The Market Call – November 2012

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We are pleased to release the November 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 November issue:

• Macroeconomy

The prolonged negative impact of the heavy rains and floods in August will certainly result in a slightly slower GDP growth in Q3, but a strong recovery is expected in Q4, as the National Government (NG) plans to accelerate infrastructure and other capital outlays, and private firms are reporting slightly better-than-expected earnings in Q3.  With crude oil prices trending downward and food sup­ply ample, there is little pressure on the inflation front. It is likely that 3.5% Q3 average inflation will be replicated in Q4.

• Fixed-Income Securities

With recession in the Eurozone and generally weak re­covery in the US, China and Japan as a backdrop, near-zero short-term interest rates will continue to prevail in advanced economies in Q4. Lower SDA rates, a likely further 25 bps cut in policy rates in December, inflows of portfolio capital to emerg­ing economies (especially, the ASEAN including the Phil­ippines) and lower regular NG debt issuances will push the yield curve further downwards, but with special im­pact on the belly.

• Equities Market

We reiterate our view of remaining invested in Philippine equities. Market backdrop warrants higher multiples longer into the future and Q3 earnings results are likely to come in as expected or even better. This should encourage further analysts’ earnings upgrade. While external risks, namely, the US fiscal cliff, the Europe debt crisis, and the slowing global growth will be disruptive to the local equities market, signs that the Philippine market has become less correlated to the major markets should provide greater confidence to investors. Download it here: THE MARKET CALL (November 2012)