Philippine Markets: 20 May 2011

20 May 2011

USD/PhP: 43.15 (as of 12:00pm) PSEi: 4285.16 - 12.77
USD/JPY: 81.65 PFINC: 969.20 + 2.91
EUR/USD: 1.4314 BDO: 58.90 - 0.05
GBP/USD: 1.6229 BPI: 57.90 - 0.25
PDSTF3M: 2.3038 MBT: 72.50 + 1.80
Prices as of 12:00pm Source: Bloomberg, Reuters


Philippine Interest Rate Outlook

Secondary market rates moved up by an average of 13 basis points as short-term rates continued its abrupt rise for the past two weeks, reflecting the normalization of rates after hitting historic lows during the previous months and mounting inflationary pressures.

The Bureau of Treasury rejected bids for the 182-day and 364-day Treasury bills during the recent auction. Rates would have risen sharply if bids were accepted. On the other hand, 91-day Tbill rate rose to 1.889 percent from the record low of 0.568 percent.

Moody’s Ratings commented that there is a strong case for Philippine credit rating upgrade however risks remain. Government needs to strengthen revenues and cut tax evasion. The agency is also expecting BSP to further tighten policy rate.

Continue to expect upward bias for short-term rates, while medium to long-term rates are expected to consolidate as market liquidity remains supportive.

Philippine Equities Outlook

Local stocks were almost unchanged week-on-week, closing at 4285.16 as volatility dominates the global equity markets as growth fears and rising interest rates overshadow postive first quarter corporate results in local markets. Profit-taking became the order of the day for local players after the benchmark index failed to make new highs.

Chartwise, the week’s close at 4285.16 continue to suggest that the market is about to top out as it struggles to stay above the 4,300 levels. A break below the 4,250 level will confirm further tests towards the 4,150 - 4,170 levels in the near-term. Only a break above the 4,330 levels will call the bulls back to play.

Immediate support and resistance is seen at 4,250 and 4,330 levels, respectively.

Philippine Peso Outlook

The local currency moved sideways this week after a two-week decline as major currencies recovered some of its losses against the greenback, after the Euro slumped against the US Dollar on sovereign debt concerns in the Euro zone.

Chartwise, continue to expect the currency to range between the 43.00 - 43.30 levels in the near-term.


BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001