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August

 

Just after very strong numbers (above-20% upticks) emerged from investment spending, infrastructure and capital outlays, foreign direct investments, and volume of industrial production index in Q2, the Philippine Statistics Authority reported an underwhelming 6% GDP growth for Q2, a substantial deceleration from 6.6% in Q1. The locus of the weakness came from the demand side, particularly the larger deficit in the trade of goods and services. It could also be attributed to faster inflation which clocked at 5.7% in July, shortly after which Bangko Sentral ng Pilipinas (BSP) raised its policy rates by 50 bps to 4%. The reported slowdown also contrasted with the positive performances of the equities and bond markets.

July

 

Muscular real economy indicators, like bulked up growth in infrastructure spending, capital goods imports, and manufacturing output, and foreign direct investments should carry the economy to faster GDP growth in Q2 to at least 7%. This improves on the 6.8% recorded in Q1. The positive data should overcome some negative sentiment—e.g., inflation speeding up, peso under siege—in Q2 and set the stage for the higher growth trajectory for the rest of the year.

June

 

Domestic demand will again widely offset weak external demand, as the government’s infrastructure works (+95.9% in April) and PPP project hum, while the manufacturing sector’s growth pace in April (+31.1%, fastest in eight years) and employment gains should boost consumer spending. Inflation, which reached 4.6% in May from 4.5% in April, appears to be peaking. But exports continued its negative streak. The rout of the peso by June will likely reverse after the BSP raised its policy rates by 25 bps to 3.5% on June 20. That may have a sobering effect on the bond and equities markets which had been skidding by June.

 

 

 

 

 

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D&L Industries, Inc. (DNL): High Margin Sales Mix

D&L Industries, Inc. (DNL): High Margin Sales Mix

August 28 2018

 

D&L Industries’ (DNL) second quarter net income grew by +14.1% to P784m bringing its first half net income to P1.5b from P1.4b last year, in line with consensus expectations. The strong +13.2% increase in its first half net income was on the back of better overall gross profit margin, up by a percentage point to 18%, due to higher contribution to total revenues of high margin specialty products (HMSP) at 63% and a recovery in commodity margins to 8.2% from 3.7% last year.

Range Trading

Range Trading

August 24, 2018

 

We expect the PSEi to trade around 7,800 amidst the lack of catalysts. There’s an upward bias as Asian markets closed higher yesterday after Federal Reserve Chairman Jerome Powell reassured a gradual approach to raising rates. In China, the central bank announced changes to its methodology for fixing the yuan to support the currency. The Hang Seng Index gained 2.2% day-on-day (d/d) while the Nikkei index gained 0.9% d/d. Meanwhile, the Dow Jones also ended in green, up by 1.01% d/d while the Nadaq gained 0.9% yesterday. Locally, the next market-moving economic release would be the results of August inflation scheduled on September 4.

Fed hikes loom

Fed hikes loom

August 24, 2018

 

We expect the yield curve to be rangebound with an upward bias ahead of the expected Fed hike during its next meeting this September 25-26. Odds raised to 96% from 88% following the release of minutes from the last Fed meeting. The minutes also noted that while the US labor market remains strong, potential trade disutes, notably with China and the European Union, could undermine economic growth. Meanwhile, Fed Chair Powell’s speech in Jackson Hole, Wyoming mirrored the sametone: gradual hikes, with two more possibly coming in September and December. Odds for another hike in December rose to 61.4% from 55% prior to the speech. This would bring the total hike to 100bps and the Fed fund rates to 2.25%-2.50%. Furthermore, the Fed’s intention to continue to oversee the reduction in it’s balance sheet was also re-confirmed. From the end of September 2017 through the end of last week, the Fed’s balance sheet fell by $221.5bn, on track to reach its target of $260bn reduction by the end of August.

 

 

 

 

 

 

 

 

 

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