Weekly Equities Summary and Outlook : September 10 – September 14, 2018
Written By Lloyd Brian Laurilla
Published on Sep 20, 2018
Reading time 4 mins
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Outlook. We expect the PSEi to continue its downward bias as global trade tension re-emerged after Pres. Trump approved new tariffs worth $200bn of Chinese exports and threatened tariffs on $267bn more Chinese goods. On the domestic front, investors will await the Monetary Board (MB) meeting on Sept. 27 which is expected to raise policy rates by another 50 bps following BSP Gov. Espenilla’s pronouncement of another strong monetary action to support the peso which slumped to a 13-year low of P54.11/$ on Sept. 17 and ensure that inflation will return to BSP’s target of 2-4% by 2019.
Market Review. The PSEi dropped by 127.2 points today (-1.7% from previous session) to close at 7,286.3. Last week, it bucked regional markets, shaving 185.5 points (-2.4%) to close on Friday at its two-month low of 7,413.2 amidst negative sentiment over the country’s widening current account deficit and rising inflation, coupled with escalating US-China trade tension and risk aversion towards emerging markets. Year-to-date (YTD), the PSEi was the second worst performing market in the region, dropping by 14.9%, fueled by massive net foreign outflows totaling P81.8bn. Net foreign selling continued for the second consecutive week at P3.5bn from previous week’s P4.4bn outflows.
Among the Asian markets, India (+9.4%), Japan (+2.9%), and Taiwan (+1.1%) were the only gainers YTD, while China (-18.4%), the Philippines (-14.9%) and Hong Kong (-9.5%) were the top underperformers.
Philippine peso weakened by 0.4% week-on-week (w/w) to close on Friday at P53.97/$. On Sept. 17, it reached an intra-day high of P54.28/$, before closing at P54.11/$. YTD, the peso was down 8.3%.
Last week, investors flocked to GLO, URC, ICT, SECB and SM for a net aggregate amount of P1.3bn, while sold BDO, ALI, AC, BPI, and MBT for a total of P2.3bn. YTD, MER, GLO, URC and TEL were the beneficiaries of net foreign inflows amounting to P6.7bn, while nearly half of total net foreign selling (P36.2bn) was accounted by heavy-weighted index stocks SM, BDO, AC, BPI and ALI.
Bangko Sentral ng Pilipinas (BSP) reported that current account deficit in Q2 2018 ballooned to $2.9bn from $156mn in the previous quarter and a reversal of the $157mn current account surplus in the same period last year. This resulted in a H1 shortfall of $3.1bn, equivalent to BSP’s full-year 2018 target and equivalent to 1.9% of GDP. The huge current account deficit in H1 was mostly attributed to massive trade-in-goods gap, up 27.9% to $23.3bn, amidst weak exports and double-digit imports growth. This was partially offset by higher trade-in-services surplus (+55% y/y to $5.9bn).
OFW cash remittances for July recovered to 5.2% y/y to $2.4bn, beating the consensus of 5.1% and a reversal from the 4.5% decline in June. Cash remittances from both land-based and sea-based workers grew by 4.5% and 7.8%, respectively. This brought the YTD total to $16.6bn, up 3% y/y. YTD remittances were supported by healthy inflows from the US (+6%), Europe (+9.4%) and Asia (+14.1%), which partially compensated for the double-digit decline in the Middle East (-15.1%) led by UAE (-16%), Saudi Arabia (-10.4%) and Qatar (-6.3%). Notably, Middle East comprised almost a quarter of total cash remittances. In peso terms, July remittances were up 10.9% y/y and 7.4% YTD. We (house view) maintain our forecast of 2-4% growth in OFW remittances for 2018 on the back of strong inflows from the US.
Aboitiz Equity Ventures (AEV) is set to start the construction of the P14bn Apo Agua bulk water supply in Davao City by next month. The project will provide 300-350mn liters of potable water daily. The project will also include a hydropower plant with a estimated output of 2.2MW. The Apo Agua project is being undertaken by Apo Agua Infrastructura, a 70-30 joint venture between AEV and JV Angeles Construction Corporation. Aseagas Corporation, a subsidiary of Aboitiz Power (AP), is also in talks with two entities for the sale of its 8.8MW biomass power plant in Batangas. AP aims to close the deal before end-2018. AEV ended on Sept. 17 at P47/share, -36.5% YTD, while AP ended at P37/share, -10.9% YTD.