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T-bills, T-bonds seen to fetch higher rates

GOVERNMENT SECURITIES on offer this will likely fetch higher yields ahead of the monetary policy meeting of the local central bank as well as April inflation data.
The Bureau of the Treasury (BTr) is offering today P15 billion worth of Treasury bills (T-bills) today, broken down into P5 billion and P4 billion in three- and six-month papers, respectively, and P6 billion in one-year debt notes.
On Wednesday, it will also offer P20 billion worth of reissued five-year Treasury bonds (T-bonds) with a remaining life of four years and 10 months.
A trader interviewed on Friday said yields on the T-bills will likely move sideways or rise by five basis points.
“For the T-bills, probably the same as the previous [auctions], sideways to 5 basis points higher,” the trader said.
The trader added that yields on the T-bonds to be placed on the auction block on Wednesday might increase by five to 10 basis points higher from the previous auction.
Meanwhile, another trader sees Wednesday’s T-bonds being awarded at a rate between 5.5% and 5.75%.
During last week’s T-bills auction, rates of the 91- and 182-day papers were at 3.597% and 3.889%, respectively, while the 364-day bills were awarded at a 3.986% rate.
Meanwhile, the government raised P12.039 billion out of the planned P20-billion borrowing from the fresh five-year bonds issued on March 6 with an average rate of 5.452%.
At the secondary market on Friday, the three-month, six-month and one-year papers fetched yields of 3.4941%, 3.8285% and 3.8565%, respectively, while the five-year bonds closed the week at 5.3543%.
The second trader said investors are still waiting for the monetary policy meeting of the Bangko Sentral ng Pilipinas (BSP) next month.
“[The market is still] looking forward for the Monetary Board meeting for the month of May,” the bond trader said, adding that the market will be cautious as the auctions will be conducted prior to the announcement of the domestic inflation data.
“The auction will come before the official CPI (consumer price index) reading, so I think the market will be cautious that’s why we’re looking at higher rates,” the trader added in a mix of Filipino and English.
According to a BusinessWorld poll of 11 economists, headline inflation likely accelerated in April to a 4.5% median forecast, which if realized will be higher than the 4.3% booked in March using 2012 as the base year.
“Any inflation reading higher than 4.3% would certainly increase the chances of a BSP action during its May 2018 meeting,” Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines said through e-mail.
Mr. Dumalagan added that the likely “uptick” in inflation for this month could bring to mind the recent comment of BSP Governor Nestor A. Espenilla, Jr. that an upward adjustment in policy rates is just a “question of timing.”
The BSP’s Monetary Board will meet for the third time this year on May 10.
Meanwhile, ANZ Research said in a report that “there is a need to see full awards in the auctions going forward” as the “under-funding via bonds auctions” as partial awards and rejections made by the Treasury in past auctions already amounted to P84 billion.
However, the P12 billion raised during the maiden sale of yuan-denominated panda bonds as well as the planned yen-denominated samurai bonds sale “could potentially reduce the funding need through bond auctions by some [P80 billion],” the firm added.
ANZ Research said the expected cut-off level for yields will be at the range of 5.55-5.7%.
The government seeks to raise P325 billion this quarter from local creditors through weekly auctions of securities.
It is holding two auctions per week — one for T-bills and another for T-bonds — compared to the previous one auction per week as it increased its borrowing requirements for the period.
It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal

Yields on government debt end flat due to inflation, US Treasuries

By Christine J. S. Castañeda, Senior Researcher
YIELDS on government securities (GS) traded in the secondary market were flat last week amid developments abroad and at home.
On average, GS yields — which move opposite to prices — were up by 5.57 basis points (bps), data from the Philippine Dealing & Exchange Corp. as of April 27 showed.
Carlyn Therese X. Dulay, Head of Institutional Sales at Security Bank Corp., said: “On average, yields on government securities were up by 5.57 basis points due to the recent auctions, inflation expectations and higher UST (US Treasury) yields.”
For his part, Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK), said the increase in GS yields was “due to increasing US interest rates and waning geopolitical concerns abroad.”
The economist also noted that the “expected widening in the US fiscal deficit and bets of further tightening moves from the US Federal Reserve” helped the 10-year US Treasuries surpass the 3% mark last week.
“The historic meeting between North and South Korean leaders also helped push yields higher by reducing investors’ safe-haven appetite. The rise in yields was capped by the ECB’s (European Central Bank) cautious tone during its April 2018 monetary policy meeting,” he added.
At its auction last Tuesday, the government awarded P4.26 billion out of the planned P10 billion for securities maturing on Feb. 22, 2038. The 20-year papers fetched a coupon rate of 6.85% and an average rate of 6.85%, higher than the 6.414% rate of the 20-year bonds sold in February.
Meanwhile, last Tuesday, yield on the 10-year US Treasury bond topped 3% for the first time in more than four years. However, it fell below the 3% mark on Thursday.
On the other hand, leaders of North and South Korea met and vowed to a permanent peace treaty and to de-nuclearize the region on its Friday summit.
At the secondary market on Friday, in the short end of the curve, the 91-, and 182-day Treasury bills (T-bills) inched up by 1.80 bps and 21.74 bps to yield 3.4941% and 3.8285%, respectively. The 364-day paper went down by 40.60 bps to 3.8565%.
In the belly, yields on the two-, four-, five-, and seven-year Treasury bonds (T-bonds) increased by 6.77 bps (4.275%), 49.50 bps (5.495%), 4.45 bps (5.3543%) and 5.49 bps (5.8061%). Meanwhile, yield on the three-year bond lost 2.63 bps to 4.5735%.
In the long end, the 10-year T-bond saw its yield go down by 3.52 bps to 6.2052% while yield on the 20-year bond went up by 12.67 bps to 7.2196%.
For this week, LANDBANK’s Mr. Dumalagan said: “[Y]ields are expected to increase amid likely upbeat Philippine inflation data and firm US reports on PCE (personal consumption expenditures) inflation and employment. The likely hawkish tone of the US Federal Reserve during its meeting in May 2018 may also push yields higher, counteracting the impact of possibly softer US GDP growth in the first quarter.”
Mr. Dumalagan also added that yields could also rise [this] week, “as demand for safe-havens could moderate after North and South Korea agreed to completely denuclearize the Korean Peninsula.”
For her part, Ms. Dulay said: “[This] week, we expect market to trade within range given that we have another set of auctions plus the release of Philippine CPI (Consumer Price Index) which is expected to print at 4.5%.”
The Philippine Statistics Authority will report official inflation data on May 4.

Reimagining Maria Clara

RECONSTRUCTING our traditional dress and infusing it with modern touches still comes with nonnegotiables: no thigh-high slits and plunging necklines, please. These are some of the warnings given to the 18 Filipino designers competing for the project called “Balik Saya.”

Initiated by the Department of Tourism (DoT) and the Intramuros Administration (IA), with support from Manila’s fifth district representative Cristel Bagatsing, the “Balik Saya” project encourages young Filipino designers to create contemporary designs for the baro’t saya, also known as the Maria Clara, while championing the use of local materials like piña, jusi, and inabel.

“It is marrying the contestants’ imagination and our history, but still keeping the style decent,” project mentor and fashion designer Jesus “Jojie” Lloren told BusinessWorld.

As for the colors, he said the hues can go from subtle to super colorful. “Our baro’t saya before were really colorful, some of us just did not realize this because our photographs were black and white,” said Mr. Lloren in Filipino.

The “Balik Saya” fashion design competition will be judged based on design, workmanship, wearability, and originality.

Mr. Lloren said the contestants can use different materials, say silk, as long as the design uses at least 25% local fabrics. As the contestants’ mentor, his role is to edit over-the-top or costume-y designs and to glam up a rather basic reincarnation.

Culminating with a fashion show on May 28 at National Museum, the five winners will be chosen by judges couturier Inno Sotto, National Museum director Jeremy Barns, model/accessories designer/entrepreneur Tweetie de Leon Gonzales, Mr. Lloren, designer Randy Ortiz, DoT secretary Wanda Tulfo-Teo, and a representative from the SoFA Design Institute.

UNDER “Balik Saya”: (L-R) Intramuros Administrator Guiller Asido, fashion designer and project mentor Jojie Lloren, Manila’s 5th District Representative Cristal Bagatsing, and National Museum Director Jeremy Barnes

“We hope to nurture in the participants creativity and natural aptitude for fashion design. This project also aims to provide a platform and opportunities for aspiring designers to showcase their work,” said Mr. Lloren.

The five winning designers will each take home cash prizes, receive an apprenticeship in Rustan’s, an overnight stay at The Bayleaf in Intramuros, and a workshop from SoFA Design Institute.

The competition was opened to anyone who resides in Manila’s fifth district which covers Ermita, Intramuros, Malate, Paco, the Port Area, Baseco, and San Andres Bukid.

“We now champion an advocacy for everyone in the district to further develop their appreciation for cultural heritage,” said Ms. Bagatsing, Manila’s fifth district representative.

According to IA administrator Guiller B. Isidro, the project hopes to revive the enthusiasm in our heritage and in Intramuros as a tourism and cultural hub.

The project is in line with the DoT’s initiative, “Intramuros Revival Project,” which includes the opening of the newly renovated Postigo de Nuestra Señora de Soledad, Plaza Moriones in Fort Santiago, and Casa Azul in Intramuros in 2017.

“Balik Saya” hopes to keep up the growing resurgence of Intramuros — which attracted 1 million visitors over Holy Week — and our traditional culture. — Nickky Faustine P. de Guzman

Brazil to lose share of sugar market as mills see no profit

SAO PAULO — Brazil will lose a significant share of the global sugar trade to competitors in the current season as price levels make it unprofitable for most mills to produce the sweetener, consultants and millers said on Friday.
Analysts are forecasting a reduction in sugar production in Brazil’s center-south in 2018-2019 of up to six million tons compared to the previous season. Mills are looking to produce as much ethanol as possible in search of better returns.
“Even the most efficient mills in Brazil can not make sugar at current prices,” said Arnaldo Correa, a sugar and ethanol consultant with Archer Consulting in Sao Paulo.
Jacyr Costa Filho, head of Brazilian sugar operations for French producer Tereos, agreed, saying that producing sugar right now was “not sustainable.”
According to data from brokerage and consultancy INTL FCStone, compiled by Reuters, Brazilian exportable surplus would fall from 30 million tons in the 2016-2017 global crop year (October/September) to 22.2 million tons in the current crop year.
Considering those numbers, Brazil’s share of the global sugar market would fall from 52% to 35%, losing space mainly to India, Thailand and the European Union, who have all produced bumper crops.
Tereos’ Costa said current prices are below production costs for 90% of producers worldwide. He estimates that a reasonable level of profitability in Brazil’s center-south would be possible with prices around 15 cents per pound.
Benchmark New York raw sugar futures were quoted around 11.35 cents per pound on Friday, slightly better than seen earlier this week when futures went below 11 cents and reached the lowest levels in two and a half years.
Prices have failed to improve despite projections of lower volumes coming from Brazil in the new center-south crop.
“Brazil has been losing market share and the center-south was no longer a driver for prices in the current season,” said FCStone sugar analyst João Paulo Botelho.
Rui Sabino, a local director for German sugar group Sudzucker, added that Brazilian production has been stagnant for the past decade.
Analysts do not expect any changes in productivity, and some think it could get worse.
“With current prices, the trend is for reduced crop care and less renovation of cane fields, which are getting old,” said Archer’s Correa. — Reuters

New TNCs unlikely to end Grab’s ‘virtual monopoly’ — PCC

By Melissa Luz T. Lopez, Senior Reporter
THE ACCREDITATION of new mobile ride-hailing services does not automatically end Grab Philippines’ “virtual monopoly” of the local market, the country’s antitrust chief said.
“It’s a big challenge to get the new entrants to attract drivers, to attract riders. It’s not enough that there are new players — the challenge is how do you get them to attract riders and the drivers?” Philippine Competition Commission (PCC) Chairman Arsenio M. Balisacan said on the sidelines of a forum at the Asian Development Bank on Friday.
Earlier this month, the Land Transportation Franchising and Regulatory Board (LTFRB) accredited two transport network companies (TNCs). This comes a month after Uber Philippines left Asian markets and sold its assets to Grab.
The LTFRB recently approved the applications of Davao-based taxi-hailing app Hirna, as well as ride-sharing service Hype Transport Systems, Inc.
The accreditation and entry of new TNCs in Metro Manila is expected to provide much-needed competition after Uber Philippines’ exit.
The PCC initiated its own investigation into Grab’s acquisition of Uber’s operations, saying that it leads to a “virtual monopolization” of the ride-sharing market in the country.
In an earlier statement, the PCC said Grab’s buyout of Uber will entail “gobbling up 93% of the ride-hailing market” in the Philippines, pointing out that new TNCs can only capture seven percent of the industry.
Pending results of the PCC’s review, the watchdog asked Uber to continue operating until April 15. Other interim measures proposed by the competition body include prescribing Grab and Uber to refrain from sharing confidential information and from imposing exclusivity clauses, lock-in periods or termination fees on Uber drivers seeking to join the Grab network.
Mr. Balisacan clarified that the PCC has not yet ruled on the motion of reconsideration filed by both parties on the extension ordered for Uber’s operations in the country. He added that they are currently looking at “various remedies” to maintain competition in the ride-sharing market, in order to arm the public with transport options.
The PCC chief added that the body is “interested to collaborate” with other competition authorities in Asia over Uber and Grab’s case, saying that they have already touched base with the Competition and Consumer Commission of Singapore, which has also cracked the whip on the acquisition.

Draghi, Carney drafted to study Brexit finance risks

THE EUROPEAN Central Bank and the Bank of England have been drafted in to study the threats that Brexit poses to financial services. Just don’t expect this “technical working group” to save the day.
Brexit’s potential to disrupt trillions of dollars of derivatives contracts and tens of millions of insurance policies has emerged as a point of contention between the UK and European Union, with British policy makers calling for a coordinated legislative solution to prevent market turmoil. The EU says the industry should take the lead.
With the politicians in a standoff, the UK sees the working group, formed at the request of the European Commission and the UK Treasury, as a way to generate solutions that will allow banks and insurers to continue servicing contracts after Britain’s withdrawal from the EU, according to people with knowledge of the matter.
The Europeans are more restrained, saying the group will concentrate on analysis of the risks and leave the fixes to the politicians, the people said, asking not to be identified as the discussions are private.
The group’s work will be separate from the Brexit talks, according to a UK government statement on Friday. It will be chaired by ECB President Mario Draghi and BoE Governor Mark Carney, but beyond that little is known. Its membership and meeting schedule haven’t been determined, one of the people said. And with less than a year until the UK quits the EU, it’s unclear how much analysis the group will have time for.
The UK has made the case that the industry on its own won’t be able to address the threat, and policy makers need to ensure that firms have the permissions they need to service contracts after Brexit. So far, the EU has been unimpressed by the claims. Valdis Dombrovskis, the EU’s financial-services policy chief, said this week that the bloc sees no “evidence that most of the issues couldn’t be solved by the private sector itself.” — Bloomberg

Florida man’s Princess Di collection celebrates her legacy, fills house

MIAMI — John Hoatson’s home is a shrine to Princess Diana, with everything from a wedding day portrait to a plush doll and miniature replicas of her wedding shoes.

Hoatson’s passion for all things Diana began when he was eight and shows no signs of fading at the age of 45, with Diana’s son Prince Harry scheduled to wed retired American actress Meghan Markle on May 18 at Windsor Castle.

The wedding will give Hoatson the opportunity to add to a collection that numbers 13,000 items. A museum valued it at about $500,000 in 2011, he said.

As a child, Hoatson was an American history buff, collecting antiques related to the first US president, George Washington. He became hooked on the royal family and Diana after seeing her wedding to heir-to-the-throne Prince Charles on July 29, 1981.

“My mother woke me up the morning of the royal wedding of Charles and Diana and told me I needed to watch it for historical reasons,” he told Reuters during an interview in his home surrounded by objects from his collection.

“I was fascinated how they still used all the carriages and still had all that pomp and pageantry even after so many centuries,” said Hoatson, who is single.

One wall in his small Pompano Beach, Florida, home is covered by a black-and-white photo of Diana gazing into the camera. A wall-covering portrait of Diana and Charles from the wedding day hangs nearby and a National Geographic documentary about her life plays on a loop on his television.

Other items include signed cards, handwritten notes to her staff, porcelain trinkets bearing the Windsor family crest, the tiny replica shoes, the plush doll in a powder blue satin dress and sparkling tiara, and coffee mugs, plates, and bowls bearing Diana’s image. He even has a bar of soap Diana used on a Caribbean vacation.

Hoatson considers his prized possession a sliver of fruitcake in its original box from the wedding day, which he acquired in 2004 from an auction house for $300. “That was when Diana became a member of the royal family,” he said.

Now, Hoatson is organizing an office watch party for Prince Harry’s nuptials and plans to begin adding mementos from the day as soon as they become available. — Reuters

 

New Hope Liuhe warns of first-half losses

BEIJING — Chinese feed and pig producer New Hope Liuhe warned on Friday it could suffer first-half losses as the country’s pig industry grapples with prices at multi-year lows.
The company reported a 5.5% fall in first-quarter net profit to 603.7 million yuan ($95.3 million) even as revenue increased by 1.3% to 14.8 billion yuan.
It did not give a reason for the profit warning, but hog prices registered one of the sharpest ever declines in the first quarter and are still below average production cost.
Liuhe has expanded production rapidly in the past two years, with current capacity of 14.8 million head, making it one of the country’s largest pig farmers.
While it still made about 60% of its income from animal feed last year, amounting to 45.6 billion yuan, sales from its pig operation grew by 70.5% to 3 billion yuan, it said in its 2017 earnings report released on Friday.
That came as it doubled the number of pigs sold to 2.4 million after boosting capacity through new farms and acquisitions.
It plans to start operating new projects to produce another 950,000 pigs this year and is ready to break ground on more farms that would produce a further 10 million pigs, the company said.
New Hope Liuhe added that it would counter falling prices by increasing production efficiency in all operations and would set up a research institute to focus on types of feed.
The company’s poultry unit is also weighing on profit, recording an operating loss of 179 million yuan in 2017, even as revenues increased by 181% to 5.76 billion yuan.
Operating profit for the pig farming unit was 438.9 million yuan in 2017, while profit from feed reached 972 million yuan.
Total full-year net profit fell 7.7% to 2.3 billion yuan.
A breakdown for individual units was not included in the first-quarter report. — Reuters

Online fashion site counts on body-scanning tech

JAPANESE billionaire Yusaku Maezawa is ready to take on Uniqlo and the Gap, and his plan begins with a funny-looking spandex suit he says will revolutionize online clothes shopping.

His company, Start Today Co., which operates the popular fashion site Zozotown, announced it will begin distributing a body-tight suit it says can accurately measure every person’s proportions. Customers don the suit, scan themselves with their smartphones, and generate 3-D models of their bodies. The Tokyo-based company will then offer clothes to fit those measurements.

Dubbed Zozosuit, it’s Maezawa’s big bet on growing his 20-year old company into one of the world’s fashion giants. The idea is that providing clothes that take the guesswork out of sizing will not only win over those who already shop online, but also attract customers who are put off by the hassles of shopping.

Maezawa on Friday laid out a 10-year timeline that will see his company’s market value rise more than fivefold to ¥5 trillion ($46 billion).

“Without trying anything on or giving it any thought, you’ll get something delivered automatically that perfectly fits you,” Maezawa said at a press conference in Tokyo, donning one of the suits. “We’ll jump into the top 10 global apparel makers.”

Shoppers returning clothes bought online because of a poor fit has been one of the biggest frustrations of the retail industry as customers shift their habits to the web. Amazon last year bought Body Labs, a 3-D body-scanning start-up that allows people to create a digital avatar of themselves that can try on virtual clothes.

Maezawa said the suit will begin selling in over 70 countries by July, and he expects to distribute six million to 10 million of them by March next year. — Bloomberg

Strong appetite seen for homes at ‘liveable food park’

REVOLUTION Precrafted is seeing strong appetite for its Pampanga project touted as the “world’s first liveable food park.”
Revolution Precrafted Chief Executive Officer Jose Roberto “Robbie” R. Antonio said he expects sales at Revolution Flavorscapes at the Lakeshore to accelerate further, after it introduced lower-priced homes starting at P1.3 million.
“We started [pre-selling last] February so [we’ve sold] the first hundred of homes. We’re probably going to expect P2 billion this month,” he told reporters at the company’s event last Saturday.
Revolution Flavorscapes, a joint venture between Revolution Precrafted and Central Country Estate, Inc. (CCEI), will feature 7,100 houses in Pampanga.
As of last Saturday, 1,000 units have been sold.
“Do we want to sell out all P17 billion by this year? We’ll have to sell P1.5 billion every month. It’s a good challenge and I think I’m up for that. I think with the P1.3 million product, I think we’re going to sell more briskly,” he said.
Buyers can choose from three types of homes with sizes ranging from 48 square meters (sq.m.) to 72 sq.m. Prices start at P1.3 million up to P2.8 million.
“Here, more importantly, we’re not just selling homes, we’re giving them the ability for entrepreneurs to live there,” Mr. Antonio said.
Pop-up food and beverage (F&B) stores will cost up to P6 million for interested buyers. Revolution Precrafted will also help buyers set up their pop-up stores.
Among the amenities at Flavorscapes include a floating cinema, a clubhouse, a 12-hectare man-made lake, museums dedicated to candies and ice cream, a gallery for chocolate, and a microbrewery.
“It’s a concept you find in higher-end communities but right now with Revolution, we’re trying to bring it to the affordable level,” CCEI Managing Director Brian John B. Mangio said.
Mr. Mangio said that with Flavorscapes as a “self-contained community” that pays homage to the food capital of the Philippines, with there will be no more need to tour around the province to taste what the local cuisine has to offer.
The food park will also feature foreign cuisines.
Another 60-70 hectares will be allotted for the second phase of the Lakeshore property, which will include a few thousand more pre-fabricated homes and include a plan for horizontal pop-up office spaces. — Anna Gabriela A. Mogato

Peso to move sideways vs dollar

By Karl Angelo N. Vidal
THE PESO is seen moving sideways against the dollar today as optimism on the back of the upgraded economic outlook for the Philippines as well as the improved geopolitical situation in the Korean peninsula might be tempered by positive US economic data.
On Friday, the local currency strengthened further at P51.965 versus the greenback as S&P Global Ratings upgraded its credit outlook for the Philippine economy to positive from stable, hinting on better chances of a rating upgrade.
The Philippines currently holds a “BBB” rating from S&P, a notch above minimum investment grade. The rating has been on a “stable” outlook since April 2015 prior to this revision.
Week on week, the peso also strengthened from the P52.095-per-dollar finish on April 20.
A currency trader said on Friday that the peso will continue to regain its strength on the back of S&P’s revision of its credit outlook for the Philippines.
“[On Friday,] we closed much lower than the previous close. That continues to be the momentum. We’re continuing to see the peso regain some strength against the US dollar,” the trader said in a phone interview.
“The positive outlook reflects our view that improvements to the [Philippine] policy-making settings could support a track record of more sustainable public finances and balanced growth over the next 24 months,” S&P said in a statement sent late Thursday.
Meanwhile, Land Bank of the Philippines (LANDBANK) market economist Guian Angelo S. Dumalagan said the dollar “might move within a narrow band” against the peso amid “mixed developments since Friday evening and caution ahead of the Labor Day break.”
Financial markets will be closed tomorrow for the Labor Day holiday.
Meanwhile, although the US economic growth slowed in the first quarter at a 2.3% annual rate from the 2.9% pace in the previous quarter, the rate was better than the 2% consensus among economists in a Reuters poll.
Reuters added that the setback is “likely temporary against the backdrop of a tightening labor market and large fiscal stimulus.”
“This report was accompanied by upbeat US economic data on consumer sentiment and first-quarter personal consumption expenditure (PCE) inflation,” Mr. Dumalagan added.
“While these upbeat readings are positive for the dollar, they may not significantly push greenback higher due to investors’ improving appetite for riskier currencies last week’s agreement between North and South Korea…”
South Korean President Moon Jae-in and North Korean leader Kim Jong-un met on Friday at the border village of Panmunjom, vowing to foster peace and work together to denuclearize the peninsula.
“We are at a starting line today, where a new history of peace, prosperity and inter-Korean relations is being written,” Mr. Kim said before they began talks.
LANDBANK’s market economist added that some investors might stay on the sidelines “ahead of likely strong March 2018 US reports on PCE inflation, personal spending, and personal income as well as April 2018 US manufacturing data.”
For today, the trader sees the peso moving between P51.90 and P52.20, while Mr. Dumalagan gave a P51-70-P52.30 range for the week. — with Reuters

Stocks likely to drop ahead of earnings reports

By Arra B. Francia, Reporter
STOCKS are seen to trek lower in the week ahead, as investors wait for the release of more earnings reports for the first quarter.
The bellwether Philippine Stock Exchange index climbed 1.36% or 103.60 points to close at 7,721.02 last Friday, gaining momentum after S&P Global Ratings raised its outlook for the Philippine economy to positive from stable.
Week on week, the market ended with a minimal decrease of five points or 0.07%, as the 2.4% decline in financials and 1.9% decrease in services tempered the increase in holding firms and property, which added 1.6% and 0.6%, respectively.
Foreign investors remained outside the market, as net foreign selling stood at P2.52 billion last week, 45% lower on a weekly basis.
“Tug of war between buyers and sellers became the week’s highlight, as several funds exited from US equities after their 10-year treasury bond yield surged to as much as 3.035%. Such was doused off later in the week, as buying resumed on improved Q1 earnings,” online brokerage firm 2TradeAsia.com said in a weekly market note.
This week, analysts flagged another possible decline for the market in lieu of quarterly earnings reports.
“The potential softening might come from Q1 results, with select listed stocks slated to present this week,” according to 2TradeAsia.com.
Set to release their financial reports this week are Manila Electric Co., Metro Pacific Investments Corp., D&L Industries, Inc., Aboitiz Equity Ventures, Inc., and Eagle Cement Corp.
Eagle Equities, Inc. Research Head Christopher John Mangun noted the same, adding that investors may wait for the index to hit the next support level.
“I think we will continue to see a weaker market as investors continue to wait on the sidelines for a bottom in the index. With only four trading days next week, I am expecting a lower turnover value,” Mr. Mangun said.
Overseas, traders may look at the US Federal Reserve Open Market Committee’s meeting on May 1 and 2, which may hint toward policy tightening.
“The spotlight could switch to the US government’s fiscal deficit, especially with the latest corporate income tax cut and planned government spending this year,” 2TradeAsia.com said in its market report.
Eagle Equities’ Mr. Mangun placed the market’s support level from 7,500 to 7,600, while resistance will be at 7,750 to 7,880. The analyst added that he remains optimistic for a reversal of trend before the end of the second quarter.
“In the meantime, small and mid-cap companies will continue to see higher trading volume as they have proven to be better opportunities to make money in the stock market right now,” Mr. Mangun said.
Financial markets will be closed on May 1 for Labor Day.

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