Weekly Equities Summary and Outlook : January 21 – January 25, 2019

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Equities Outlook

Outlook. The PSEi may trade cautiously this week between 7,900-8,100 as investors await the high-level trade talks between US and China later this week and amid renewed fears of US slowdown following disappointing earnings results. On the domestic front, investors will await the January inflation print which will be released next week and the start of the earnings season.

Key event this week is the Fed policy meeting on January 31 (PH time) which is widely anticipated to keep its policy rates steady.

Market Review. The PSEi closed flat for the past two trading sessions, closing today at 8,050.8. Last week, the local bourse likewise traded sideways, up 6.1 points (+0.1% week-on-week, w/w) to end at 8,053.2 despite IMF’s downgrading global growth for the next two years to 3.5% for 2019 from earlier estimate of 3.7% and 3.6% for 2020 from 3.7%. YTD, PSEi is still the best performing among the Asian markets that we follow, gaining 7.9%.

Market Flows. Net foreign buying continued for the ninth straight trading sessions, bringing the YTD net inflows to P17bn.

Regional Markets. Except for India and Singapore, Asian markets rose last week led by Thailand (+2.5%), South Korea (+2.5%) and Taiwan (+1.4%). YTD, the Philippines remained the outperformer (+7.9%), followed by Hong Kong (+6.7%) and South Korea (+6.7%).

Currencies. The Philippine peso depreciated by 0.5% w/w to close at P52.54/$ on Friday. YTD, the peso gained 0.1%. For Most Bought/Sold Stocks, see table in next page.

Economic News

Bangko Sentral ng Pilipinas (BSP) expects foreign direct investments (FDIs) to sustain the $9-10bn level this year amid a more favorable economic environment given slowing inflation and faster growth. For the first ten months of 2018, net FDIs rose 1.8% to $8.5bn, driven by the huge surge in debt equities by 18.5% to $5.6bn, while equity capital placements slumped by 28.1% to $2bn. Nonetheless, the YTD figure is on track to hit the BSP’s full year target for 2018 of $10.4bn.

National Economic and Development Authority (NEDA) Secretary Ernesto Pernia said that the country’s economic managers will push for the exemption of priority projects from the 45-day spending ban for public works by the Commission on Election (Comelec) due to the mid-term elections. The ban will cover the period March 29-May 12. The proposal will be taken up during the cabinet meeting on February 6. The aim of the exemption is to keep the infrastructure projects on schedule and to minimize the negative impact of the reenacted budget on the economy due to the delayed approval of the proposed $3.7trn national budget by Congress. NEDA estimated that the country’s GDP could slow by 1.1-2.3 percentage points if it operates under the reenacted budget for the full year 2019. The projects to be submitted for exemption will include the national projects to be implemented by the Department of Public Works and Highways (DPWH), Department of Transportation (DoTr) and those under the Build, Build, Build projects such as the Metro Manila subway.

Corporate News

Metro Pacific Tollway Corporation, the tollway arm of Metro Pacific Investments Corporation (MPI), will earmark P45bn for capital expenditures for 2019 to accelerate the construction of its key projects. This amount is 5x of the P9bn capex last year. The projects include the Cavite-Laguna Expressway (Calax), Cebu-Cordova Link Expressway (CCLEx), North Luzon Expressway (NLEx) Harbor Link Segment 10 — R10 road, C5 South Link Expressway, and NLEx-South Luzon Expressway (SLEx) connector road. MPI closed today at P4.94/share, up 6.5% YTD.

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