Equities 4 MIN READ

Stock Market Weekly: Market pullback likely

With the market now trading at overbought levels, coupled with the rising COVID cases in China, investors are expecting a pullback this week.

November 28, 2022By First Metro Securities Research


The Philippine Stock Exchange index (PSEi) edged higher by 2.58% week-on-week as it closed at 6,606.94 (+169.56 points). The market saw six straight days of net buy flows from foreigners on the back of positive catalysts, including the US Fed’s announcement of a slower pace of hikes as inflation begins to ease. Investors also considered the comments of Bangko Sentral ng Pilipinas Governor Felipe Medalla who ruled out jumbo or off-cycle rate hikes. The weaker US dollar and the peso appreciating to its highest level since September 2022 as it closed at P56.67 on Friday also added to last week’s positive sentiment.

Top index performers were Metropolitan Bank & Trust Company (MBT) (+8.7%), Converge (CNVRG) (+8.7%), and SM Investments Corporation (SM) (+5.9%), while index laggards were Meralco (MER) (-7.1%), JG Summit (JGS) (-2.0%), and San Miguel Corporation (SMC) (-1.2%). The index breadth was positive, with 20 gainers versus 9 losers. The average daily turnover value was PHP 5.5 billion. Foreigners were net buyers of PHP 2.3 billion.


The PSEi is likely to pull back after six straight weeks of ascent, as it is now trading at overbought levels. The market may also worry about China, which reported a fourth straight daily record of 39,971 new COVID cases yesterday. Investors will also be closely monitoring the release of the US jobs report for November on Friday, December 2, 2022. The jobs data will be the last monthly employment report before the US Fed’s next meeting on December 13 and 14, 2022.


Manila Water Company, Inc. (MWC) — TAKE PROFIT ON BREAKDOWN

The stock is now bullish, trading above its key moving averages (50-day, 100-day, and 200-day). However, the stock is also currently trading near overbought levels with the Relative Strength Index (RSI) indicator at 82. Taking profit once MWC trades below its 9-day exponential moving average (EMA) (~ below PHP 19.16) is advisable. The next support levels are PHP 19.00/PHP 17.00.


After a recent rally, LTG is looking to retest its immediate resistance level of PHP 9.58. The recent rally was driven by the company disclosing that its Board of Directors approved the declaration of PHP 0.50 per outstanding common share in special cash dividends for shareholders on record as of December 6, 2022.

The ex-dividend date will be on December 1, 2022, and payment will be made on December 16, 2022. We are of the view that a clear bullish signal will be indicated by a break above its August 2022 high of PHP 9.58. Accumulating LTG once it breaks above PHP 9.58 is advisable. Set stop limit orders below PHP 9.20 and take profits at around PHP 10.10/PHP 11.00.


ACEN’s share price is currently trading near overbought levels. As for company guidance, ACEN noted the Supreme Court’s decision declaring void the administered or regulated pricing, which exposed the company to approximately PHP 1 billion in losses, which are not yet reflected in its 9-month 2022 results. With this, the company expects to be impacted by approximately PHP 3.5 billion in losses for full year 2022.

ACEN plans to mitigate these losses by 2023. On a positive note, ACEN expects strong electricity spot prices in Australia, which will contribute to the bottom line. Aside from this, with the repricing of ACEN’s retail electricity supplier (RES) customer contracts, the company is projecting an improved margin. Taking profit once ACEN trades below its 9-day EMA (~ below PHP 6.95) is advisable. The next support levels are PHP 6.50/PHP 6.00.


Resistance: 200-day MA (~6,600)

Support: 100-day MA (~6,350)

The PSEi has been up for six straight weeks and is now hovering near its 200-day moving average price for the first time since April 2022. The technical indicator Moving Average Convergence/Divergence (MACD) confirms the bullish momentum. Continue to observe the market, as it is now trading at overbought levels with the RSI at 70. Those looking to enter should wait for the likely pullback.


Look to accumulate on the pullback around 6,450-6,500. Set stop limit orders below 6,300.


Tuesday, November 29, 2022
– Philippine bank lending year-on-year for October 2022 (previous: 12.9%)

Wednesday, November 30, 2022
– US GDP annualized quarter-on-quarter for 3Q 2022 (consensus estimate: 2.8%, actual for 2Q 2022: 2.6%)

Thursday, December 1, 2022
– US Personal Income and Spending for October 2022 (consensus estimate: 0.4%/8%; previous: 0.4%/0.6%)
– US Initial Jobless Claims as of November 26, 2022 (consensus estimate: 231,000, previous: 240,000)
– US S&P Global Manufacturing PMI for November 2022 (consensus estimate: 47.6, previous: 47.6)
– Philippine S&P Global Manufacturing PMI for November 2022 (consensus estimate: 47.6)

Friday, December 2, 2022
– US Change in Nonfarm Payrolls for November 2022 (consensus estimate: 200,000, previous: 261,000)

Read More Articles About:
Equities 4 MIN READ

Stock Market Weekly: Market expected to resume rally

With the central bank saying that it will adjust foreign exchange policies to restrain the peso’s volatility, we may see a rally this week.

November 21, 2022By First Metro Securities Research


The Philippine Stock Exchange index (PSEi) ended 2.40% higher week-on-week at 6,437.38 (+150.61 points). The local bourse sustained its upward momentum early in the week following strong corporate earnings results, the surprise in GDP growth data, and the rise in September 2022 remittances sent home by overseas Filipinos.

The market took a breather mid-week ahead of the Bangko Sentral ng Pilipinas’ (BSP) policy meeting, but soon extended its gains until Friday on foreign net inflows and the peso’s appreciation following the BSP’s widely expected 75-basis-point rate hike.

Top index performers were Converge (CNVRG) (+20.0%), AC Energy (ACEN) (+10.8%), and Ayala Land Inc. (ALI) (+10.4%), while index laggards were Globe Telecom (GLO) (-3.7%), BDO Unibank Inc. (BDO) (-3.4%), and SM Prime Holdings Inc. (SMPH) (-2.9%). The index breadth was positive, with 22 gainers versus 8 losers. The average daily turnover value was PHP 5.3 billion. Foreigners were net buyers of PHP 1.7 billion.


We expect the market to continue last week’s rally on the BSP’s pronouncement to adjust foreign-exchange policies to curb speculation and further temper the volatility of the peso. However, gains may be capped by recent hawkish comments by the US Federal Reserve.


D&L Industries, Inc. (DNL) — BUY

DNL posted an 18% year-on-year (y-o-y) increase in 3Q 2022 earnings to PHP 910 million, bringing the 9-month 2022 net income to PHP 2.5 billion (+17% y-o-y), as DNL’s diversified businesses, the essential nature of the products it manufactures, and its ability to adjust its selling prices mitigated the impact of macroeconomic headwinds (volatile commodity prices, higher interest rates, and a weak peso) during the period.

The management is optimistic that full year 2022 earnings will exceed the record net income booked in 2018 (PHP 3.2 billion) given the near-term catalysts such as the anticipated holiday-induced spending and the lifting of mask requirements indoors. Moving forward, the completion of DNL’s Batangas plant in January 2023 is expected to support the company’s growing export business in the food and oleochemicals segment.

Accumulating DNL once it breaks above PHP 7.50 is advisable. Those more conservative can accumulate once DNL breaks above PHP 8.00. Set stop limit orders below 5%-7% of the average cost. Take profit at around PHP 8.80.

Shakey’s Pizza Ventures, Inc. (PIZZA) — BUY ON BREAKOUT

PIZZA posted a net income of PHP 454 million for the first nine months of 2022 (9 months of 2021: net loss of PHP 35 million), with 3Q 2022 net income standing at PHP 250 million (3Q 2021: net loss of PHP 49 million). PIZZA attributed its performance to the resurgence of dine-in sales owing to easing mobility restrictions, initiatives to expand off-premises takeout and delivery services, and the expansion of its store network.

Despite the elevated cost environment and its impact on consumer sentiment, PIZZA is optimistic that the holiday festivities will enable its top line to exceed pre-pandemic levels this year. It expects 2022 net income to end near 2019 levels (PHP 865 million). As for price action, the 200-day moving average (MA) has acted as a key resistance level since March 2022. A break above the 200-day MA will likely result in the counter retesting the PHP 8.10 level. Accumulating PIZZA once it breaks above PHP 8.10 is advisable. Set stop limit orders below PHP 7.65. Take profit at around PHP 9.00.

Vista Land & Lifescapes, Inc. (VLL) — SELL ON BREAKDOWN

The stock is currently in a downtrend, with share prices trading below its major moving averages (50-day, 100-day, and 200-day). On November 11, 2022, MSCI announced that it had removed VLL from the MSCI Philippines Small Cap Index, effective on the close of November 30, 2022.

We expect the stock to see foreign outflows as tracker funds that follow the MSCI index realign their portfolios in accordance with the recent adjustments. As for price action, VLL is trading below its major MAs, and other technical indicators show that the bearish momentum is still ongoing. Lighten your position once VLL breaks below PHP 1.50. The next support levels are at PHP 1.00 and PHP 0.67.


Resistance: 6,600

Support: ~6,325 (100-day moving average price)

The PSEi rallied anew and is now trading above the 100-day MA. The Moving Average Convergence Divergence (MACD) confirms the bullish momentum, with the MACD line trading above both the signal and zero lines. Continue to observe the market, as it is trading near overbought levels. Should the market sustain trading above the 100-day MA, the next resistance is 6,600.


– Accumulate if the market stays above the 100-day MA this week.


Wednesday, November 23, 2022
– US preliminary manufacturing Purchasing Mangers’ Index (PMI) (consensus estimate is 50.0, while the actual for October 2022 is 50.4)

Friday, November 25, 2022
– Philippine Budget Balance for October 2022 (Actual for September 2022: -PHP 179 billion)

Read More Articles About:
Rates & Bonds 3 MIN READ

Globe Telecom: Dominating the local telecommunications industry

Globe Telecom Inc. is the market leader in the Philippine telco industry with decades of expertise and leading capital investments.

November 17, 2022By Metrobank

This article is exclusive to Metrobank preferred clients.

Log in your Wealth Manager account to get access to investment insights, bank views, and webinar videos.

Given the overall level of yields, we look for bonds with good relative value for additional yield pickup. We see opportunity in the Philippine telecommunications Industry, led by the PLDT-Smart and Globe, which has seen their bonds trade incongruently with their market positioning.

For QIBs looking for high-yield placements, we shine a spotlight on GLOPM 2.5 30.

Bond Details:

Read More Articles About:
Equities 2 MIN READ

Banks are in: Three reasons to be optimistic with the financial sector

Despite elevated inflation rates, the perils of escalating conflict arising from the Russia-Ukraine war, and fears of economic recession globally, the country’s banks are doing well.

November 17, 2022By Anthony O. Alcantara

Recently, banks have reported huge gains in their profits for the first nine months of the year. According to the Bangko Sentral ng Pilipinas, the Philippine banking system’s net earnings have soared by 44% as of September.

And where do banks get these profits? For the most part, from trading gains and interest income.

Trading income—which comes from trading fixed income and currencies, among others—has more than doubled to PHP 17.09 billion from PHP 6.16 billion or by 178%. Net interest income, which refers to interest income minus expenses related to interest-bearing liabilities, has increased by 10% from PHP 491.88 billion to PHP 542.50 billion.

In addition, bad loans have also declined to its lowest level in 20 months.

Here’s why we are optimistic about the finance sector:

  1. Wider economic reopening. This means more people buying things such as gadgets, clothes, and food, and paying for services such as haircuts, massages, hotels. People and businesses are encouraged to take on loans.
  2. Higher income because of higher policy rates. When the central bank increases interest rates, banks’ margins initially expand.
  3. Surge in digital transactions. We believe people will never go back to traditional banking after having experienced the convenience and efficiency of digital transactions. For banks, this means reducing the cost to serve through digitalization.

To read more about what makes the finance sector attractive, you can read our report here.

If you are a client and not yet enrolled in Wealth Insights, you may seek assistance from your investment specialist or relationship manager.

ANTHONY O. ALCANTARA is the editor-in-chief of Wealth Insights. He has over 20 years of experience in corporate communications and has a master’s degree in technology management from the University of the Philippines. When not at work, he goes out on epic adventures with his family, practices Aikido, and sings in a church choir.

Read More Articles About:
Rates & Bonds 2 MIN READ

Post-Halloween opportunities in peso government bonds

As some investors sell off because of defensiveness of the market, new opportunities have sprung up for clients who want to tactically position in peso government securities.

November 16, 2022By Metrobank Government Securities Trading Desk

This article is exclusive to Metrobank preferred clients.

Log in your Wealth Manager account to get access to investment insights, bank views, and webinar videos.

Halloween is over. Yet the market continues to be spooked by several factors that ultimately point to higher yields.

Despite this spooky atmosphere, several opportunities have emerged for clients who want to tactically position in government securities.

Short-dated bonds like RTB 3-10 (3-month), FXTN 5-75 (4-month) FXTN 7-58 (5-month), and RTB 10-4 (9-month) have adjusted significantly higher as they re-align with higher policy rates – making them more viable short-term investment alternatives.

Three-year bonds are currently trading near the 6.40-6.60% area, while 10-year bonds are hovering near 7.30-7.50%.

With yields in these tenor buckets fast approaching their 2018 highs, investors may start to tactically position near the entry levels indicated in the table below.

Read More Articles About:
Economy 3 MIN READ

Costly fertilizer: There’s more to our inflation woes

Fertilizer prices have been on the rise, prompting farmers to use less of it to grow their crops. This causes yields to go down, threatening the country’s food supply and elevating food prices even more.

November 16, 2022By Ina Calabio

Fertilizer prices have drastically soared globally since 2021, owing to the surging cost of production, supply disruptions, and export restrictions.

The rise in energy prices has played a part in the upsurge of fertilizer production costs, as high natural gas prices led to a reduction in ammonia production, a key input in nitrogen fertilizer production. Meanwhile, surging power prices likewise pushed China – a major producer and exporter of urea and phosphate (types of fertilizer) globally – to impose restrictions on their fertilizer exports to stabilize their domestic prices and secure domestic supply, which then significantly reduced global supply.

Should we be worried?

In 2021, the Philippines imported 83% of its total fertilizer supply, of which 41% came from China, making the country susceptible to the upsurge in global fertilizer prices.

Based on the Fertilizer and Pesticide Authority (FPA) 2020 data, 45% of the country’s fertilizer imports comprised of urea, followed by ammosul (ammonium sulfate) comprising 22% Their average retail prices peaked in May 2022, reaching PHP 2,992.08 (prilled urea), PHP 2,969.47 (granular urea), and PHP 1442.6 (ammosul) per 50-kilo bag, as of the week from May 30 to June 3. Prices have grown by more than 100% compared to the same period last year.

Retail prices (end-of-month) of fertilizers have substantially risen since 2021. Source: Fertilizer and Pesticide Authority (FPA).

The surge in fertilizer prices has significantly impacted local farmers, prompting them to reduce fertilizer application, which then resulted in lower yields in agricultural commodities such as rice, among others. As of the November 3 data of the Bureau of Plant Industry (BPI), the country has already imported 3.2 million metric tons (MT) of rice, exceeding the 2.8 million MT full-year rice imports in 2021. This is to make up for the supply shortfall due to lower yields and the destruction caused by recent typhoons.

The United States Department of Agriculture (USDA), in its recent grain and feed update report (as of October 3), has already revised its production and import projections for the Philippines given the impacts of scant fertilizer application and calamities to rice yield. Milled rice production for MY 2022/23 is seen to decline by 3.51% to 11.975 million MT from 12.411 million MT, while imports are expected to increase by 3.0% from 3.3 million MT to 3.4 million MT.

While urea and ammosul prices have slightly tapered since May, they are still elevated and will remain so as China has extended its export restrictions until the end of 2022, keeping global supply tight. Moreover, the impending rise in export prices of the country’s major rice trade partners could pose challenges, especially given the increased rice import projection for the country and the impact of the peso depreciation.

Just recently, the country’s inflation hit a 14-year high of 7.7% in October, with food inflation accelerating to 9.8%. And until global market issues subside and interventions to boost local food production become palpable, we can expect more surges in food prices.

INA CALABIO is a Research & Business Analytics Officer at Metrobank in charge of the bank’s research on industries. She loves OPM and you’ll occasionally find her at the front row at the gigs of her favorite bands.

Read More Articles About:
Economy 2 MIN READ

November 2022 Updates: Better-looking growth outlook

The Philippines posted higher-than-expected GDP growth in the 3rd quarter of 2022, improving the economic outlook for the year. Nonetheless, elevated prices are expected to linger, pushing continued BSP action as global headwinds remain.

November 15, 2022By Metrobank Research

The country’s inflation rate hit another all-time high of 7.7% in October, primarily driven by a faster acceleration in the prices of food and non-alcoholic beverages due to the impact of recent weather disturbances on the food supply.

Inflation is still seen to remain elevated in the coming months, peaking in the fourth quarter as global headwinds remain. Nonetheless, the economy has a better outlook as GDP for the third quarter of 2022 grew by 7.6%, beating market expectations, driven by strong consumption and export performance despite soaring prices.

Meanwhile, interventions by the BSP as well as an expected seasonal increase in OFW flows and exports seem to strengthen the peso as the USD/PHP exchange rate has remained at the PHP 57 to PHP 58 level after hitting PHP 59 in early October. However, interest rates in the coming months are expected to rise given the consistent hawkish statements by the US Fed and the Bangko Sentral ng Pilipinas’ signals of matching the Fed’s action.

Considering these new developments, we have revised our forecasts for 2022 (GDP, inflation, and RRP rate) and 2023 (inflation and RRP rate) in the table below, as we continue to monitor further movements:

For more information on the performance and outlook for several macroeconomic indicators, as well as local and global macroeconomic news, please download the full report here.

Read More Articles About:
Equities 5 MIN READ

Stock Market Weekly: Market to absorb expected 75-bp rate hike

We can expect sideways trading with a slight downward bias this week as investors await more earnings and data releases as well as the central bank’s policy rate decision.

November 14, 2022By First Metro Securities Research


The Philippine Stock Exchange index (PSEi) rose by 1.64% week-on-week to close at 6,286.77 (+101.24 points), lifted by net foreign buying, extending its streak to six trading days. During the week, investors factored in the slew of major local earnings and data releases as well as the results of the MSCI Semi-Annual Index Review.

The benchmark index initially rose on Monday, led by SM Prime Holdings, Inc. (SMPH) and International Container Terminal Services, Inc. (ICT) following their respective 3rd quarter 2022 earnings results but subsequently fell on Tuesday and Wednesday from investors’ profit-taking. On Thursday, the index fell despite the surprising 7.6% year-on-year 3rd quarter 2022 gross domestic product (GDP) growth which was much higher than the 6.0% consensus. On Friday, the PSEi rose 1.93%, lifting the local bourse amid the lower-than-expected October US inflation print which fueled speculation that the US Fed could begin to moderate its aggressive fight against inflation moving forward.

Top index performers were Puregold Price Club Inc. (PGOLD) (+9.1%), SM Prime Holdings Inc. (SMPH) (+8.4%), and Ayala Corp. (AC) (+7.8%), while index laggards were Semirara Mining and Power Corp. (SCC) (-10.1%), Metro Pacific Investments (MPI) (-7.4%), and PLDT (TEL) (-5.2%). The index breadth was positive with 19 gainers versus 11 losers. The average daily turnover value was PHP 4.6 billion. Foreigners were net buyers by PHP 2.1 billion.


We expect the PSEi to trade sideways with a slight downward bias as investors await more earnings and key data releases, including the cash remittances report and the highly anticipated policy rate decision of the BSP, which is expected to match the US Fed’s rate hike of 75 basis points (bps). On the international front, investors look ahead to the G-20 Summit and continue to monitor key developments in crypto.


Aboitiz Power Corp. (AP) — BUY

AP’s core net income came in at PHP 18.3bn (+17% year-on-year) — ahead of consensus estimates. AP continues to expect earnings to remain strong for the rest of the year as the power demand and supply situation in the country is still tight, which could result in elevated wholesale electricity spot market (WESM) prices. AP also reiterated that the fuel pass through provision in its power contracts as well as coal hedging contracts should be able to mitigate the impact of rising coal prices. As for the price action, we believe that a break above PHP 33.20 will result in the stock retesting PHP 36.50. On the other hand, a break below PHP 27.50/PHP 27.00 will likely result in the counter slipping further towards PHP 28.50. Accumulating AP once it breaks above PHP 33.20 is advisable. Set stop limit orders below PHP 31.00 and take profits at around PHP 36.50.

Bloomberry Resorts Corp. (BLOOM) — BUY

BLOOM reported 3rd quarter 2022 net income of PHP 1.5 billion (3rd quarter 2021: net loss of PHP 1.1 billion), bringing earnings for the first nine months of 2022 to PHP 4.0 billion (1st half 2021: net loss of PHP 3.0 billion) – above consensus expectations – lifted by the VIP segment as quarantine measures continue to ease.

BLOOM’s earnings performance is expected to sustain its strong recovery as it continues to benefit from the policy that allows vaccinated foreigners to enter the Philippines as well as the reopening of borders across Asia.

Similarly, the Philippine government’s stance of not implementing lockdowns moving forward allows BLOOM to resume their activities to full capacity, which will further improve the company’s mass table and electronic gaming machine (EGM) volumes. Accumulating BLOOM once it breaks above PHP 7.20 is advisable. Set stop limit orders below PHP 6.80. Take profit at around PHP 8.00 to PHP 8.10.

PLDT, Inc. (TEL) — BUY

TEL reported a net income of PHP 27.6 billion for the first nine months of 2022 (+45% year-on-year). Excluding the impact of asset sales and Voyager Innovations, TEL’s core net income

reached PHP 25.4 billion (+10% year-on-year) – well ahead of consensus estimates. On consolidated service revenues, TEL logged PHP 141.9 billion (+4.5% year-on-year), driven by data and broadband, which grew by 9% to PHP 113.2 billion, contributing 80%.

Despite rising competition in both the mobile and fixed-line segments, we believe that TEL can mitigate the impact of the said risk to its earnings due to: (i) It is best positioned to capture the long-term structural fixed broadband opportunity with its ~48% market share, owing to its extensive nationwide fiber footprint (>839,000 km), international network capacity of 60 terabytes (Tbps), and swift rollout of over 6.72 million fiber ports as of June 2022; (ii) it is less reliant on mobile service revenues, which account for only 41% of the market as of June 2022. It has less to lose versus Globe Telecom (GLO); (iii) its increasing corporate data and data center revenue, with a total estimated capacity of 172 MW (rack capacity: estimated >13,600) by 2023, thereby mitigating potential pressure on earnings amid increased competition in its core telco operations; and (iv) it has a better balance sheet position after the tower sale, which enables TEL to pay down debt, and at the same time fund investment requirements to stave off competition.

Accumulating once TEL breaks above PHP 1,643.00 is advisable. Set stop loss orders below PHP 1,560.00. Take profit at around PHP 1,800.00 to PHP 1,900.00 (PHP 1,930 for long-term investors).


Resistance: 6,300 / 6,400

Support: 5,700 / 6,000

The PSEi resumed its rally last week, briefly trading above the 100-day moving average (MA) price (~6,318). However, it failed to stay above the said level. This further validates the 100-day MA as the market’s resistance, which the PSEi must break to resume the ongoing rally.


Those looking to accumulate are suggested to buy once the market breaks back above the 100-day MA.


Monday, November 14, 2022
– Corporate Earnings: Globe Telecom (GLO), GT Capital (GTCAP), San Miguel Corporation (SMC)

Tuesday, November 15, 2022
– Corporate Earnings: Ayala Corporation (AC)

Wednesday, November 16, 2022
– Corporate Earnings: Alliance Global Group Inc. (AGI)

Thursday, November 17, 2022
– BSP interest rate decision; consensus estimate is a hike of 75 bps
– Overseas Filipino (OF) cash remittances year-on-year for September 2022 (consensus estimate is 3.5%; actual for August 2022: 4.3%)

Read More Articles About:
Economy 3 MIN READ

On Exchange Rates: Watch and Listen for Signals

The behavior of exchange rates is heavily influenced by a variety of factors, such as OFW flows, foreign direct investments, reserves, terms of trade, inflation, and interest rates. What may be less known is that transparency and signals from the central banks can also influence exchange rates.

November 10, 2022By Anna Isabelle “Bea” Lejano

Movements in the USD/PHP rate are commonly known to be driven by overseas Filipino workers (OFW)’s remittances, the volume of exports, and differentials between the key policy rate of the Philippines and the US. However, there is also another factor that may not be as apparent: the signals communicated by the central banks.

Central banks, such as the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP), hike the key policy rate to curb inflation, ensure orderly market conditions, and manage volatility in the exchange rate.

Expectations on the key policy rate also play a crucial role in the movements of the exchange rate–not just on actual movements in the key policy rate. So, the central banks may give signals to manage expectations and subsequently, currency movements.

Case in point: though the US Fed Funds rate (FFR) was unchanged in May 2013 (see graph above), signals from the US Fed that it will tighten monetary policy led to the immediate depreciation of the USD/PHP rate, even if actual FFR hikes started in December 2015. Because markets priced in the hike and anticipated that returns for US investments will be higher than that of the Philippines, the peso depreciated.

The same situation happened in 2021. The US Fed signaled a tapering of its quantitative easing (QE), where the central bank buys securities from the open market to bring down interest rates and raise the money supply. The US Fed aslo signaled rate hikes for the following year. Because of these signals, the market priced in the anticipated tapering of QE and the contractionary monetary policy of the US Fed. This led to the depreciation of the peso even before 2022, earlier than the US Fed hikes.

In the same way, the BSP also sends signals to manage fluctuations in the exchange rate.

BSP Governor Felipe Medalla announced that the BSP would match the US Fed hikes point by point way before the Monetary Board meeting on November 17 and even before the Federal Reserve Open Market Committee (FOMC) meeting on November 2, where it was widely believed that the US Fed would hike its FFR by 75 basis points or 0.75 percent.

Even if the BSP’s meeting was still weeks away and the US Fed hiked by 75 bps resulting in only a 25-basis point policy differential between the RRP rate and the FFR during early November, the peso stayed at the PHP 58/USD level. The BSP’s intervention in the FX market by selling dollar reserves also likely aided the peso from being volatile and from further weakening.

The average policy rate differential between the PH and US is 100 bps or more, at least in 2022. So, a 25-basis point differential should have depreciated the peso.

Mr. Medalla said that the signaling was done to temper any impact on the peso because of the recent US Fed hike before the BSP Monetary Board meeting. This shows that statements from the central bank can preempt the foreign exchange market from reacting, even if there are no actual hikes. Thus signaling from the central bank can influence currency movements as much as actual policy rate hikes.

Since the BSP signaled that it would match the Fed point by point for the remainder of the year, a 75-bps hike in November and a possible 50 bps hike in December by the US Fed would likely bring RRP rates at the 5.50 percent level by yearend.

Meanwhile, US FFR rates are seen to settle at 4.50 percent, maintaining a 1 percent policy differential from the RRP. Hopefully, these signals from the BSP could help the peso from further depreciating.

ANNA ISABELLE “BEA” LEJANO is a Research & Business Analytics Officer at Metrobank, in charge of the bank’s research on the macroeconomy and the banking industry. She obtained her Bachelor’s degree in Business Economics from the University of the Philippines School of Economics and is currently taking up her Master’s in Economics degree at the Ateneo de Manila University. She cannot function without coffee.

Read More Articles About:
Equities 4 MIN READ

Stock Market Weekly: Downward bias expected amid sideways trading

Investors are waiting for several catalysts before making their moves this week—more earnings results, Philippines’ GDP and unemployment numbers, and the US inflation print.

November 7, 2022By First Metro Securities Research


The Philippine Stock Exchange index (PSEi) ended 0.52% higher week-on-week to 6,185.53 (+32.10 points). The market started the shortened trading week in the green but fell soon after expectations of a US Fed pivot were met with a 75-basis-point hike.

Ahead of the US Fed’s announcement, the Bangko Sentral ng Pilipinas (BSP) has indicated a hike in policy rates to match the Fed in the next policy meeting on November 17, 2022. The Fed’s interest rate hike was followed by the news of higher-than-expected October 2022 inflation print in the Philippines at 7.7% year-on-year (September 2022: 6.9%, October 2021: 4.0%, consensus estimate: 7.2).

Despite the Fed’s interest rate hike and higher local inflation rate, the local bourse rose on last-minute bargain hunting due to outstanding third quarter earnings for most PSEi constituents and the positive sentiment on China’s reopening. Meanwhile, the peso marginally gained against the dollar, closing at PHP 58.55 last Friday versus last week’s PHP 58.80.

Top index performers were LT Group Inc. (LTG) (+5.3%), Universal Robina Corporation (URC) (+3.8%), and San Miguel Corporation (SMC) (+2.9%). Index laggards were Ayala Corporation (AC) (-6.2%), Converge (CNVRG) (-2.4%), and Semirara Mining and Power Corporation (SCC) (-2.3%). The index breadth was positive with 18 gainers versus 12 losers. The average daily turnover value was PHP 4.5 billion. Foreigners were net buyers by PHP 771.9 million.


We expect the PSEi to trade sideways with a downward bias as investors await more earnings results and market catalysts, including the Philippines’ Gross Domestic Product (GDP) and unemployment rate releases. On the international front, investors will be closely monitoring the upcoming US Consumer Price Index (CPI) report on Thursday, which is projected to come in slightly lower at 8.0% and is considered a key factor in determining the central bank’s next course of action.


Manila Electric Company (MER) — BUY

MER recorded a 9-month 2022 consolidated core net income of PHP 19.6 billion (+9% y-o-y)—ahead of consensus estimates—on the back of sustained growth in energy sales and higher earnings of the power generation segment in the Philippines and in Singapore.

MER’s energy sales for the period is in line with its target sales volume growth of within 5 to 6% this year. The outperformance of the commercial sector is also consistent with our view given that the retail, restaurants, education, and public transport segments are expected to pick up. As for the refund ordered by the Energy Regulatory Commission, the management said it did not result in a significant decline in the company’s bottom line this year as MER had fully provisioned for the bulk of the amount to be refunded. Accumulating once MER breaks above PHP 320.00 is advisable. Set stop limit orders below PHP 300.00. Take profit at around PHP 360.00/ PHP 380.00.

Cemex Holdings Philippines, Inc. (CHP) — LIGHTEN POSITION

CHP reported a net loss of PHP 552 million (9M21: net income of PHP 94 million) in 3Q 2022 amid foreign exchange losses. Excluding this, 3Q 2022 core net income reached PHP 262 million (-39.8% y-o-y) due to weak private construction demand and higher input costs. This brought 9M 2022 core net income to PHP 737 million (44% y-o-y), below consensus estimates. In the next quarter, we expect CHP’s margins to remain under pressure amid rising power and fuel input costs. CHP’s volume growth should remain muted as construction activity will be

affected by the inclement weather. Lightening positions once CHP breaks below PHP 0.62 is advisable. The next support level is at PHP 0.58.

AgriNurture, Inc. (ANI) — BUY ON BREAKOUT

ANI formed a pennant, a short-term bullish continuation pattern. The price seems to be resuming a sharp rally after taking a brief pause. The measured target price is PHP 8.60 – PHP 8.90, according to Technical Insight, our automated chart pattern recognition program. Accumulating once ANI breaks above PHP 7.05 is advisable. Set stop loss orders below PHP 6.50. Take profit at around PHP 8.00 to PHP 8.60.


Resistance: 6,300 / 6,400

Support: 5,700 / 6,000

The PSEi opened strong at the early part of the trading week but was not able to sustain the rally and has since stayed below the current 6,250 resistance level. Once the PSEi breaks above 6,200/6,300, we can expect the market to test 6,800 next.


Those looking to accumulate are suggested to buy once the market breaks back up above 6,200/6,300.


Monday, November 7, 2022
– Corporate Earnings: International Container Terminal Services Inc. (ICT)

Tuesday, November 8, 2022
– Philippine unemployment rate for September 2022 (August: 5.3%)
– Corporate Earnings: Ayala Land Inc. (ALI), AC Energy (ACEN)

Wednesday, November 9, 2022
– Corporate Earnings: Monde Nissin Corporation (MONDE), Metro Pacific Investments Corp. (MPI), Robinsons Land Corporation (RLC), SM Investments Corporation (SM)

Thursday, November 10, 2022
– Philippine GDP year-on-year for 3Q 2022 (consensus estimate: 6.0%; 2Q 2022: 7.4%)
– Corporate Earnings: Converge (CNVRG), JG Summit (JGS), San Miguel Corporation (SMC)

Friday, November 11, 2022
– US Consumer Price Index (CPI) year-on-year for October 2022 on Friday, November 10, 2022 (consensus estimate: 8.0%; September 2022: 8.2%)
– Corporate Earnings: LT Group Inc. (LTG)

Read More Articles About: