Equity Research


Market Outlook

Will Gov’t Sustain Fastest 2020 Pandemic Spending in Decades?

October 9, 2020


Despite the lockdown that hobbled infrastructure spending, down by 9.4% eight months into the year, government (gov’t) total spending for the period jumped 21% versus last year, same period. While there’s been a deceleration of gov’t spending in the last three months until last August, the pace of growth has never been this fast since 1995. It was only in 2018 when growth matched the current 21% upturn.

Weak Consumer Amid Higher Rates

Weak Consumer Sector Face Interest Rate Challenge

September 18, 2020


Unfortunately, interest rate upticks come at this time of still weak Philippine consumer sector based on several indicators: mobility index, consumer sentiment (reflected in a lowest reading since 2009 based on Social Weather Station survey), widespread joblessness and the still raging virus infection (increase in new daily Covid-19 cases to 3,903 in the past seven days compared to 2,593 in the first week of September).

NG Financing

Peso Yield Curve Inches Up

September 7, 2020


The country’s fiscal program has evolved faster than expected. The National Government (gov’t) budget deficit was revised higher to Php1.8T as the GDP growth forecast deteriorated to -6% based on last July’s revision by economic planners from -2% last March. The deficit came from a lower full year forecast of Php678bn this year.


GDP Report: Economic Fallout

August 14, 2020


The Philippines has officially landed into a recession after the GDP fell in two consecutive quarters and this could put the BSP under more pressure to cut policy rates in their August 20 meeting to support the recovery. PH GDP posted a record slump of 16.5% in Q2 due to a quarter long lockdown that halted economic activity. This is a deeper dive from the downwardly revised -0.7% in Q1 and plunged the economy to a steep contraction of 9% in H1. First Metro expects the economy to shrink by 8% to 9% for full year 2020.

Philippine Banks

Philippine Banks: Provisions Hit

August 4, 2020


Provisions were the key weak point of operations, causing Php4.5bn worth of net loss in 2Q20, wiping out half of the 1Q20 earnings of Php8.8bn. As a result, BDO’s 1H20 net income shrank by 78% to just Php4.3bn. That was sharper than BPI’s 15% drop in income to Php11.7bn.


Meralco: Dividend Play

August 4, 2020


First half core earnings down 14% to Php10.6bn as 2Q20 earnings dipped 28%, hit by the lockdown.

Stimulus Vs. Infection Rise

Stimulus Vs. Infection Rise

July 6, 2020


Is the Philippines ready for a bounce back? One setback is rising Covid19 infection which lags the flattened curves of peer countries.

BSP's Heavy Lifting

BSP’s Heavy Lifting

June 26, 2020


What was earlier expected to be a non-event (the BSP’s June policy meeting) turned out to be a stunner. The BSP in its last meeting cut the policy rate by 50 bps to 2.25% in an effort to lower interest rates ahead of a government bond issuance (estimate is Php250bn) and provide the much needed monetary easing amid the pendency of two versions of the second tranche of fiscal stimulus in Congress - Php1.3 trillion by the House of Representatives and Php130bn supplemental budget proposal of the Department of Finance.

PSEi's Forward Woes

PSEi’s Forward Woes

June 22, 2020


A 2021 recovery of up to 8% in Philippine GDP might prove elusive. Aside from the threat of a second wave which has prompted the authorities to extend the General Community Quarantine (GCQ) for the National Capital Region (makes up 38% of GDP) until June 30, the timing and scale of the fiscal stimulus hang in Congress.

Cement Sector

Cement Sector: To Ride Infrastructure Resumption

June 17, 2020


The country’s listed cement producers reported double-digit profit declines in 1Q-2020 as the enhanced community quarantine (ECQ) beginning in the second half of March suspended cement production and halted construction activities in Luzon and slowed the same in Visayas and Mindanao. Cemex led the decline, down 47% year-on-year (y-o-y) to P89M net income, followed by Holcim’s 29% drop to P502M and Eagle’s -25% to P1.2B.


PSEi: A rally gone too far?

June 15, 2020


PSEi corrected a bit by 0.17% last week to 6476.24 from the week’s start after a 17.8% rise since the announced economy’s reopening last May 26. Fear of a sec­ond wave of infection and negative news flow — record unemployment of 17.7% last April and higher-than-expected exports and imports slumps of 50% and 67% for the same period, respectively, — hardly jarred the PSEi below 6,500, pulling back only to the week’s lowest of 6439.67.

Market Outlook

Cyclicals Are Back But Defensives are Clear Winners

June 4, 2020


Now that the economy has partially reopened, the cyclicals are back. Banks, property and commodity-driven stocks are the tactical favorites/buys this week. The optimism over a quick global recovery has not only pushed the equities markets up but strengthened the peso as well, climbing to its highest level since January 2018 versus the dollar. Global funds were net buyers of domestic equities for a third day.

Market Outlook

COVID19: Philippine Industry Transformation and Possibilities

May 29, 2020


Recession risk estimates are getting more precise. From just -1% GDP growth dip this year, Government forecasts the slide could be -3.4% at most, lower than the estimates of more pessimistic research houses abroad like Capital Economics based on how tough and long the Philippine lockdown has been.

Property Outlook

Philippine Property: How to Price a Firesale

May 20, 2020


Brutal to property earnings, the pandemic is at the same time opening once-in-a-lifetime opportunities in real estate. Private equity firms worldwide are with an estimated $328bn in dry powder for real estate deployment, according to the data firm Preqin Ltd. New York-based Blackstone, with $538bn in assets under management, is “starting to see some rescue situations.” The sector weakness is everywhere but next year hopes are up for an early recovery in Asia Pacific after a likely drop of 25% in transaction values this year and -35% in the US.


Philippine Utilities: Earnings Dip

May 14, 2020


Except for Meralco’s earnings gain of 2% to Php5.7bn on the back of electricity sales of 5%, Philippine utilities, the so called defensive plays, suffered income drops with those in power generation dipping more severely— Aboitiz Power Corp.’s -49% to Php2.09bn; Semirara Mining and Power Corp.’s (SCC) -43% to Php1.2bn and Manila Water Corp.’s (MWC) -12%.

Philippine Telcos

Philippine Telcos: Dividends At Risk

May 11, 2020


Touted as the most insulated from the pandemic-led lockdown in terms of service usage, telcos still suffered drops in earnings in 1Q20. PLDT (TEL) fell a bit harder, -4.5%, than Globe’s -2.6% in 1Q20 earnings yet the difference is in what seems to be an emerging upturn for PLDT’s core telco business against Globe’s relatively maturing profitability. Thanks to TEL’s subscriber growth and advances in the data business.


Macro Setting Ripe for More Policy Easing

May 7, 2020


With GDP on a contraction mode and inflation easing to 2.2% from 2.5% a month ago, the macro setting is ripe for further monetary easing by the BSP. Another 25 bps cut in the policy rate before the month is out is likely, lowering the benchmark to 2.5% and another 100 bps cut in the triple R early next month to a still high 11%. The BSP governor has said he is authorized to do a total of 400 bps cut in the triple R up to 8% should the need arise.

GDP Disappoints; Worst is Yet to Come

GDP Disappoints; Worst is Yet to Come

May 7, 2020


Economy is likely to show its worst results in 2Q20 and 3Q20. OFW remittances are already showing weakness, reflected in the -4.4% contraction of net primary income that is included in the computation of the bigger Gross National Income (GNI) figure and has already flattened consumption spending to 0.2% in 1Q20.

PH Banks

Philippine Banks: Asset Quality Issues

May 5, 2020


A key issue facing banks today is asset quality given the pandemic and recession risks. From a high of 40% during the Asian Financial crisis, Philippine banks’ NPL ratio has dropped to 3% and further down to less than 2% last year only to likely surge anew in the face of a sharp economic slowdown, first in decades. So banks with strong capitalization are in the best position to weather the crisis and Metrobank has a lot to offer vs peers.

Boosting Stimulus

Boosting Stimulus

April 13, 2020



Based on the NEDA report, government’s full year deficit this year is estimated at 5.4% of GDP assuming a range of GDP growth of -0.2-4.3%.

Singapore Stimulus Package

Singapore Stimulus Package: Generous and Best Model?

April 8, 2020


US$1.1 billion for households: cash payout and an additional goods and services tax (GST) voucher

The Bear is Out

PSEI: The Bear is Out

March 9, 2020


Still due to the rising infection rates of COVID19 worldwide, global equity indices were down last week (wow) and year-to-date (ytd), continuing their path to correction territory; MSCI World Index, 0.38% wow and -8.87% ytd; MSCI Emerging Market 0.65%, wow, -9.20%; Stoxx Europe 600 Index, 0.34%, -11.20% ytd. After being flattish last week, up by 0.3%, PSEi collapsed to bear market ground in today’s closing (March 9, 2020), losing 457.77 pts or 7.2% to 6,312.61 after government announced a public health emergency due to COVID19’s local transmission, a more dangerous 2nd phase of spread.

Central Banks vs COVID-19

Central Banks vs COVID-19

March 3, 2020


Central banks and governments from US, Asia to Europe are on a bigger defensive stance against the virus hit on global growth, embarking or mulling further fiscal and monetary policy stimulus. The question is will the necessary stimulus be sufficient to avert a global recession?


Ayala Land’s AREIT: Will peers follow?

February 20, 2020



REIT is an asset class that could be ripe for the Philippine market, touted as a recession-hedged investment. It has a tendency to outperform equity indexes amid market volatility and weak market conditions. Thailand’s REIT is a case in point. Table 1 on the left shows the total return of the REIT index at 99.99% (2015 to Feb. 19, 2020), greater than the main market index’s +10.90% and property index of Thailand, -8.26%.

REITs have arrived

REITs Have Arrived

February 10, 2020


The Philippine REIT Law’s IRR has the following incentives: reduced or 33% minimum public ownership requirement from 67%; proceeds to be be reinvested in Philippine property or infrastructure within one year; 12% VAT on the transfer of assets to the REIT has been removed, zeroed out; zero tax on REIT company upon dividend declaration of at least 90% of income but rest of income subject to existing corporate income tax; and dividends accruing to corporate investors are tax-exempt while individual investors will be taxed the existing 10% on dividend income.

January Inflation

Inflation Surprise

February 5, 2020


Will the BSP cut or pause? It’s a surprise and cuts the odds of a BSP rate cut. Will the market sell today? Not necessarily as Asian markets are up and even the US. But what’s the month-on-month (MOM) inflation rate?

Worse than SARs

Worse than SARs?

February 4, 2020


China’s economy is bigger and weaker than during SARS in 2002-2003. The virus outbreak is already adversely affecting supply chains and commodities markets. It is denting growth prospects in SEA, even South America..

A World Economy Shock

A World Economy Shock?

January 28, 2020


The spread of the dangerous virus has spooked global markets. Timing is bad, right after the trade war deal that has helped the health of the global economy and improved sentiment. All should have been good and well going into the Lunar New Year 2020. But no, the world is worrying anew because of Wuhan corona virus that has sent markets into a wealth-destroying tailspin. Is the world heading into another shock?


4Q19 Growth Gains Steam: Fiscal Ramp-up Ahead

January 24, 2020


Philippine real GDP growth accelerated to +6.4% year-on-year (yoy) in 4Q 2019 on par with market consensus of 6.4% but below government’s own forecast of 6.6%. It puts 2019 GDP growth below 6% at 5.9% near the low end of the full year 2019 target growth range of 6.0%-6.5%.

200117 Market Outlook

BSP’s New Weapon

January 17, 2020


Expect the BSP to be confidently reducing bank reserve requirement until BSP Governor Diokno’s term ends in 2023 but only in an environment of price stability defined as 2%-4% medium term inflation target. BSP’s confidence arises from a new open market instrument set to be launched soon intended to “sterilize” inflationary money supply from the triple R cuts. It’s being longer than term deposit facility of the BSP (TDF) makes it more potent and it being a bond makes it tradeable.

200103 Market Outlook

2020 Global and EM Market Views

January 3, 2020


“2020 is not a year of recession,” said Rick Lacaille, global chief investment officer at State Street Global Advisors. “We expect the global economic recovery to continue into 2020 against a backdrop of continued monetary easing, policy shifts and persistent pockets of resilience. Low inflation, robust consumer spending and a relatively strong global services sector combine to propel the cycle forwards. There are clear risk factors but overall, we expect world real GDP growth of 3.4 percent, up from our projection of 3.2 percent in 2019.”

Consumer Sector: On Firmer Ground

Consumer Sector: On Firmer Ground

January 2, 2020


Household consumption spending stabilization in 2019 cushioned Philippine GDP from the sustained deceleration to recent contraction of investments and decelerating exports, proving the former was a resilient pillar of domestic growth.