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Dear Colleagues, Partners and Clients:


We are pleased to release the February issue of The Market Call, as published by the FMIC & UA&P Capital Markets Research.  This is a result of an in-depth analysis on the emerging and leading trends in the global and local markets that have shaped the direction of the Philippine capital markets in the last four weeks.

Here are the highlights of the February issue:


  • Macroeconomy
    The slight slowdown of the economy in Q4 2013 is likely to continue into Q1 2014, as 4-6 months would be needed to bring back the supply chain and incomes closer to normal. Thus, we expect Q1 2014 GDP growth to be even slower at 5.8% to 6.0%.  But continued relief work and reconstruction work getting off the ground beyond Q1 should propel the economy back to its 7% growth path.  While inflation is a concern, it is unlikely to go beyond 4.2% in Q1, but rather ease by Q2 as agriculture recovers and supplies become more adequate.


  • Fixed-Income Securities

2014 started inauspiciously as market players psyched themselves about having to face higher interest rates during the year in the face the Fed’s “tapering” and the acceleration of inflation domestically. Nonetheless, we think the fears may be a bit exaggerated and so there would still be opportunities for savvy bond investors during the year. In the corporate bond space, issuances should accelerate for the rest of Q1 as firms realize that the window for ultra-low interest rates may be over. It would also appear that the issuances will be larger, and that would be good for the secondary market as it would encourage more trading.


  • Equities Market

The month of February could prove to be challenging for the Philippine equity markets. Foreign outflows could accelerate given two risk events; 1.) Continuation of the Fed’s taper process and 2.) MSCI quarterly rebalancing. Foreign inflows have the tendency to be at their weakest or negative during the months of MSCI scheduled rebalancing (i.e. February, May, August and November). On the bright side, while MSCI’s scheduled rebalancing usually creates confusion, it also leads to opportunities. Stocks that experienced a substantial reduction in weight or are deleted from the index tend to perform better a month after the implementation date of the rebalancing. Consequently, we are on the lookout for stocks that mispriced (due to MSCI rebalancing) and prefer to accumulate as it declines.

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