The Market Call – September 2012

We are pleased to release the September 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 September issue: •     Macroeconomy We expect a sharp deceleration of economic activity in August but a recovery in September. With the National Government (NG) able to spend more on infrastructures and operating expenses and a slight uptick in the U.S., the slowdown in Q3 will be minor. Meanwhile, Q4 recovery will be robust given election spending in the US and the beginnings of one in the Philippines.  These factors keep us optimistic that GDP growth in Q3 as well as for the whole year would settle at 5.5-6%. •     Fixed-Income Securities Although higher inflation is expected in August and September due to the floods and heavy rains that lowered available supply especially in Metro Manila, we think that based on the Typhoon Ondoy record, prices will normalize by end-September and so inflation rates should be at around 3.5% in the next three months. Because of this, yields across-the-board may have a slight upward bias in the coming month but they should return to their low levels in tandem with the inflation reports. •     Equities Market For the month of September, we focus on three major themes as key drivers: first, the external risk events as central banks continue to try to save the world economy, an ongoing theme since the Lehman collapse; second, earnings result in Q2 were mostly in-line, but company earnings are yet to see a substantial upgrade; finally, much like August, September is usually a weak and low value turnover month for Philippine equities which is further aggravated by seemingly inexhaustible foreign selling.  With these themes in mind, it is best to keep exposures light ahead of the risk events that we expect to emerge this month. Increasing exposure may start once we have clarity on when the Fed and ECB will act. Download it here: THE MARKET CALL (September 2012)