February 2026 – Daily Market Updates Markets Daily |… Read More February 12 – Daily Market Update February 12, 2026 12 February 2026 – Daily Market Updates Markets Daily —… Read More February 11 – Daily Market Update February 11, 2026 11 February 2026 – Daily Market

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Bond Valuation Methods and Formulas

Leave a Comment / Fixed Income, Bond Pricing And Valuation, Educational Blogs / PhillipCapital DIFC Research Team

Bond Valuation Methods Mastering Bond Valuation Methods and Formulas: A Comprehensive Guide for Investors In the sophisticated landscape of global finance, bonds are often perceived as the “steady hand” that balances a volatile portfolio. However, the true value of a bond is not found in its face value alone, but through rigorous mathematical assessment. For investors navigating the markets via PhillipCapital DIFC, understanding bond valuation methods is the difference between speculative trading and strategic wealth preservation. This guide delves into the core formulas and methodologies used by institutional analysts to determine the intrinsic value of debt securities. Table of Contents The Fundamental Concept of Bond Valuation The Time Value of Money in Pricing The Standard Bond Valuation Formula Valuing Zero-Coupon Bonds Understanding Yield to Maturity (YTM) Interest Rates and Price Sensitivity Advanced Valuation Adjustments Conclusion What is the Fundamental Concept of Bond Valuation? Bond valuation is the technical process of determining the fair market value of a debt security. It is based on the principle that a bond’s price today should equal the sum of the present value of all future cash flows it is expected to generate. These cash flows include periodic coupon rates and the return of the principal (par value) at the end of the bond’s term. When you engage in investment advisory services, valuation acts as your primary filter. If a bond’s calculated intrinsic value is higher than its current market price, it is considered undervalued (trading at a discount). Conversely, if the market price exceeds the intrinsic value, the bond is overvalued (trading at a premium). How Does the Time Value of Money Apply to Bond Pricing? The “Time Value of Money” (TVM) is the bedrock of bond pricing. It dictates that a dollar received today is worth more than a dollar received in the future due to its potential earning capacity. To value a bond, we must “discount” future cash flows back to their present value using a specific discount rate, which typically reflects current market interest rates and the issuer’s credit risk. In professional wealth management, this discounting process ensures that investors are compensated for the opportunity cost of locking away their capital. The Essential Bond Valuation Formula: Step-by-Step Breakdown Formula: To calculate the price of a standard coupon-paying bond, analysts use the following formula: Where: P = Current price of the bond. C = Periodic coupon payment (Coupon Rate × Face Value). r = Required rate of return or market yield (discount rate). t = The specific time period. n = Number of periods until maturity. F = Face value (Par value) of the bond. This formula combines an annuity (the coupons) with a single future sum (the face value). By calculating each component, you can determine if a fixed income security is priced fairly relative to its risk. Optimize Your Fixed-Income Strategy Leverage our expertise to build a robust portfolio with over 1,000+ global bond instruments. Explore Global Bonds How Do You Value Zero-Coupon Bonds? Zero-coupon bonds do not provide periodic interest. Instead, they are issued at a significant discount to their face value. The investor’s return is the difference between the purchase price and the amount received at maturity. The Zero-Coupon Formula: Because there are no intermediate cash flows, zero-coupon bonds are highly sensitive to changes in the bond yield vs interest rates environment. They are often used by institutional investors for long-term liability matching. What is Yield to Maturity (YTM) and Why is it the Gold Standard? Yield to Maturity (YTM) is the most comprehensive measure of a bond’s return. It is the internal rate of return (IRR) an investor will earn if the bond is held until the end of its term and all payments are reinvested at the same rate. While the coupon rate is static, the YTM is dynamic. It accounts for the bond’s current market price, par value, coupon interest, and time to maturity. For clients utilizing institutional services, comparing YTM across different debt instruments is essential for identifying the best risk-adjusted returns. How Do Interest Rate Fluctuations Influence Valuation? The relationship between bond prices and interest rates is strictly inverse. When market interest rates rise, newly issued bonds offer higher coupons, making existing bonds with lower rates less valuable. To attract buyers, the price of these older bonds must fall until their yield matches the new market rate. Understanding this sensitivity is a core part of risk and return profile management. Long-term bonds generally have higher “duration,” meaning their prices fluctuate more significantly when rates move. Secure Your Financial Future Get expert guidance on global bond markets and fixed income. Contact Our Desk Advanced Valuation: Dealing with Semi-Annual Coupons and Accrued Interest In the real world, most bonds pay interest semi-annually. To value these accurately, the standard formula must be adjusted: Divide the annual coupon (C) by 2. Divide the annual discount rate (r) by 2. Multiply the number of years to maturity (n) by 2. Additionally, if you buy a bond between coupon dates, you must account for accrued interest—the interest earned since the last payment. This leads to the “Dirty Price” (actual price paid) versus the “Clean Price” (quoted price). Our trading platforms provide real-time calculations for these technical nuances, ensuring transparency in every transaction. Conclusion: Integrating Valuation into Your Investment Strategy Mastering bond valuation methods and formulas is not just for mathematicians; it is a prerequisite for successful long-term investing. By understanding how to discount cash flows and calculate YTM, you move beyond surface-level metrics and gain a deeper understanding of market value. At PhillipCapital DIFC, we empower our clients with the tools and research necessary to apply these principles, ensuring that every bond in their portfolio serves its purpose of providing stability, income, and growth. Frequently Asked Questions (FAQs) Why is bond valuation important for retail investors? It helps determine if a bond is a good deal compared to other investments like stocks or savings accounts, ensuring you don’t overpay for a fixed stream of income. What is the

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February 19 – Daily Market Update

Leave a Comment / Uncategorized, Daily Market Updates, Market Updates / PhillipCapital DIFC Research Team

19 February 2026 – Daily Market Updates Markets Daily — Broad Market Update Tone check Risk appetite is taking a breather. US equity futures are a touch softer as investors weigh the timing of policy easing against still-sturdy inflation readings, while Europe trades lower on mixed earnings and cyclical weakness. Asia finished mostly firmer, led by Japan’s tech-heavy benchmarks. Oil extends its rebound on heightened geopolitical jitters, and digital assets are steadier after recent volatility. Market snapshot (as of 06:06 a.m. ET; levels provided) S&P 500 Futures: 6871.75 (-0.33%) Stoxx Europe 600: 624.62 (-0.65%) Nikkei 225: 57467.83 (+0.57%) WTI Crude (front-month): 66.12 (+1.43%) Bitcoin: 66813.69 (+0.77%) Note: Market data may be delayed depending on provider agreements. What’s driving the tape Policy recalibration: Central bank officials remain cautious about declaring victory on inflation, keeping the market’s rate-cut timetable in flux. The result: a tug-of-war between resilient growth data and lingering price pressures, with yields and risk assets chopping in ranges. Earnings season crosscurrents: Guidance is taking center stage. Companies with clear margin visibility and pricing power are being rewarded, while those citing cost creep or supply constraints are seeing quick reratings. Dispersion across sectors remains high. AI and capex arithmetic: Investors continue to debate the balance between heavy infrastructure spend and the timing of monetization. That has introduced periodic volatility across semis, cloud, and software, even as long-term demand narratives remain intact. Geopolitics and commodities: Crude is firmer as traders price a higher risk premium. Broader commodity moves are uneven, with energy leading and industrial inputs mixed. Crypto steadies: After outsized swings, the major coin is firmer. Participation trends have shifted between offshore venues and US-listed products, contributing to episodic liquidity pockets and basis moves. Regional wrap US: Futures drift lower as equities digest a powerful multi-month advance. Quality growth and balance-sheet strength continue to command a premium. Bond markets are in wait-and-see mode ahead of upcoming data and central bank commentary. Europe: Benchmarks are lower, paced by cyclicals and select industrials facing supply chain and cost headwinds. Defensive groups and cash-generative staples are relatively resilient. Asia: Japan outperformed, helped by tech and exporters. The broader region was mixed as investors balanced a constructive earnings outlook with a cautious global policy backdrop. Fixed income and FX Rates: Treasury yields are range-bound as the market toggles between soft-landing hopes and sticky-services-inflation concerns. Curves are relatively steady with modest intra-day swings around data releases and speeches. Currencies: The dollar trades in a tight range versus major peers. Rate differentials remain the key driver, while commodity-linked FX is taking its cue from energy markets. Commodities Energy: Oil extends gains amid geopolitical concerns and signs of improving demand in pockets of the global economy. Refining margins and inventory trends are in focus for energy equities. Metals: Price action is mixed as growth-sensitive metals track the global activity pulse while precious metals trade alongside real yields and haven flows. Flows and positioning Global allocations: International appetite for US assets has remained robust, supported by relative growth, deep markets, and currency dynamics. Valuation shifts over the past year have also encouraged selective rebalancing into US equities and Treasuries. Equity style tilt: Investors continue to favor profitability, free cash flow, and balance-sheet durability. Factor leadership can rotate quickly around policy headlines; maintaining diversification across styles has helped dampen volatility. Sector highlights (broad) Tech and AI ecosystem: Ongoing reassessment of near-term spend versus earnings impact keeps volatility elevated, but secular demand drivers remain a tailwind. Consumer and services: Companies with strong customer retention and pricing discipline are outperforming; those exposed to higher delivery, labor, or input costs face a tougher setup. Industrials and transportation: Order books are healthy in places, but supply bottlenecks and component availability are a watch item. Energy: Higher crude supports upstream and select service names; integrateds benefit from cash generation and capital discipline. The day ahead Focus: Corporate updates from large retailers, industrials, and travel/leisure; central bank speakers; and upcoming inflation and activity data later in the week. What to watch: Guidance quality, margin commentary, inventory management, and any shifts in capex plans. Portfolio considerations Equities: Favor quality balance sheets and sustainable cash flows; keep diversification across growth and value to manage factor swings. Fixed income: With policy uncertainty persisting, a barbell across short/intermediate duration can help manage rate risk while capturing carry in higher-quality credit. Commodities: Consider energy’s role as both a cyclical and geopolitical hedge; monitor refinery and inventory trends. Risk management: Maintain hedges where appropriate; volatility remains event-driven and can spike around data or headlines. Levels at a glance (as provided) S&P 500 Futures: 6871.75 (-0.33%) Stoxx Europe 600: 624.62 (-0.65%) Nikkei 225: 57467.83 (+0.57%) WTI Crude: 66.12 (+1.43%) Bitcoin: 66813.69 (+0.77%) This material is a broad market update for information purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Markets are volatile and subject to change. Disclaimer: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. The content of the Website must not be construed as personal advice. For retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. Rolling Spot Contracts and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of our retail client accounts lose money while trading with us. You should consider whether you understand how Rolling Spot Contracts and CFDs work, and

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Contrarian Investing /Dip Buying

Leave a Comment / Trading Strategies, Educational Blogs / PhillipCapital DIFC Research Team

Contrarian Investing / Dip buying Mastering the Art of Contrarian Investing: Strategic “Buy the Dip” Opportunities The financial markets are often driven by two powerful emotions: fear and greed. While most investors flock toward assets reaching new highs, seasoned market participants often look in the opposite direction. Contrarian investing—specifically the “buy the dip” approach—is a sophisticated strategy that involves acquiring high-quality assets when their prices have fallen sharply and market sentiment is overwhelmingly negative. This philosophy assumes that markets frequently overreact to short-term news, creating a disconnect between an asset’s intrinsic value and its current market price. At PhillipCapital, we believe that understanding the mechanics of market rebounds is essential for building a resilient, long-term portfolio. This guide explores the depths of contrarianism, providing the clarity needed to distinguish between a temporary setback and a fundamental decline. Table of Contents What defines a true contrarian investment strategy? Why do markets often overreact to negative news cycles? How can investors distinguish between a “dip” and a “falling knife”? What role does fundamental analysis play in buying the dip? How should risk management be structured in a contrarian portfolio? Conclusion: The Path to Disciplined Contrarianism What defines a true contrarian investment strategy? Contrarianism is not merely about being stubborn or “going against the grain” for the sake of it. It is a disciplined investment framework centered on the belief that the crowd is most wrong at the points of maximum optimism and maximum pessimism. A true contrarian seeks out investment opportunities where the consensus view has pushed prices to an extreme that is no longer supported by economic reality. When you “buy the dip,” you are essentially providing liquidity when others are panicking. This requires a deep understanding of global market trends and the patience to wait for the market to correct its own irrationality. The goal is to accumulate positions in robust assets at a discount, positioning the portfolio for significant capital appreciation when the sentiment eventually shifts back toward the mean. Why do markets often overreact to negative news cycles? Behavioral finance teaches us that humans are prone to cognitive biases, such as “loss aversion” and “herding.” When negative news breaks—be it a geopolitical event or a disappointing earnings report—investors often rush to the exits simultaneously. This mass exodus creates a “liquidity vacuum,” driving prices far below what the actual data justifies. For those engaging in professional wealth management, these overreactions are viewed as temporary “noise.” Markets are reflexive; the lower the price goes due to panic, the higher the eventual expected return becomes for the patient investor. By filtering through the noise, one can identify when a price drop is an emotional response rather than a structural change in the asset’s viability. Secure Your Financial Future Explore bespoke strategies tailored to your risk profile View Our Services How can investors distinguish between a “dip” and a “falling knife”? The most significant risk in contrarian investing is the “falling knife”—an asset whose price is dropping because its fundamental value has been permanently impaired. To distinguish a profitable dip from a value trap, investors must look at the “why” behind the move. A healthy dip is typically characterized by a broad market sell-off where even high-quality equities and derivatives are dragged down by macro sentiment. Conversely, a falling knife often involves a specific internal failure, such as a breach of governance or a redundant business model. Utilizing advanced trading platforms can help investors monitor technical support levels and volume indicators to confirm if a floor is being established before committing capital. What role does fundamental analysis play in buying the dip? Without fundamental analysis, buying a falling asset is nothing more than gambling. A contrarian must be able to calculate the “intrinsic value” of an asset. This involves analyzing balance sheets, cash flow stability, and the competitive landscape. If the intrinsic value remains unchanged despite a 20% drop in share price, the “margin of safety” has increased, making it a textbook “buy the dip” candidate. For investors focused on commodities and currencies, this might mean looking at supply-demand imbalances that the market has temporarily ignored. Fundamental strength provides the conviction necessary to hold a position when the rest of the market is still selling, ensuring that the entry is based on data rather than hope. How should risk management be structured in a contrarian portfolio? Buying assets under pressure requires a rigorous risk management protocol. One should never “go all in” at the first sign of a decline. Instead, a “scaling-in” or dollar-cost averaging approach allows the investor to lower their average entry price if the dip continues. Furthermore, diversification remains paramount. Even the most compelling contrarian play can take longer to rebound than anticipated. By maintaining a balanced portfolio through diversified asset classes, investors ensure that their total capital is not held hostage by a single sector’s recovery timeline. Setting “mental stops” or hard stop-losses based on a change in the fundamental thesis—rather than just price—is what separates successful contrarians from those who hold losing positions indefinitely. Partner with PhillipCapital DIFC Leverage our global expertise to navigate volatile markets. Contact Our Experts Conclusion: The Path to Disciplined Contrarianism Contrarian investing and “buying the dip” are powerful tools for capital growth, provided they are executed with clinical precision and emotional detachment. By recognizing that markets often overreact to short-term stimuli, investors can capitalize on the gap between price and value. The key takeaways for any aspiring contrarian include: Distinguish Sentiment from Reality: Look for price drops driven by panic rather than structural decay. Prioritize Quality: Only buy the dip on assets with strong fundamentals and proven resilience. Exercise Patience: Market rebounds rarely happen overnight; a long-term horizon is your greatest ally. Manage Risk: Use scaling-in techniques and maintain diversification to protect against extended volatility. At PhillipCapital, we provide the institutional-grade insights and robust platforms necessary to execute these sophisticated strategies. Whether you are navigating global equities or looking for value in fixed income, a disciplined approach to market dips can

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February 18 – Daily Market Update

Leave a Comment / Uncategorized, Daily Market Updates, Market Updates / PhillipCapital DIFC Research Team

18 February 2026 – Daily Market Updates Markets Daily A broad look at global markets and what’s driving sentiment today Market snapshot (as of 6:16 a.m. ET) S&P 500 futures: around 6897 (+0.5%) Stoxx Europe 600: roughly 627 (+1.0%) US 10-year Treasury yield: near 4.07% (+1 bp) Nikkei 225: about 57144 (+1.0%) Bitcoin: around $67300 (-0.5%) Global overview Equities are firmer to start the day as dip-buyers step back in following last week’s tech-led swings. Europe is extending gains with broad participation across cyclicals and financials, while Japan continues to outperform as earnings and corporate-reform themes underpin sentiment. In the US, index futures are stabilizing after a choppy stretch, with investors leaning into quality balance sheets and secular growers but staying selective in higher-duration, AI-exposed names. Rates, FX and credit US Treasuries are little changed, with the 10-year hovering just above 4%. Traders are balancing resilient growth data with a “higher-for-longer” policy backdrop, keeping the front end anchored and term premium in focus. The dollar is broadly steady versus major peers, with attention on upcoming US data and global PMIs. The euro and pound are range-bound; the yen remains sensitive to rate differentials and policy expectations. Credit markets remain orderly. Investment-grade spreads are steady, and primary issuance windows remain open, though pace and pricing discipline vary by sector. Commodities and digital assets Oil is trading in a tight band as supply headlines and demand indicators offset. Refined product cracks and inventory trends remain key near-term drivers. Precious metals are steady to slightly firmer ahead of central bank updates, with haven demand and rate expectations in the mix. Crypto is mixed, with bitcoin consolidating near the mid-$60Ks as flows rotate across large-cap tokens. Market drivers to watch Policy and central banks: Minutes from major central banks and speaker calendars may refine the timing and pace of any 2026 policy adjustments. Markets still expect patience, with inflation progress and labor rebalancing in focus. Earnings season: Another busy stretch across technology, industrials, consumer and energy. Guidance on capital spending, AI-related costs, and pricing power will likely steer factor performance and sector rotations. Macro data: Global flash PMIs, US housing trends, jobless claims, and inflation updates from key economies will shape growth and disinflation narratives. Positioning and flows: After recent factor whipsaws, watch for rotations between megacap growth, defensives and cyclicals. Options hedging, systematic re-risking, and buyback windows may amplify intraday moves. Equities: what’s working Quality bias: Solid balance sheets, consistent free cash flow and visible demand pipelines continue to command premiums. Select cyclicals: Industrials, travel/leisure and parts of energy show resilience where backlogs and pricing support margins. Tech dispersion: Ongoing divergence within semis, software and hardware. Execution and unit-economics matter more than topline AI narratives. Fixed income: key themes Range-bound yields: Barring a material surprise in growth or inflation, rates likely remain in a broad range as markets await clearer guidance. Carry over convexity: Investors continue to favor high-quality carry and laddered duration, while keeping dry powder for volatility-driven opportunities. Credit discipline: Spreads are fair to full in many segments; security selection and covenant quality remain in the spotlight. Portfolio considerations Keep diversification broad across styles and regions given cross-currents in policy, growth and earnings. Balance equity risk with duration that matches liability needs; consider barbell approaches in both equities (quality + selective cyclicals) and fixed income (short carry + intermediate core). Maintain a clear risk framework: use defined stop levels, hedge event risk selectively and review liquidity buffers. The day ahead Data: Global PMIs, US housing indicators and weekly labor figures over the coming sessions. Policy: Central bank minutes and appearances that could fine-tune rate-path expectations. Earnings: Updates across tech, consumer, industrials and energy—watch guidance on capex, AI spend, pricing and demand elasticity. Note: This commentary is a general market update for informational purposes only and is not investment advice. Market levels are indicative and subject to change. Disclaimer: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. The content of the Website must not be construed as personal advice. For retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. Rolling Spot Contracts and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of our retail client accounts lose money while trading with us. You should consider whether you understand how Rolling Spot Contracts and CFDs work, and whether you can afford to take the high risk of losing your money. February 17 – Daily Market Update February 17, 2026 17 February 2026 – Daily Market Updates Markets Daily |… Read More February 16 – Daily Market Update February 16, 2026 16 February 2026 – Daily Market Updates Markets Daily —… Read More February 13 – Daily Market Update February 13, 2026 13 February 2026 – Daily Market Updates Markets Daily |… Read More February 12 – Daily Market Update February 12, 2026 12 February 2026 – Daily Market Updates Markets Daily —… Read More February 11 – Daily Market Update February 11, 2026 11 February 2026 – Daily Market Updates Markets Daily —… Read More February 10 – Daily Market Update February 10, 2026 10 February 2026 – Daily Market Updates Markets Daily: Caution… Read More February 4 – Daily Market Update February 4, 2026 4 february 2026 – Daily Market Updates Markets Daily: Broad… Read More February 3 – Daily Market Update February

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Partial Capital Protection

Leave a Comment / Structured Products, Educational Blogs, Types of Structured Products / PhillipCapital DIFC Research Team

Partial Capital Protection Partial Capital Protection: The Strategic Bridge Between Security and Growth In the current global financial landscape, investors often face a binary choice: accept the low yields of fixed deposits to ensure safety, or exposure their capital to the full volatility of equity markets to chase growth. However, sophisticated portfolio management rarely deals in absolutes. Partial Capital Protection offers a “middle path”—a structural innovation that allows investors to define their maximum risk tolerance while significantly amplifying their potential returns. This strategy is not merely about “hedging”; it is about optimizing the efficiency of your capital. By agreeing to risk a small, predefined portion of principal (typically 5% to 15%), investors can unlock participation rates that often exceed the performance of the underlying asset itself. In this in-depth guide, we analyze the mechanics, strategic trade-offs, and portfolio applications of partial capital protection. Table of Contents How does Partial Capital Protection function at a structural level? Why choose Partial Protection over 100% Capital Guarantees? Which investor profiles benefit most from this risk-reward profile? What asset classes and indices can be linked to these structures? How do interest rate cycles and volatility impact pricing and returns? Conclusion: Engineering a Resilient Portfolio How does Partial Capital Protection function at a structural level? At its core, a Partially Capital Protected Note (PCPN) is a hybrid financial instrument. It combines the safety of a fixed-income security with the upside potential of a derivative. The “thickness” of this strategy lies in how the internal funding is engineered. When you invest, your capital is essentially split into two distinct buckets: The Zero-Coupon Bond (The Anchor): The majority of your investment (e.g., 85-90%) is used to purchase a zero-coupon bond. Over the investment term, this bond accrues interest and matures at the “protected” value (e.g., returning 90% or 95% of your original capital). This provides the mathematical floor below which your investment cannot fall, barring issuer default. The Option Component (The Engine): The remaining capital is used to purchase call options on a specific underlying asset (like the S&P 500 or Euro Stoxx 50). Because you are accepting a small risk to your principal (Partial Protection), the issuer has more budget to purchase these options compared to a 100% protected product. Why choose Partial Protection over 100% Capital Guarantees? The decision to move from 100% protection to, say, 95% or 90% protection is fundamentally a decision about Opportunity Cost and Participation Rates. In a 100% Capital Protected product, the issuer must use almost all available funds to secure the bond floor, leaving very little cash to buy the growth options. This often results in a low “Participation Rate”—perhaps only capturing 40% or 50% of the market’s rise. If the market goes up 10%, you might only make 4%. However, by accepting just 5% risk (Partial Protection), you drastically increase the budget available for the option component. This creates a leverage effect. Instead of 40% participation, a partially protected note might offer 120% or 150% participation. Scenario A (100% Protection): Market rises 20% → Investor earns 8%. Scenario B (90% Protection): Market rises 20% → Investor earns 30% (assuming 150% participation). For professional investors, risking 10% of the principal to potentially triple the return profile is often considered a highly efficient trade. It transforms the investment from a defensive savings substitute into a genuine growth engine comparable to direct equity trading enhance Your Market Exposure Discover how soft protection floors can double your upside potential. View Investment Solutions Which investor profiles benefit most from this risk-reward profile? Partial Capital Protection is not a “one-size-fits-all” solution; it is engineered for specific stages of the wealth lifecycle and specific market views. The “Cash-Plus” Seeker: High Net Worth Individuals (HNWIs) holding large cash reserves often find that inflation erodes their purchasing power. They are willing to risk a small fraction (e.g., 5%) to aim for double-digit returns, which is impossible with standard deposits. The Tactical Hedger: Professional clients often use these structures to stay invested during uncertain times (e.g., elections or geopolitical tension). They know that exiting the market completely risks missing a rebound, but staying fully invested is too dangerous. Partial protection offers the mathematical middle ground. The Transitioning Investor: For clients moving from a savings-only mindset to an investment mindset, the leap to 100% risk is terrifying. Partial protection acts as a psychological and financial bridge, allowing them to experience global equities with a defined safety net. What asset classes and indices can be linked to these structures? One of the most powerful features of Partial Capital Protection is its versatility. Because the protection is derived from the bond component, the growth component can be linked to almost any liquid asset class. Global Indices: The most common underlying assets are major indices like the S&P 500, NASDAQ 100, or Nikkei 225. These offer broad diversification. Thematic Baskets: Investors can target niche growth areas without taking on stock-specific risk. For example, a note could be linked to an “AI & Robotics” basket. If the sector crashes, your capital is protected. If it booms, you participate. Commodities & Currencies: For those looking to hedge against inflation or currency devaluation, notes can be linked to the price of Gold, Oil, or specific currency pairs available via our trading products. How do interest rate cycles and volatility impact pricing and returns? Understanding the macroeconomic environment is crucial for timing entry into these products. Two main factors drive the attractiveness of Partial Capital Protection: Interest Rates: These products generally offer better terms in a high-interest-rate environment. When rates are high, the zero-coupon bond (the safety floor) costs less to buy. This leaves a larger surplus of cash to buy the growth options, allowing issuers to offer higher participation rates or higher protection levels. Volatility: High market volatility usually makes options more expensive (due to higher premiums). However, for a partial protection investor, volatility can be a double-edged sword. While it makes the “upside” costlier to buy, it also increases the chance of the

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February 17 – Daily Market Update

Leave a Comment / Market Updates, Daily Market Updates / PhillipCapital DIFC Research Team

17 February 2026 – Daily Market Updates Markets Daily | Broad Market Update US equity futures point lower with technology leading declines as Wall Street returns from the holiday. European shares are broadly flat, while trading in Asia was mixed and thinned by Lunar New Year closures. Precious metals are softer, crude is edging down, and digital assets are under pressure. Market snapshot (as of 06:12 am ET; levels subject to change) Nasdaq 100 Futures: 24617.25 (-0.75%) Stoxx Europe 600: 618.46 (-0.01%) Nikkei 225: 56566.49 (-0.42%) Spot Gold: 4922.87 (-1.39%) Bitcoin: 67837.88 (-1.45%) Global macro and policy United Kingdom: The latest labor figures showed unemployment ticking up and pay growth easing. Interest-rate markets increased expectations for additional Bank of England cuts by year-end, weighing modestly on sterling and supporting gilts. Europe: Policymakers continue to discuss ways to deepen the euro’s global footprint. While largely a long-run initiative, it underscores a push to strengthen financial resilience and liquidity in euro-denominated markets. Japan: Government bond yields fell further following a well-received auction, extending the recent rally and reinforcing a lower-volatility backdrop for local rates. Commodities and geopolitics: Oil prices drifted lower as traders monitored diplomatic developments in the Middle East alongside steady supply dynamics. Equities: what’s moving AI-driven swings continue to ripple across sectors. Recent headlines have triggered broad, sometimes indiscriminate selling in industries perceived as vulnerable to automation. That has been followed by sharp rebounds as investors differentiate likely winners from names with more durable cash flows. Expect elevated dispersion and ongoing factor rotations. Corporate highlights: Leisure and travel: A major cruise operator advanced in early trading amid reports of an activist building a significant stake. Media and entertainment: Large-cap media names moved on talk that deal discussions could be revisited after a revised proposal. Health care: A diversified life-sciences company reportedly neared a multibillion-dollar purchase of a medical-technology firm; potential knock-on effects were seen across diagnostics peers. Japan financials: Shares in a leading brokerage’s parent slipped after local regulators began a probe into the unit’s activities. Shipping and logistics: Container shipping rallied after a takeover agreement valued a target at roughly $4.2 billion. Materials: Gold and silver miners traded lower alongside weakness in underlying metals. Earnings on deck: Medtronic (pre-market); Palo Alto Networks and Cadence Design Systems (after the bell). Investors will focus on guidance quality, margin resilience, and any commentary on demand normalisation into mid-year. Rates, FX and credit US Treasuries: Yields are steady to slightly lower as participants balance slower inflation progress with moderating growth signals. Curve shape remains sensitive to incoming data and central bank communications. Europe rates: Gilt yields fell on softer UK labor momentum; bunds were little changed in early dealings. Foreign exchange: The dollar is mixed. Sterling eased on shifting BoE expectations; the euro was broadly stable; the yen firmed modestly in tandem with the JGB rally. Cross-asset volatility remains below recent peaks but above last year’s lows. Commodities and digital assets Gold slipped as real yields firmed and risk sentiment stabilized after last week’s swings. Industrial metals remain underpinned by ongoing interest in energy transition supply chains, even as short-term positioning looks crowded. Crude benchmarks softened amid headline risk and range-bound fundamentals. Bitcoin traded lower, mirroring broader risk-on/risk-off dynamics and profit-taking after recent gains. The takeaway Markets are navigating a push-pull between resilient earnings leadership and periodic de-risking tied to AI narratives, M&A headlines and evolving central bank paths. Expect choppy sessions, higher dispersion within sectors, and a renewed emphasis on balance-sheet strength and pricing power. Near term, watch labor and inflation prints in major economies, guidance from today’s earnings slate, and any signals on policy timing from central bank speakers. House view for clients Maintain diversified exposure across regions and styles, with an eye on quality balance sheets and consistent free-cash-flow generation. Use volatility to rebalance toward long-term targets; consider staggered entry points rather than single-date allocation shifts. Ensure risk controls are in place around event-heavy periods. Important information This material is a general market update for information purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any financial instrument. Market data are indicative and subject to change. Disclaimer: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. The content of the Website must not be construed as personal advice. For retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. Rolling Spot Contracts and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78% of our retail client accounts lose money while trading with us. You should consider whether you understand how Rolling Spot Contracts and CFDs work, and whether you can afford to take the high risk of losing your money. February 17 – Daily Market Update February 17, 2026 17 February 2026 – Daily Market Updates Markets Daily |… Read More February 16 – Daily Market Update February 16, 2026 16 February 2026 – Daily Market Updates Markets Daily —… Read More February 13 – Daily Market Update February 13, 2026 13 February 2026 – Daily Market Updates Markets Daily |… Read More February 12 – Daily Market Update February 12, 2026 12 February 2026 – Daily Market Updates Markets Daily —… Read More February 11 – Daily Market Update February 11, 2026 11 February 2026 – Daily Market Updates Markets Daily —… Read More February

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PEG ratio

Leave a Comment / Deliverable Equities, Educational Blogs, Stock Valuations / PhillipCapital DIFC Research Team

PEG Ratio The Advanced Metric for Finding Growth at a Reasonable Price In the fast-paced world of global equities, relying solely on the Price-to-Earnings (P/E) ratio can sometimes lead investors into “value traps”—stocks that appear cheap but have poor growth prospects. For investors in the UAE and beyond, distinguishing between a genuine bargain and a stagnant company is critical. This is where the Price/Earnings-to-Growth (PEG) ratio becomes an essential tool. By factoring in expected earnings growth, the PEG ratio provides a more three-dimensional view of a company’s valuation, helping you identify opportunities that offer the perfect balance of value and potential, especially when analyzing volatile Global Stocks (Non-US) markets. Table of Contents What is the PEG Ratio and how does it differ from the P/E Ratio? How do you calculate the PEG Ratio correctly? What is considered a “Good” PEG Ratio for investors? Why is the PEG Ratio critical for Growth at a Reasonable Price (GARP) strategies? What are the limitations of using the PEG Ratio? How does the PEG Ratio vary across different sectors? Conclusion What is the PEG Ratio and how does it differ from the P/E Ratio? While the traditional P/E ratio tells you how much you are paying for current earnings, it fails to account for how fast those earnings are growing. The PEG ratio fixes this blind spot by dividing the P/E ratio by the company’s expected earnings growth rate. Think of the P/E ratio as a snapshot of today’s price, whereas the PEG ratio is a roadmap of future potential. For example, a high-growth technology stock might have a high P/E of 30, which looks expensive. However, if that company is growing its earnings at 30% per year, its PEG ratio would be 1.0, suggesting it might actually be fairly valued. This nuance is why sophisticated traders often look beyond basic multiples when analyzing US Stocks & ETFs or high-flying tech giants. How do you calculate the PEG Ratio correctly? The formula for the PEG ratio is deceptively simple, but the quality of the input data matters immensely.Formula: PEG Ratio = (P/E Ratio) / (Earnings Growth Rate) To get an accurate figure, you first determine the P/E ratio by dividing the stock price by its Earnings Per Share (EPS). Then, you divide that result by the projected annual EPS growth rate. Investors often face a choice: should they use trailing historical growth or forward-looking estimates? For markets that price in the future—like those accessible through our Deliverable Equity services—using the forward growth estimate (typically for the next 1-3 years) is often more effective. This forward-looking approach aligns better with dynamic market conditions than relying on past performance alone. Unlock Global Market Access Access over 25 global exchanges and apply your valuation strategies on top-tier US and Asian equities. Open An Account What is considered a “Good” PEG Ratio for investors? Interpretation of the PEG ratio often follows a standard rule of thumb, famously popularized by legendary investor Peter Lynch: PEG = 1.0: The stock is considered fairly valued. The market is paying a multiple exactly in line with the growth rate. PEG < 1.0: The stock may be undervalued. This suggests you are paying less for future growth, which is often a “buy” signal for value-conscious investors. PEG > 1.0: The stock may be overvalued. The price is outpacing the company’s expected growth. However, context is vital. In today’s premium valuation environment, especially within the Wealth Management space, high-quality companies with deep “moats” often trade at PEG ratios between 1.5 and 2.0. Blindly rejecting anything over 1.0 could mean missing out on industry leaders that compound wealth over decades. Why is the PEG Ratio critical for Growth at a Reasonable Price (GARP) strategies? The PEG ratio is the heartbeat of the Growth at a Reasonable Price (GARP) strategy. GARP investors seek the “sweet spot” between pure value investing (which often targets slow-growth firms) and pure growth investing (which can be risky and expensive). By using the PEG ratio as a filter, you can identify companies that have robust growth engines but haven’t yet been bid up to astronomical levels by the hype cycle. This disciplined approach is particularly useful when constructing a diversified portfolio, ensuring you aren’t overpaying for the promise of future returns. What are the limitations of using the PEG Ratio? No single metric is a magic bullet. The PEG ratio has specific limitations that every prudent investor should acknowledge: Reliance on Estimates: The “G” (Growth) component relies on analyst forecasts. If these estimates are overly optimistic, the stock might appear cheaper than it really is. Dividend Neglect: The standard PEG calculation often ignores dividend income. For Bond and Debentures or high-yield utility stocks, the PEG ratio might unfairly penalize the company because a significant portion of the return comes from cash payouts, not just share price growth. Mature Companies: It is less effective for evaluating mature, low-growth companies (like established banks or utilities) where stability and dividends are more important than rapid earnings expansion. Diversify Your Portfolio Go Beyond Equities Hedge your equity risks and explore opportunities in commodities and currencies with our advanced derivatives platforms. Explore Futures & Options How does the PEG Ratio vary across different sectors? Comparing the PEG ratio of a software company to an oil producer is like comparing apples to oranges. Different sectors have different capital requirements and growth profiles. Technology & Biotech: These sectors typically command higher PEG ratios because investors are willing to pay a premium for innovation and scalability. A PEG of 1.5 might be considered “cheap” for a high-flying tech stock. Cyclicals & Industrials: Sectors like energy or manufacturing often trade at lower PEG ratios. Here, investors should be cautious; a very low PEG might signal that the market expects earnings to collapse in the next cycle, known as a “value trap.” Financials: When analyzing banks or insurance firms using our daily Market Updates , remember that these institutions often grow in line with the broader economy. A PEG

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February 16 – Daily Market Update

Leave a Comment / Market Updates, Daily Market Updates / PhillipCapital DIFC Research Team

16 February 2026 – Daily Market Updates Markets Daily — Broad Market Briefing As of 6:50 a.m. ET Equities: European benchmarks edged higher, with the region-wide gauge hovering near 620, up roughly 0.3%. Currencies: The US dollar index was marginally firmer, near 1,182 on a broad trade-weighted basis. Commodities: WTI crude traded just under $63, slightly higher on the session; gold eased about 0.7%. Digital assets: Bitcoin hovered around $68.6k, down modestly. Macro and market context Risk tone: Global equities started the week on a constructive note despite thin liquidity across parts of Asia due to Lunar New Year holidays and North American holiday closures. Participation is lighter, but dip-buying interest remains evident in select tech, industrials and consumer names. Rates backdrop: After a strong week for sovereign bonds driven by renewed wagers on policy easing later this year, traders are now focused on a dense run of growth and inflation data that could recalibrate the path of rate expectations. AI narrative, two-way risk: Markets continue to grapple with the balance between productivity upside from artificial intelligence and the near-term drag from heavy capital outlays. That tension is visible in equity factor performance (infrastructure and security favored over certain application layers) and in credit markets, where hedging demand has picked up around large capex spenders. Expect dispersion within tech to remain elevated. Overnight movers and themes Europe: Cyclical and quality-growth pockets led early gains. Select materials shares underperformed after broker actions, while parts of the UK small/mid-cap software space lagged following deal headlines that removed a potential bid premium. Defensive sectors were mixed as bond yields steadied. Energy and commodities: Oil was broadly steady as supply discipline and a measured demand outlook offset each other; gold softened alongside a slightly firmer dollar. Industrial metals remained rangebound pending fresh China activity signals. FX: The dollar ticked higher against a basket of majors, while several high-carry emerging-market currencies were relatively resilient amid stable commodity prices and subdued volatility. The week ahead — key indicators and events Monday: North America: US markets closed for Presidents’ Day; Canada closed for Family Day. Latin America: Brazil closed for Carnival (through Feb. 17). Asia: Several markets closed or operating on shortened schedules for Lunar New Year. Tuesday: Europe: Germany’s inflation updates and sentiment surveys; UK labor market figures. US: Regional manufacturing pulse. Asia: Mainland China closed for Lunar New Year. Wednesday: Europe/Asia: France inflation; Japan trade balance. UK: CPI inflation. US: Housing starts, industrial production, leading indicators, core durable goods. Earnings: Mix of global miners, ratings/analytics, and chip-related bellwethers. Thursday: Europe: Euro-area consumer confidence. US: Weekly jobless claims, advanced indicators, trade, pending home sales. Earnings: Large-cap retail, diversified industrials, and resources. Friday: Europe/Asia: Euro-area PMIs, Japan CPI, UK retail sales. North America: Canada retail sales; US personal income/spending with PCE inflation, GDP update, new home sales, manufacturing PMI, and consumer sentiment. Policy watch: US legal and policy developments remain on the radar for potential implications to trade and tariff expectations. Strategy watch — what we’re tracking Tech dispersion: Investors continue to differentiate between AI “enablers” (compute, data infrastructure, observability, cybersecurity, cloud platforms) and areas where automation may compress pricing power. Expect continued rotation within software and services as spending priorities evolve. Credit hedging: As capex cycles swell at mega-cap platforms and select hyperscale-adjacent players, appetite for downside protection in credit has increased. Monitor spreads and hedging costs as leading indicators of stress or confidence in return on investment. Rates and duration: A heavy slate of growth and inflation data could challenge last week’s bond rally. A hotter PCE or firm PMIs would likely nudge front-end yields higher; a downside surprise would reinforce soft-landing hopes. FX and EM: Carry and commodity support have steadied several emerging currencies relative to G-7 peers. Watch terms-of-trade shifts if oil and base metals break out of recent ranges. Quick take by asset class Equities: Breadth remains a focal point. Participation outside of the largest tech names has improved in fits and starts, but durability likely hinges on confirmation from earnings revisions and macro surprises. Fixed income: The balance between disinflation progress and growth resilience remains tight. The next PCE print is pivotal for validating or challenging current rate-cut timelines. Commodities: Crude is pinned between disciplined supply and a cautious demand outlook; volatility may rise around inventory data and growth prints. Precious metals remain sensitive to real yields and the dollar. Crypto: Consolidation persists after a strong multi-month run; flows and regulatory headlines remain key swing factors. Housekeeping and market closures US: Closed today for Presidents’ Day. Canada: Closed today for Family Day. Asia: Multiple markets closed or on reduced hours for Lunar New Year through midweek. Brazil: Markets closed for Carnival through Feb. 17. Key risks to monitor Data surprises on inflation and growth that shift the policy path. Earnings guidance tied to AI spending payback periods. Geopolitics and trade policy developments. Liquidity pockets around holiday-thinned sessions. This material is a general market update for information purposes only and does not constitute investment advice or a recommendation to buy or sell any security or instrument. Past performance is not indicative of future results. Disclaimer: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors as you could sustain losses in excess of deposits. The products are intended for retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. The content of the Website must not be construed as personal advice. For retail, professional and eligible counterparty clients. Before deciding to trade any products offered by PhillipCapital (DIFC) Private Limited you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. Rolling Spot Contracts and CFDs are complex instruments

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Spot vs Forward Rates

Leave a Comment / Educational Blogs, Currency Concepts, Spot FX and CFDs / PhillipCapital DIFC Research Team

Spot Vs Forward Rates Understanding Spot vs. Forward Rates In the fast-paced world of global finance, currency fluctuations can either be a source of significant profit or a substantial risk to your capital. For investors and businesses operating across international borders, mastering the mechanics of foreign exchange (FX) is essential. Two of the most fundamental concepts in this arena are Spot Rates and Forward Rates. While they both represent the value of one currency against another, they serve vastly different purposes in a diversified portfolio. Whether you are looking to execute immediate transactions or hedge against future volatility, understanding these rates is the first step toward sophisticated wealth management and strategic risk management. This guide breaks down these concepts for the discerning investor. Table of Contents What Exactly Is a Spot Rate in the Foreign Exchange Market? How Does a Forward Rate Differ from a Spot Rate? What Factors Determine the Pricing of a Forward Rate? When Should an Investor Prioritize Spot Transactions Over Forward Contracts? How Do Forward Rates Function as a Tool for Risk Hedging? Can Speculators Profit from the Spread Between Spot and Forward Rates? Conclusion: Integrating FX Rates into Your Investment Strategy What Exactly Is a Spot Rate in the Foreign Exchange Market? The spot rate is the current market price at which a currency pair can be bought or sold for immediate delivery. In the global Forex market, “immediate” typically refers to a “T+2” settlement period—meaning the transaction is finalized two business days after the trade date. The spot rate represents the real-time equilibrium between supply and demand. It is influenced by instantaneous macroeconomic data, geopolitical shifts, and central bank announcements. For retail and professional investors alike, the spot rate is the most transparent reflection of a currency’s value at any given second. When you see a currency pair quoted on a financial news ticker, you are looking at the spot rate. How Does a Forward Rate Differ from a Spot Rate? While the spot rate deals with the “now,” the forward rate is a contractual price agreed upon today for a transaction that will occur at a specific future date. This date could be 30, 60, 90 days, or even a year into the future. The primary distinction lies in the timing of the delivery and the certainty of the price. In a spot transaction, you accept the market price as it exists today. In a forward contract, you “lock in” an exchange rate now to protect yourself from the uncertainty of where the spot rate might be when the actual exchange of funds is required. This is particularly vital for those managing institutional services where large-scale future cash flows must be protected from currency depreciation. What Factors Determine the Pricing of a Forward Rate? A common misconception is that the forward rate is a prediction of where the spot rate will be in the future. In reality, forward rates are calculated based on the Interest Rate Differential between the two currencies involved. This calculation is rooted in the “Cost of Carry” model. If one currency has a higher interest rate than the other, it will typically trade at a “forward discount” to prevent arbitrage. Conversely, the currency with the lower interest rate will trade at a “forward premium.” Factors such as inflation expectations and the duration of the contract also play minor roles, but the interest rate policies of central banks remain the dominant force in determining the gap between the spot and forward price. Consult with our experts to navigate complex FX markets. Explore our diverse range of global bonds available for trading. Explore Our Services When Should an Investor Prioritize Spot Transactions Over Forward Contracts? Choosing between spot and forward rates depends entirely on your liquidity needs and your outlook on market volatility. Investors should prioritize spot transactions when they require immediate liquidity or when they believe the local currency will strengthen in the short term. Spot trades are also preferred by traders who utilize CFD trading to capitalize on intraday price movements without owning the underlying asset. Because spot transactions do not involve the “premium” often associated with forward contracts, they are generally more cost-effective for one-off payments or immediate asset acquisitions. How Do Forward Rates Function as a Tool for Risk Hedging? For corporations and long-term investors, the forward rate is less about profit and more about insurance. This process is known as “hedging.” Imagine a company based in the UAE that expects a large payment in Euros six months from now. If the Euro weakens against the Dirham during those six months, the company will receive less value. By entering into a forward contract at today’s forward rate, the company eliminates this “exchange rate risk.” They know exactly how much they will receive, regardless of how the market fluctuates. This stability is a cornerstone of sophisticated structured notes and corporate treasury operations. Can Speculators Profit from the Spread Between Spot and Forward Rates? Yes, professional traders often engage in “Carry Trades” or arbitrage strategies based on the relationship between these two rates. In a carry trade, an investor borrows money in a currency with a low interest rate (and thus a lower spot cost) and invests it in a currency with a higher interest rate. While this can be lucrative, it is not without risk. If the spot rate moves drastically against the investor, the losses can exceed the interest earned. This level of trading requires access to comprehensive equities and derivatives markets and a deep understanding of how global monetary policy shifts can cause the spot and forward rates to converge or diverge unexpectedly. Ready to Enter Global Markets? Partner with a regulated, trusted DIFC broker. Contact Us Today Conclusion: Integrating FX Rates into Your Investment Strategy Understanding the nuance between spot and forward rates is a hallmark of an informed investor. The spot rate offers a window into the current pulse of the global economy, providing the price for immediate action. In contrast, the forward

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PhillipCapital DIFC Research Team

February 20 – Daily Market Update

Bond Valuation Methods and Formulas

February 19 – Daily Market Update

Contrarian Investing /Dip Buying

February 18 – Daily Market Update

Partial Capital Protection

February 17 – Daily Market Update

PEG ratio

February 16 – Daily Market Update

Spot vs Forward Rates

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