Equities Summary and Outlook
Outlook. We expect the PSEi to trade sideways, within the 7,700-7,800 range, ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting and Q2 GDP results on August 9, and more earnings releases from heavily-weighted stocks such as GLO, SM, SMC, TEL, MEG and AGI to be released this week. Yesterday, SMPH and ALI announced their first half 2018 net income: SMPH’s second quarter net income increased by +16% to P9bn, bringing 1H18 to P16.6b up by +16% (in-line) while ALI recorded a 19% growth in 2Q18 resulting in a growth of +18% to P13.6b in the first half (slightly behind). Meanwhile, SECB, which released their earnings this afternoon, was down 18% in 1H18 to P4.3b (-20% for 2Q18, behind) on the back of lower trading gains (-59%,) higher tax expense (+55%) and slow growth in net interest income (+8%).
Market Review. The PSEi bucked regional markets last week, up +1.53% week-on-week (w/w), as foreign flows returned for the second week in a row. July was a positive month for the PSEi, up by +6.6%, after five consecutive months of losses. The market was the second top performer next to Thailand’s +6.7% gain in July. From its peak of 9,058 in January, the market was down by -13.7%.
- Year-to-date (YTD), the PSEi was down -8.6%, the second worst performing market in the region. China was the worst performing at -17.1%. Meanwhile, India and Taiwan were the top performers with 10.3% and 5.4%. W/w, the PSEi was the sole gainer while Asian markets were mostly flat.
- Foreigners were net buyers last week, now at its second week of net buying, totalling P856m. YTD, total net foreign selling stood at P68.6b.
- Average daily value traded for the week crept up to P6.1b from P5.9b during the week ended July 27 but still below the YTD average daily value traded of P7.2b. Last week, 54% of the trading participants were foreigners.
- PHP was flat w/w at P53.29/$, up by 0.27%. Ytd, the peso was still the second worst performer in the region, down by -6.5%, next to Indonesia (-6.8%).
- Last week, foreigners’ top buys were SM, MER, JGS, JFC and URC (P1.2b). Meanwhile, foreigners sold BPI, MBT, AGI, SCC and TEL (P710m).
- YTD index gainers were SMC (+25%), MER (+13%), JFC (+9%), SMPH (+1%) and AC (+0.5%) while the biggest losers were MPI (-37%), AGI (-25%), MBT (-22%), JGS (-21%) and GTCAP (-20%). W/w, the top gainers were AEV (+12%), MPI (+11%), DMC (+6%), JFC (+4%) and RLC (+4%) while the losers were BPI (-4%), MER (-2%), ALI (-2%), SECB (-1%) and URC (-1%).
Bank lending (net of RRP) grew by 19.1% year-on-year (y/y) in June, slightly slower than the 19.3% in May. The top five sectors (64% of total) were the following: real estate activities (+16.1% vs 15.7% in May), wholesale and retail trade, repair of motor vehicles and motorcycles (+24.9% vs 23.4%); manufacturing (+17.8% vs 17.7%); electricity, gas, steam and airconditioning supply (+10.3% vs 11.6%) and financial and insurance activities (+31.1% vs 31.3%). In terms of loans for household consumption, the fastest segment was credit cards at +21.4%, faster than May’s +21.1% growth. Motor loans were slower at +19.9%, slightly slower than +22.0% in May 2018. Meanwhile, domestic liquidity (M3) was up by 11.7% y/y to about P11.1tr in June 2018, slower than the 14.3% expansion in May. This was the slowest growth since May 2017 when it grew 11.5%. Domestic claims and net foreign assets grew slower, up by 16.0% and 2.4% in June versus 16.8% and 5.4%, respectively, in May.
Inflation clocked in at 5.7% in July, another 5-year high and faster than the 5.2% recorded in June. Spikes were seen in different categories: Food and non-alcoholic beverages were up by 7.1%, alcoholic beverages and tobacco grew 21.5%, utilities and fuels by 5.6%, transportation by 7.9% and health by 3.7%. Average inflation from January to July was at 4.5%.
ALI’s 1H18 net income grew 18% to P13.6b on the back of higher residential revenue (+31%) from foreigners, especially Chinese nationals. Office rentals were also higher by 20%, pushed by POGOs, while retail grew 12%. On the other hand, SMPH earnings were up by 16% to P16.6b in 1H18 as revenues increased by 15% in 1H18 on the back of robust revenues in residential (+23%) and malls (+12). Reservation sales also grew 25% to P34.45 in 1H18. More details on SMPH this Thursday.
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