Weekly Equities Summary and Outlook : April 22 – April 26, 2019

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Equities Outlook

Outlook. Standard & Poor’s (S&P) raised the Philippines sovereign credit rating from BBB to BBB+ with stable outlook. Thus, PSEi may rally and easily break above 8,000 on account of the credit rating. The market will also take its cue from the April inflation print and earnings results this week from Metro Pacific Investment Corp., Integrated Micro-Electronics, Inc., Aboitiz Power Corp. and Aboitiz Equity Ventures, Inc. (May 2).

On the domestic front, BSP Governor Benjamin Diokno said he expects GDP growth of more than 6% in the first quarter of 2019 despite the 2019 budget approval delay.

Market Review. PSEi up 0.37% to close yesterday at 7,897.02. Last week, the Philippine market rose 0.4% week-on-week to close on Friday at 7,868.3, failing to climb to the 7,900 level, as investors stayed cautious of the U.S.-China trade talk.

Market Flows. Net foreign buying picked up significantly at P3.4 billion, resulting in YTD tally of P42.6 billion.

Regional Markets. Except for Taiwan (+0.3%), Singapore (+0.2%), Malaysia (+1.1%), and Philippines (+0.4%), all Asian markets were losers last week led by China (-4.3%), Korea (-3.0%), and Indonesia (-1.7%). Year-to-date (YTD), China is still the best performer (25.3%) followed by Hong Kong (14.3%) and Taiwan (13.4%).

Currencies. The Philippine peso fell 0.8% week-on-week to close on Friday at P52.19 as investors anticipated the first quarter GDP growth of United States which was 3.2% vs 2.7% expected.

Economic News

Department of Trade and Industry (DTI) reported that Philippines have $12.2 billion worth of investments as President Duterte witnessed the exchange of 19 business agreements with Chinese firms. The investments would be allocated for projects on energy, infrastructure, food, telecommunications, agricultural products, tourism and economic zone and industrial park development. DTI Secretary Ramon Lopez stated that these projects would not only broaden the Philippines’ manufacturing base and increase its exports, but will also help decrease dependence on oil and gas imports and will bring more than 21,000 jobs to Filipinos. The projects are: 1) 250MW South Pulangi Hydroelectric Power Plant, 2) Petrochemical refinery processing plant, 3) agreements to supply agricultural product to Chinese companies, 4) develop economic zones (e.g. fintech hub and financial center and expansion of the Cagayan North International Airport).

Meanwhile, BSP reported inflation forecast to settle within the 2-4% target range in 2019 and 2020. The decline in the forecast path for 2019-2020 can be attributed primarily to the lower-than-expected inflation in Q1 2019 and slower domestic liquidity.

Corporate News

Aboitiz-led Union Bank of the Philippines net income rose by 75% to P2.2 billion in the first quarter of 2019 versus the previous quarter due to higher earning asset base, lower operating expenses (P4.3 billion, down by 12%), and a 70% decrease on provision of losses. UBP’s performance translated to a return on equity (ROE) of 9.6%, return on assets (ROA) of 1.3%, and revenue-to-expense ratio of 1.6x.

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