Philippine Markets: 23 August 2011

23 August 2011 

USD/PhP:          42.325                        PSEi:             4375.39                        + 84.28 

USD/JPY:           76.67                        PFINC:                   987.00                        + 4.10 

EUR/USD:         1.4477                        BDO:                  58.55                        unch 

GBP/USD:         1.6547                        BPI:                  59.00                        1.60 

PDSTF3M:         1.1085                        MBT:               71.75                        - 1.25 

Prices as of  4:00pm                        Source: Bloomberg, Reuters 

Local stock index firms up amid bargain-hunting 

By: Doris C. Dumlao 

Philippine Daily Inquirer 

MANILA, Philippines—The local stock index rallied back to the 4,300 level on Tuesday as investors saw an opportunity to hunt for bargains as offshore markets stabilized on hopes that the US Federal Reserve may take more action to avert a US recession. 

The main-share Philippine Stock Exchange index added 84.28 points or 1.96 percent to finish at 4,375.39. 

All counters were up but the upswing was still led by mining/oil, followed by services whose sub-indices jumped by 3.94 percent and 2.67 percent, respectively. 

Turnover was heavy at P6 billion. Despite the overall index gain, there were only 67 advancers which were outnumbered by 78 decliners while 39 stocks were unchanged. This was because the biggest trades focused on large-cap stocks. 

Lepanto “A” (open only to local investors), PLDT, SM Investments, Lepanto “B” (open to both local and foreign investors), Philex, Ayala Land, AGI and SM Prime led the index higher. 

While mining stocks like Lepanto continued to benefit from a surge in gold prices to a new record high of $1,900 per ounce, there was a renewed play on index heavyweight PLDT as the Aug. 26 extended deadline for the telecom giant to close a deal to take over Digitel drew near.  The PLDT share price surged by 3.9 percent to P2,430, moving closer to the P2,500 per share share-swap pricing that will enable PLDT to acquire a majority stake in Digitel, assuming the regulatory obstacles are cleared. 

Gus Cosio, president of First Metro Asset Management, noted that apart from the nearing deadline on the Digitel transaction, the stock went on ex-dividend on Tuesday. That means that whoever owns the security on the date will get the dividend payment. 

This brought PLDT’s total pay-out this year to P122 which comes out to a yield of 9.5 percent per annum, Cosio said.  “This is a cheap stock to punt given the further enhanced value should the merger pushed through,” he said. 

Non-PSEi stocks ORE, Premiere and Manila Mining A and B also gained in heavy trade. 

On the other hand, there was profit-taking on San Miguel, Boulevard Holdings, Zeus Holdings, Metrobank and Security Bank. 

“My thoughts continue to be that our market is all right.  A number of stocks represent safe plays for investors with a six-month to one-year horizon.  It may be time to be bold.  If we see good GDP (gross domestic product) numbers,” he said. 

Firmer trading on Wall Street also provided a positive tone for the local market on Tuesday. The Dow Jones Industrial Index was up by 37 points or 0.34 percent overnight – stabilizing after four weeks of losses – on hopes that the US Fed may have something up its sleeves to perk up the fragile US economy. 

BDO UNIBANK, INC. 

Jonathan Ravelas

Chief Market Strategist

(632) 858-3145 

Morning Brief: 23 August 2011

91-day T-bill rate falls below 1%  The yield on the 91-day treasury bills again fell below 1 percent, easing to an average 0.979 percent as investors swamped Monday’s government auction. The average rate was 109.4 basis points lower than the 2.073 percent set in the previous auction two weeks ago. Also, Monday’s average was 87.1 basis points lower than the corresponding yield for deals done in the secondary market that averaged 1.85 percent. Interest rates on the 182-day treasury bills also fell 125 basis points to an average 1 percent while those for the 364-day paper slid to an historic low of 1.5 percent. The average for the six-month bill was 97.5 basis points lower than the prevailing average for deals at the Philippine Dealing and Exchange Corp. trading board, which was 1.975 percent. On the other hand, the average for the year-long bills was 87.5 basis points lower than the 2.375 percent in the secondary market. The Treasury awarded P3 billion in six-month bills and P4 billion in year-long securities, which were the full amounts it offered for each maturity. National Treasurer Roberto B. Tan said the auction results indicated that there was “a lot of liquidity [and that fund managers] are looking for investment opportunities.” Tan said the market’s behavior on Monday might have been influenced by the withdrawal of funds from the local stock market. “Some of the T-bill subscriptions may be from foreign investors who cannot go to special deposit accounts,” Tan added. The SDA facility is one of the tools that the Bangko Sentral ng Pilipinas uses to control the supply of money in the local economy and this, in turn, influences consumer prices. However, unlike treasury bills, SDAs cannot be traded. As for the benchmark bill, the government raised P2.8 billion, or P800 million more than planned due to the high volume of tenders. On Monday, the government raised a total of P9.8 billion with investors offering a total of P43.03 billion. Tenders for the three-month bills reached P14.69 billion or more than seven times the P2 billion on offer. Bids for the six-month bills reached P13.7 billion, or more than four times the P3 billion available. Tenders for the year-long bill totaled P14.64 billion, more than thrice the offer of P4 billion.

U.S. Stocks Rise on Fed Bets as Banks, Energy Shares Pare Gains  U.S. stocks rose, rebounding from the biggest four-week decline by the Standard & Poor’s 500 Index since 2009, amid speculation the Federal Reserve will take steps to stimulate the world’s largest economy. Equities pared gains as financial and energy shares trimmed their advance by the most, while Bank of America Corp. (BAC) tumbled 5.2 percent. Alcoa Inc. (AA) and General Electric Co. (GE) added at least 1 percent, pacing gains among companies most-tied to the economy. Lowe’s Cos. rose 1.2 percent after the home-improvement retailer announced a $5 billion stock buyback. Boeing Co. rallied 1.8 percent as people familiar with the matter said Delta Air Lines Inc. plans to order 100 of the company’s jets. The S&P 500 gained 0.6 percent to 1,130.55 at 11:17 a.m. in New York, after rallying as much as 2 percent earlier today. The benchmark index slumped 4.7 percent last week, giving it a 16 percent loss since July 22. The Dow Jones Industrial Average added 79.35 points, or 0.7 percent, to 10,897 today. Fed Chairman Ben S. Bernanke is scheduled to speak at a central bank meeting on Aug. 26 in Jackson Hole, Wyoming. “People are of the belief that there’s an increasing likelihood of a new quantitative easing program,” Mark Luschini, the chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a phone interview. “We hold no expectation that we’re going to see that. The hurdle remains pretty high. I’m a little concerned that if get some rally on that expectation and it doesn’t come through, that the equity market would be set for a decline. Treasuries Fall on Speculation Fed’s Bernanke to Will Signal More Stimulus Treasuries fell amid speculation Federal Reserve Chairman Ben S. Bernanke will signal additional measures to stimulate the economy, damping demand for the safest assets. Treasury two-year note yields touched the highest in two weeks amid concern yields that dropped to record lows this month will erode demand when the U.S. sells $99 billion of debt this week. Bernanke is scheduled to speak Aug. 26 in Jackson Hole, Wyoming at an annual conference sponsored by the Fed Bank of Kansas City. Stocks pared earlier gains. “The market is floundering lower around Treasury supply and Bernanke coming,” said Sean Murphy, a trader at Societe Generale SA in New York, one of the 20 primary dealers that trade with the Fed. “The jury is still out on if we are going to get more from Bernanke or not, so the market is in a wait- and-see mode.” Ten-year yields rose four basis points to 2.11 percent at 5:02 p.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent note due August 2021 fell 12/32, or $3.75 per $1,000 face amount, to 100 5/32. The record low yield of 1.97 percent was set Aug. 18. Two-year note yields rose one basis point to 0.20 percent, touching the most since Aug. 8. The Standard & Poor’s 500 Index closed little changed after gaining as much as 2 percent.

Oil Drops From Three-Day High as U.S. Equities Decline, Stockpiles to Rise  Oil dropped from a three-day high in New York as investors bet that increasing stockpiles and signs of a slowing U.S. economy indicate fuel demand will falter in the world’s biggest crude-consuming nation. Futures slipped as much as 0.4 percent today after most U.S. equities fell. An Energy Department report tomorrow may show crude inventories rose 1.5 million barrels in the seven days ended Aug. 19, climbing for a second week. London-traded Brent declined yesterday on speculation that Libyan production may recover after rebels entered the capital city of Tripoli in a push to force out Muammar Qaddafi. Crude for October delivery fell as much as 33 cents to $84.09 a barrel in electronic trading on the New York Mercantile Exchange, and was at $84.29 at 8:59 a.m. Sydney time. The contract yesterday gained $2.01, or 2.4 percent, to $84.42, the highest since Aug. 17. The September future expired yesterday.

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