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We are pleased to release the April 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 April issue:

§  Macroeconomy

Inflation in Q2 is likely to fall back to below-3% as crude oil prices trend lower in March, and inventories continue to bulge, while the second crop of rice harvest is quite promising.  Fiscal spending is likely to be robust. Aside from the conventional reason (i.e. election spending), the call of the BSP to boost the demand for dollar may propel the increase in NG spending. The call was made to temper the sharp peso appreciation that has already incurred negative effects on the country’s gross international reserves (GIR).

§  Fixed-Income Securities

The investment grade status of the Philippines may result in a relative increase in portfolio investments, sustaining demand for securities which offer security and decent yields.  The SDA rate may be brought down to the range of 1.5% to 2.5%, across all tenors as the cumulative 100 bps rate cut may have not provided significant effects to reduce continued short term capital inflows. Considering the country’s new investment grade status, there is reason to expect long term capital inflows.

§  Equities Market

Despite the investment grade status, we think the market will suffer setbacks over the next few months. As valuations come to the fore, perception on fair value of Philippine equities would carry the headlines to investors’ strategies. It is important to have rational and process oriented investment approach. In the next 12 months, we remain constructive and will stay focused on opportunities ahead.

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