Outlook. We expect the PSEi to hover around 7,800 with a downward bias amidst concerns on further escalation of the US-China trade spat and emerging market woes precipitated by huge currency sell-off in Turkey and Argentina. On the domestic front, investors will await the August inflation print to be released tomorrow (Sept. 5) that is widely anticipated to hit a multi-year high of 5.9% year-on-year (y/y) from July’s 5.7%.
Market Review. The PSEi fell 23.5 points (0.3% from Friday’s closing) yesterday to end at 7,832.2. Last week, it rose 89 points (+1.1% week-on-week, w/w) to close on Friday at 7,855.7. The local bellwether finished the month of August 183.7 points higher (2.4% month-on-month, m/m), sustaining two straight months of gains, despite disappointing Q2 GDP results and a 50-bp Monetary Board (MB) policy rate hike, and heightened trade tension between the US and China. Year-to-date (YTD), the PSEi trimmed its losses to 8.2%. From the year’s low of 6,987 on June 25, the market has gone up 12.4%.
- Among the Asian markets, India (+13.5%) was the outperformer YTD buoyed by positive sentiment on the country’s robust growth and sustained economic reforms. It was followed by Taiwan (+4%), and Malaysia (+1.3%). Meanwhile, China (-17.6%) was the top laggard due to concerns on trade war and slowing growth. Next was the Philippines (-8.2%) and Hong Kong (-6.8%).
- Net foreign selling slightly eased last week to P415mn from previous week’s P492mn. YTD, net foreign outflows totaled P73.8bn.
- Philippine peso (PHP) closed on Friday at P53.47/$, flat from previous week’s rate. YTD, the PHP depreciated by 6.6%, only the third weakest currency next to Indian rupee (-10%) and Indonesian rupiah (-7.9%).
- Foreign investors bought ALI, SMPH, GLO, SM and BDO last week for an aggregate amount of P2.1bn, while sold GTCAP, MBT, SCC, RRHI, and MEG for a combined total of P1.1bn. YTD, MER, GLO and TEL were the main beneficiaries of net foreign inflows totaling P5.1bn. Meanwhile, foreign investors sold SM, BDO, AC, BPI and ALI amounting to P32bn.
Philippine inflation is expected to accelerate for the eight consecutive month in August with a median consensus at 5.9% year-on-year (y/y) from July’s print of 5.7%. The consensus is in-line with the Bangko Sentral ng Pilipinas’ (BSP) forecast of 5.9% for the month (or within a range of 5.5-6.2%). On a m/m basis, this implies an easing to 0.4% uptick from 0.5% in July and 0.6% in June. BSP attributed the higher inflation in August to faster increases in the prices of rice and key food items due to weather disturbances and supply disruptions, coupled with higher gas and LPG prices and upward adjustments in power rates, especially in Meralco-serviced areas. Meralco rates went up by P0.0265/kWh last month, partly due to rising fuel cost that contract suppliers use. We (house view) expect inflation to hit its peak in August at 6.1% y/y.
BSP reported that growth in domestic liquidity (M3) eased for the second straight month in July to 11% y/y from previous month’s 11.8% (revised). Meanwhile, outstanding loans of commercial banks (net of RRPs) grew at a slightly faster pace of 19.6% y/y in July from June’s 19.1%, boosted by strong lending for production activities (+19.7% y/y from previous month’s +19.2%). However, it was partially offset by the slight slowdown in consumer loans (+16.9% from June’s +17.8%). Loans for production activities were driven by double-digit growth in wholesale and retail trade (+26%), financial and insurance (+36%), real estate (+16%) and manufacturing (+19%). Collectively, these sectors comprised 44% of total loans outstanding. Meanwhile, consumer loans slowed due mainly to the deceleration in motor vehicle loans (+18.1% from +19.9% in June), reflecting the continued decline in vehicle sales which in July hit its largest drop (-24.1% y/y) since February 2018.
Robinsons Retail Holdings, Inc. (RRHI) disclosed yesterday that it had entered into a share purchase agreement with Mitsubishi Corporation for the sale of the latter’s 8% stake in Robinsons Convenience Store, Inc. (RCSI), the exclusive operator of Ministop in the Philippines. The transaction will bring RRHI’s effective ownership in RCSI from 51% to 59%. Mitsubishi Corporation also sold its remaining 4% stake in RCSI to Japan-based partner Ministop Co., Ltd. to bring its ownership in RCSI to 41%. RCSI operates 492 Ministop branches all over the Philippines. RRHI closed yesterday at P82/share, down 14.8% YTD.
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