Outlook. The PSEi may attempt to break the resistance level of 7,300 on weak volume as investors await the third quarter corporate earnings season that started this week with the release of SMPH’s results today (in-line with consensus) and CHP and PX’s on Friday (Oct. 26). Thus, market’s upward trajectory may not be sustained and may likely trade range-bound. On the global front, strong corporate US earnings and China’s top regulators pledge to support its economy and tackle market volatility following its lower-than-expected Q3 GDP print at 6.5% may help improve sentiment amid uncertainties from Brexit, the Italian budget woes and rising tension between Saudi Arabia and the West over the fate of Jamal Khashoggi.
Market Review. The PSEi rose 82.4 points today (+1.2% from Friday) to end at 7,236.2. Last week, it bucked regional markets, rebounding by 146.8 points (+2.1% week-on-week, w/w) to close on Friday at 7,151.5 following six straight weeks of sell-off. Falling global oil prices amid reports of higher US crude stockpile and strengthening Philippine peso buoyed domestic market despite net foreign outflows extending for 37 straight trading sessions totaling P19bn. Year-to-date (YTD), PSEi was down 16.4%, remaining as the second worst performing among the markets that we follow, next only to China’s 22.9% decline. Net foreign outflows, likewise, rose to P92.6bn YTD, up P2bn from the previous week.
- Except for India (+0.8%), all Asian markets were down YTD led by China (-22.6%), the Philippines (-16.4%) and Hong Kong (-14.6%).
- The Philippine peso was the top gainer in Asia last week, up 0.8% w/w to close on Friday at P53.70/$, its strongest level since September 5 due to improved inflation outlook and amid a seasonally strong Q4 remittances inflows. Nonetheless, the peso was still down 7% YTD, the third worst performing next to Indian rupee’s -12.9% and Indonesian rupiah’s -10.7%.
- ALI, AP, BDO, SCC and DMC were the top recipients of net foreign inflows last week totaling P720mn, while SMPH, SM, MBT, BPI and SECB recorded the largest net outflows amounting to P1.5bn. YTD, MER, GLO, URC and TEL were the only gainers among the index stock for an aggregate amount of P8.1bn, while net outflows were the largest for SM, BDO, BPI, AC and MBT for a combined total of P40.2bn.
Bangko Sentral ng Pilipinas (BSP) reported that balance of payments (BOP) in September reverted to deficit amounting to $2.7bn from a surplus of $1.3bn in the previous month. This led to the third consecutive quarter of BOP deficit in Q3 totaling $1.9bn. YTD, BOP deficit tallied to $5.1bn, more than 3x the BSP’s revised BOP shortfall estimate of $1.5bn for full year 2018. The September deficit came mainly from BSP’s foreign exchange operations and payments made by the National Government (NG) for its foreign exchange obligation, which were partially offset by NG’s net foreign currency deposits. YTD BOP deficit was partially attributed to widening trade-in-goods deficit which from January-August ballooned by 65% y/y to $26bn from $15.8bn in the same period last year due to sustained importation of capital goods (+16.1% y/y) and raw materials and intermediate goods (+13.4%), which collectively comprised 72% of total imports for the period. The reported BOP position is consistent with the GIR level of $74.9bn as of end-September, equivalent to 6.8 months’ worth of imports of goods and payments of services and primary income, its lowest level since December 2008. It is also equivalent to 5.9x the country’s short-term external debt based on original maturity and 4.2x based on residual maturity.
Fitch Ratings lowered its growth forecast for the Philippines in 2018 to 6.5% from an earlier projection of 6.8% amid rising interest rates and slower growth recorded in H1 2018 at 6.3%. However, strong domestic demand given moderated inflation would help accelerate Philippine growth to 6.7% next year. Fitch’s forecast for 2018 is at the lower end of the government’s revised growth outlook of 6.5-6.9% for 2018 and mirrored the earlier downgrades of other multi-lateral agencies. Early this month, IMF slashed Philippines’ 2018 GDP growth to 6.5% from 6.7%, albeit growth will pick-up to 6.6% in 2019; ADB to 6.4% from 6.8% while growth to quicken to 6.7% in 2019; and World Bank to 6.5% from 6.7%, and by 6.7% next year.
SM Prime Holdings (SMPH) reported a consolidated net income of P23.4Bbn for the first nine months of 2018, up 17% y/y. On Q3 2018 alone, net income grew 20% to P6.8bn. Consolidated mall revenues (which comprised 58% of total revenues) rose 12% from January-September to P43.3bn amid an 8% same-mall-sales growth. Its residential group expanded by 23% to P25.3bn due to higher construction accomplishments of projects launched in 2015-2017 and higher sales take up of various projects from foreign buyers and OFWs. SMPH closed today at P34.90/share, down 6.8% YTD.
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