Philippine Markets: 19 August 2011

19 August 2011 

USD/PhP:          42.64     + 0.13                PSEi:             4339.90                        - 63.64 

USD/JPY:           76.47                        PFINC:                   994.70                        - 15.52 

EUR/USD:         1.4281                        BDO:                  59.00                        - 1.00 

GBP/USD:         1.6481                        BPI:                  58.55                        - 0.70 

PDSTF3M:         2.0115                        MBT:               73.80                        - 2.20 

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

Philippine Interest Rate Outlook 

Secondary market rates fell down by an average of 13 basis points week-on-week as investors ran to the  safety of government debt as volatility continued in the financial markets.  Local market players are expecting monetary board to keep interest rates unchanged during the next policy meeting in September as economic growth could slowdown due to recent events in developed markets.  Expect interest rates to remain on the low side and move sideways in the week ahead.. 

Philippine Equities Outlook 

Local shares bucked the trend and rose 0.42 percent week-on-week to 4339.90 as local investors took the previous week's decline as an opportunity to reenter the market.  The rally was being led by the counters in the mining sector.  Supporting the current market optimism is the low interesr rate environment which is supportive of business expansion, the encouraging 1H corporate results which shows an average growth of 13 percent in income.  However, the market's rally was capped at the 4,400 level toward the end of the week as global market investors shifted to a risk-off mode on lingering concerns on the 'two terrors' (The US and Euro debt woes) 

Chartwise, the week's close at 4339.90 implies that the rally towards the 4,400 levels is viewed as a mere technical rebound.  The next move could carry the market barometer to test the 4050 - 4150 levels in the near-term.  Only a move above the 4,400 levels could shift the near-term bearish sentiment into the neutral to bullish stance. 

Philippine Peso Outlook 

The local currency consolidated this week to close at 42.64 as volatily dominated this week's theme. The currency continues to take its cue to dollar movements against the major currencies especially the euro. 

Chartwise, the week's close at 42.64 remains supportive of a  near-term bounce back to 43.00 levels.  Immediate support and resistance is seen at the 42.50 and 43.00 levels, respectively. 

BDO UNIBANK, INC. 

Jonathan Ravelas

Chief Market Strategist

(632) 858-3145