Equities Summary and Outlook
Market Outlook. We expect the market to trade sideways to lower should the March inflation reading on Thursday proved upward to the consensus estimate of 4.7%, higher than 4.5% in February and the central bank’s estimate of 3.8% to 4.6%.
Market Review. The market traded flat, up by +0.1% to 7,979, following most regional markets (see table of Asian Indices) as investors watched developments on trade war and the US technology sector. After trading within the 7,900 range last Monday, the market slightly rose to 8,047.03, up 1.4% day-on-day last Tuesday, on news that the United States and China are communicating for a softer tone on trade. Quarter-end window dressing also supported the market but was short-lived as the sell-off in the US technology sector (Facebook shares fell 5% in a day upon Mark Zuckerberg’s decision to testify before Congress) spilled over to Asian markets. The index closed weaker in March, down -5.8%, the second worst performer following Indonesia’s -6.2% decline. Year-to-date (YTD), the PSEi was also the second worst performer, down -6.8% next to Japan’s -7.1%. YTD, the top performer was Malaysia at +3.3%.
Foreigners continued to sell Philippine stocks last week with total net foreign selling at Php2.5bn. The most sold stocks were BDO, ALI, SM, ICT and SMPH for a total amount of Php1.43bn while the most bought names were AGI, GLO, JFC, SMC and MPI amounting to Php376mn. Ytd, foreigners bought TEL, JFC, PGOLD, MER and MEG (Php3.93bn) while SM, ALI, AC, BDO and SMPH were the most sold stocks (-Php21.4bn).
Economic Summary and Outlook
Bank lending (net of reverse repurchase) expanded by +19.5% in February year-on-year (y-o-y), faster than the +19.0% growth recorded in January (revised). Month-on-month (m-o-m), commercial bank loans (net) increased by +1.8%. Drivers of loan expansion were:
- Loans for production activities (88.4% of total loans) was up +18.6% in February versus +18.0% the previous month.
- Production loans increased on the back of: real estate activities (+18.1%); electricity, gas, steam and airconditioning supply (+28.5%); wholesale and retail trade, repair of motor vehicles and motorcycles (+18.5%); manufacturing (+10.7%); financial and insurance activities (+15.3%); and, information and communication (+28.8%).
- Partially offset by agriculture, forestry and fishing (-11.4%), and administrative and support services activities (-40.0%).
- Meanwhile, loans for household consumption was at 19.9% lower than the 20.2% recorded in January as motor vehicle loans slowed which offset the growth in credit card and salary loans.
Meanwhile, government debt was up 9.87% y-o-y (versus 9.99% in January 2018) and 1.4% m-o-m in February on a weaker peso. Majority of the debt was locally-sourced at 64.9% of total which declined slightly by 0.021% m-o-m to Php4.4trn on net redemption of government securities amounting to Php1.28bn. The decline in debt was offset by a Php0.36bn increase in onshore dollar bonds value due to peso depreciation. External debt, on the other hand, increased 4.2% m-o-m to Php2.4trn as peso depreciated to Php52.07 from Php51.34 end-January. For 2018, the government expects to borrow more from domestic creditors amounting to a total of Php888.227bn and to set a 74-26% borrowing mix in favor of local source.
GT Capital (GTCAP) FY2017 core net income rose 29% to Php15.0bn from Pp11.7bn in 2016 as consolidated revenues increased 19% to Php239.8bn from Php202.1bn. Chunk of the group’s net income were from the following: Toyota Motor Philippines (+11%, net income) contributed 39.1% to total net income, Metrobank (+10%, core net income) at 34.4% of total, and Metro Pacific Investments (+17%, core net income) at 9.6%. AXA, contributing 3.6%, grew 21% in core net income while the two property companies’ aggregate net income were slightly lower to Php2.1bn from Php3bn in 2016.
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