Philippine Markets: 25 March 2011

25 March 2011

USD/PhP: 43.305 -0.115 PSEi: 3875.81 + 34.27
USD/JPY: 81.000 PFINC: 867.63 + 4.53
EUR/USD: 1.4167 BDO: 50.40 + 0.55
GBP/USD: 1.6110 BPI: 53.80 + 0.10
PDSTF3M: 1.4019 MBT: 62.25 + 0.15
Prices as of 4:00pm Source: Bloomberg, Reuters



Philippine Interest Rate Outlook

Secondary market rates moved lower as market participants had already priced in the 25-bps hike in the Bangko Sentral Ng Pilipinas (BSP) benchmark rates. Rising inflation expectations put pressure on interest rates to rise to combat further rise. The monetary authorites decided late Thursday afternoon to raise its benchmark rates to 4.25 percent from 4.00 percent, marking its first adjustment since July 2009. BSP cited its move as preemptive as they raised their inflation forecast range to 3.00-5.00 percent from the previous 3.00 - 4.40 percent range.

Continue to expect rates to move sideways to up in the near-term while gradual rise is seen over the medium term.

Philippine Equities Outlook

Local shares consolidated this week buoyed by improved sentiments in Wall Street. However, the continued spread of the "unrest" virus in the Middle East and North Africa continued to provide instablity to the region causing oil prices to remain above the US$100/bbl. This uncertainly continues to put a toll on inflation expectations. Thus building a rising global inflation expectations, which could support further tighting in interest rates. This could provide some adjustments in the stock market.

Chartwise, the week's close at 3875.81 continues support further tests toward the 3,700 levels in the near-term. Immediate support and resistance is seen at 3,700 and 3,950 levels, respectively

Philippine Peso Outlook

The local currency rose anew by 0.90 percent week-on-week to 43.305 after the monetary authorities raised its benchmark rates by 25 bps to 4.25 percent. The weaker sentiment on the dollar also contributed to the peso's strength this week.

Chartiwse, the week's close at 43.305 continues to suggest further consolidation between the 43.25 - 44.00 levels in the near-term.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001