Weekly Equities Summary and Outlook : August 20 – August 24, 2018

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Equities Summary and Outlook

Outlook. We expect the PSEi to trade around 7,800 amidst the lack of catalysts. There’s an upward bias as Asian markets closed higher yesterday after Federal Reserve Chairman Jerome Powell reassured a gradual approach to raising rates. In China, the central bank announced changes to its methodology for fixing the yuan to support the currency. The Hang Seng Index gained 2.2% day-on-day (d/d) while the Nikkei index gained 0.9% d/d. Meanwhile, the Dow Jones also ended in green, up by 1.01% d/d while the Nadaq gained 0.9% yesterday. Locally, the next market-moving economic release would be the results of August inflation scheduled on September 4.

Market Review. The PSEi gained 182.95 points to 7,766.47, up by 2.4% week-on-week (w/w), tracking regional markets. Asian markets were up by at least 0.8% (except Singapore) w/w while the Dow Jones and S&P were also up by 0.5% and 0.9%, respectively. From its peak of 9,058 in January, the market was down by -14.3%.

• Year-to-date (YTD), the PSEi was down -9.3%, still the second worst performing market in the region next to China at -17.5%. W/w, the PSEi was second top gainer next to Indonesia’s 3.2% gain.
• Average daily value traded increased to P6.7b from P5.3b (week ending Aug. 17) but still below the YTD average of P7.1b. Last week, 51% of the trading participants were foreigners.
• PHP was flat w/w at P53.37/$, down by 0.1%. The peso was still the second worst performer in the region, down by -7.1%, next to Indonesia (-7.9%).
• Foreigners were net sellers last week with total amount of sale at P492m. YTD, total net foreign selling stood at P74.5b. Foreigners’ top buys for the week were ALI, GLO, JFC, SMPH and URC (P1.7b) while the most sold stocks were BDO, MBT, GTCAP, SCC and SM (P1.3b).
• YTD index gainers were SMC (+54%), JFC (+14%), MER (+11%), GLO (+5%) and SMPH (+3%) while the biggest losers were GTCAP (-30%), MPI (-27%), MBT (-25%), JGS (-24%) and AEV (-23%). W/w, the top gainers were SMC (+16%), SMPH (+7%), URC (+7%), AGI (+6%) and JFC (+6%) while the losing stocks were MEG (-5%), MBT (-3%), GTCAP (-3%), SCC (-3%) and LTG (-1%).

Economic News

The National Government deficit for July was at P86.4b, 71.8% higher y/y on the back of a 34% increase in nominal spending and a 24% increase in revenue generation. This brought January to July deficit to P279.4b, higher by 36% from the same period last year. Revenues from January to July amounted to P1.7trn, higher by 21% versus last year and equal to 58% of the government’s target. Meanwhile, expenditures for the same period were higher by 23% y/y to P1.9trn on higher allotment to LGUs (+10.3%), interest payments (+7.2%) and subsidy (+33.5%). The government’s target deficit for FY2018 is at 3% of GDP.

Tourist arrivals in July rose by 5.86% to 601,322 y/y bringing January to July 2018 tourist arrivals to 4.31m, up by 9.74%. The top tourism market of the Philippines was South Korea with 937,227 tourists (+1.1% during the same period last year), accounting for 21.76% (lower than 23.6% in Jan-July 2017) of total arrivals. The main driver was China, up by 40% to 764,094 tourists due to warmer relations with Beijing and lifting of its travel ban to the Philippines. This was equal to 17.7% of total tourist arrivals, 3ppts higher than last year’s contribution of 12.7%. United States was third with 649,496 arrivals, up by 8.3% and equal to 15.1% of total. Japan and Australia came in next with 366,649 and 161,077 tourists, respectively, up by 7.4% and 6.7%. Cumulatively, the two markets accounted for 12.2% of total arrivals. The Department of Tourist believes it can hit or surpass its target of 7.4m tourists arrivals by year-end as it rolls-out a new campaign and as Boracay reopens on October 26.

Corporate News

Aboitiz Power (AP) announced last Friday the signing of a Geothermal Resources Supply and Services Agreement with the Philippine Geothermal Production Company, Inc (PGPC) for drilling and supply of steam of new production wells in Tiwi and MakBan Geothermal Complex. Under the agreement, PGPC will drill 12 new production wells over a 6-year period to increase steam by 20%.

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