Weekly Equities Summary and Outlook : Jan. 29 – Feb. 02, 2018
Written By Lloyd Brian Laurilla
Published on Feb 06, 2018
Reading time 2 mins
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First Metro Weekly Equities and Economic Outlook - January 29 - February 02, 2018
Outlook. We expect the market to continue its correction after a sell-off in Dow Jones amidst rising bond yields. Investors remain cautious ahead of the inflation reading, the BSP's overnight borrowing rate and full-year 2017 earnings this week. Metrobank (MBT) released its FY 2017 core net income, up 10% to Php19.9bn.
Drivers. Two major economic events to watch out for: January inflation reading on Tuesday and BSP overnight borrowing rate on Thursday. The BSP surprised the market with a January inflation forecast of 3.5%-4.0% versus consensus of 3.5%. BSP rates are expected to remain unchanged.
Market review. After touching an all time high of 9,058 last Monday (year-to-date, +5.84%), the market dropped to 8,810 on Friday, -2.5% lower week-on-week (w-o-w) as the local bellwether tracked regional markets’ decline. MSCI indices likewise were in the red w-o-w: MSCI Emerging Markets ETF down -4.37%, and MSCI Asia Pacific Ex Japan down -2.5%. Today, the market erased its year-to-date (ytd) gains, up by only 0.7% to 8,616 following Dow Jones’ 666-point decline last Friday.
The Dow Jones’ fell -4.12% w-o-w on strong US jobs data: average hourly wages jumped 9 cents to $26.74, a yearly increase of 2.9% versus expectations of 2.6% (fastest wage growth since 2009); Non-farm payrolls grew by 200,000 in January, exceeding expectations of 180,000.
The strong jobs data signalled tightness in the labour market which means the Fed may tighten more aggressively this year. 10-year yield rose to a 4-year high of 2.85%.
As of date, the PSEi was the worst w-o-w performer in Asia, down by 5% from last Monday’s high. Ytd, the PSEi was the second worst performer.
Foreigners sold a total of Php6.77bn last week, worst weekly net foreign selling since Sept. ‘16. Ytd net foreign buying left with Php51.42mn.
Foreigners sold SM, SMPH, BDO, ALI and AC for a total of Php4.63bn while most bought names were TEL, GLO, BPI, MEG and MER.