Rates & Bonds 2 MIN READ

Peso GS Weekly: Expect the auction to garner strong interest

There is still healthy appetite for the 13-year tenor bucket. We foresee selling interest to be met by bottom fishing as other investors bet on price recovery. See our top picks for this week.

January 31, 2023By Government Securities Trading Department

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.


The peso government securities (GS) market experienced multiple days of volatility last week, with dealers’ and investors’ trading activity focused on medium- to long-term bonds. For instance, bonds in the 13-year tenor bucket were bought at an intra-week low of 5.95%, while the benchmark 5-year bond, Retail Treasury Bond (RTB) 5-16 finally traded at a premium for the first time since its issuance last year.

The Bureau of the Treasury (BTr) then awarded the re-issuance of 10-year Fixed Rate Treasury Note (FXTN) 10-69 at an average of 5.913% and a high of 5.99%. As the awarded levels were just within market indications and as the rally in the GS market has persisted for several weeks already, better selling interest eventually emerged as some players were already keen to take profit from their positions. 20-year FXTN 20-25 was given up to an intra-week high of 6.50%, but bottom-fishing activity capped any further sell-offs.

Elsewhere, the Philippines’ fourth quarter gross domestic product (GDP) print of 7.2% vs. the 6.6% consensus estimate was taken as a non-event by the market,

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Economy 3 MIN READ

2022 GDP: Where did growth come from?

Private consumption, driven by the unleashing of pent-up demand, have accelerated growth last year, among others. Challenges, however, remain.

January 30, 2023By Metrobank Research

The gross domestic product (GDP) in the fourth quarter of 2022 reached a whopping 7.2%, higher than the median analyst forecast of 6.8%. This brought the full-year GDP growth to 7.6%, which exceeded even the government’s target of 6.5% to 7.5%.

Last year’s GDP at constant prices has already exceeded pre-pandemic (2019) levels, driven by higher consumption, government spending, and exports, among others. Indeed, the Philippines was able to weather through an environment of high inflation and interest rates, as well as weather disturbances, external events, and geopolitical tensions.

In this report, we highlight the major components and sectors that buoyed the country’s output, and our outlook for the coming year.

Click here to download.

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Equities 4 MIN READ

Stock Market Weekly: Heightened trading activity due to PSEi rebalancing

Aside from the effects of the PSEi rebalancing, investors will be keeping an eye on oil price hikes, the interest rate decision of the US Fed, and US economic data releases this week.

January 30, 2023By First Metro Securities Research

The Philippine Stock Exchange index (PSEi) snapped its five-week winning streak after dropping by 0.06% week-on-week to close at 7,052.16 (-4.46 points). The local bellwether started the week on a positive note after huge market-on-close buy flows and foreign buying.

Gains were reversed on Tuesday as profit-taking ensued, but quickly recovered on Wednesday ahead of local GDP data. On Thursday, the index fell despite the higher-than-expected 7.2% 4Q 2022 GDP (consensus estimate: 6.8%), bringing the full-year 2022 growth at 7.6%, its best since 1976. On Friday, it inched up higher as investors cheered the better-than-expected US 4Q 2022 GDP of 2.9% (consensus estimate: 2.7%).

Top index performers were Robinsons Land Corporation (RLC) (+9.7%), AC Energy (ACEN) (+6.2%), and GT Capital (GTCAP) (+5.9%), while index laggards were Wilcon Depot Inc. (WLCON) (-7.5%), Monde Nissin (MONDE) (-4.9%), and Puregold Price Club Inc. (PGOLD) (-3.3%). The index breadth was positive with 17 gainers versus 13 losers. The average daily turnover value was PHP 4.8 billion. Foreigners were net buyers by PHP 1.8 billion.


We expect the market to trade sideways with a downward bias given the portfolio realignment of index tracking funds ahead of PSEi rebalancing and the anticipated oil price hike by as much as PHP 0.80-PHP 1.00/liter on diesel and PHP 1.20-PHP 1.40/liter on gasoline.

On the international front, investors will be on the lookout for the interest rate decision of the US Fed (consensus estimate: +25 basis points, or bps) amid signs of slowing inflation. The smaller rate hike by the Fed may lift hopes for a soft landing in the US, hence, boosting market sentiment.

Investors will also await more earnings releases from the US as well as from local companies this week. Trading activity is expected to pick up at the latter part of the week ahead of the effectivity of the PSEi rebalancing on February 6, 2023, where UnionBank of the Philippines (UBP) and DMCI Holdings, Inc. (DMC) will replace Megaworld Corp. (MEG) and Robinsons Land Corp. (RLC).


Jollibee Foods Corp. (JFC) — BUY ON BREAKOUT

JFC formed a continuation diamond, a long-term bullish continuation pattern. When the price breaks upward out of the diamond’s boundary lines, it marks the resumption of the prior uptrend.

The measured price target after JFC broke out of the continuation diamond pattern is from PHP 306.00 to PHP 320.00, according to Technical Insight, our automated chart pattern recognition program. Accumulating once JFC breaks above PHP 260.00 is advisable. Set stop limit orders below PHP 240.00. Take profit at around PHP 306.00 to PHP 320.00.

SM Investments Corp. (SM) — BUY ON BREAKOUT

SM Investments Corp. (SM) formed a pennant, a short-term bullish continuation pattern. The measured price target after SM breaks out of its bullish pennant is PHP 1,045.00 to PHP 1,074.00, according to Technical Insight, our automated chart pattern recognition program. Accumulating once SM breaks above PHP 950.00 is advisable. Set stop loss orders below PHP 900.00. Take profit at around PHP 1,050.00 to PHP 1,074.00.

DoubleDragon Properties Corp. (DD) — BUY ON BREAKOUT

The stock broke above its short-term downtrend line in the first week of January 2023. Now, DD is consolidating and is looking to break above its three-month resistance of PHP 7.45. We are of the view that a break above PHP 7.45 will result in a retest of PHP 8.30/PHP 9.00.

As for company outlook, DD is optimistic this year as its Hotel101 overseas will start to generate dollar revenues. Moreover, management mentioned that Hotel101 Global aims to become one of the top 10 largest hotel brands in the world with a portfolio of over 200,000 hotel rooms by 2035.

These will be developed through direct investments, joint ventures with local companies in other countries, and through brand and concept licensing arrangements. Accumulating once DD breaks above PHP 7.45 is advisable. Set stop loss orders below PHP 7.10. Take profit at around PHP 8.30/PHP 9.00.


Resistance: 7,500

Support: 6,800 / 7,000

While the PSEi broke its five-week winning streak, the recent pullbacks remain to be shallow, further signaling that the bulls are in control. Foreign buying is still strong. The technical indicator MACD (moving average convergence divergence) confirms the bullish momentum, with the MACD line hovering above both the signal and zero lines.


Continue to hold, accumulate more once the market pulls back to 6,800. Stop limit orders below 6,500.


Wednesday, February 1, 2023
– PH S&P Global Manufacturing PMI (Purchasing Managers’ Index) for January 2023 (December 2022: 53.1)

Thursday, February 2, 2023
– US FOMC (Federal Open Market Committee) interest rate decision (consensus estimate: 25-bp rate increase)

Friday, February 3, 2023
– US change in nonfarm payrolls for January 2023 (consensus estimate: 175k; actual for December 2022: 223k)
– US unemployment rate for January 2023 (consensus estimate: 3.6%; actual for December 2022: 3.5%)

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Rates & Bonds 3 MIN READ

Peso GS Weekly: Sell-offs may remain subdued

Local bond yields were lower last week. These seven bonds may help you structure your portfolio as we welcome February in a few days.

January 25, 2023By Government Securities Trading Department

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.


Strong buying momentum carried on last week as yields of peso Government Securities (GS) tracked the rally seen in global markets.

On Tuesday, the Bureau of the Treasury (BTr) successfully reissued the 20-year Fixed Rate Treasury Note (FXTN) 20-25 at an average yield of 6.525% and a high of 6.600%. Similar to the previous bond auction, non-competitive bids tendered were more than double the amount being offered.

With cumulative bids reaching around PHP 134 billion, the BTr surprised market participants as it increased the non-competitive awards by PHP 14 billion, bringing the total accepted amount to PHP 49 billion from the regular offering of PHP 35 billion. The increased auction awards caused market players to be extra cautious in the long-end part of the yield curve. Thus, profit taking was more evident in this bond, causing it to underperform late last week.

Meanwhile, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said that the BSP will likely cap key policy rates at 6%, equivalent to additional rate hikes totaling 50 basis points from the current policy rate. This boosted the market’s risk taking appetite,

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Equities 4 MIN READ

Stock Market Weekly: Investors keep an eye on US data releases

There are a lot of data releases from the US to digest this week, which means sideways trading and lackluster activity for now.

January 24, 2023By First Metro Securities Research

The Philippine Stock Exchange index (PSEi) rose by 1.5% eek-on-week to close at 7,056.62 (+105.08 points). The benchmark index closed at the 7,000 level on Monday, its first occurrence since April 25, 2022, buoyed by positive sentiment from markets abroad and seven straight sessions of foreign buying.

Investors also factored in the OFW cash remittances for November 2022 which beat estimates at USD 2.93 billion (+5.8% year-on-year versus the consensus estimate of 4.2%), bringing 11-month 2022 remittances to USD 32.65 billion (+3.4% y-o-y). At the latter part of the week, traders took some profit because of market overbought levels and slowdown concerns due to lower-than-expected US retail sales.

Top index performers were GT Capital (GTCAP) (+6.9%), Wilcon Depot Inc. (WLCON) (+6.1%), and Ayala Land Inc. (ALI) (+5.3%), while index laggards were Meralco (MER) (-5.9%), Universal Robina Corp. (URC) (-5.2%), and JG Summit (JGS) (-2.5%). The index breadth was positive with 17 gainers versus 12 losers. The average daily turnover value was PHP 7.1 billion. Foreigners were net buyers by PHP 4.5 billion.


We expect the market to trade sideways as investors closely watch the key economic data releases from the US: the Q4 advance estimates of US GDP and core Personal Consumption Expenditures (PCE) index, initial jobless claims, and new home sales.


Bank of the Philippine Islands (BPI) — BUY ON PULLBACKS

BPI broke above its three-year resistance level of PHP 100.00 and is now trading at around PHP 112.40, its highest since March 2018. Given the breakout, it is optimal to wait for the pullback before accumulating. However, the stock’s rally has been a bit sharp, with trading near overbought levels. Those with exposure who bought at our buying level may take some profits.

As for management guidance, the company expects earnings growth this year to be driven by higher revenue from continued loan growth and expansion in net interest margins, which should offset growth in operating expenses. Moreover, provisions are expected to trend closer to pre-pandemic levels. Accumulate once BPI pulls back to PHP 108.00/ PHP 106.00. Set cut loss below PHP 99.00 and take profit at PHP 120.00.


DMCI’s recent rally was likely driven by the company’s expected addition to the PSEi by February 2023. Given that DMC has rallied by 37% since November 2022, profit taking can quickly occur especially with the stock now trading at overbought levels. Note that since 2019, the share price of those added to the PSEi drops at an average of 7% one month after the announcement date.

Suggested profit taking levels are at around the 8- or 9-day Exponential Moving Average Price (EMA). Since EMAs are fast moving and volatile, we recommend setting trailing stops in line with the value of the EMA on the date of the planned day of profit taking. Looking at company guidance, for SCC, despite the risk that coal prices could decline in 2023 on global recession concerns, management expects the Newcastle Coal Index (NEWC) to average USD 360 per metric ton in 2023, just 1% lower as compared to the average price in the first nine months of 2022. For Maynilad, the completion of the rate rebasing exercise and the approval of the tariff adjustments raise the company’s earnings visibility going forward and eases regulatory concerns. For DMCI Power, the additional capacity in Masbate is expected to boost the segment’s contribution to the group. Set trailing stops at around the 8- or 9-day EMA. The next support levels are at PHP 12.00/PHP 10.80.

Century Pacific Food Inc. (CNPF) — BUY ON BREAKOUT

CNPF’s share price broke out of a symmetrical triangle, an intermediate-term bullish pattern. The measured price target after CNPF broke out if its symmetrical continuation triangle is PHP 27.00 to PHP 27.50. according to Technical Insight, our automated chart pattern recognition program. Regarding fundamentals, we like CNPF because of the following: (i) its diversified product portfolio that is well positioned to capture changing consumer preferences and weather macroeconomic headwinds; (ii) its pricing power that can partially cushion cost pressures; (iii) its OEM export business that mitigates the impact of the weak local currency;

and (iv) robust operating cash flows and strong balance sheet.

Accumulating once CNPF breaks above PHP 25.00 is advisable. Set stop limit orders below PHP 23.75 and take profit at PHP 27.50/PHP 28.00. For long-term investors, our target price for CNPF is PHP 29.00.


Resistance: 7,500

Support: 6,800 / 7,000

SUPPORT: 6,800/7,000 RESISTANCE: 7,500

The PSEi rallied for the fifth straight week, complemented by strong volume and net foreign buying. The pullbacks during the latter part of the week have also been shallow, further signaling that the bulls are in control. MACD confirms the bullish momentum with the MACD hovering above both the signal and zero lines.


Continue to hold, accumulate more once the market pulls back to 6,800. Stop Limit orders below 6,500


The key data releases this week are:

Tuesday, January 24, 2023
– US S&P Global preliminary manufacturing Purchasing Managers’ Index (PMI) for January 2023 (consensus estimate is 45.0; actual for December 2022: 44.7)

Thursday, January 26, 2023
– PH GDP YoY for 4Q 2022 (consensus estimate: 6.8%; actual for 3Q 2022: 7.6%);
– PH exports YoY for December 2022 (consensus estimate: 8.8%; actual for 3Q 2022: 13.2%);
– PH imports YoY for December 2022 (consensus estimate: -6.0%; actual for 3Q 2022: -1.9%);
– US New Home Sales for December 2022 (consensus estimate: 610K; actual for November 2022: 640k):
– US GDP annualized quarter-on-quarter for 4Q 2022 (consensus estimate: 2.7%; actual for 3Q 2022: 3.2%); and
– US Core Personal Consumption Expenditures (PCE) QoQ for 4Q 2022 (consensus estimate: 3.9%; actual for 3Q 2022: 4.7%)

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Economy 0 MIN READ

Where are global food and energy prices headed in 2023?

Food and energy commodity prices are seen easing in 2023 given projections of an economic slowdown and weaker global demand. Nonetheless, risks remain and much depends on how the world copes with the ongoing challenges.

January 20, 2023By Ina Calabio

As the world fully reopened and learned to coexist with COVID-19 in 2022, economies were greeted with challenges as the rebound in demand amid supply chain disruptions shook the global markets.

In particular, we’ve seen energy and food commodity prices soar to record highs, which has elevated inflation globally.

Energy commodities

Brent crude averaging USD 64/barrel in 2019 peaked at USD 123/bbl in June 2022. European natural gas surged to USD 70/MMBtu (million British thermal units) in August 2022 from an average of USD 18/MMBtu in 2021 before the Russia-Ukraine conflict struck.

As demand for energy rose in lieu of Russian supply, Indonesian coal prices which were USD 121/metric ton (MT) in 2021 reached USD 321/MT in June 2022 and stayed around this level until they slightly eased in December 2022.

As main inputs of production, higher energy prices led to pump price hikes as well as higher transport fares and electricity costs in the country.

Food inflation

Supply chain disruptions and price upticks in agricultural inputs such as fertilizers, also a major input, eventually rippled to food prices. High fertilizer costs and weather disturbances likewise reduced the food supply, further pushing food prices up.

Food inflation in the Philippines reached 10.6% in December 2022, as vegetable prices grew by 32.4% year-on-year. Other food commodities such as corn, a main ingredient in animal feeds, likewise soared and remain elevated.

Philippine headline and food inflation reached their highest levels in December 2022, driven by higher prices of food commodities such as vegetables and tubers, rice, fruits, and nuts. The inflation of electricity, gas, and other fuels, though easing, remained elevated.

Nevertheless, most global commodity prices have since eased following their peak as demand weakened. Europe eventually stored enough energy for winter, which tapered natural gas and coal prices towards yearend. China’s back-and-forth reopening and lockdowns throughout the year weakened demand pressure and somehow kept oil prices from soaring further. Recession jitters likewise moderated oil demand, thus easing prices.

Will this go on?

Despite aggressive monetary policy tightening by most central banks globally, including the Bangko Sentral ng Pilipinas (BSP), the fight against inflation is not yet won.

Energy prices may have eased, but they still haven’t gone down to their pre-pandemic and pre-war levels. Moreover, much depends on how the advanced economies will navigate global commodity markets in 2023.

Europe’s total shift away from Russian energy spells volatility next winter (see related article). China’s economic comeback will also pose major challenges as it affects energy prices. Conversely, the projected slowdown in global output and subsequent softer demand could help lessen the inflationary pressures.

For the Philippines, much of the inflation pressure will still come from the supply side and external headwinds in 2023. Fertilizers will remain expensive compared with pre-pandemic levels, and electricity price hikes are still underway.

Nonetheless, the World Bank projects inflation to gradually moderate globally over the course of the year, but it expects underlying inflation pressures to persist.

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.

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Rates & Bonds 2 MIN READ

Peso GS Weekly: Local bond yields may continue their descent

Will the market continue to suppress its appetite for longer-tenor bonds? For this week, we believe these five bonds deserve your attention.

January 18, 2023By Government Securities Trading Department

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.


Yields of peso government securities (GS) took their cue from the global bond market following the rally in US Treasuries, as better buying interest was seen ahead of the 13-year auction on Tuesday.

The Bureau of the Treasury (BTr) fully awarded PHP 35 billion for the reissuance of Fixed Rate Treasury Note (FXTN) 25-7 with an average yield of 7.182% and a high of 7.23%. Given the oversubscription of 5.29x, the BTr offered another PHP 5 billion via the TAP facility, which was easily absorbed by the market. Given the strength of the auction, aggressive position-taking was seen for 12- to 13-year bonds as yields were lifted down to 6.95% to 7.00%.

Continued buying interest was seen the rest of the week despite statements from Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla ruling out the possibility of policy rate cuts or pauses in the near term as inflation remains elevated. Five-year bonds rallied by as much as 47.5 to 60 basis points (bps), while yields of seven-year bonds fell by 50 to 57.5 bps, and the 12 to 13-year bonds by 80 to 85 bps.

Some profit-taking, however, was seen towards the end of the trading day

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Economy 4 MIN READ

Examining the economy in 2022 and predicting what’s ahead

Here is a quick review of what happened in 2022 and how it may affect the Philippine economy this year and the next.

January 18, 2023By Anna Isabelle “Bea” Lejano

Despite more relaxed mobility restrictions and the reopening of most countries, the previously anticipated faster global growth for 2022 was unexpectedly hampered by geopolitical tensions and external events.

In February 2022, the conflict between Russia and Ukraine broke out, which disrupted supply chains and induced an energy crisis, especially in Europe. The shockwaves in the global commodities market pushed inflation up globally.

This led to a more aggressive monetary policy tightening by the US to abate inflation, which then strengthened the dollar and weakened other global currencies. Moreover, this was also the year when China implemented its zero-COVID policy more aggressively, triggering market volatility because so much depended on that country’s demand.

These three major events affected the global economy, with global GDP growth in 2022 expected to fall to 2.9%, according to estimates from the World Bank and Euromonitor, versus the 3.2% forecast of the International Monetary Fund (IMF), from 6% growth in 2021.

Growth beyond expectations

Despite these global headwinds, the Philippines outperformed growth expectations in 2022, as improved domestic conditions offset external challenges. On average, the economy grew by 7.7% from Q1 to Q3 of 2022, versus 4.9% during the same period in 2021.

First quarter growth posted the sharpest increase for 2022, mostly on base effects. The positive expansions in the 2nd and 3rd quarters put the Philippines as the second-best performing nation among emerging Southeast Asian economies.

Growth was primarily fueled by private consumption, with pent-up demand driving revenge spending due to the reduction in COVID-19 cases and the accelerated pace of the economic reopening that followed. Election-related and campaign activities during the first half of the year likewise boosted domestic demand and bolstered certain industries, such as travel, accommodation, information and publishing, and communication, among others.

Inflation woes

Full-year average inflation, on the other hand, came in at 5.8%, versus 3.9% in 2021. This was in the face of inflationary pressures from the supply-chain bottlenecks caused by the conflict in Eastern Europe, which elevated global commodity prices, especially for food and fuel items.

Further exacerbating headline inflation were the weather disturbances that constricted the supply of various agricultural commodities, as well as shortages in select commodities throughout the year, such as salt, sugar, fertilizer, and onions, among others. Second-round effects, which have seeped into transportation costs and wages, have also pushed prices higher.

Because of the high-inflation environment experienced globally, the US Federal Reserve adopted a hawkish monetary policy stance in 2022, increasing benchmark rates by a cumulative total of 425 basis points (bps) to a range of 4.25% to 4.50% by yearend 2022.

Rate hikes to combat inflation

As a result, central banks around the world, including the Bangko Sentral ng Pilipinas (BSP), had to assume a tighter monetary stance as well. The BSP hiked policy rates by a total of 350 bps to 5.5% by yearend 2022 to mitigate heightened inflation expectations, the weakening of the local currency, the rise of second-round effects manifested in wage increases and transport fare hikes, and the higher suggested retail prices of several commodities.

Because of aggressive Fed rate action, the peso depreciated substantially in 2022, where it closed at record lows of PHP 59:USD 1 twice, during September and October, depreciating by 15.7% since yearend 2021.

Nonetheless, the peso was able to rebound in the last few months of 2022 due to interventions by the BSP, the seasonal increase in OFW remittances, and the export season toward yearend. Additionally, markets seemed to have already priced in rate cuts despite the Fed’s continued rate hike signals, which likely strengthened the peso.

Outlook for 2023 and 2024

In the near term, high inflation is expected to persist, but it will likely ease throughout 2023 and 2024 because of monetary tightening and an easing of supply chain disruptions. The 2023 inflation scenario would likely mirror that of 2022, but in reverse (see graph below).

Thus, inflation is expected to settle at the 5.0% to 6.0% range this year, and 4.5% to 5.5% in 2024. Consequently, borrowing costs are seen to peak this year at 6.0% and come down to 5.0% in 2024 based on inflation expectations.

Inflation is expected to settle in the 5% to 6% range in 2023.

For the dollar-peso exchange rate, markets are already pricing in rate cuts even if the Fed is still on hike mode, but the peso is still projected to weaken towards yearend to around PHP 57 as a potential recovery in China’s demand may rally oil prices up in Q2, and the Philippines will likely be importing a lot in Q3 due to continued growth.

Nevertheless, due to expected lower inflation and interest rates in 2024, the peso is forecasted to strengthen to PHP 56.6 by yearend 2024.

Growth from rising domestic demand

Robust growth in 2023, which we estimate to be at around 6% to 7%, is still expected, driven by domestic demand and consumer spending amid further easing of COVID-19-related restrictions as well as increased infrastructure spending, among others.

However, this year’s growth is assumed to be lower than the previous year’s on account of the following: external headwinds such as the continued conflict between Russia and Europe, which may likely continue to lead to supply chain bottlenecks; the second-round effects of inflation; the effects of the BSP’s policy rate hikes on spending; and potential acceleration of prices due to a rebound of China’s demand stemming from its zero-COVID policy pivot.

This acceleration in demand from China will likely push central banks to continue raising interest rates to arrest rising prices while reining in consumption and therefore growth. Consequently, the slowdown of advanced economies, such as the US and Europe, may pull down the Philippines’ growth this year.

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.

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Equities 4 MIN READ

Stock Market Weekly: Expect some profit-taking

The local bourse is nearing overbought levels, which may lead to sideways trading with a downward bias. Investors, however, expect further cooling of US inflation and a slower pace of rate hikes.

January 16, 2023By First Metro Securities Research

The Philippine Stock Exchange (PSEi) surged 4.25% higher week-on-week to close at 6,951.54 (+283.57 points), tracking the Asian region, driven by China’s reopening and the weaker US dollar.

Also bolstering optimism was the easing of the US inflation print from 7.1% in November 2022 to 6.5% in December 2022, as well as comments from the top economic managers in the Philippines that imply slower rate hikes this year.

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said that the BSP may be nearing the end of its monetary tightening cycle as he sees inflation normalizing to about 3% in the latter part of the year. He also signaled a 25- to 50-basis-point rate hike in the Monetary Board’s February meeting, noting that there is less pressure to match the US Fed’s rate hikes. At the same time, Department of Finance (DOF) Secretary Benjamin Diokno said that the BSP is nearing its peak rate and that there could be a pivot towards the middle of the year.

Top index performers were Metro Pacific Investments Corporation (MPI) (+12.5%), Aboitiz Power Corporation (AP) (+12.1%), and Monde Nissin (MONDE) (+11.8%) while index laggards were AC Energy (ACEN) (-5.2%), Semirara Mining and Power Corporation (SCC) (-2.1%), and Globe Telecom (GLO) (-1.3%). The index breadth was positive with 26 gainers versus four losers. The average daily turnover value was PHP 6.8 billion. Foreigners were net sellers by PHP 45 million.


We anticipate a volatile market and expect trading to go sideways with a downward bias on some profit-taking as the local bourse is nearing overbought levels. Nonetheless, this may be tempered by the expectation of further cooling US inflation, which suggests a slower pace of rate hikes moving forward.

Investors are also awaiting corporate earnings releases from the US as well as monitoring more data releases from China, as the latter reported nearly 60,000 deaths from COVID-19 after dismantling its zero-COVID policy in early December 2022.


Nickel Asia Corp. (NIKL) — BUY ON PULLBACKS

NIKL formed a head and shoulders bottom, an intermediate-term bullish pattern, of which a breakout through the resistance signals a reversal to a new uptrend. The measured price target after NIKL broke out of its head and shoulders bottom pattern is PHP 7.00.

Looking at the fundamentals, we reiterate that the growth in stainless steel production and the incentives and penalty programs imposed by the European and US governments continue to drive adoption rates for electric vehicles. Nickel prices can also remain elevated given the proposal by the Indonesian government to impose a progressive levy on the export of nickel pig iron and ferronickel.

Moreover, we believe NIKL’s foray into the renewable energy generation business is a long-term catalyst amid the tight power supply in the country. Accumulating once NIKL pulls back to PHP 6.40/PHP 6.30 is advisable. Set stop limit orders below PHP 6.00 and take profits at around PHP 7.20.

Robinsons Retail Holdings, Inc. (RRHI) — BUY ON BREAKOUT

Year-to-date, RRHI has rallied by as much as 9.1%. This was after the company disclosed that it will acquire an additional 4.4% stake in Bank of the Philippine Islands (BPI) worth almost PHP 20 billion, bringing the retail firm’s stake to 6.8%.

Despite the recent rally, RRHI’s share price has so far failed to surge past or even retest its immediate resistance levels of PHP 60.00/PHP 62.00. As for the fundamentals, amid a rising inflation environment, we turn to retailers, given their ability to pass on costs to their mid- to high-income target market.

We retain our forecasts for RRHI, as our outlook for the mall-based retailer remains largely intact amid: (i) favorable mobility trends and shifting wallet allocation conducive to RRHI’s growth; and (ii) a strong balance sheet position. Accumulating once RRHI breaks above PHP 62.00 is advisable. Set stop limit orders below PHP 58.50 and take profits at around PHP 70.00/PHP 72.00.


Despite the recent rally, TEL’s share price failed to retest its key resistance level of PHP 1,500.00. Currently, TEL is showing signs of profit-taking at the PHP 1,400.00 level, which suggests that the recent rally may just be a dead cat bounce. We believe that TEL needs to surge past PHP 1,500.00 for the rally to be sustainable.

As for fundamentals, we still see TEL as best positioned in the current competitive and regulatory environment among telcos under our coverage. We expect the capex overrun will have limited impact on TEL’s core telco business and that its balance sheet can absorb worst-case conditions relating to the overspend.

Accumulating once TEL breaks above PHP 1,500.00 is advisable. Set stop loss orders below PHP 1,400.00. Take profits at around PHP 1,700.00 to PHP 1,900.00. For long-term investors, our target price for TEL is PHP 1,550.00


Resistance: 7,000 / 7,500

Support: 6,600 / 6,800

The PSEi surged again, supported by strong volume. The market is now heading towards 7,000 for the first time since April 2022. The technical indicator MACD (Moving Average Convergence Divergence) confirms the bullish momentum, with the MACD hovering above both the signal and zero lines. With the RSI (Relative Strength Index) currently at 67, there could be some pullback this week. Take note that the PSEi must stay above 6,400 for the ongoing rally to be sustained.


Continue to hold. Accumulate more once the market pulls back to 6,800. Set stop limit orders below 6,400.


Monday, January 16, 2023
– Overseas Filipino (OF) cash remittances year-on-year for November 2022 (consensus estimate: 4.2%; actual for October 2022: 3.5%)

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Economy 2 MIN READ

Possible COVID surges in China not a reason to worry

China supplies 15% of global exports. Should we be worried about the COVID outbreaks in China? Our equities department head shares his thoughts.

January 13, 2023By Ricky Maddatu, CFA
China (1)

In a meeting of China’s National Health Commission, it was revealed that nearly 248 million have contracted COVID in the first 20 days of December 2022. While the numbers and the resulting hospitalizations and deaths may appear bleak, we think that China’s rapid reopening would be net positive for the global economy overall.

Over the long term, the zero COVID policy, which was in effect until late last year, was not sustainable, and it would be much more detrimental to the economy compared to opening the country for business, albeit with the risk of running infections to record levels.

Three waves

According to the chief epidemiologist of China’s Center for Disease Control and Prevention, there may be three waves of spreading in the coming months. The first started in December 2022 and that will last until January 2023.

The second will start late January 2023 to mid-February 2023 because of people travelling for the Lunar New Year on January 21. The third wave will most likely occur from late February to mid-March 2023 when people get back to work after the long holiday.

Some are understandably concerned about possible outbreaks not just in China but in countries where Chinese nationals, who may be infected, would most likely visit over the holidays.

Important trading partner

Over the past two years, China has accounted for about 15% of global exports. As for the impact on the Philippines, China accounts for over 20% of our imports and is our biggest source of foreign goods.

The surges and the possible lockdowns in response to these surges would deal a blow to most economies should any supply chain disruption occur. That would most likely keep inflation elevated.

At this juncture, however, it is more reasonable to think that a move away from the zero COVID policy to one that favors reopening the economy is warranted, net positive, and ultimately necessary for both China and the global economy.

RICKY MADDATU, CFA, is Assistant Vice-President and Head of Multi-Asset Investments, in charge of the Trust Banking Group’s multi-asset strategy for the Metrobank Trust Group’s discretionary accounts. Ricky enjoys teaching and training others, and he frequently lectures on various investment topics. When not staring at Bloomberg screens and spreadsheets, he spends his spare time on different business ventures with his wife and family.

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