The Bellwether – Volume 3, No. 1

      Dear all, Releasing the 1st issue of The Bellwether Volume 3, as published by FMIC's Research Department. This is a monthly publication on market action and outlook. The following are the highlights of the issue: Philippine Gaming Sector: Resilient to Economic Slowdown Macau recovery is hard to anticipate in the near-term as President Xi Jinping is too keen in addressing the corruption in China. In addition, there are no new supplies expected until mid-2015, resulting in lack of catalysts for the Macau gaming sector. In spite of this, we anticipate a better year for the Philippine gaming sector as new capacities and a booming economy are highly anticipated in the next few years. In addition, casino players shift to other gaming destinations, which include the Philippines. The pessimism is overblown because the standpoints of regulation, geography and demographics of the Philippines will benefit from pent-up gaming demand from Macau’s restrictions, e.g. disallowing travel to Macau by Chinese mainlanders by more than 2x in a quarter.   Treasury Gains on Oil Price Drop and Global Demand for Safety We believe that the low level of oil prices will continue to spur demand for government securities. Our house view of 2015 average inflation @ 2.7% will support low level of yields. For the next few days, there might a period of profit-taking after the announcement of the January 2015 inflation. The market will also be looking at the view or any change in language (if there is any) of the Monetary Board this coming Feb 16 meeting.   SM Prime Holdings, Inc. (SMPH): Jazz Residences leads SMDC expansion SMDC has set a capex budget of PHP15-18bn for 2015. The company will launch 10 projects including Shore Residences at the Mall of Asia Grounds, Air Residences and Jazz Residences in Makati, Fame Residences in Mandaluyong, and Trees Residences in Fairview. Approximately 12,000-14,000 units will be completed in 2015, priced at an average of PHP3mn/unit. This implies real estate revenues of PHP36-42bn, 73-102% higher than in 2013.   PSEi Price Performance: Conglomerate Leading the Pack The PSEi rose 5.3% YTD to 7,613.15 as of February 3, Out of 30 index members, 24 rose while 6 fell with 14 stocks gained more than 5% led by FGEN at +17.8%. The conglomerate members of PSEi lifted the whole index with an average growth of 8.1%.  Foreign Direct Investment (FDI):  Hitting Historical High of USD5bn Jan-Oct 2014 Net FDI touched all-time high of USD5.3bn, as both equities and debt instruments yielded above 50% growth in net inflows.  PH Net FDI posted 64% growth, highest in the region. The average growth in the region was at 3.75%, as the growth in the Philippines, Thailand (+58.2%), Singapore (+35.6%) and India (+18.6%) offset the contraction in South Korea (-21.5%), Malaysia (-2.3%), Taiwan (-13.9%) and China (-15.9%). Despite the strong growth it posted, the country still has the lowest net FDI in the region. Download the full PDF here! DOWNLOAD