Outlook. The PSEi may trade cautiously above 7,500 this week ahead of the release of the December inflation on January 4 which the market widely anticipates to further decelerate from November’s 6% print and amid Pres. Trump’s announcement over the weekend of positive developments in trade talks with China. Meanwhile, China’s disappointing Caixin PMI manufacturing data for December of 49.7 vs consensus of 50.1, which signals contraction in factory activity for the first time in 19 months, may weigh on the market.
Market Review.. The PSEi traded sideways last week (-13.7 points or -0.2% week-on-week, w/w) to end 2018 at 7,466. For the month of December, the index sustained its second consecutive month of gains, up 1.3% month-on-month (m/m). This trimmed the full year losses to 12.8%, albeit still the bellwether’s worst decline since 2008 when the index dropped by 48.3%. All counters ended the year in the red led by Mining & Oil (-28.7%), Financials (-20.2%) and Holdings (-14.8%).
Market Flows.. Net foreign selling slowed to P1.3bn last week, bringing the full year net outflows to P60.9bn.
Regional Markets... India (+5.9%) was the sole gainer in Asia for 2018, while China (-24.6%), South Korea (-17.3%) and Hong Kong (-13.6%) led the underperformers on the back of brewing US-China trade war.
Currencies.. Philippine peso closed the year at P52.58/$, up 0.5% w/w but down 5.1% for full year 2018. For Most Bought/Sold Stocks, see table in next page.
Bangko Sentral ng Pilipinas (BSP) expects inflation to continue to decelerate in December, clocking in between 5.2-6% year-on-year (y/y). The improvement in inflation is attributed to falling global crude prices, the rollback in jeepney fares and the slight peso appreciation. Notably, average global fuel prices (WTI) dropped by 13.6% m/m in December amid concerns over global supply glut. On the upside, these could be partially offset by higher electricity rates in Meralco serviced-areas as electricity rates increased modestly by P0.0902/kWh in December due to higher generation charges as well as transmission, taxes and other charges. BSP expects inflation for 2018 to average 5.2%.
Semiconductor & Electronics Industries in the Philippines Foundation (SEIPI) expects electronics exports to sustain expansion of 5-6% in 2019, driven by automotive electronics and industrial products. As of YTD-October, electronics exports have grown by 5.2% y/y to $31.7bn, on track to meet the industry’s full year outlook of 5-6% for 2018. Electronics is the country’s largest export products, accounting for 56% of total exports. SEIPI said that industry growth will be moderated by investors concerns over the final version of TRAIN 2/TRABAHO bill provisions on incentives, highlighting that some of its member companies have put their investments on hold or transferred to other countries.
Aboitiz Equity Ventures (AEV) will invest as much as $200mn in the next two to three years to expand and upgrade the factories of its Asia-Pacific animal feeds manufacturer Gold Coin Management Holdings, Ltd. Gold Coin operates 20 livestock and aqua feed mills across 11 countries in Asia Pacific. Last year, AEV acquired a 75% stake in the company for $334mn. AEV closed last Friday at P55/share, down 26% for full year 2018.
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