Philippine Stock Market weekly updates – February 14 to 18, 2011

Mr. Philippine stock market felt depressed again this week as it experienced another sluggish trading week as the Philippine Stock Exchange Index (PSEi) stayed below the 3,900 level. Since the start of this month, the PSEi seesawed between 3,700+ and 3,800+ but never breached the 3,900 level. Concerns on inflation especially in China and Europe, political concerns in Egypt and other African countries and the continued flight of capital continue to put pressure on investors to stay on the sidelines despite the continuous flow of good news and the attractive valuation of most Philippine securities.

Most analyst say that the sell off is temporary and that Philippine stocks will recover. First Metro Investment Corporation sees the PSEi reaching new heights this year as the sell off of Philippine stocks ends in March and further sees the PSEi recovering to last quarter 2010 levels within the first half of 2011. Online stock broker, Citiseconline meanwhile sees the PSEi hitting 5,300 later this year or by next year. Regional investment group CLSA Asia-Pacific Markets on the other hand sees a huge potential for loans to pick up significantly in the coming years and that 2012 is the year that loans will move up dramatically as they expect proponents of the public-private partnership projects to secure debt financing to finance their respective projects, hence they believe that banking stocks have become attractive especially during this time of market sell down.

It may be dark and gloomy in other places of the world economically but the sun continues to shine in the Philippines investment wise. An important indicator of economic health is the Balance of Payment surplus which is simply the difference between the inflow and outflow of dollars and other foreign currencies. The Bangko Sentral ng Pilipinas (BSP) yesterday reported that the Balance of Payment surplus was at $1.61 billion last month.. This is 31 percent from $1.23 billion reported in January last year. The BSP believes that foreign currency inflows will continue this year.

The BSP also reported this week that remittances from Filipinos abroad exceeded government forecast and reached the highest ever recorded, growing to 8.2% over the $17.07 billion registered in 2009 to $18.76 billion for this year. This robust growth in remittances is seen to further fuel domestic consumption.

Nevertheless, despite this ray of sunshine a dark cloud glooms over the distance. Inflation continues to be a gnawing concern. Standard & Poor’s urged monetary authorities in Asia to consider taking action swiftly to address the risk of inflation. The BSP has said that containing inflation remained the predominant policy thrust and. has set the country’s inflation target rate at the 3-5% target range for 2011 and 2012 (3.5% and 4.5 % respectively). The BSP, while admitting that inflationary pressures in the country was rising further said this would not be cause for concern as inflation in the Philippines was not yet a serious threat as in neighboring countries. The Philippine’s real policy rate which is the difference between a central bank’s key interest rate and the inflation rate, was at +0.5 percent while the real policy rates in other Asian countries including the United States and the Eurozone are in negative territory.

WEEKLY CORPORATE ROUND UP

Ayala Land Inc. (ALI) is quite upbeat in its business outlook and plans to spend P33 billion for this year alone. This is 70 % higher than its capital outlay last year and is said to be the largest capital outlay committed by a real-estate developer.

Security Bank’s (SECB) 2010 profit was up 134 % to P7.2 billion in 2010. This means a 35% return on equity which has definitely outperformed other banks.

The country’s largest shopping mall operator SM Prime Holdings, Inc. (SMPH) has reported that its consolidated net income grew by more than 12% to P7.9 billion in 2010, from P7 billion in 2009. By the end of this year, SMPH will have a total of 47 malls in the Philippines and in China with an estimated combined gross floor area of 5.7 million square meters.

Diversifying San Miguel Corp. (SMC) is reported to have pushed back the target date for its follow-on offering to the second quarter of this year. Initially the conglomerate planned an offering of 1 billion common shares valued at P200 to P250 per share within the first quarter. SMC led telecommunications firm wi-Tribe, which is a joint venture between SMC and Qatar Telecom has signed a partnership with Skype.com to allow subscribers to make cheaper calls abroad.

Construction and engineering firm Megawide Corp (MWIDE) successfully made its debut in the stock market with a P2.29-billion initial public offering. This makes Megawide the first IPO offering this year. The SM group acquired 64 percent of the IPO making them owners of 20 % of the company. This seemed a logical and good move business wise as the SM group’s property arm, SM Development Corp (SMDC)., currently accounts for 70 percent of Megawide’s projects. Megawaide closed at its IPO price of P7.84/share during its first day of trading.

Joining the Bancassurance bandwagon, Sun Life Financial Philippines Inc. (SLF) and the Yuchengco group’s Rizal Commercial Banking (RCB) will soon join hands to create a banc assurance venture. Sun Life signed a deal this weak to acquire 49 % of the Yuchengco group’s Grepalife Financial Inc. which will soon result in an entity called Sun Life Grepa Financial Inc.

Recently acquired Fil-Estate Land Inc. (LND) will soon be renamed to “Global-Estate Resorts Inc.” and will soon be revitalized to become a tourism oriented firm. Sixty percent of Fil-Estate was recently acquired by Alliance Global (AGI), the holding company of Andrew Tan

UEM Development Philippines (MK) plans to issue P2 billion worth of shares to Henry Sy Jr. and Robert Coyiuto Jr. as part of a share-swap deal that will allow the company to gain control of the privatized infrastructure operated by National Grid Corporation (NGCP) of the Philippines. Trading of UEM shares is still suspended since late last year in order to give the stockholders sufficient opportunity and time to consider their investment options as the company undertakes major corporate actions which includes the swap of the shares of UEM for shares in Pacifica21 Holdings and OneTaipan Holdings which own 60 percent of NGCP.

Philippine Airlines (PAL) has reported that has turned around its $22.9-million comprehensive net loss and has posted a net income of $15.1 million for the third quarter of its fiscal year.

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