Philippine Markets: 24 August 2011

24 August 2011 

USD/PhP:          42.475           + 0.15        PSEi:             4366.45                        - 8.94 

USD/JPY:           76.69                        PFINC:                   989.59                        + 2.59 

EUR/USD:         1.4400                        BDO:                  59.40                        + 0.85 

GBP/USD:         1.6480                        BPI:                  58.00                        - 1.00 

PDSTF3M:         1.1327                        MBT:               72.60                        + 0.85 

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

Philippine stocks dip amid profit-taking 

By: Philippine Daily Inquirer 

Philippine Daily Inquirer 

MANILA, Philippines—The local stock index closed a tad lower on Wednesday as investors locked up gains from index heavyweight Philippine Long Distance Telephone Co. and braced themselves for a swing to negative territory on Wall Street in the next session. 

The main-share Philippine Stock Exchange fell by 8.94 points, or 0.2 percent, to finish at 4,366.45, weighed down by the decline in PLDT, which went on an ex-dividend. This meant that there was a rush for those who wanted to get dividend payments to load up PLDT on Tuesday, some of which unloaded on Wednesday. 

Joseph Roxas, president of Eagle Equities Inc., said the local market was anticipating a downturn in US stocks Wednesday night and also pointed out the sluggish trading across the region. 

Overnight, US stocks posted sharp gains on hopes that the US Federal Reserve would adopt more measures to stimulate the economy. However, the futures index indicated a potential slide of about 80 basis points in the Dow Jones Industrial Index in the next session. 

Roxas said Moody’s downgrade of Japan’s credit rating wasn’t much of a factor during Wednesday’s stock market trades. 

“The market was a mixed bag today with the index closing down; meanwhile, the number of gainers still outpaced losers,” DA Market Securities noted in its market wrap-up. 

The brokerage noted that the market was weighed down by PLDT’s 3.21 percent decline equivalent to its dividend of P78 as the telco went on ex-cash. 

“With global economic uncertainty ahead, we look forward to developments in terms of fiscal policy in the advanced economies. It would be more prudent to stay on the sidelines as the real score unravels. At the same time, it is also recommended to keep a watchful eye on bargain levels for favored stocks,” DA Market Securities said. 

Because of PLDT’s decline, the services counter fell by 2.2 percent. All other counters firmed up. PLDT has a 13.75 percent weight on the PSEi, the single biggest among blue chips. 

Despite the overall index decline, there were 80 advancers against 63 decliners while 44 stocks were unchanged. 

Turnover was extraordinary at P18.2 billion as San Miguel Corp. crossed about P13 billion shares in Manila Electric Co. that it had sold to subsidiary San Miguel Pure Foods at P220 per share. 

There was a foreign net selling of P270 million for the day. 

Apart from PLDT, the index was also burdened by declines in the share prices of ICTSI, Metro Pacific Investments, Philex, DMCI and AGI.  There was also profit-taking on non-index stock ORE. 

On the other hand, Lepanto “A” and “B” (particularly A, which is only for local investors) continued to rise. EDC, Manila Mining A and B, Boulevard, BDO, Ni Hao, San Miguel Corp., Aboitiz Power, Metrobank and Security Bank also gained in heavy trade. 

BANCO DE ORO UNIBANK, INC. 

Jonathan Ravelas

Chief Market Strategist

(632) 858-3145 

Morning Brief: 24 August 2011

Central bank sees inflation abating  THE BANGKO SENTRAL ng Pilipinas (BSP) sees less pressure on inflation now than in previous months with commodity prices easing due to a weak global economy, and authorities are concerned about protecting domestic growth.  The BSP is closely monitoring capital inflows and liquidity given signs of a buildup in portfolio flows and credit growth but there are no indications of any asset price bubbles, Assistant Governor Cyd Amador told Reuters in a telephone interview. "At the very top of policy agenda continues to be inflation management, but we are mindful of the impact of our policy actions on growth," Ms. Amador said.  "Inflation pressures seem to have been abating a bit primarily because of the weak global outlook," she added. Central bank Deputy Governor Diwa C. Guinigundo, meanwhile, said in a text message: "monetary policy will remain flexible in promoting price stability without constraining output growth". The "shockwaves" of a possible global downturn, he said, will be faced with a "resilient economy, strong external payments position, sound banks and better fiscal picture ... We have therefore greater policy space in ensuring macroeconomic balance." Analysts said the BSP was likely to keep its policy rate at a two-year low of 4.5% at its next meeting on Sept. 8, two days after the release of August inflation data, but it may impose non-rate measures to dampen liquidity.  Radhika Rao at Forecast Pte in Singapore said the US Federal Reserve’s decision to maintain an accommodative policy bias well into 2013 and the moderation in global commodity prices would help temper Philippine inflation.  "The BSP can enjoy the luxury of maintaining status quo on the rates front," she said. "However, the scope of non-rate and directed measures have indeed risen in light of acceleration in M3 (money supply) prints and pressured bond yields."  The central bank raised rates by a total 50 basis points at policy reviews in March and May, then increased bank reserve requirements in June and July by 2 percentage points in all, as its focus shifted to managing liquidity.  Officials have said they no longer think inflation could top 5%, with the peak expected to hover around 5% sometime in the fourth quarter. Annual inflation was 4.6% in July, steady from June. The BSP said in July that inflation this year could average 4.7%, within its 3-5% goal.  The surge in capital inflows to emerging markets was a challenge facing central bankers in the near term due to fiscal uncertainties in the United States and Europe, Ms. Amador said.  "The challenge is not just to manage short term flows, but also to shape the economy in such a way that it can efficiently absorb these flows towards longer term and more productive investments," she said.  Manila is targeting growth of 7-8% this year, after a 7.6% expansion in 2010, but economists in a Reuters poll expect growth to slow to 5.4%. The BSP has said it was not considering capital controls, but it was monitoring closely activities in the non-deliverable forwards (NDF) market-dollar-based offshore derivatives-to check if they were being used for speculation.  Ms. Amador said authorities were reviewing all policy tools and regulations to arrest any signs of possible imbalances or excessive credit or liquidity growth.  "You need to act well before those crop [up], otherwise you have limited room to maneuver," she said.  Latest data show net portfolio inflows as of August 5 at $2.8 billion, over four times above year-ago levels. Money supply in June climbed 11.4% from a year ago, the fastest in 14 months, with the seasonally adjusted monthly money supply growth of 2.7% the highest so far this year. -- Reuters with a report from N. J. C. Morales

U.S. Stocks Rally on Stimulus Speculation  U.S. stocks rallied, driving the Standard & Poor’s 500 Index up from the cheapest valuations since 2009, as weaker-than-estimated economic data reinforced optimism the Federal Reserve will act to spur growth. Monsanto Co. (MON), Chevron Corp. (CVX) and Microsoft Corp. (MSFT) added at least 3 percent, pacing gains in companies most-tied to the economy. The Morgan Stanley Cyclical Index rose 2.9 percent, breaking a five-day losing streak. Sprint Nextel Corp. (S) jumped 10 percent, the most since May 2010, after the Wall Street Journal said it will start selling Apple Inc.’s iPhone. Financial shares reversed losses after the Federal Deposit Insurance Corp.’s list of “problem” banks shrank for the first time since 2006. The S&P 500 rose 3.4 percent to 1,162.35 at 4 p.m. in New York, for the biggest rally since Aug. 11. All 10 industries in the benchmark gauge rose, with gains ranging between 1.8 percent and 4.6 percent. The Dow Jones Industrial Average added 322.11 points, or 3 percent, to 11,176.76. Treasury 2-Year Notes Sell at Record Low Yield; 30-Year Bond Yield Rises The Treasury sold $35 billion of two-year notes at a record low yield of 0.22 percent as investors continue to seek the world’s safest securities as a refuge from financial market turmoil and a slowing economy. U.S. 30-year bonds dropped as stocks rose. Yields on Treasuries were at almost record lows amid speculation Federal Reserve Chairman Ben S. Bernanke may signal on Aug. 26 that policy makers are willing to take further measures to prevent the U.S. economy from returning to recession. The note auction was the first of the maturity to be sold after Standard & Poor’s on Aug. 5 downgraded the U.S. AAA long-term sovereign rating. “Obviously, there’s still a bid for fixed-income securities,” said Paul Horrmann, a broker in New York at Tradition Asiel Securities Inc., an interdealer broker. “The ramifications of this rating doesn’t do much. We have plenty of money. There’s lots of cash on the sidelines.” Yields on benchmark 10-year notes rose five basis points to 2.15 percent at 5:01 p.m. in New York, according to Bloomberg Bond Trader prices. The yield reached as high as 2.16 percent. The 2.125 percent securities maturing in August 2021 fell 13/32, or $4.06 per $1,000 face amount, to 99 3/4. The current two-year note yield rose one basis point to 0.22 percent. The yield on the 30-year bond rose to 3.49 percent, touching the highest since Aug. 18.

Oil Rises a Third Day as Industry Report Shows Decline in Crude Stockpiles  Oil advanced for a third day in New York as investors bet that shrinking U.S. crude supplies indicate that fuel demand will increase in the world’s biggest consumer of the commodity. Futures gained as much as 0.5 percent after the industry- funded American Petroleum Institute said supplies fell 3.34 million barrels to 347 million last week. An Energy Department report today may show inventories climbed for a second week. Prices rose yesterday amid speculation that the Federal Reserve will bolster efforts to stimulate the economy. Crude for October delivery advanced as much as 41 cents to $85.85 a barrel in electronic trading on the New York Mercantile Exchange, and was at $85.71 at 8:42 a.m. Sydney time. The contract yesterday rose $1.32, or 1.6 percent, to $85.44. Prices are 20 percent higher the past year. Brent oil for October settlement gained 95 cents, or 0.9 percent, to $109.31 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract settled at a premium of $23.87 to U.S. futures, compared with a record close of $26.21 on Aug. 19.

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