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Friday, April 15, 2011

Philippine Markets: 15 April 2011


15 April 2011

USD/PhP: 43.22 PSEi: 4251.64 + 16.68
USD/JPY: 83.38 PFINC: 945.18 + 1.40
EUR/USD: 1.4470 BDO: 53.10 + 0.20
GBP/USD: 1.6340 BPI: 58.75 - 0.10
PDSTF3M: 0.9865 MBT: 68.35 + 0.10
Prices as of 12:00pm Source: Bloomberg, Reuters


Philippine Interest Rate Outlook

Secondary market rates moved down by an average of 11 basis points week-on-week. Market liquidity remains the key reason for drop in yields despite lingering inflation concerns due to pervasive increase in commodity prices. Expect short-term yields to remain on the low side with downward bias while the rest of the tenors are expected to move sideways next week.

Philippine Equities Outlook

Local stocks slightly moved higher to 4251.64 after dropping to 4160.42 this week. Investor optimism was prevalent due to positive earnings outlook and resilient global equity markets. However due to the long holiday in observance of Paschal Triduum, expect market to consolidate during the three-day trading week.

Chartwise, the close at 4251.64 suggests range trading between 4,200 – 4,300 levels next week.

Philippine Peso Outlook

The local currency remained in 43.00 – 43.50 range this week as weakness of US dollar against the major currencies offset the lower than expected February exports number. Expect currency to remain on the lower side of the range next week in anticipation of build up of remittances during the long weekend.

Chartwise, key support and resistance remains at 43.00 and 43.50 respectively. Breach of 43.00 will suggest test of 42.50 while break of 43.50 may suggest a near term bottom has been formed at 43.00 levels.


BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher

(632) 858-3001

Morning Brief: 15 April 2011



Filipinos’ optimism weakens

OPTIMISM HAS DIMINISHED among Filipinos, the Social Weather Stations (SWS) said in a new report, although overall those who are bullish about their personal lives and the economy continue to significantly outnumber defeatists.

A March 4-7 SWS survey, the results of which were made exclusive to BusinessWorld, found 35% of the respondents claiming that their lives would improve in the next 12 months, more than three times the 11% who said otherwise.

Subtracting one from the other resulted in a "high" net personal optimism score of +24, 11 points down from November 2010’s "very high" +35 (42% optimistic, 7% pessimistic).

The respondents’ outlook on how the economy would fare in the year ahead also deteriorated, plunging 26 points to just +4 (27% "will be better" minus 24% "will be worse") from +30 (39% minus 8%) last November.

Asked about how their lives had changed in the past 12 months, 36% said it had worsened and 26% said it improved, resulting in a net gainers-losers score of -13, eight points lower than November’s -5.

A Palace official blamed the results on external events such as continued political unrest in the oil-producing Arab world -- which has led to weekly fuel fuel price hikes -- and last month’s disaster in Japan, host to thousands of migrant Filipinos and a major trading partner.

The SWS said net personal optimism dropped in all areas except the Visayas, where it rose by three points to a "very high" +33. It was down by 21 points in Balance Luzon to a "fair" +17, 11 points to a still "very high" +30 in Metro Manila, and seven points to a "high" +25 in Mindanao.

Declines were recorded in all socioeconomic classes. The indicator fell by 31 points in class ABC to +21 ("high"), by 15 in class E to +17 ("fair"), and by eight points to +27 ("high") among the class D or masa.

Net economic optimism, meanwhile, plunged in all areas and classes. Balance Luzon saw a 34-point drop to -3 while a slightly lower 27-point fall to +14 was recorded in Metro Manila. The decline was 21 points to +9 in Mindanao and 18 points to +5 in the Visayas.

Class ABC’s economic optimism plummeted 44 points to +3 while the masa’s dove by 27 points to +1. Among the class E, the result was a 21-point tumble to +11.

Reflecting the latest personal optimism scores, net gainers -- the percent of gainers over losers -- became less negative in the Visayas (up six points to -8) and remained steady in Metro Manila (-7). It worsened in Balance Luzon (down 14 points to -19) and Mindanao (an identical 14-point fall to -10).

Net gainers fell to double-digit negatives in all classes, the SWS said. The drop was 26 points to -16 for class ABC, 14 points to -17 in class E and four points to -11 among the class D.

Sought for comment, Secretary Herminio B. Coloma, Jr. of the Presidential Communications Operations Office said the results were expected considering the period when the poll was taken.

"From a very high level of expectation, there were clearly new challenges, and not of our own making -- there was a rapid increase in oil prices that is a global phenomenon and was not experienced last year. The last it was experienced was in April to July 2008," Mr. Coloma said in a telephone interview.

The natural result, said Mr. Coloma, is that "more citizens are affected by the impact of these external events," even the class ABC who despite their greater capacity to absorb economic shocks may be "more cautious in their risk-taking, as investors and entrepreneurs."

The government, he claimed, is working at "a whole range of options, including a possible wage increase" in a bid to mitigate the impact of external events.

"What it tells us is that we have to work doubly hard and intensify government efforts for closer social safety nets ... cushion [the] impact and bring about a quality of public services, especially for the poor families who are most affected, to enable our people to cope," Mr. Coloma said.

The SWS classifies net personal optimism scores of +30 and above as "very high" and +20 to +29 as "high" since they are greater than what is normally expected or above the category containing the median and the mode ("fair", ranging from +10 to +19).

For net economic optimism and net gainers-losers, the SWS classes the most common answers, the median and the modal, as "low" and "very low." "Fair" is assigned to the negative category (-9 to zero) as this is above what is normally expected. "Mediocre" applies to the category between "fair" and "low."

For last month’s survey, the SWS polled 1,200 adults nationwide via face-to-face interviews. The error margins used were ±3% for national and ±6% for area percentages. -- J. D. Poblete


PH blue chips included in regional exchange
Speedier Asean economic union seen

By Ronnel Domingo
Philippine Daily Inquirer


MANILA, Philippines—Thirty blue-chip stocks listed on the Philippine Stock Exchange are included in the 210 “most exciting” stocks in the Asean Exchange, the newly launched common website of seven bourses in Southeast Asia.

These 30 Philippine stocks—mostly firms engaged in banking, real estate and utilities—are part of the so-called Asean Stars, a selection of the largest and most dynamic Southeast Asian firms that are in the league of world leaders in their respective sectors.

Other PSE-listed firms in the group are in the business of telecommunications, mining, industrial services, industrial conglomerates, transportation, consumer services, retailing, food and beverage, and food and drugs.

They include Lepanto Consolidated Mining Co.; Philex Mining Corp.; DMCI Holdings Inc.; Aboitiz Equity Ventures Inc.; Ayala Corp.; International Container Terminal Services Inc.; ABS-CBN Broadcasting Corp.; Jollibee Foods Corp.; SM Investment Corp.; JG Summit Holdings Inc.; Universal Robina Corp.; Banco de Oro Unibank Inc.; Bank of the Philippine Islands; China Banking Corp.; Metropolitan Bank & Trust Co.;

Alliance Global Group Inc.; Ayala Land Inc.; Filinvest Land Inc.; Megaworld Corp.; Robinsons Land Corp.; SM Prime Holdings Inc.; Globe Telecom Inc.; Philippine Long Distance Telephone Co.; Aboitiz Power Corp.; First Gen Corp.; First Philippine Holdings Corp.; Energy Development Corp.; Manila Water Co. Inc.; Manila Electric Co.; and Metro Pacific Investments Corp.

The Asean Exchange, a team-up of seven bourses from six members of the Association of Southeast Asian Nations was launched last April 8, representing 3,613 listed firms with total capitalization of some $1.98 trillion.

Meant to help regional integration by promoting the growth the Asean capital market, Asean Exchange is made up of the PSE and the stock exchanges of Indonesia, Malaysia, Singapore, Thailand and Vietnam.

The other six are the Indonesia Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Singapore Exchange, and Vietnam’s Hochiminh Stock Exchange and Hanoi Stock Exchange.

The launch coincided with the wrap up of a meeting among Asean finance ministers held in Indonesia, which resulted in the officials’ agreeing “to work further on implementing the financial integration measures and to monitor the commitments already made.”



Most U.S. Stocks Rise as House Passes Measure to Avert Government Shutdown

Most U.S. stocks advanced, erasing an early decline, as the House approved a spending bill that will avert a government shutdown and on investors’ optimism about higher-than-estimated corporate earnings.

Supervalu Inc. (SVU) surged 17 percent for the top gain in the Standard & Poor’s 500 Index after the owner of Save-A-Lot and Albertsons grocery stores projected full-year profit that beat projections. Halliburton Co. (HAL) and Anadarko Petroleum Corp. (APC) added more than 1.3 percent as oil rose on reports that Saudi Arabia reduced output this month. JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC) dropped at least 1.7 percent as Goldman Sachs Group Inc. (GS) cut its recommendation on financial shares.

Almost four stocks gained for every three that fell on U.S. exchanges at 4 p.m. in New York. The S&P 500 increased less than 0.1 percent to 1,314.52, erasing an earlier decline of as much as 0.9 percent. The Dow Jones Industrial Average advanced 14.16 points, or 0.1 percent, to 12,285.15 today.

“The government is still running,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “That’s a sigh of relief for the market. Investors are focusing on the good economic fundamentals and solid corporate earnings. Yes, we do have global issues, European debt concern and higher commodities prices. Still, the stock market is very resilient.”


Treasury Notes Decline for First Time in Three Days as Risk Appetite Rises

Treasury notes fell for the first time in three days as stocks erased losses on a return in investor appetite for higher-yielding assets.

U.S. government securities earlier rose after claims for jobless benefits unexpectedly increased and wholesale costs slowed, tempering speculation the economy is improving. The difference in yields between Treasury 2- and 30-year securities shrank to the narrowest in a week as the U.S. drew higher-than- forecast demand at an auction of $13 billion of 30-year debt. Data on U.S. consumer prices are due tomorrow.

“It’s choppy trading,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York. “The auctions went OK. Now that they are over, the focus is on the inflation news for tomorrow.”

Ten-year note yields increased four basis points, or 0.04 percentage point, to 3.50 percent at 5:31 p.m. in New York, according to BGCantor Market Data. They earlier touched 3.42 percent, the lowest level since April 5. The price of the 3.625 percent security due in February 2021 dropped 10/32, or $3.13 per $1,000 face amount, to 101 1/32. Two-year yields added four basis points to 0.77 percent after tumbling to 0.70 percent, the lowest since March 25.

The benchmark 30-year bond yield increased less than one basis point to 4.55 percent. It earlier fell to 4.52 percent, the lowest level since April 6.

The Standard & Poor’s 500 Index ended the day little changed after falling earlier as much as 0.9 percent.

U.S. consumer prices increased 2.6 percent last month from a year earlier after gaining in February at an annual rate of 2.1 percent, a separate Bloomberg survey forecast before a government report tomorrow.


Crude Oil Advances on Reports Saudi Arabia Reduced Production This Month

Crude oil climbed for a second day in New York on reports that Saudi Arabia, holder of the world’s largest oil reserves, reduced output this month.

Futures rose 0.9 percent after John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi, said the desert kingdom cut production by 300,000 barrels a day. Barclays Plc said Saudi Arabia may be reducing production of its lighter oil blends introduced in response to the slump in Libyan output.

“The news that the Saudis are cutting output should be scaring the daylights out of people,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “It looks like they couldn’t find buyers for their light blends.”

Crude oil for May delivery increased $1 to settle at $108.11 a barrel on the New York Mercantile Exchange. Prices are up 26 percent from a year ago.



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

BDO UNIBANK INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher

(632) 858-3001
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