Friday, January 28, 2011
Philippine Markets: 28 January 2011
28 January 2011
USD/PhP: 44.10 PSEi: 3970.34 - 20.15
USD/JPY: 82.71 PFINC: 898.39 + 1.92
EUR/USD: 1.3705 BDO: 52.40 - 0.65
GBP/USD: 1.5891 BPI: 54.20 - 0.30
PDSTF3M: 3.3096 MBT: 66.60 + 1.30
Prices as of 12:00pm Source: Bloomberg, Reuters
Philippine Interest Rate Outlook
Secondary market rates were lower this week by an average of 76 basis points across the curve as correction sets in the market following expecations that BSP will not raise rates in the near-term. Most likely they will move as early as the second quarter. Other factors that forced a correction was the BTr's decision to reject rates at its latest auction, sending a clear signal to the market that low rates are still here supported by the strong liquidity and assurances from government officials that inflation will remain tame.
This correction has pushed the 3M PDST-F rate from a high of 4.1769 to the week's close of 3.3096, lowery by 82 bps week-on-week, while the 5Y PDST-F also behaved similarly to the 3M PDST-F falling from a high of 6.5269 to the week's close of 5.6058
Continue to expect sideways to upward movements in the week ahead of the January 2011 inflation figures , with the 3M PDST-F ranging between 3.00-4.00 percent levels. While the 5Y PDST-F rate is seen to range between the 5.50 - 6.25 percent.
Philippine Equities Outlook
Local stocks rose 0.49 percent week-on-week to 3970.34 for the first time in three weeks on bargain hunting activities. However, risk aversion resurfaced during the end of the week, reversing most of the week's gain due to lack of market moving news.
Chartwsie, the week's close at 3970.34 implies that the current rally is a mere pullback (as mentioned in the previous week, which may be limited to the 4,000-4,050 levels), a rally above the 4,150 level is needed to counter the current bear sentiment. Failure to see this in the week ahead could signal a resumption of the corrective trend testing the 3,800 -3,850 levels in the near-term.
Philippine Peso Outlook
As of 12:00pm, the local currency rose against the dollar compared to the previous week as the US dollar continued to slide against the major currencies, causing the greeback to perform weaker against emerging market currencies.
Chartwise, this week's movements is viewed as a mere correction of the emerging strong dollar trend against the peso, expect the 43.80-44.00 levels to hold in the week ahead, with an expectation to test the 44.50 in the near-term.. Only a break below the 43.80 levels will entertain further peso strength towards the 43.00 -43.50 levels.
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Morning Brief: 28 January 2011
Fed gives BSP room on rates THE US FEDERAL RESERVE’S decision to maintain its policy rate at near zero supports the Bangko Sentral ng Pilipinas’ (BSP) current stance of keeping its own rates at a record low, the central bank chief yesterday said. "The Fed move relieves some pressure off the consensus that has been building up that the US economy is at a pace of recovery which may lead the Fed to change its policy stance, and the effect of such development on inflation expectations and portfolio rebalancing out of EMs (emerging markets)," BSP Governor Amando M. Tetangco, Jr. said in a text message yesterday. "This is broadly in line with our own assessments and supports our current policy stance." In its final 2010 policy meeting last December 29, the Monetary Board decided to keep overnight borrowing and lending rates at 4% and 6%, respectively, as it noted that the inflation outlook remained favorable. The rates have not been adjusted since July 2009. The Federal Open Market Committee (FOMC), which decides on US monetary policy, kept its benchmark interest rate at 0-0.25% following a two-day meeting that ended Wednesday, saying the economy’s performance supported the policy of keeping rates low. "Information received since the FOMC met in December confirms that the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions," it said in a statement. The FOMC also said it would continue with a plan -- announced last November -- to purchase $600 billion worth of long-term US Treasury securities until the second quarter of the year. Impact BSP Deputy Governor Diwa C. Guinigundo said that while the Fed decision could boost global economic momentum, it could also fuel more capital inflows to emerging markets such as the Philippines. "Short-term impact is to increase risk aversion and induce more FX (foreign exchange) inflows to emerging markets including the Philippines," Mr. Guinigundo said in a text message. "Long-term effect is expected to be more positive. Growth recovery in the US could be boosted, financial markets normalize, such that global prospects could be brighter," he said. "The risk, of course, is the fiscal costs associated with further quantitative easing." Watchful Mr. Tetangco said that while current monetary policy remained appropriate, the BSP would continue to be watchful of external developments. "[W]e continue to be mindful of changes in growth dynamics of our major trading partners, including the US and China, to see if any changes to our own policy stance are necessary," he said. The Monetary Board will next meet on February 10 to discuss policy. Inflation averaged 3.8% last year, hitting the central bank’s forecast and falling within the 3.5-5.5% full-year target.For 2011, the BSP has an inflation forecast of 3.6% and a full-year target of 3-5%. Inflation data for January will be released on February 4. The central bank has said inflation for the first month of the year could fall within a 2.7-3.6% range. -- reports from L. D. Desiderio and Reuters
South Luzon Tollways Corp. (SLTC) said the upward rate adjustment of about 4.5 percent would take effect one minute past midnight on Feb. 1. For class 1 vehicles or private cars, the toll will go up to P2.80 per kilometer from the current P2.68. This means motorists traveling the entire Alabang to Calamba length of the SLEx would have to pay P79 from the current P76. Class 2 or public utility vehicles, particularly buses, would have to pay P159 from the current P152. Trucks, which are class 3 vehicles, would be charged P238 from P228 today. An additional P22, P43 and P65, respectively, would be charged class 1, 2 and 3 vehicles that take the eight-km link between the SLEx and the Southern Tagalog Arterial Road (STAR). SLTC president Isaac David said the new rates would still be an average of 7.58 percent less the rates approved by the Toll Regulatory Board (TRB) late last year. The TRB had approved a 300-percent hike in SLEx toll rates to allow the SLTC, which is a subsidiary of Malaysia’s MTD Capital Berhad, to recover the P14 billion it had spent so far to develop and modernize the roadway. SLTC, however, decided to give motorists a break at the start of the year by raising the rates by only 250 percent. But the company said it would have to gradually raise the rates every month until April to bring the tolls to the approved level. SLTC was originally set to raise its rates in July last year, but was stopped by several court orders and foot-dragging by the regulator. SLTC, which is co-owned by the government through Philippine National Construction Corp., holds the right to manage and operate the SLEx up to 2036. The toll rates at the SLEx before the 300-percent increase was approved were P22 for class 1 vehicles from Alabang to Calamba, P43 for class 2 vehicles and P65 for class 3 vehicles. |
U.S. Stocks Advance on Earnings Reports, Home-Sale Data; Qualcomm Climbs U.S. stocks rose, with the Standard & Poor’s 500 Index gaining a fifth day, as home sales and Qualcomm Inc.’s forecast beat projections, offsetting Japan’s credit downgrade and higher-than-estimated jobless claims. Qualcomm rallied 5.9 percent as the biggest maker of mobile-phone chips benefited from more sales of devices that browse the Internet. An index of car companies in the S&P 500 advanced 2 percent after online researcher Edmunds.com forecast a 17.3 percent jump in the industry’s new sales in January. Netflix Inc. surged 15 percent as profit topped projections. Microsoft Corp. increased 0.3 percent after its quarterly results were released before exchanges closed. The S&P 500 rose 0.2 percent to 1,299.54 at 4 p.m. in New York. The index has gained 1.5 percent over its five-day advance. The Dow Jones Industrial Average added 4.39 points, or less than 0.1 percent, to 11,989.83.
Treasury notes and bonds gained after the U.S. sold $29 billion of seven-year notes at a yield lower than the one forecast by the primary dealers that are required to bid on the securities. The gap between U.S. 2- and 30-year yields had widened to almost a record, indicating investors are demanding greater compensation for the risk of rising inflation. “The Treasury’s actions have given the bill market a bid, as there will be somewhat less issuance in the front end,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of 18 primary dealers that trade with the Fed. “We are still seeing a steeper curve, and the steepness should stay with us. Investors have been shunning longer-dated debt in favor of the short as inflation concerns have begun to crop up.” Rates on one-month bills dropped as much as three basis points, the most on an intraday basis since Dec. 20, to 0.11 percent. They traded at 0.13 percent at 5:05 p.m. in New York, down two basis points, according to BGCantor Market Data. Three- month bill rates fell as much as two basis points, the most since Dec. 29, to 0.14 percent. One basis point equals 0.01 percentage point. The yield difference, or spread, between 2- and 30-year Treasuries widened to as much as 4.016 percentage points before trading at 3.991 percentage points. It reached 4.018 percentage points on Jan. 20, the steepest slope to the so-called yield curve since Bloomberg records on the data began in 1977. It was 2.995 percentage points in August. |
Oil Falls to Eight-Week Low in N.Y. After Jobless Claims Rise Crude oil fell to an eight-week low in New York, and slid to a record discount versus London’s Brent, as a bigger-than-forecast gain in U.S. jobless claims bolstered concern that the economy will be slow to recover. Futures dropped 1.9 percent after Labor Department figures showed applications for jobless benefits rose 51,000 to 454,000 last week. Orders for U.S. durable goods decreased in December. “The market has just collapsed,” said Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania. “The economic numbers today were horrendous. We’ve had one bearish headline after another since last week.” Crude oil for March delivery tumbled $1.69 to $85.64 a barrel on the New York Mercantile Exchange, the lowest settlement price since Nov. 30. Futures are up 16 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
Thursday, January 27, 2011
Morning Brief: 27 January 2011
Oil firms urged to cut diesel prices P1/liter discount for public utility drivers MANILA, Philippines—The Department of Energy is urging local oil companies to provide fuel discounts to public utility drivers to help cushion the impact of increasing oil prices on transport fares. Energy Undersecretary Jose Layug Jr. confirmed Wednesday that the DOE was in talks with Petron Corp. and Pilipinas Shell Petroleum Corp. on a possible discount of as much as P1 a liter for diesel. “We are already finalizing this. We expect that by next week, we could already start implementing the discounts,” Layug explained. However, he did not indicate the duration of the discounts as the parties were still threshing out the details of the program. A special lane would again be opened to public utility drivers specifically for this program, he added. Petron chairman Ramon S. Ang confirmed in a text message that the country’s biggest oil refiner and retailer would support the government discount program, but did not indicate the amount it was willing to provide. Pilipinas Shell confirmed that its Pepeng Pasada discount for jeepney drivers would be increased to P1 from the current 50 centavos per liter in selected stations. Prices of local petroleum products have been on an uptrend, with local firms implementing oil price increases five times since the middle of December last year. As of January 25, the price of diesel has risen to P41.60 a liter, regular gasoline to P49.64 a liter, and E10 gasoline to P53.52 a liter, according to the latest DOE oil monitor report. The same report showed that the price of Dubai crude rose $0.35 a barrel during the January 17-21 period compared with the previous week’s level. Prices of gasoline, diesel and kerosene, based on the Mean of Platts Singapore benchmark, similarly rose by $1.30 a barrel, $2.05 a barrel and $2 a barrel, respectively, during the same period compared with its averages in the previous week. According to the report, the fresh round of increases could be attributed to the demand forecasts released by the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA). “OPEC said it now expects world oil demand growth of 1.2 million barrels a day, or 1.4 percent, to 87.32 million barrels a day for 2011, referring to the magnitude and speed of the world economic recovery. On the other hand, the Paris-based IEA predicted oil demand this year to rise to 89.1 million barrels a day, up from 87.7 million barrels a day in 2010. Last month, IEA forecast oil demand to hit 88.8 million barrels a day,” the DOE report stated. “While world oil prices have also been driven by high oil demand in China, the move of the government of China to combat inflation is somehow keeping oil prices in check,” it added. The bourse yesterday formally launched its renamed PSEtrade system -- operational since July last year -- and its top official said that next in line would be linking up with five Association of Southeast Asian Nations (ASEAN) counterparts. "In the plan, by the end of the year you will have a system up and running with at least three participants. Others will come in 2013 and 2014," PSE President and Chief Executive Hans B. Sicat said in a briefing. The initial phase of the ASEAN electronic trading link will involve Singapore, Malaysia and Thailand, Mr. Sicat said, adding: "We look forward to [joining] early next year then Vietnam and Indonesia [will follow]." Representatives of the six exchanges finished a three-day meeting last Tuesday, he said. In February 2009, the PSE, Singapore Exchange, Bursa Malaysia, Stock Exchange of Thailand and the Indonesia Stock Exchange said the e-trading link -- which would also include the HoChiMinh Stock Exchange -- could go live in 2010. The six bourses signed an agreement in 2008 and at that time Thai officials said trading could begin as early as 2009. No explanation was given for the delay but the Philippines has said the tie-up would increase liquidity and boost investor participation in the local stock exchange. "There will be the ability where all stocks listed on the PSE will be bought by other people within ASEAN with ease," Mr. Sicat said. PSEtrade is the new name of the Nouveau Systeme de Cotation or NSC that was adopted last July 26. It replaced the Maktrade system that dated back to the unification of the Manila and Makati stock exchanges’ trading operations 15 years ago. "When the ASEAN linkage comes on board, we can say our system will be able to communicate with that ASEAN trading platform, something which would not happen with Maktrade," Mr. Sicat said. In another development, the PSE yesterday also announced that its board had elected former Trade Secretary Jose T. Pardo as independent director effective yesterday. Mr. Pardo was also appointed as chairman of the bourse’s Corporate Governance Committee. "He is a highly respected person in both the private and public sectors whose extensive professional experience will help push the PSE’s initiatives towards corporate governance forward," PSE Chairman Cornelio T. Peralta was quoted as saying in a statement. The PSE has 253 listed firms and 133 active trading participants. |
U.S. Stocks Rise as Dow Tops 12,000 on Fed Statement, Home Data U.S. stocks rose, sending the Dow Jones Industrial Average above 12,000 for the first time since June 2008, after the Federal Reservemaintained stimulus measures and new-home sales topped projections. Lennar Corp. and Standard Pacific Corp. rallied at least 2.1 percent. Alcoa Inc. and Schlumberger Ltd. advanced more than 2.2 percent as commodities prices climbed. DeVry Inc., the owner of for-profit schools, jumped 13 percent after profit beat analysts’ estimates.Boeing Co. slumped 3.1 percent after forecasting 2011 profit that trailed projections. The S&P 500 gained 0.4 percent to 1,296.63 at 4 p.m. in New York, rallying a fourth straight day. The Dow Jones Industrial Average added 8.25 points, or 0.1 percent, to 11,985.44 and reached 12,020.52 earlier. “I don’t know what more the stock market could have hoped for,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion. The Fed continues “to address the two pillars that guide monetary policy: inflation and employment, and they’re both under what the Fed would like to see. The Fed is going to maintain this course until the economy is well in a recovery.” The S&P 500 rallied for a fourth straight day and has climbed 24 percent since Fed Chairman Ben S. Bernanke said on Aug. 27 that he would take action to boost the economy. Among 120 companies in the index that have posted quarterly results since Jan. 10, 88 beat the average analyst earnings estimate, according to data compiled by Bloomberg. Since Jan. 21, SunTrust Banks Inc. and KeyCorp -- lenders based in Atlanta and Cleveland, respectively -- more than doubled forecasts, the biggest positive surprises.
Government securities dropped earlier after sales of new homes rose more than forecast in December and the U.S. sold $35 billion of five-year notes. Ten-year Treasury Inflation- Protected Securities show bondholders expect the consumer price index to increase 2.28 percentage points a year on average over the life of the debt, compared with a 1.7 percent rise forecast for this year by economists surveyed by Bloomberg News. “The $600 billion is going to continue,” said Richard Schlanger, who helps invest $20 billion in fixed-income securities as vice president at Pioneer Investments in Boston. “The focus is on the high unemployment rate, and until that dissipates a little bit, I think it is full speed ahead with their program.” Benchmark 10-year note yields climbed eight basis points, or 0.08 percentage point, to 3.42 percent at 5 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent securities due in November 2020 fell 21/32, or $6.56 per $1,000 face amount, to 93 14/32. Thirty-year bonds yielded 4.59 percent, up 10 basis points. They increased as much as 12 basis points, the most on an intraday basis since Jan. 5. |
Oil Rises on U.S. New Home Sales Gain, Federal Reserve Outlook Crude oil climbed as new-home sales in the U.S. beat forecasts and Federal Reserve policy makers agreed to keep stimulus measures to bolster the U.S. economy. Futures increased 1.3 percent and equities rose after the Commerce Department said purchases of new homes surged 18 percent in December. The Fed reiterated today that $600 billion in debt purchases in its quantitative-easing program are needed through June. Oil dipped briefly after the Energy Department reported a larger-than-forecast gain in supplies. “A bit of economic bullishness can make a big difference in the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There was nothing bullish in today’s inventory report.” Crude oil for March delivery rose $1.14 to settle at $87.33 a barrel on the New York Mercantile Exchange. It was the biggest increase since Jan. 11. |
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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