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MANILA, May 14, 2012 - (ACN Newswire) - First Metro Investment Corp (FMIC) and University of Asia and the Pacific (UA&P) have published the April issue of "The Market Call, Capital Markets Research". The report, which covers the Philippines' Macroeconomy, Fixed Income Securities, Equity Markets and Economic Indicators, includes the following highlights:
"Macro-Economy: Back on Track -
The economy is emitting signals that it is back on track from 2011's three consecutive quarters of tepid growth. 2012 Q1 data (to be released end-May) is likely to show above 5% growth if the early indicators are to be taken seriously. Meralco electricity sales - used as a good proxy for non-agricultural GDP - showed an above-par growth rate of 10% (year-on-year) for Q1. This is well-supported by the double-digit government spending excluding interest payments (+13.6%) in Q1, export growth in February, (+14.3%), and cement output (construction) rising by (+12.7%) year-to-date (YTD) growth. Overseas Filipino Workers (OFW) remittances remained robust, expanding by 5.7% in Jan-Feb of Q1.
The economic expansion is taking place in a low inflation environment where actual inflation rate is at the lower end of BSP targets, and relatively low fiscal deficit aided by tax collection improvements. This situation is likely to extend unto Q2 and beyond. Fiscal sector will play an important role to bolster the economy for the succeeding quarters, coupled with the continued vibrant consumer spending all throughout the whole year. These two will underpin the government forecast annual GDP growth of 5.5% this year.
"Fixed Income Securities: Good News Blunt Slight Upward Drift In Yields -
After a series of positive news in April, bond yields started to ease. Essentially, we saw a lower than expected inflation figure of 2.6% for March. This was followed by a fiscal deficit in Q1 2012 reported at P28.6 B, a number vastly lower than the P83 B target for the quarter. Finally, there was the Bangko Sentral ng Pilipinas (BSP) deciding to keep policy rates unchanged. All these led to a moderate easing in yields along the government securities curve. Furthermore, the BSP said that it was contemplating on another cut in reserve requirements to boost lending that would fuel economic growth. This came after news of renewed concerns over the European debt crisis and slowdown in foreign direct investments (FDI).
Nevertheless, April was a month of rejections and partial awards in the scheduled government securities auctions given the comfortable cash position of the National Government (NG). Government was also bent on keeping interest rates at levels that would not distort the shape of the current yield curve.
"Equity Markets: New PSEi Records Again, But Earnings Must Outperform -
Having made significant gains in the 1st quarter of 2012, the Philippine equities market continued its strength in April, ignoring the economic and fiscal malaise in the euro-zone. The main index, PSEi, recorded another all-time high in April (5,218.97). Strong 1st quarter earnings reports and improved economic data in the US have supported investors' risk appetite. Investors remain confident on Philippines' growth and earnings story.
Come end-May 2012, the country will release its 1st quarter gross domestic product (GDP) and majority of listed companies will release their earnings results. Our view is that the economy grew at a faster clip of 5.3% (see Macroeconomy) and earnings are likely to be in-line with consensus. While the market is likely to move higher on bullish sentiments, our rational view tells us that caution is always a good strategy. This means that portfolios should always have cash available and avoid to be fully invested. Should GDP and earnings be in-line with expectations, we are confident that the market will be supported at these levels. Any further upside in stock prices would be the result of positive surprises in earnings forecasts. So far, Philippine equities may have already priced in the market strong economic growth and 12-month forward earnings per share.
To download this full Market call, and all recent reports, please visit http://firstmetro.com.ph/publications_marketcalls.asp.
Contact:
Anna Marie Tuprio
Corporate Planning & Affairs Department
Tel: +63-2-858-7951
E-mail: marie.tuprio@firstmetro.com.ph
Topic: Research / Industry Report
Source: First Metro Investment Corporation
Sectors: Daily Finance
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