First Metro Investment Corp Releases March Philippines 'Market Call'

Apr 19, 2012 17:00 JST

Source: First Metro Investment Corporation

MANILA, Apr 19, 2012 - (ACN Newswire) - First Metro Investment Corp (FMIC) and University of Asia and the Pacific (UA&P) have published the March issue of "The Market Call, Capital Markets Research". The report, which covers the Philippine Macroeconomy, Fixed Income Securities, Equity Markets and Economic Indicators, includes the following highlights:

"Macro-Economy: Economy Looks Better in Q1 -
Economic data made available in Q1 would indicate a much improved economy, which lead us to forecast Gross Domestic Product (GDP) growth of 5% or more for the quarter. Among the figures that made us more optimistic are: (1) Meralco electricity sales (a proxy for economic activity) rose by an average of 8.3% for Jan- Feb of the year, (2) The economy produced 1.1 million jobs for the year ending Jan 2012, (3) Inflation slid to a 29-month low of 2.7%, (4) The National Government has started the year running with a fiscal deficit of P15.9 B, despite a strong 12.5% increase in tax revenues, and (5) Exports in January expanded by 4.0%, the first positive growth figure after 8 months of negatives.

- There was a massive decline of people who do not work from 4.1 M to 448,728.
- The overall decline in revenues compared poorly against December's 6.8% gain and more so compared to January 2011's 47.31% growth.
- The exports for January reached $4.121 B, a big jump from December's $3.407 B.
- We expect that exports to continue its recovery as job growth and consumer sentiment have improved in the U.S.

Fixed Income Securities: Yields Higher on Fears of Higher Oil Prices -

Hot money inflows into developing countries of Southeast Asia has slowed down as of late as fears that higher crude oil prices would not only stoke inflation but also stymied the nascent recovery in the US and other advanced countries have gripped the market. Consequently, bond yields in the country and across the region headed north, despite the slowly improving investment climate in Europe after the Greek default was mitigated and the Federal Reserve extending accommodative policy rates until 2014. February inflation registered a 29-month low at 2.75%, once again supporting the second policy rate-cut to 4% for the first quarter. Additionally, the surge of the equities market has led to stronger preference for higher yielding long-term bonds. But bond yields may not move up much as the Philippine government has announced that it would borrow P107.9 B with P52.5 in T-bills and P54 B in T-bonds in the second quarter. The borrowing plan is significantly lower than a year ago as the government tries to reduce its borrowing costs given that the January fiscal report showed a P15.9 B deficit.

- This indicates investors' preference for even longer-tenored papers as the country's fundamentals strengthen along with more active government spending.
- With another RTB sale being unlikely but not absolutely impossible according to the BSP, trade volume has since then climbed back to P78.79 B.
- In planned corporate issuances, more are in the pipeline to be released as SEC requirements are settled to take advantage of the period of low interest rates and high liquidity...
- As yield spreads narrowed, further flattening is possible as the equities market continue to rally in an upward trend.
- Corporate long-term bond or notes issuances will significantly pick up pace in Q2.

Equity Markets: A Tale of Price and Earnings

After the remarkable rally in the first two months of 2012, the Philippine equities market made further gains in March. Factors that stimulated the rally were the economic momentum in the US, easy monetary policy globally, improved investor sentiment on local macro situation, and the robust foreign fund inflows. Moving forward, we see these factors to remain intact longer. However, we have become wary of the Philippine equities market. Valuations have become challenging and market complacency is at high levels. Having said these we are constructive on the Philippine equities markets medium- to longer-term but it is susceptible to near-term pullbacks. While the market is likely to move higher on the back of tailwinds from bullish sentiments, we take a closer examination on the market's valuation to better assist us in our investment decision process.

- The market is likely to move higher on overly bullish sentiments. But unless earnings show up, we prefer to be neutral meaning keeping out trading positions light.
- Metrobank (MBT), Banco de Oro (BDO) and Bank of the Philippine Islands (BPI) posted double-digit growth for Q1.
- SMPH was buoyed by speculations on consumer spending growth.
- Foreign investors stepped up their involvement in the domestic bourse as they accounted for roughly 40% of the total trades which reached P502 B for the quarter.

To download this full Market call, and all recent reports, please visit http://firstmetro.com.ph/publications_marketcalls.asp.

Contact:

Anna Marie Tuprio
Corporate Planning & Affairs Department 
Tel: +63-2-858-7951       
E-mail: marie.tuprio@firstmetro.com.ph

Source: First Metro Investment Corporation
Sectors: Daily Finance

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