The Market Call – October 2012

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We are pleased to release the October issue of The Market Call, as published by the FMIC & UA&P Capital Markets Research. This is a result of an in-depth analysis on the emerging and leading trends in the global and local markets that have shaped the direction of the Philippine capital markets in the last four weeks. Here are the highlights of the October issue:

• Macroeconomy

Eurozone crisis and US economy slowdown notwithstanding, September-December of this year should be very good months for the Philippine economy, as it will be driven by solid domestic demand especially with the National Government (NG) having much fire power to spend for the rest of the year, and OFW remittances remaining robust. We think the economy will have a full-year growth of 5.7-6.0%.

• Fixed-Income Securities

Despite inflation expected to be tame after a one-time surge in August, yields at the very long-end (20-25 years) may have a slight upward bias because the huge supply of these debt papers will “flood” the market. Nonetheless, after the initial push, it is likely to soften towards the end of the year, as liquidity will likely pull down the 25-year back to below-6%. We expect more corporate bond issuance in Q4 as companies take advantage of low interest rates, and as expansion plans are mushrooming especially considering the elections in May 2013.

• Equities Market

Compared to a month ago, we are now more comfortable in increasing exposure to Philippine risky assets as we approach year-end. While risks from external factors remain, we do not see an imminent risk aversion among investors in the near-term. The Fed and ECB’s actions have averted this scenario. On the local front, fundamentals remain healthy. Macroeconomic outlook remains bright, earnings expectations are robust, and seasonality is positive. All these shape our more constructive outlook for Q4. Download it here: THE MARKET CALL (OCTOBER 2012)