Latest Views

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.

May

 

Led by Investment spending of both the public and private sectors, Gross Domestic Product (GDP) got back into a faster growth track with a 6.8% uptick in Q1, up from 6.5% in both Q1 and Q4-2017, second best in East Asia. Manufacturing sector again outperformed the Services Sector handily. Higher inflation at 4.5% in April constrained consumer spending as crude oil prices pierced the $70/barrel resistance.

April

 

Even as the Philippine economy revs up to race faster, bond yields appear to have galloped uncontrollaby as earnings yields (E/P) to 10-year bond yield spreads suggest and US Treasuries have tracked a downward trend since its peak in mid-February. The PH economy appears to have had roaring 2018 start as capital goods imports rose by 16.9%, while National Government spending (exclusive of interest payments) to boost Infrastructure expenditures climbed by 25.2% in January, and Manufacturing output surged by 24.8%, the fastest in seven years.

 

 

 

 

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Bear

Bear

June 22, 2018

 

We expect the PSEi to remain volatile around 7,000 as investors sell on strength every time the market goes beyond this level. There’s more downward bias as trade war concerns escalate. China and European Union officials agreed to oppose US protectionism and unilateralism which could later cause a global recession. Key events to monitor are US GDP on Thursday and Philippine June inflation next week.

Local yields soar on BSP hike

Local yields soar on BSP hike

June 22, 2018

 

We expect upward pressure on bond yields to persist this week following the Bangko Sentral’s (BSP) rate hike last week, the second this year which brought the policy rate to 3.5%. Consensus before the monetary board meeting was that the BSP will stand pat (but another hike sometime within the year was expected), although there was already a growing sense of urgency after the meeting was rescheduled a day earlier following the Fed’s second hike of the year last May. We expect the move to temper the peso’s continued hemorrhage this year, which touched a 12-year low at Php53.50 last June 18. The peso improved by 0.3% to php53.29 after the hike by week’s close. Standard & Poor (S&P) and Fitch’s BMI Research expect another 25-bp hike to 3.75% within the year to curb inflation and ease pressure on the peso.

FDI’s shine amid policy uncertainty

FDI’s shine amid policy uncertainty

June 20, 2018

 

Philippine Stocks Fall to 14-Month Low Before Central Bank Meet. This was the media headline early last Monday. PSEi shed 115.43 points on close to 7414.11, narrowing early morning losses of up to 195 points on Php7.7bn traded value on Monday. The selldown swirled about the same concern (among others); will the BSP choose to stay on the curve or not (raise the key rate a second time).

 

 

 

 

 

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