Weekly Equities Summary and Outlook : January 7 – January 11, 2019

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Equities Outlook

Outlook. The PSEi closed today at 8,024.1 and is likely to approach 8,100-8,200 level as evidenced by rising volume (average value turnover of P8.5bn last week vs P4.7bn in the last week of December) amid eight straight trading sessions of net foreign inflows totaling P6.7bn. But we may see some profit taking as the RSI at 69.1 approaches the oversold level. Investors may also digest the disappointing trade data from China (exports -4.4% vs estimate of +2%; imports -7.6% vs consensus of +4.5%) and its record high trade surplus with the US in 2018 (+17% to $323bn) which raise concerns over the weakness of China’s economy and global demand, while the latter may add fuel to US-China trade war.

Key data to be released this week are the OFW remittances for November (January 15) and balance of payments (BOP) for December (January 18).

Market Review. The PSEi edged higher for the second consecutive week, up 142.9 points (+1.8% week-on-week, w/w) to close on Friday at 7,904.1 fueled by optimism over cooling domestic inflation, dovish Fed and the US-China trade talk. Year-to-date (YTD), the index has gained 5.9%, making it the best performing index among the markets that we follow. From its 2018’s low of 6,843 on November 13, the local bellwether has risen by 15.5%. Top gainers YTD are JGS (+15.8%), SECB (+13.1%), PGOLD (+12.8%) and RLC (+10.7%).

Market Flows.. Net foreign buying last week totaled P4.5bn, bringing the YTD tally to P5.8bn.

Regional Markets.. All Asian markets were up last week led by Singapore (+4.6%), Japan (+4.1%) and Hong Kong (+4.1%). YTD, the PH (+5.9%) is the top performing market, followed by Singapore (+4.2%) and Hong Kong (+3.2%), while Malaysia (-0.4%) and India (-0.2%) are the underperformers.

Currencies.. The peso gained 0.7% w/w to end on Friday at P52.14/$. YTD, it has strengthened by 0.8%. For Most Bought/Sold Stocks, see table in next page.

Economic News

Bangko Sentral ng Pilipinas (BSP) reported that foreign direct investments (FDI) in the first ten months of 2018 rose 2% year-on-year (y/y) to $8.5bn, on track to hit the $10bn mark posted in 2017 and ahead of the BSP’s target of $10.4bn for 2018. Debt instruments, which comprised 69% of total FDIs, drove the expansion (+18.6% y/y to $5.8bn), while equity investments slumped by 28.1% to $2bn. Reinvestment of earnings grew 2.3% to $677mn. In October alone, net FDI fell by 74.2% to $491mn due to lower equity placements (-93.6% y/y to $98mn). YTD equity capital placements mostly came from Singapore ($906mn), Hong Kong ($264mn), China ($189mn), Japan ($184mn) and the US ($120mn), The funds were mostly channeled to manufacturing ($1bn), real estate ($269mn), financial and insurance ($230mn), arts, entertainment and recreation ($188mn) and electricity, gas, steam and airconditioning supply activities ($130mn).

Philippine Statistical Authority (PSA) reported that trade deficit from January-November rose to $37.7bn, 61% y/y higher from the same period last year. This was on the back of flat exports growth (-0.9% to $62.7bn) vis-a-vis double-digit expansion in imports (+15.8% to $100.4bn). For the month of November, trade deficit amounted to $3.9bn from $3.2bn in November 2017 as exports slightly fell by 0.3% while imports grew at a faster pace of 6.8%. Higher imports YTD was attributed to rising demand for capital goods (+15.5% y/y) and raw/intermediate materials (+15.7% y/y) driven by the country’s investment-led growth, coupled by high global crude prices (imports +26.4% y/y). PH recorded the largest trade gap with ASEAN ($15.1bn), followed by China ($11.4bn) and South Korea ($8bn). ASEAN ($10bn), US ($9.8bn), Hong Kong ($8.9bn), Japan ($8.8bn) and China ($8.1bn) were the country’s largest export destinations, comprising 73% of total exports.

Corporate News

Aboitiz Power (AP) is opened for further expansion thru acquisitions, possibly overseas, as it seeks opportunities in Vietnam, Myanmar and Indonesia. Last year, the company agreed to acquire voting and economic stakes in AC’s thermal company AC Energy for $579.2mn. The deal is awaiting approval from the Philippine Competition Commission (PCC). AP said it is on track to hit 4,000 MW in sellable capacity by 2020. AP closed today at at P37/share, +5.4% YTD.

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