Friday, January 14, 2011
Philippine Markets: 14 January 2011
14 January 2011
USD/PhP: 44.23 + 0.08 PSEi: 4132.04 + 61.93
USD/JPY: 82.51 PFINC: 929.29 + 14.99
EUR/USD: 1.3394 BDO: 56.00 + 0.20
GBP/USD: 1.5843 BPI: 57.75 + 1.75
PDSTF3M: 1.1519 MBT: 65.70 + 1.00
Prices as of 4:00pm Source: Bloomberg, Reuters
Philippine Interest Rate Outlook
Secondary market rates moved sideways week on week as investors await full year 2010 budget deficit figures towards the end of the month. Market players expect the 2010 PH annual deficit to be lower than its full year target of PhP325bn.
Rising inflation expectation, arising from an increase in commodity prices has caused some upward pressure on the rates.
Expect interest rates to move sideways next week.
Philippine Equities Outlook
Local stocks dropped 1.68 percent week-on-week to 4132.04 as profit-taking activities took place amidst lack of market moving news. Inflation concerns also gripped the market as transport and food prices continue to creep up. However, bargain hunting activities appeared near the 4,000 levels caused the market to close week off the lows.
Chartwise, the week’s close at 4132.04 suggests test of 4,200-4250 levels in the near-term. Failure for the market to clear the said levels in the week ahead could call for a re test of the 4000 levels.
Philippine Peso Outlook
The local currency lost 0.18 percent week-on-week to 44.23 despite dollar weakness against major currencies as demand for the greenback rose on rising commodity prices. The currency continued to trade between 43.50-44.50 range since November 2010.
Chartwise, continue to see the currency to test the 44.50 levels in the near-term. Only a decisive break below the 43.50 levels will encourage tests towards the 43.00 levels
Morning Brief: 14 January 2011
World Bank sees PH economy growing by 5-5.4% By Michelle Remo
In its latest publication, “Global Economic Prospects 2011,” the World Bank has set its growth forecast for the Philippines for this year and next at a range of 5 to 5.4 percent. This is slower than its 6.8 percent growth projection for the Philippines for 2010. “Crucial to this projection is the assumption that strong investor confidence, manifested in strong private investments and (favorable) consumer sentiment surveys, would be sustained by the government’s efforts to step up reforms in governance and to improve overall investment climate,” Eric Lee Borgne, senior economist of the World Bank for the Philippines, said during the launch of the publication on Thursday. The World Bank expressed confidence that domestic investments would sustain this year the rare increase seen last year. Also, the multilateral institution expects remittances to continue growing in 2011, which will fuel the growth in household consumption. The World Bank sees robust expansion of the business process outsourcing industry as foreign direct investments in this sector are seen to continue coming in. The latest government report showed the Philippines growing by 7.5 percent in the first three quarters of 2010 over the year-ago level. This was the fastest seen in three decades and was driven partly by remittance-fueled consumption, government spending and domestic investments. The growth last year was a sharp acceleration from the 1.1 percent increase registered in 2009. A peculiar driver in 2010 was domestic investments, or fixed capital formation, which registered an 18.2 percent growth in the first three quarters. Government spending last year, however, was unusually high because of the national elections.
Central bank Governor Amando M. Tetangco, Jr. pointed to increased investor sentiment as behind the result, which was far greater than $402.2-million net inflow recorded in the comparable 2009 period. The tally accounts for flows of "hot money" -- funds which can be easily invested or pulled out of a country -- as of Dec. 24, the BSP data showed. A net inflow of $388.02 million was posted in 2009. The BSP expects the 2010 tally to hit $2.9 billion. Gross inflows for the period amounted to $12.848 billion, more than twice the $6.284 billion a year earlier. Gross outflows hit $8.245 billion, up from $5.882 billion. Foreign funds have been flooding emerging markets due to continued weakness in western countries. "The hefty rise in portfolio inflows is really due to improved investor sentiment towards the Philippines," Mr. Tetangco said in a text message. "As [countries like the Philippines]... continue to outperform advanced economies, it is reasonable to expect that more flows will find their way to emerging market economies." -- L. D. Desiderio |
Stocks in U.S. Decline as Jobless Claims Data Overshadow Earnings Optimism U.S. stocks fell, sending benchmark indexes lower for the first time in three days, as jobless claims climbed more than economists estimated and concern about a slowdown in Chinese demand dragged down commodity producers. Alcoa Inc. and ConocoPhillips dropped at least 2.1 percent following a decline in commodities prices after the World Bank said Chinamay raise interest rates further. Merck & Co. slid 6.6 percent, the biggest drop in the Dow Jones Industrial Average, as a trial for a blood-thinner drug was halted. Bank of America Corp. fell 1.5 percent after the lender was removed from Citigroup Inc.’s “Top Picks Live” list. The Standard & Poor’s 500 Index retreated 0.2 percent to 1,283.76 at 4 p.m. in New York after yesterday rising to the highest since August 2008. The Dow average decreased 23.54 points, or 0.2 percent, to 11,731.90. The difference between 2- and 30-year yields widened to a record as investors demand higher compensation against inflation as the economic recovery gains traction. Treasuries pared earlier gains after the bonds sold today yielded 4.515 percent, higher than the average forecast in a Bloomberg News survey of the Fed’s 18 primary dealers. “It’s the Fed that’s buying the market,” said Thomas Tucci, head of U.S. government bond trading at Royal Bank of Canada’s RBC Capital Markets unit in New York, which as a primary dealer trades directly with the central bank. “In December, the dealer community had securities on their books that are now gone.” The yield on the 30-year bond declined four basis points, or 0.04 percentage point, to 4.49 percent at 5:26 p.m. in New York, according to BGCantor Market Data. It dropped as much as seven basis points in the hour before the auction, then erased the decline before falling again. The price of the 4.25 percent security due in November 2040 rose 21/32, or $6.56 per $1,000 face amount, to 96. Ten-year yields slid seven basis points to 3.30 percent, and two-year yields fell two basis points to 0.58 percent. |
Crude Oil Falls From Highest Level in 27 Months as Jobless Claims Increase Crude oil fell from the highest level in 27 months as a bigger-than-forecast increase in U.S. jobless claims signaled that demand will be slow to rebound. Oil dropped 0.5 percent after the number of first-time claims for unemployment insurance payments jumped to the highest level since October in a Labor Department report. Demand for petroleum products has tumbled 8.2 percent in the past two weeks, according to the Energy Department. “The jobless claims are making people marginally bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. Oil for February delivery fell 46 cents to settle at $91.40 a barrel on the New York Mercantile Exchange. Yesterday, futures closed at $91.86, the highest level since Oct. 3, 2008. Prices have risen 15 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
Thursday, January 13, 2011
Morning Brief: 13 January 2011
Food crisis feared in ’11 due to tight supply By Ronnel Domingo Philippine Daily Inquirer MANILA, Philippines—Weather shocks as well as supply and demand uncertainties may trigger another full-blown Asian food crisis this year and push up Philippine consumer prices by 1.5 percentage points, according to financial services firm Credit Suisse. Taking off from National Statistics Office (NSO) data, this would mean that the inflation rate may jump to about 4.5 percent by the middle of the year, from 3 percent year-on-year in December. In a nine-page report on Asian inflation, Credit Suisse said a repeat of the crisis seen in most of Asia in 2007 and 2008 “cannot be ruled out.” “In the worst case scenario, we assume that the UN Food and Agriculture Organization food price index rises by a further 30 percent from [present],” the company said. The report, penned by Santitharn Santhirathai and Wu Ku Lung, noted that non-Japan Asia’s (NJA) food price inflation in November 2010 was at its highest level in the past decade, except for 2007-08 when global food prices spiked to extraordinary heights. “As such, it is no wonder that food price inflation is among the top concerns on investors’ minds,” the paper added. “Recent flooding in rice exporting economies … and food inflation problems in China have led many investors and analysts to wonder whether the NJA economies are heading towards another food price crisis, similar to the one in 2007-08,” Credit Suisse said. Credit Suisse said it expects grain prices to rise by another 13 percent to 14 percent in 2011 from levels seen in the fourth quarter of 2010, which would translate into about an 8-percent to 9-percent increase in NJA food prices in local currency terms. The firm added that, based on this scenario, food inflation in Asia outside Japan might rise to about 15 percent by mid-2011, translating to an additional 1.5 percentage points to inflation rates. According to the NSO, the inflation rate for food alone—which accounts for about half of the overall inflation rate—remained at 2 percent in December.
MERCHANDISE EXPORTS growth was at its slowest so far for 2010 last November but the month’s results were enough to top the full-year target, fueling optimism for 2011. Outbound shipments rose by 11.2% in November to $4.14 billion from a year ago, the government reported yesterday. This brought aggregate merchandise exports for the 11 months to $47.22 billion, up by 34.5% from last year’s $35.12 billion and surpassing the government’s 2010 target of $43.1 billion or a 15% growth. Month on month, exports declined by 13.4% from October’s $4.78 billion, data from the National Statistics Office (NSO) showed. Exports had grown by 27.4% the previous month. The November growth rate, however, was faster than the 5.8% recorded in the same month last year. Experts said the slowdown was expected due to seasonal trends. University of Asia and the Pacific (UA&P) economist Peter Lee U said, "November to December is the peak sales season [overseas], so most products have been exported from here before that period." Amid the continued growth, the government said it would review targets for 2011 once full-year economic data for 2010 become available. In a telephone interview, National Economic and Development Authority (NEDA) Deputy Director-General Augusto B. Santos said, "Our performance is good despite the perceptively weak global economic recovery [last year]." "Given the good showing, it (exports growth) may exceed 15% for 2011; in that case we may have to review the macroeconomic targets of the government," he added. Myrna Clara B. Asuncion, acting director for policy and planning at the NEDA, said the 13% export growth target for 2011 could be revised when fourth-quarter data come in next month. Industry officials, for their part, said growth would be modest in 2011. Sergio R. Ortiz-Luis, Jr. , Philippine Exporters Confederation, Inc. (Philexport) president and Export Development Council (EDC) vice-chairman, said in a telephone interview: "We have been saying that chances are high that growth targets will be exceeded. We are already levelling up to pre-crisis levels, where we hit our highest numbers." "This (the November exports data) is a preview of what we will have in 2011, which is a more modest growth of around 11%," he added. Arthur S. Young of the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) said in a separate telephone interview: "We do expect that we are well within the 30% range." Both the SEIPI and Philexport maintained their 2010 growth targets at 25-30% and 20%-25%, respectively. Asked for a growth forecast for 2011, Mr. Young said: "It’s a little premature to arrive at a concrete number. But we believe growth for 2011 is at around 10%, as we are back to seasonal trends." "We expect a slow start in the first quarter and things to pick in the second to third quarter of 2011," he added. Mr. Ortiz-Luis said the EDC had set an export growth target of 11% for 2011. Electronics grew by 8.5% and remained the country’s top export earner in November, generating $2.33 billion in sales or 56.4% of the total. Growth was driven by semiconductor sales which went up by 19.6% to $1.72 billion in November. Apparel and clothing accessories, which accounted for just 3.3% of the total, followed with $138.20 billion in sales, up by 2.4%. The biggest gainers were gold, which went up by 208.5%; petroleum, 176.1%; and coconut oil, 118.5%. Exports of woodcraft and furniture grew by more than half to $134.22 million. According to the NEDA’s Ms. Asuncion, the main growth drivers in November were "upward shipments for manufactured goods, primarily semiconductors, and petroleum products." Experts expect rising world demand for electronics and semiconductors to continue supporting the country’s exports industry. "The outlook for exports... is good because of bright prospects for electronics," UA&P economist Cid L. Terosa said. "Exports will be one of the main drivers of the economy aside from remittances," he added. Mr. U said the "world economy is growing," enhancing the prospects of the country’s export industry. Japan was the top export destination for the month with revenues amounting to $668.27 million, up by 7.72% from a year earlier. China came in second with $652.76 million, up by nearly 180%, followed by the United States with $488.62 million. |
U.S. Stocks Climb on Banks Upgrade, Europe's Effort to Resolve Debt Crisis U.S. stocks rose, sending benchmark indexes to the highest since August 2008, as Wells Fargo & Co. raised its rating for large banks on prospects for higher dividends and amid speculation Europe will step up measures to control its crisis. Bank of America Corp. and Citigroup Inc. gained at least 2 percent. JPMorgan Chase & Co. added 2.6 percent after Chief Executive Officer Jamie Dimon told CNBC that he would like to boost the company’s dividend. Canada’s Consolidated Thompson Iron Mines Ltd. soared 33 percent after Cliffs Natural Resources Inc. agreed to buy the company for about C$4.9 billion ($4.95 billion). Nvidia Corp. jumped 15 percent after Oppenheimer & Co. predicted a “good year” for the industry’s earnings. The Standard & Poor’s 500 Index rose 0.9 percent to 1,285.96 at 4 p.m. in New York, the highest since Aug. 28, 2008. The Dow Jones Industrial Average increased 83.56 points, or 0.7 percent, to 11,755.44.
Government securities had slumped earlier on speculation European officials are stepping up efforts to solve the region’s debt crisis, damping demand for the refuge appeal of U.S. debt. Indirect bidders, a class of buyers that includes central banks, bought 53.6 percent of the notes today, compared with an average of 44.5 percent in the last 10 sales. The Federal Reserve said it would buy $112 billion of debt during the next four weeks under the next round of its quantitative easing program. “Yields are better than they have been,” said Thomas Simons, a government debt economist in New York at Jefferies Group Inc., one of 18 primary dealers that trade Treasuries with the Federal Reserve. “The foreign bid has come back to some degree.” The yield on the 10-year note rose three basis points, or 0.03 percentage point, to 3.37 percent at 5:05 p.m. in New York, according to BGCantor Market Data. It touched as high as 3.41 percent. |
Oil Rises to 27-Month High After U.S. Supplies Decline, Equities Increase Oil climbed to a 27-month high after supplies dropped more than forecast and the Standard & Poor’s 500 Index increased on signals European officials are stepping up efforts to solve the debt crisis. Futures increased 0.8 percent after the Energy Department said stockpiles fell 2.15 million barrels to 333.1 million last week, the lowest level since February. Inventories were forecast to decrease by 1.4 million barrels, according to a Bloomberg News survey. The S&P 500 rose above its highest close since August 2008 as European leaders consider aid for Portugal. “It was a big drop in crude-oil stocks, but not out of bounds of expectations,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester Massachusetts. “Portugal is likely to see a rescue package, and that’s cause for relief. The European financial crisis has been a major concern for the past year.” Crude oil for February delivery climbed 75 cents to $91.86 a barrel on the New York Mercantile Exchange, the highest settlement since Oct. 3, 2008. Futures are up 14 percent from a year ago. |
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
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