The Market Call – December 2012

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We are pleased to release the December 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 December issue:

• Macroeconomy

Although faced by a higher base in Q4 2011, this year’s Q4 should be at least as good as the Q1-Q3 average GDP growth of 6.5%, since infrastructure spending is going full blast, especially with the May elections in sight.  A second consecutive month of zero-growth for seasonally adjusted annualized rate (SAAR) of inflation confirms the decelerating trend that is supported by stable food and slightly easing crude oil prices. We see inflation to average 3.2% this year.

• Fixed-Income Securities

Despite little boost from the BSP on money growth, domestic liquidity as a result of OFW remittances and portfolio capital inflows would point to lower yields for December and beyond.  T-bills and T-bond rates will continue to have a slight downward bias, especially considering that the NG’s borrowing requirement has been reduced after the huge Retail Treasury Bond offering in September. Besides, NG has postponed its bond exchange for early 2013. With even better economic growth prospects and a likely credit rate upgrade in 2013, the GS secondary bond markets will be even more active than it has been in 2012.

• Equities Market

Despite the strong macroeconomic growth, challenging valuations are hard to ignore. We see pullbacks to proliferate over the near-term. Given the euphoric mood of the market, we think now is the best time for investors to raise cash by either taking profit from stocks that had gone ahead of themselves or by cutting positions on losing bets. Being in a liquid position will enable investors to be flexible for a portfolio transition into 2013. Since we are looking for a correction, we would take advantage of market sell-offs as opportunities to rebalance portfolio. Download it here: DOWNLOAD