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MANILA, Mar 21, 2012 - (ACN Newswire) - First Metro Investment Corp (FMIC) and University of Asia and the Pacific (UA&P) have published the February issue of "The Market Call, Capital Markets Research". The report, which covers the Philippine Macroeconomy, Fixed Income Securities, Equity Markets and Economic Indicators, includes the following highlights:
"Economy Set for Rebound in 2012 -
Accelerating electricity sales and slower inflation in January coupled with record low interest rates are telltale signs of an economic rebound for 2012. Already, the Asian Development Bank has raised its forecast GDP growth for the country to 5% and other multilateral agencies are expected to follow suit as the year unfolds. The fly in the ointment is the poor record of exports in December 2011, but that is likely to be offset by much stronger government spending especially on infrastructures. Even the local stock market has exuded this confidence as it reached new record highs in February.
The current inflation rate is well in line with the government target inflation of 4% +/- 1% for 2012-2014. Despite greater liquidity, credit expansion from banks remained muted. Manufacturing sector for exports posted a recovery of -1.3% coming from -18.3%, while Agro-based products attained a 1.1% growth - a sign of recovery from -12.4%.
"Yields of Longer Tenors Continue to Fall
Favourable macroeconomic conditions continue to spur demand for longer-dated government securities highlighted by the record P179.8 B of Retail Treasury Bonds (RTBs) to be issued on March 1st. With ample liquidity in the system - fuelled by a large balance of payments surplus, the influx of foreign portfolio capital, and a declining inflation from October 2011 to January 2012 - bond yields fell to record lows and the government yield curve flattened. Furthermore, domestic inflation in January hit a record 13-month low at 3.9%, falling within the BSP's benign outlook of averaging below the 4% mid-point of its 3-5% target range. The BSP had already lowered reserve requirements even before the January figure was released. With the easing inflation trend, the BSP has more leeway to reduce its policy rates, a move that many analysts expect. The BSP has also rationalized and cut the reserve requirement by 3% to 18% effective April 6, 2012 in order to help boost the economy after a lacklustre performance in 2011. All these factors set the stage for a period of low interest rates for the Philippines.
Over the past month, the yield curve had shown a marked flattening, as yields fell continuously in the long-end while remaining fairly steady in the short-end. The secondary market activity may remain anemic unless more corporate issuances, other than for refinancing for better rates, occur soon. With the positive outlook for Southeast Asia further reinforced by Thailand's forecast of a higher economic growth in 2012, the region is likely to see greater demand for debt papers. The Philippine yield curve remains to be the steepest in the region. The spread between the 10-year and 2-year yields is at 239 bps in spite of a 39 bps decline from January.
"Being Rational
The Philippine equities market has had strong gains in February with the PSEi rising to an all-time high of 4,997 on February 23 - a mere 3 points shy of our 2012 target. Given bullish price actions and lingering memories of the fear-based sell-offs in risky assets at the end of 3Q-2011, we find it difficult to avoid problem such as "anchoring." It is a behavioral finance term which refers to "the tendency of investors' thoughts being anchored or attached to a certain reference point despite it having less or no relevance to investment decisions at hand." As a result, investors' decision-making ability becomes clouded by cognitive dissonance. In order for us to be objective, our approach to the problem is to reassess current investing environment by identifying both bullish and bearish factors currently driving the market in order to make better investments decisions.
The ongoing deleveraging in the US and fiscal austerity measures in the Eurozone are likely to result in prolonged sluggish growth in the developed world. The tensions in Iran are likely to keep oil prices buoyant in the near-term. As long as higher average value turnover and foreign fund inflows are sustained in our market, we can tolerate higher market P/E."
Download this, and all previous Market Call reports, at: http://firstmetro.com.ph/publications_marketcalls.asp
Contact:
Anna Marie Tuprio
Corporate Planning & Affairs Department
Tel: +63-2-858-7951
E-mail: marie.tuprio@firstmetro.com.ph
Topic: Research / Industry Report
Source: First Metro Investment Corporation
Sectors: Daily Finance
http://www.acnnewswire.com
From the Asia Corporate News Network
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