Philippine Markets: 22 July 2011

22 July 2011 

USD/PhP:          42.40        - 0.22                PSEi:             4478.36                        - 1.65 
USD/JPY:           78.63                        PFINC:                   1014.21                        + 7.38 
EUR/USD:         1.4397                        BDO:                  62.50                        + 2.05 
GBP/USD:         1.6285                        BPI:                  59.30                        + 0.70 
PDSTF3M:         2.7312                        MBT:               76.55                        - 1.55 
Prices as of  4:00pm                        Source: Bloomberg, Reuters 



Philippine Interest Rate Outlook 

Secondary market rates moved down by an average of 10 basis points week-on-week as demand for government debt remained robust due to ample market liquidity. However, inflation concerns remain as primary commodities like rice continue to consolidate near their highs.  Investors await June budget data to be released.  Expect interest rates to move sideways next week. 

Philippine Equities Outlook 

Local shares rose 0.44 percent week on week to 4478.36, reaching 4515.77 all time high this week as global equity markets rallied at the back of Greek bailout. European debt concerns dissipated after Euro zone leaders agreed on a comprehensive, long-term program that will help debt-stricken Greece and at the same time prevent contagion in other countries.  Also, US corporate earnings were positively accepted by investors despite weakness in some financials.  However, US debt ceiling problems remains on the background and could trigger profit-taking in the equity markets next week. 

Chartwise, the week’s close at 4478.36 suggests corrective downward movement with initial support at 4,350 – 4,400 levels.  Expect equity market to take a breather after reaching new highs. 

Philippine Peso Outlook 

The local currency rose 1.26 percent week-on-week to 42.40 as weakness of dollar against major currencies like the Euro dominated market sentiment. Also, upbeat sentiment in the equity markets helped peso break 42.50 support level.  The last time we have seen peso trade below 42.50 levels was during May 2008.   

Chartwise, with the break of 42.50 support, expect market to test 42.00 in the immediate term. However, expect exchange rate to take a breather towards 42.70 levels. 

BDO UNIBANK, INC. 

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher 
(632) 858-3001