Weekly Equities Summary and Outlook : May 7 – 11, 2018
Market Outlook. We expect the market to trade sideways to upward as investors’ concerns ease after the central bank’s move to raise rates. Last Friday, we also saw net foreign buying of Php571mn, the highest since January 17, 2018 which could signal foreign funds are coming back. Yesterday, foreigners were still net buyers with a total purchase worth Php293.4m. This is the first time since end-January that foreign buying continued for two consecutive days. Note, however, that value traded remained below the Php8.1bn daily average at Php5.7bn last Friday and Php7.9bn yesterday. Key economic releases to monitor would be balance of payments on the 18th, budget balance on the 23rd and US GDP on the 30th. Key concerns remain inflation and weakening currency.
Market Review. After two weeks of range trading, the market finally broke out of its 7,500 trading range, ending at 7,752 on Friday, up +2.73% week-on-week (WoW). Investors cheered Bangko Sentral ng Pilipinas’ (BSP) move to raise rates by a token 25 basis points, the first time in around four years. The overnight lending rate now stands at 3.75%, overnight reverse repurchase at 3.25% and overnight deposit rate at 2.75%. The Monetary Board also raised its inflation forecasts for 2018 and 2019 to 4.6% and 3.4%, respectively, from 3.9% and 3.0%. Signalling a “timely increase in rates,” BSP’s more hawkish tone eased concerns on inflation which reached a 5-year high of 4.5% in April, fastest in Southeast Asia. The market continued its rally yesterday, adding 133 points from last Friday’s close to 7,885 (+1.7% day-on-day), led by SM Prime Holdings (SMPH), up by 7.43%. The surge came after the 1.55% upward adjustment in SMPH’s MSCI weight. MacroAsia and Integrated Micro-Electronics Inc, up by 4.9% and 4.8%, respectively, were also added to the MSCI Global Small Cap Indices effective May 31. Other details below:
Overseas Filipinos’ remittances were down -9.8% YoY to $2.4bn for the month of March bringing first quarter remittances to $7.0bn, almost flat at +0.8% yoy, from last year’s level. Main drivers were:
GT Capital’s first quarter 2018 core net income rose 18% to Php3.8bn, behind consensus, driven by higher equity shares in net income of Metrobank (Php5.9bn +5% vs 1Q17), AXA (Php553mn +45%) and Metro Pacific Investments Corporation (Php3.6bn +16%). Meanwhile, Toyota Motors’ Php2.4bn net income was 4.6% lower than the previous year as retail sales slumped 9.3% to Php33.7bn in the quarter. Federal Land and ProFriends were also down, 28% vs 1Q17.
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