Philippines Markets: 8 November 2010

08 November 2010

USD/PhP: 43.245 + 0.545 PSEi: 4295.62 - 53.49
USD/JPY: 81.19 PFINC: 1018.33 - 14.51
EUR/USD: 1.3969 BDO: 61.00 - 1.80
GBP/USD: 1.6148 BPI: 60.95 + 0.10
PDSTF3M: 3.6981 MBT: 78.70 - 3.80
Prices as of 4:00pm Source: Bloomberg, Reuters



PHILIPPINE PESO UPDATE

Today's clost at 43.245, implies a near-term bottom is in place at the 42.50 levels. A sustained rally above the 43.50 levels suggests possible test of 44.00 - 44.50. However, failure to clear the said levels implies current rally as mere correction and will trigger retest of 42.50 - 42.80 levels.



Local stocks falter
www.inquirer.net

Local stocks tumbled on further profit-taking on Monday as investors pocketed gains after last week's spike to new highs.

The main-share Philippine Stock Exchange index shed 53.49 points or 1.23 percent to 4,295.62.

The decline was led by the services, holding firms and financial counters which all faltered by over 1 percent.

Value turnover amounted to P4.5 billion. There were 61 advancers as against 77 decliners while 49 stocks were unchanged.

Morning Brief: 8 November 2010

World Bank ready to fund PPPs THE WORLD BANK may finance Philippine infrastructure projects lined up for public-private partnerships (PPPs) through a peso-denominated bond issue if the government needs help, the multilateral lender’s country director said. The bank, however, will wait until state agencies roll out their bidding frameworks at a conference this month before plans are finalized, Bert Hofman told BusinessWorld last week. If approved, World Bank funding could benefit 10 transportation and water supply projects listed earlier by Malacañang and another five agriculture and energy ventures bared by the Trade department last week. The Aquino administration is scheduled to stage an investment conference on Nov. 18-19 to drum up private sector interest in PPP projects. This tack comes as the government aims to cap the 2011 budget deficit at P290 billion after a record P325-billion shortfall was targeted for this year. "We think we can play a role by giving advice. We have financial aspects as well if the government desires," Mr. Hofman said in a chance interview, citing the possibility of "peso financing through international bond issues." The World Bank, through the International Bank for Reconstruction and Development, has issued bonds for other member countries in the past. These have financed, for instance, the reconstruction of storm-damaged power and water facilities in the Dominican Republic and energy efficiency projects in Montenegro. "It’s important since the infrastructure revenues are going to be in peso. They need peso financing," Mr. Hofman said. He declined to name which of the projects have interested the World Bank, but noted that its private lending arm, the International Finance Corp., had helped draft feasibility studies for the planned Light Rail Transit South Extension. "After the conference, it will be more concrete," Mr. Hofman said, adding that the bank will first hear out the government’s "framework for PPP." So far five more projects have cropped up on top of the 10 worth P127.8 billion listed by Malacañang, a document given to reporters late last week states. The draft, which Trade Undersecretary Cristino L. Panlilio said forms part of the Trade department’s presentation at the conference, includes two agribusiness and three wind energy projects: the Kabulnan-2 multipurpose irrigation and power project ($319.40 million); logistics support for the fishery supply chain ($33.33 million); a wind farm power project ($125 million); Northwind Pamplona Project ($75 million); and the Northwind Aparri Project ($100 million). These are "priority projects ready for tendering in 2011", the document states. Forty other power projects have been earmarked for PPP inclusion the longer-term totaling P348.5 billion, the document sates further. As this developed, an Asian Development Bank (ADB) official urged emerging economies to use significant dollar savings and to mobilize private sector support for new infrastructure. "The infrastructure challenge for developing Asia is one of the most daunting we face today," the ADB quoted its president, Haruhiko Kuroda, as telling delegates at the Infrastructure Finance Forum in Japan. The Manila-based ADB, Asia-Pacific Economic Cooperation Business Advisory Council and the Japan Bank for International Cooperation sponsored the conference. "The needs are immense with ADB calculating that about $8 trillion in new infrastructure investments will be required in the region through to 2020 to support current levels of economic growth," the bank said, adding that gross domestic savings in emerging Asia already reached almost $4 trillion last year. The ADB said much of the cash has been underutilized, with "regulatory obstacles, currency mismatches and underdeveloped capital markets hindering broader financing of essential infrastructure." The bank said that of the total infrastructure needed, energy and electricity will cover 40%, followed by transport at some 25%. Social infrastructure for education, health, water and sanitation, and other public goods will take up another 25%. Investments in telecommunications will account for 10%. To mobilize existing resources, emerging economies need to reinforce existing legal and regulatory frameworks to attract more private investors and financing. Further development of local capital markets and more lending in the domestic sector will also help address currency mismatches which are a hindrance to investors in the sector, the ADB said.

'Nothing on the horizon that could upset the market' Corporate earnings season: check. Midterm elections: check. Federal Reserve meeting: check. Jobs report: check. For weeks, stocks have been on the rise as investors placed their bets on improving profits, a Republican victory, the Fed's plan to pump billions into the economy and pick up in the job market. All of those events have played out favorably for the market, with all the major indexes logging double-digit gains since the end of August: the Dow has climbed almost 13%, the S&P is up 15%, and the Nasdaq has jumped almost 20%. And last week, as investors knocked out three major events, stocks posted their biggest weekly gains in about two months and hit fresh two-year highs. And though the week ahead is light on economic and corporate news, experts say the momentum in stocks is likely to continue. "The wind is at our backs in terms of the economy, and all the building blocks are set for stocks to move higher," said Timothy Ghirskey, chief investment officer at Solaris Asset Management. "Equities seem to be the asset class of choice, given the low yields on bonds, and the Fed is also encouraging more money into the stock market." Though there might be modest pullbacks or flat days for the market as investor reap profits, Ghirskey expects stocks to continue rising through the end of the year. "As long as we're not hit with a surprise on the Bush tax cuts issue, there's nothing really on the horizon that could upset the market," he said. "The electorate made it pretty clear that it wants to see the Bush tax cuts extended, and it seems like that could be the outcome, which would be favorable for stocks." Following the midterm election last week, President Obama said that he is willing to negotiate to ensure the Bush tax cuts are extended for the middle class by Jan. 1. Monday: There are no market-moving economic or corporate events expected on Monday. Tuesday: The Commerce Department releases the wholesale inventories report in the morning. Inventories are expected to have risen 0.6% in September after jumping 0.8% in August. Wednesday: The Department of Labor releases the weekly jobless claims report in the morning. The number of Americans filing new claims for unemployment last week is forecast to fall to 450,000 from 457,000 in the previous week, according to a consensus of economists surveyed by Briefing.com. Continuing claims -- a measure of Americans who have been receiving benefits for a week or more -- are expected to have edged up to 4.35 million from 4.34 million in the previous week. The trade balance, due in the morning from the Commerce Department, is expected to have narrowed to $45.0 billion in September from $46.3 billion in August. Reports on import and export prices, and weekly crude oil inventories are also due in the morning. The October Treasury budget is on tap for the afternoon. Macy's (M, Fortune 500) is due to report results before the start of trading. The retailer is expected to have earned 4 cents per share versus a loss of 3 cents per share a year earlier, according to analysts polled by Thomson Reuters. After the closing bell, Cisco (CSCO, Fortune 500) is expected to post earnings of 40 cents per share, up from 36 cents per share a year ago. Thursday: Leaders of the world's major economies, including President Obama, convene for a two-day summit in Seoul, South Korea. They are expected to discuss recent currency tensions as well as other global economic challenges and regulations. Before the market opens, media conglomerate Viacom is expected to report earnings of 69 cents per share, flat compared to the same period a year ago. Earnings from rival Walt Disney Co., which are due after the closing bell, are also forecast to stay flat at 46 cents per share. Treasury bond markets, government offices and some banks are closed for Veterans Day, but all other financial markets are open. Friday: Before the market opens, J.C. Penney and Wendy's/Arby's Group will report financial results. The retailer's earnings are expected to increase, while analysts expect the fast food chain to show a loss for the quarter. The University of Michigan's consumer sentiment index for November, due later in the morning, is expected to have risen to 69.0 from 67.7 in the previous month.

Crude Oil Advances to Two-Year High as Jobs Increase More Than Forecast Crude oil surged to its highest level in two years as U.S. payrolls rose more than forecast in October, a sign the economy is recovering, and the dollar headed for a weekly decline against most major currencies. Oil capped its best week since February as payrolls gained and the jobless rate held at 9.6 percent. The Dollar Index, which tracks the currency against six others, was poised to drop 0.9 percent this week, the most in four weeks, after the Federal Reserve announced $600 billion in stimulus measures Nov. 3. The jobs number is “very supportive” for energy markets, said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund focusing on energy. “If unemployment figures start to improve, you’ll start to see gasoline demand pick up and refineries boosting runs.” Oil for December delivery gained 36 cents, or 0.4 percent, to settle at $86.85 a barrel on the New York Mercantile Exchange, the highest settlement price since Oct. 8, 2008. Crude rallied 6.7 percent this week and has advanced 9.1 percent in the past year.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001