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Thread: S&P says PH economy a ‘rare bright spot

  1. #321
    BSP on guard against price spikes as inflation hits 3-year high

    By: Daxim L. Lucas, Doris Dumlao-Abadilla - @inquirerdotnet Philippine Daily Inquirer / 05:15 AM February 07, 2018

    The sudden spike in prices of goods and services in the country is a "temporary" phenomenon that central bank planners expect to eventually stabilize, a top monetary official said yesterday.

    In a statement, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said the January year-on-year inflation rate - which hit a three-year high of 4 percent - was "expected" by regulators, even as he admitted that the figure was "at the top end" of their forecasts.

    The January inflation rate is significantly higher than the 3.3 percent in December, according to the Philippine Statistics Authority, citing higher costs of food, beverages and tobacco - the most aggressive increase in prices since October 2014.

    All eyes are now on the BSP's monetary setting on Thursday - the first for 2018 - as the spike in the country's inflation rate heightened the possibility of an interest rate hike coming sooner than later. The 4-percent January rate overshot the 3.5 percent market consensus forecast and touched the upper end of the 2-4 percent target of the BSP.

    Espenilla attributed the faster pace of price increases to the combined effects of the administration's tax hikes implemented last month and the rise in world oil prices, "and food [prices] to some extent."

    The government's Tax Reform for Acceleration and Inclusion lowers personal income taxes and simplifies estate and donor's taxes but expands the value-added tax base, increases oil and automobile excise taxes and introduces excise tax on sugar-sweetened beverages.

    "The BSP could hike rates as early as Thursday following the surge in January headline consumer price index," Bank of the Philippine Islands lead economist Jun Neri said in a post on Twitter following the inflation announcement.

    "The likelihood of a tightening move at Thursday's meeting has increased significantly," ING Philippines economist Joey Cuyegkeng said in a research note.

    Cuyegkeng had expected the BSP to tighten interest rates not earlier than March.

    "We continue to believe that the policy statement will shift to a more decisively hawkish tone, highlighting rising inflation risks that could threaten its 2-4 percent target, thus setting the stage for a rate hike in March," investment house Nomura said in a research note.

    "However, we have not completely ruled out a move this week as the BSP may want to act pre-emptively - and after this high CPI (consumer price index) print, we now assign a higher 30-40 percent likelihood to this outcome, from 20-30 percent earlier."

    Nomura forecasts a total of 100 basis points of cumulative rate hikes this year, taking the policy rate to 4 percent.

    "Despite the faster than expected inflation released today, they might have to wait for a few more plots to support higher inflation case," BDO Unibank chief strategist Jonathan Ravelas said in a text message. "But if they act, it's more of a calibrated preemptive response to inflation."

    Nonetheless, Espenilla gave no indication that the central bank would be jolted into tightening monetary policy earlier in the year by the latest inflation numbers.

    "We think these are temporary drivers of inflation and would eventually stabilize," he said.

  2. #322
    Infrastructure spending hit P568.8B in 2017

    Philippine Daily Inquirer / 05:26 AM March 01, 2018

    The amount spent by the government to build infrastructure in 2017 reached P568.8 billion, exceeding the program as more projects were rolled out toward the end of the year, the latest Department of Budget and Management data released yesterday showed.

    In a press conference, Budget Secretary Benjamin E. Diokno said the shift to an annual cash-based budget in 2019 from the multiyear obligations-based system at present would further reduce cases of underspending, which had been on a decline in the past two years.

    Last year's disbursements on infrastructure and other capital outlays surpassed by 3.5 percent the programmed P549.4 billion, DBM data showed. Diokno said they were able to exceed the program as there were many projects left behind by the previous administration that they continued to implement.

    Diokno said they "did not go beyond" the budget as the government underspent on other aspects such as personnel services, maintenance and other operating expenses, allotment to local government units, interest payments, tax expenditures and capital transfers to LGUs.

    Infrastructure spending in 2016 was P493 billion.

    In a report, the DBM attributed the higher disbursements on infrastructure and other capital outlays in 2017 to "the implementation of road infrastructure projects [of the Department of Public Works and Highways], projects under the Armed Forces of the Philippines Modernization Program [of the Department of National Defense], Capability Enhancement Program [of the Department of the Interior and Local Government-Philippine National Police], and other capital outlay projects such as repair and rehabilitation of school facilities [of the Department of Education/state universities and colleges]."

    In December, alone, the amount spent on infrastructure rose 23 percent year-on-year and jumped 87.8 percent month-on-month to P82.3 billion, DBM data showed.

    "This covers road projects such as construction, improvements of roads and replacement of bridges in Luzon, Central Visayas and Mindanao; flood control projects and rehabilitation of dike and river basins in Pangasinan, Central Luzon (Pampanga and Nueva Ecija), and National Capital Region (Marikina, Valenzuela and Quezon City), and projects under the AFP Modernization Program, such as acquisition of munitions and purchase of engineering and information and communications technology equipment," the DBM said.

    Diokno said the share of infrastructure spending to gross domestic product last year was about 5.6 percent, higher than the target of 5.4 percent.

    He expressed optimism that this year's 6.1-percent infrastructure spending-to-GDP goal was attainable. - BEN O. DE VERA

  3. #323
    How far can the stock market fall?

    By: Henry Ong - @inquirerdotnet Philippine Daily Inquirer / 05:12 AM April 04, 2018

    A stock market correction, by definition, typically involves temporary pullbacks in share prices of around 10 percent from a recent high within a short period of time.

    But the current market downtrend is slowly turning out to be more than a minor market correction as the PSE index, which has already lost by as much as 13.7 percent from its peak in January, seems not bottoming out just yet.

    There are fears of larger decline in the PSE index if investors continue to anticipate losses in the coming weeks.

    Will this correction eventually transition into a bear market? How low can the stock market go? How long will this correction last?

    If market history is any guide, the PSE index can possibly lose some more in a prolonged decline before any significant market recovery takes place.

    Based on the past three major corrections in the last five years since 2013, the PSE index lost by as much as 25 percent in eight months in 2015 and in 2013, the market similarly lost about 23 percent in seven months before share prices recovered.

    The shortest decline with the least damage was in 2016 when the PSE index lost by 20 percent in just five months before the market resumed its bullish uptrend afterwards.

    If the market is looking at the PSE index to fall further toward its 7,400 support in the coming weeks, the total loss would only be 18.4 percent from its recent high this year at 9,078. This could be the quickest correction if the market recovers sharply after hitting this support.

    But if historical patterns were to be followed, assuming the market would lose by at least 20 percent at shortest possible time, the PSE index should eventually bottom out at 7,100 level by June or July.

    This current downtrend could be one of the major adjustments needed by the market to sustain its long-term bullish uptrend that began in 2008.

    Historically, the PSE index has been able to rise stronger, achieving new record highs every time a major market correction occurs.

    In fact, all market recoveries over the past seven years have been longer and more profitable.

    One example of this case was in September 2011 when the market picked up right after it bottomed out and never looked back in the next 20 months, gaining almost 100 percent in total returns.

    In December 2013, the PSE index had a 16-month bull run and made a 42.5-percent gain, while in 2016 market recovery, the PSE index also led a 13-month uptrend that ended in a record high this year with total returns of 39.7 percent.

    The current market situation offers great opportunity to prepare for the next recovery. Remember that the first stocks that will recover are those that are part of the PSE index.

    The most volatile stocks in the group are the ones that will lead the market. Volatility can be measured by looking at the historical beta of a stock.

    A stock with beta of 1.5 means the stock shall rise by 1.5 percent on the average for every 1 percent increase in the PSE index.

    The strength of this relationship is measured by the degree of the stock’s correlation with the market.

    Based on the last 365 trading days, the five most volatile stocks in the PSE index as measured by beta with about 60 percent correlation are SM Investments (1.25), SM Prime (1.22), Ayala Corp (1.15), Ayala Land (1.25) and JG Summit (1.29). Since these stocks are highly correlated to the PSE index, they are also the most vulnerable during a market selloff.

    If the market expects the PSE index to lose more in the short term, buying blue-chip stocks at historically low prices couldn’t have come at a better time.

    Over the past 10 years, large cap stocks have generated high returns consistently from capital appreciation with a median return of 14 percent per year.

    Highly correlated stocks have outperformed the average annual returns of the PSE index stocks over the years: SM Investment (23 percent), JG Summit (23 percent), SM Prime (19 percent), Ayala Land (16 percent) and Ayala Corp (15 percent).

    A falling stock market should not be avoided, but rather should be seen as a welcome opportunity to buy value stocks at a low price and then sell high in the future.

  4. #324
    PSE index stays above 8,000, defies regional slump

    By: Doris Dumlao-Abadilla - Reporter / @philbizwatcher Philippine Daily Inquirer / 05:22 AM April 04, 2018

    The local stock barometer stabilized above the 8,000 mark on Tuesday, defying the slump across most regional markets on selective buying of large-cap stocks.

    Reversing early losses, the main-share Philippine Stock Exchange index (PSEi) added 9.27 points or 0.12 percent to close at 8,048.72.

    Elsewhere in the region, stock markets were mostly lower, tracking the overnight decline in Wall Street.

    The PSEi was led higher by the holding firm and mining/oil counters, which both advanced by over 1 percent.

    The services and property counters also firmed up.

    On the other hand, the financial counter declined by 1.13 percent while the industrial counter also fell by 0.9 percent.

    Value turnover amounted to P6.11 billion.

    Local investors supported the day’s gains as foreign investors were still net sellers amounting to P238.61 million.

    Despite the PSEi’s gain, market breadth was negative as 104 decliners outnumbered 98 advancers while 45 stocks were unchanged.

    The PSEi was led higher by SM Investments, which gained 3.17 percent, while Globe Telecom advanced by 2.71 percent.

    Ayala Land and LT Group both gained over 1 percent while BDO, PLDT and AGI all firmed up.

    Outside of PSEi stocks, notable gainers included PXP, which gained 5.44 percent. LR added 1.13 percent.

    On the other hand, Security Bank and BPI both declined by over 2 percent while Jollibee and URC fell by over 1 percent.

    Ayala Corp., SM Prime, JG Summit and Metrobank also slipped.

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