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November 2013

MARKET CALL

The

Capital Markets Research

FMIC and UA&P Capital Markets Research

Macroeconomy 2 Fixed-Income Securities Recent Economic Indicators 19 Contributors


The Market Call - September 2013

10 Equity Markets 21

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Macroeconomy

Super Typhoon Yolanda Blows Away Economys Winning Streak*


Just as another set of economic data was pointing towards an above-7% Gross Domestic Product (GDP) in Q3, killer super typhoonYolanda (international name: Haiyan), that devastated large swathes of the Visayas and Palawan, may have killed the further acceleration suggested by the countrys Leading Economic Indicators (LEI) for Q4. After all, industrial output and exports expanded at a faster pace in August and peso equivalent of Overseas Filipino Workers (OFW) remittances rose at a double digit rate. The worlds biggest ever typhoon, that packed over-300 kph winds and huge waves flattened and killed thousands of Filipinos in the eastern coast of some Visayas islands, may now mean below-6.0% GDP growth in Q4 and the first half of 2014. To be sure, reconstruction efforts could offset the loss on output and income due to the negative effects of the super typhoon, but the affected areas reportedly represent some 12% of the countrys population, and the latter would probably tilt the balance. LEI Reflects Sustained Economic Growth in Q4 The composite leading economic indicator (LEI), a short-term forecasting tool of macroeconomic activity developed by the National Statistical Coordination Board (NSCB), accelerated to 0.181 in Q4 2013 from a revised 0.046 in the previous quarter. Indications are that the Philippines may continue to stay in an upward trend until this quarter. Meanwhile, the computed slope of the index for Q4 2013, which indicates the change, was 0.135, also higher than the rate of 0.087 in the previous quarter. This acceleration, which goes back to Q4 2012, promises continued satisfactory performance of the countrys economy until the end of the year, but now tempered by Typhoon Yolandas negative impact. The advance of LEI remained broad-based as in the previous quarter, but the total share of positive contributors decreased by about 5.0 percentage points. Eight out of 11 indicators supported the trend money supply, wholesale price index, total merchandise imports, hotel occupancy rate, terms of trade index, electric energy consumption, number of new businesses, and stock price index altogether comprising 77.6% of the total contributions. Meanwhile, the foreign exchange rate, visitor arrivals, and consumer price index were the negative contributors. The contribution of each of the 11 indicators is measured through the combined effects of (1) the direction (the slope or change) of the cycle component of each indicator; and (2) the correlation of their cycle components with that of the reference series. Table 1 below shows the composite LEI estimates and the corresponding slopes for the period Q1 2001 to Q4 2013.
Period Q1-2012 Q2-2012 Q3-2012 Q4-2012 Q1-2013 Q2-2013 Q3-2013 Q4-2013 Composite 0.037 0.015 -0.029 -0.058 -0.066 -0.041 0.045 0.181 Slope 0.013 -0.022 -0.044 -0.038 0.002 0.025 0.087 0.135

Source: National Statistical Coordination Board (NSCB)

* Our usual data cut-off is at the end of each month; but we make recognition of Super Typhoon Yolandas impact in this issue as an exception.

The Market Call - November 2013

Macroeconomy

Inflation rate advanced to 2.7% in September on the back of hefty price gains in heavily-weighted Food and Non-Alcoholic Beverages (FNAB) and Housing, Water, Electricity, Gas, and Other Fuels (HWEGOF).

3 Industrial Sectors Electricity Demand Revitalizes in September Indicative of the recovery of exports and the manufacturing sector, electricity consumption of the Industrial sector expanded 6.9% (year-on-year) in September, the second month of acceleration and the fastest so far in 2013. The slowdown in electricity consumption in the residential and commercial sectors was due to the effect of floods in Metro Manila which limited total Meralcos electricity sales volume growth to 5.9%. Electricity sales to the Industrial sector had picked up from negative territory in July, rising further by 2.8% in August. This recovery overshadowed the sharp easing of growth rates in the Residential and Commercial sectors. Residential electricity sales shed 6.4 percentage points, slowing to 5.9% from 11.3% in August while energy sales growth to the Commercial sector slipped to 5.7% from 8.9%. Mall operators and restaurant owners complain of low customer turnover during typhoons and floods.
Figure 1 - Meralco Sales and VoPI Year-on-Year Growth, 20092011

The robust Industrial power sales may be due to the surprisingly strong 20.9% export earnings growth and the 18.3% gain in the Volume of Production Index (VoPI) in August. Industrial output improved on the (revised) 14.9% uptick in July as 15 out of 25 major industry groupings posted strong gains. Three industries surged with triple-digit expansions, i.e., Furniture & Fixtures at 175.4%, Chemical products at 145.0%, and Leather products at 102.9%. The first two continued their above-100% growth record in July. Thus, it is quite likely that manufacturing output accelerated further in Q3, and would be second only to the construction sectors likely lead. Inflation at 3-Month High of 2.7% in September Inflation rate accelerated to 2.7% in September after reaching a 10-year low of 2.1% in August on the back of hefty price gains in heavily-weighted Food and Non-Alcoholic Beverages (FNAB) and Housing, Water, Electricity, Gas, and Other Fuels (HWEGOF). Nonetheless, the headline inflation rate remains below the 3% lower limit of the Bangko Sentral ng Pilipinas (BSP) inflation target. Likewise, YTD inflation stands at 2.8%, and core inflation, which excludes volatile food and energy items, accelerated by 0.4 percentage points to a modest 2.3%. FNAB sub-index gained an 8-month high of 0.6 percentage points mainly caused by the uptick in the rice index coupled with at most 0.3 percentage points in corn, fish, and other food products. Meanwhile, as the average price in the world crude oil spot market continued to accelerate for the fifth month, pump prices and Meralco electricity rates rose, HWEGOF increased 1.4 percentage points, the highest since January 2010.

Source: National Statistics Office (NSO)

The Market Call - November 2013

Macroeconomy

The YTD NG deficit remained below the cap due to weak NG spending that grew 4.1%, the lowest in six months

4 The September figure was the least broad-based in Q3 with only four commodity group price indices posting inflation higher than their values a month ago. Acceleration in the indices of FNAB and HWEGOF were evident in 10 regions most especially in the National Capital Region (NCR) where the two indices advanced 3.1 and 1.1 percentage points, respectively. Alcoholic Beverages and Tobacco (ABT) and Health also accelerated by 0.2 percentage points. The other four commodity group price indices decelerated with heavily-weighted Transport taking the lead, followed by Furnishing, Household Equipment and Routine Maintenance of the House; Clothing and Footwear; and Communication. Kindly refer to the table below for comparative values. The three remaining price indices remained at their levels a month ago.
Inflation Year-on-Year Growth Rates All items Food and Non-Alcoholic Beverages Alcoholic Beverages and Tobacco Clothing and Footwear Housing, Water, Electricity, Gas, and Other Fuels Furnishing, Household Equipment and Routine Maintenance of the House Health Transport Communication Recreation and Culture Education Restaurant and Miscellaneous Goods and Services Sept. 2.7% 2.5% 31.2% 2.9% 1.1% 2.3% 3.0% 0.6% 0.0% 2.5% 4.8% 2.2% Aug. 2.1% 1.9% 31.0% 3.0% -0.3% 2.4% 2.9% 1.0% 0.1% 2.5% 4.8% 2.2% YTD 2.8% 2.4% 29.4% 3.8% 1.5% 3.7% 3.0% 0.7% 0.3% 2.2% 4.6% 2.4%

Figure 2 - Inflation Rates Annualized (2009-2013) Seasonally Adjusted vs. Year-on-Year

Source: National Statistics Office (NSO)

Underspending by NG Maintains YTD Budget Deficit Below the Cap The National Government (NG) spending grew 4.1% in September, the lowest in six months, while total revenue collection rose 20.9%. Despite such growth disparity between revenue and spending, the NG recorded a deficit of P18.6 B, bringing the YTD deficit to P101.2 B, still way below the P144.5 B target. The surge in revenue collection was due to both low base effect and strong performance of tax and non-tax revenue channels. Tax revenue expanded by 18.3%, slightly lower than the 21.0% in August but higher than the 13.1% YTD pace. Both the Bureau of

Source: National Statistics Office (NSO)

Seasonally-Adjusted Annualized Rate (SAAR) showed that inflation rate could not be attributed to seasonal factors as seasonally-adjusted (s.a.) inflation rose to 6.4%, the highest since September 2012, from 3.6% (revised) in August. This was triggered by the 9.1 percentage points uptick in s.a. non-food prices that offset the 1.7 percentage points decline in s.a. food prices.
The Market Call - November 2013

Inflation accelerated to 2.9% in October from 2.7% a month ago due to continued uptick in FNAB, Clothing and Footwear and HWEGOF mainly in areas outside NCR (AONCR) and lower base compared to September figure.

Macroeconomy

The BSP maintained the policy rates unchanged together with SDA facility and reserve requirement ratios as inflation outlook showed no signs of upward risks.

5 Customs (BoC) and the Bureau of Internal Revenue (BIR) reported collections rapidly rising by 10.9% and 21.1%, respectively. These growths were higher than their respective YTD pace of 5.3% and 15.3%. Nontax revenue, likewise, grew 45.9%, the biggest gain in three months. Meanwhile, the National Government (NG) spending was at its slowest gain in three months with only 4.1% growth in September. This may have been due to greater care after the Napoles- pork barrel scam that exploded in the media. Larger share was allotted to interest payments, which grew 21.1%. Allotment to Local Government Units (LGUs) rose 4.9%, slightly lower than 5.5% a month ago.
Figure 3 - Year-on-Year NG Revenue Performance Growth Rates

(BSP) maintained key policy rates unchanged at 3.50% for the reverse repurchase (RRP) facility and 5.50% repurchase (RP) facility on its meeting last October 24. The interest rates on term RRPs, RPs, special deposit accounts (SDAs), and reserve requirement ratios were likewise left steady. Meanwhile, Reserve Money (RM) quickened by 0.1 percentage point to 26.7% in August, the highest since November 2007, as the yawning gap between the Net Foreign Assets (NFA) and Net Domestic Assets (NDA) remained. The former rose 8.6% due to ample Net International Reserve (NIR) build-up while the latter declined 2.2% due to declines in Net Other Items.
Figure 4 - M1, M2 & M3, Year-on-Year, 2009-2013

Source: Bureau of the Treasury (BTr)

Source: Bangko Sentral ng Pilipinas (BSP)

Policy Rates Unchanged, Money Growth Still on Acceleration Streak On the back of well-anchored inflation and its outlook and the countrys improved absorptive capacity, the Monetary Board of the Bangko Sentral ng Pilipinas

Total domestic liquidity (M3), whose computation was made to conform to international standard practices, continued to grow rapidly by 31.0%, the same pace as in August. BSP expected this as the value of Special Deposit Account (SDA) fell 10.9%

The Market Call - November 2013

Macroeconomy

Exports recuperation continued in August posting an 11-month high growth of 20.2%; Electronic Products, however, was disappointing.

6 as a result of operational adjustment in SDA facility, which encouraged the move back to deposits. The computed money multiplier (MM) declined 4.4% to 3.6X after a three-month streak as banks became more cautious in lending. Exports Recovery Continues, Hit 11-Month High The overall export earnings continued its recovery posting an 11-month high growth of 20.2% (y-o-y) in August from 2.3% in July. It was broad based with seven out of the top 10 export products supporting the trend, featuring some eye-popping figures with six of the top ten exports posting above-65.0% gains. However, the August figure has not come without a dash of pessimism. First, it relied on a low base of -9.0% a year ago, and second, Manufactures grew by 9.5% despite the low base. Nonetheless, it must confer positive sentiment as the country outperformed selected countries in East Asia in terms of export growth in August 2013. YTD export growth reached -0.6% from -3.6% in July. Among the seven top products that propped up the trend, Petroleum Products skyrocketed by 115,374.8% from 3,356.8% a month ago due to a 19.6% expansion of East Asias imports (contributed mainly by Japan, China, Taiwan and South Korea). The demand for Philippine products of the EU and the US also expanded by 42.8% and 15.2%, respectively. Five Manufacturing Products likewise benefited from such expansion namely, Other Mineral Products; Chemicals; Woodcrafts and Furniture; and Ignition Wiring Set and Other Wiring Sets Used in Vehicles, Aircrafts and Ships. These five product lines posted double-digit growths, with the first four exceeding 65.0% growths. Meanwhile, Machinery and Transport Equipment; Metal Component; and Electronic Products flagged red, although the changes in the last two products were almost negligible (i.e., close to zero). The decline in Electronic Products was attributed to low demand for Semiconductors; Office Equipment; Consumer Electronics; Telecommunications; and Medical/ Industrial Instrumentation mainly in Singapore. (Kindly refer to the table below for comparative values.) Exports in September may go down due to a high base of 22.8% jump in 2012 and the acceleration of average price in the world crude oil spot market.
Top 10 Philippine Exports for All Countries in June 2013 (Year-on-Year Growth in Percent) Gainers Petroleum Products Other Mineral Products Bananas (Fresh) Chemicals Woodcrafts and Furniture Other Manufactures Ignition Wiring Set and Other Wiring Sets Used in Vehicles, Aircrafts and Ships Losers Machinery and Transport Equipment Metal Component Electronic Products -58.0 -0.5 -0.4 131.7 -84.9 -21.3 -28.5 -14.4 -13.0 12.2 -16.6 3.3 Aug 115,374.8 455.0 266.2 121.2 68.7 65.6 Jul 3356.8 -21.3 22.7 22.8 44.2 -37.6 YTD 198.7 101.6 74.6 40.7 62.6 6.1

Note: a means no value. Source: National Statistics Office (NSO)

The Market Call - November 2013

Macroeconomy

The robustness of OFW remittances, which grew 6.8% in August, was magnified by peso depreciation, causing its peso value to surge 11.4%, the highest in 46 months.

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Figure 5 - Exports Growth Year-on-Year and Month-on-Month

Peso Remittances Bloat 11.4% to 46-Month High Overseas Filipino Workers (OFW) remittances in peso terms rushed to its highest growth since October 2009 at 11.4% in August, from 10.2% in July, on high remittance inflows and substantial y-o-y peso depreciation. Dollar value of OFW remittances rose 6.8%, the highest in seven months, due to hefty sending of money from the US, Saudi Arabia, the United Kingdom, the United Arab Emirates, Singapore, Canada, and Japan. Meanwhile, peso had let up 4.3% (y-o-y) against the greenback as political unrest in Syria, uncertainty on Fed tapering moves, and foreign selling in the local stock market fueled additional volatility. About seventy seven percent (77.0%) of total cash remittances were sourced from land-based OFWs and the remaining 23% from sea-based OFWs. The outlook for the growth in remittance flows remained intact as exemplified by continued demand for Filipino workers abroad and development in financial institutions. According to the Philippine Overseas Employment Administration (POEA), approved job orders totaled 542,367 in January to August. Of these, around 39.0% were processed job orders mainly for services, production, professional, technical, and related workers intended to work in Saudi Arabia, the United Arab Emirates, Kuwait, Taiwan, Hong Kong, and Qatar. Moreover, the POEA reported that workers with processed contracts reached 1.16M for the H1 2013.

Source: National Statistics Office (NSO)


Source: National Statistics Office (NSO)

Figure 6 - Philippine Exports Country Destinations

Source: National Statistics Office (NSO)

The Market Call - November 2013

Macroeconomy

The Peso continued its appreciation bias for the second month in October as speculations of Moodys upgrade and end of fiscal impasse materialized on the backdrop.

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Figure 7 - OFW Remittances Growth Rates (Year-on-Year in US$ and PhP Terms) Figure 8 - Daily Peso-Dollar Exchange Rate, October2013

Source: Bangko Sentral ng Pilipinas (BSP) Sources: Bangko Sentral ng Pilipinas (BSP)

Peso Continues Appreciation for the Second Month The Peso averaged P43.18/US$ in October, a 1.5% appreciation from a month ago, although this was weaker compared to a year ago. The volatility improved at P0.47 the lowest since April. The peso appreciated steeply in the first week on rumors of an investment upgrade of the Philippines by Moodys and US House Speaker Boehners statement that he would not let the government breach the debt ceiling. Investors risk appetite, however, had weakened in the next week as the fiscal impasse (US government shutdown and debt ceiling) and negative news from China flourished on the backdrop, thus pushing the peso-dollar rates above the monthly average rate. The pesos strength reverted on the nomination of Janet Yellen as the new Fed chairman, raising of debt ceiling, and the hint of postponing tapering until the end of the year. Some profit-taking in the local stock market and the bets that the US is unlikely to shift monetary policy at the end of the FOMC meeting weakened the peso by month-end.
The Market Call - November 2013

Meanwhile, all the selected currencies of countries in Asia-Pacific region also strengthened against the greenback. Australian Dollar (AUD) and Malaysian Ringgit (MYR) appreciated the most, by more than 2.0%. Singaporean dollar (SGD), Indonesian Rupiah (IDR), Philippine Peso (PHP), and Thai Baht (THB) followed suit. It must be noted that the reversal in IDR and THB were mainly due to improving fundamentals
Monthly US Dollar Cross Rates of Selected Asia-Pacific Currencies Currency AUD CNY HKD IDR KRW MYR PHP SGD THB Jul-13 3.0% 0.0% 0.0% 2.3% -0.8% 1.6% 1.0% 0.6% 1.0% Aug-13 1.2% -0.3% 0.0% 5.0% -0.9% 2.6% 1.3% 0.3% 1.4% Sep-13 -2.5% 0.0% 0.0% 6.7% -2.8% -0.7% -0.3% -0.7% 0.3% Oct-13 -2.6% -0.3% 0.0% -1.5% -1.6% -2.5% -1.4% -1.6% -1.4%

Note: Positive changes mean depreciation and negative changes mean appreciation against the greenback Source: x-rates.com

Fixed Income Securities Macroeconomy

GDP probably expanded by 7.3% in Q3, but could slow down to below 6.0% in Q4, with the immediate effect of the typhoon on income and output.

9 and their relative cheap values after depreciating for four months since July. Lastly, Chinese Yuan (CNY) and Hong Kong Dollar (HKD) had negligible appreciation. Technical analysis using the moving average (MA) method indicates that the peso is likely to consolidate in the short term, as the 30-day MA moved closely to actual exchange rates. Meanwhile, the narrowing gap between 200-day MA and actual rates has put an element of doubt as to the direction of the peso over the long-term.
Figure 9 - Daily Peso-Dollar Exchange Rate, October 2012October 2013

effects in the Visayas, but steady to lower crude oil prices wold pull down inflation to 3.3% in Q4, which would bring full-year inflation to 3.0%, at the low end of the BSPs target. The fiscal picture continues to look better. Tax collections rising pace have been at double-digit rates and this would keep deficit and debt build-up in check and bring down the debt ratio clearly below 50% by the end of the year. BSP is right not to be overly worried about the sharp jump in money supply (M3 at over 30% in August and September), as funds flow out of SDAs. Much of this money is put into financial instruments and hopefully more into production. But banks remain risk-averse and are not and wont be lending-crazy. Exports appear to be doing better in H2 as we had anticipated. However, this mini-surge would just be enough to bring exports growth to positive territory for the year. OFW remittances will be a positive factor for the economy in H2 due to the depreciation of the peso, and should continue to do so unto Q4. The peso will not likely appreciate significantly, if at all, considering the outflow of funds from emerging

markets (EMs).

Forecasts
Rates Inflation (y-o-y %) 91-day T-Bill (%) October 2.9 0.29 43.18 3.68 November 3.2 0.28 43.60 3.74 December 3.4 0.26 43.60 3.69 January 3.6 0.22 43.57 3.61

Source: Bangko Sentral ng Pilipinas (BSP)

Peso-Dollar (P/$) 10-year (%)

Outlook Despite the devastating impact of super typhoon Yolanda, our basic positive view on the economy remains, with some shimmer a little off.
GDP probably expanded by 7.3% in Q3, but could slow down to below 6.0% in Q4, with the immediate effect of the typhoon on income and output. Headline inflation averaged at 2.4% in Q3 on the face of the slower pace in the rise of crude oil prices. This will certainly rise in Q4, exacerbated by the super typhoons

Source: Authors estimates

The Market Call - November 2013

Fixed Income Securities

U.S. Shutdown Reinforces Further Stimulus Delay


10 The 16-day partial US government shutdown may have been a blessing in disguise for global financial markets. The political deadlock that resulted in budget indecision reinforced the view that the US was not yet ready to gradually withdraw (or taper) its bond purchases program. The decision to lift the debt limit was a band aid relief that did not promise long-term solutions for the US debt and fiscal problems. With Janet Yellen chosen to succeed Fed Chairman Bernanke by January 2014, markets have started to calm their earlier expectations of a radical rise in interest rates by year-end of 2013. The new view is for tapering to start in Q1 2014. Meanwhile, in the Philippine market for government bonds, high cash levels in investors hands continue to contain yields especially after the Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP) decided to keep policy rates unchanged. Primary Market: Zero-rate for 91-day T-bills
The two regular auctions in October together with the unplanned T-bill auction on October 8 via tap facility were met with overwhelming demand, and yields of T-bills plummeted to all-time lows. The 91-day T-bill, in particular, fetched a near-zero average yield of 0.001%. The 182-day and 364-day T-bills similarly posted average record yields of 0.090% and 0.190%, respectively. The bid cover for the 91-day T-bill offer was 9.65x, the highest this year so far. Meanwhile, the 182-day and 364-day T-bills were oversubscribed by 5.91x and 3.46x, respectively. The Bureau of the Treasury (BTr) took advantage of the unmet demand and ultra-low rates by offering another P20 B worth of securities through a tap facility. Demand in the tap still exceeded offers. The demand for T-bills was heightened by expectations of an appreciation of the peso by year-end as well as the Moodys credit rating upgrade.
Figure 10 - FXTN

Source: Philippine Dealing and Exchange Corporation (PDEx)

T-Bills and T-Bonds Auction Results Date 7-Oct-13 T-Bond/T-Bill 91-day 182-day 364-day 8-Oct-13 91-day 182-day 364-day 22-Oct-13 Total 20-Year Offer (PhP B) 4.00 6.00 10.00 4.00 6.00 10.00 20.00 60.00 Tendered (PhP B) 38.590 35.460 34.610 38.00 30.50 10.00 40.425 227.59 Awarded (PhP B) 4.00 6.00 10.00 4.00 6.00 10.00 20.00 60.00 Tendered Offered 9.65 5.91 3.46 9.50 5.08 1.00 2.02 5.23 Yield 0.001 0.090 0.190 0.001 0.090 0.190 4.5120 Change (bps) -86.500 -83.000 -76.500 -86.50 -83.00 -76.50 99.50 -

Source: Bureau of the Treasury (BTr)

The Market Call - November 2013

Fixed Income Securities

The US budget stalemate and debt ceiling pushed down longer tenor yields in the secondary market trading.

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Figure 11 - Weekly Traded Volume (in Billion PhP)

policy stance.

Corporate Bond Market: Rush Before the Year-end


Volume in the corporate bond market perked up in October in both the secondary market and new issues. Trading volume in the secondary market hit a 9-month high of P5.06 B in October or some 9x from P580 M a year ago and twice the P2.542 B of trades last month. The October performance was driven up by Power Sector Assets and Liabilities Management Corporation (PSALM) as trading of its debt papers was about 3.20x greater than volume in September. PSALM towered over the other major corporate debt issuers with P4.36 B trading volume. Ayala Land, Inc. (ALI) followed with P 1.61 B worth of its debt changing hands during the month.
Source: Philippine Dealing and Exchange Corporation (PDEx)

Corporate Issuances
Although the pipeline for bond/notes issues was fairly clogged, only the primary issuances of First Gen Corporation (FGEN), Ayala Land Inc. (ALI) and Rockwell Land Corporation (ROCK) were listed in the market in October.
Figure 12- Corporate Trading (in Million PhP)

Meanwhile, the 20-year T-bond offer was similarly well received, fetching an average yield of 4.5120%. In comparison to the auction last March, this was 99.5 bps higher.

Secondary Market: Yields at Long End Finally Fall


The US budget and debt ceiling stalemate pushed down longer tenor yields in the secondary market trading. In the long end, yield of the FXTN 25-08 plummeted by 115 bps and that of the FXTN 20-17 tumbled, as well, by 74 bps. In the belly of the curve, yield on the FXTN 5-67 plummeted by 150 bps. Investor optimism rose during the month after Moodys hiked the countrys debt rating to investment grade status following the other two major rating agencies. Optimism was sustained especially in the third week of the month after the US put an end to the 16day partial government shutdown. Traded volume went back up in the second week after the ratings upgrade. Weak trades resumed in the third week as investors played defensively as the US debt ceiling deadline fast approached. The decision of the US government to end the shutdown in the fourth week triggered aggressive trading. Then, traders stayed on the sidelines while waiting for US jobs data and the BSP-MB

*Authors computations Source of basic data: Philippine Dealing and Exchange Corporation (PDEx)

The Market Call - November 2013

Fixed Income Securities

Credit Rating and Investors Service Philippines Inc. (CRISP) assigned an AA+ issuer rating on Rockwell Land with a positive outlook.

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Figure 13 - Corporates (in Million PhP)

7-year and one quarter unsecured peso-denominated fixed-rate bonds. Credit Rating and Investors Service Philippines Inc. (CRISP) assigned an AA+ issuer rating on Rockwell Land with a positive outlook. Proceeds from the bond sale will be allotted for capital expenditures particularly the Proscenium project. In the Pipeline. Although a good number of issuances are being worked out, only the following were officially disclosed by listed companies: JG Summit Holdings Inc. (JGS) aims to raise P50 B from a bond issue to finance some two-thirds of the entire P72 B deal it entered into to acquire San Miguel Corporationss entire 27.1% stake in Manila Electric Co. (MER). It is contemplating on a rights issue to cover the balance.

*Authors computations Source of basic data: Philippine Dealing and Exchange Corporation (PDEx)

First Gen Corporation (FGEN), the Lopez-led power generation firm, issued 10-year bonds worth $250 M USD. The bonds were traded in the Singapore Exchange Securities Trading Limited (SGX). Proceeds from the issuance will be used to fund power projects and other general corporate purposes. It plans to spend $2.3 B for a 1,300 MW expansion of its energy projects through the San Gabriel natural gas power project. It plans to issue another $50 M worth of 10-year bonds after the successful issuance. Ayala Land, Inc. issued bonds worth P6 B in total. The P4 B bonds are due in 2020 and the rest of the P2 B are due in 2033. The bonds carry coupon rates of 4.625% and 6.0%, respectively. BPI Capital Corporation, BDO Capital and Investment Corporation and First Metro Investment Corporation were joint lead underwriters and bookrunners. Rockwell Land Corporation is set for its P5 B bond sale in November. The company will issue P5 B worth of

Manila North Tollways Corporation, the private operator of the 84-kilometer North Luzon Expressway (NLEX), plans to hold a P7 B bond offering to fund the extension of NLEX to the Manila Port Area. It plans to issue the bonds in Q1 2014, likely in the form of retail bonds. Filinvest Land, Inc. (FLI) is set to offer P5 B worth of
Figure 14 - ROPs Yields

Source: First Metro Investment Corporation (FMIC)

The Market Call - November 2013

Fixed Income Securities

FOMC minutes described the Feds insistence on continuing its QE3 and seeking to find stronger evidence of U.S. recovery.

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fixed-rate retail bonds, with P2 B oversubscription. It plans to issue tenors of 7 to 10 years. The Philippine Rating Services Corporation (Philratings) has assigned a PRS Aaa rating to the bond, the highest possible for a bond. The proceeds of the bonds will be used to partially finance projects in Q4 2013 and in 2014. Bank of the Philippine Islands (BPI) is set to exercise its option to call P5 B worth of hybrid security, lower tier 2 notes. The papers were issued on December 12, 2008 and were supposed to mature on December 12, 2018. China: PRC Makes its Way towards Liberalization Peoples Republic of China (PRC) posted a 7.8% GDP growth in Q3 2013 y-o-y, bouncing up from 7.5% in Q2 2013. Moreover, GDP growth was at 7.7% in the first nine months of the year. This went beyond the governments full-year target of 7.5%. Recent developments in PRCs financial sector are centered on liberalization and setting up safety nets to remedy its credit problem. Peoples Bank of China (PBoC) has started to ease control over interest rates with the introduction of prime lending rates. These can now be used by lenders to price loans. In July, it can be remembered that the government scrapped a floor for lending rates. PRC is also looking to address the lack of transparency in credit in provinces by considering the issue of municipal bonds. This will be a trial program designed to see if there will be an improvement in credit transparency. Moreover, both PRC extended its Renminbi Qualified Foreign Institutional Investor (RQFII) program to Singapore with an aggregate quote of CNY50 B. Both wanted to strengthen their ties for regulation and financial sector development.

ROPs

Dollar-denominated bond yields were biased downwards across all tenors. The belly of the curve took the biggest drop with the yield on ROP19 falling by 46.8 bps to a yield of 2.749%. Yield on the ROP16 also slipped by 29.4 bps. The short-end and long-end of the curve also moved south. The ROP14 yield eased by 4.9 bps while that of the ROP32 by 24.2 bps. The short reprieve for the US borrowing limits and further negotiations on budget cuts pulled down US T-bond yields in and gave market players some opportunities in ROPs.

Indonesia: BI Keeps Policy Rates The Bank of Indonesia (BI) Board of Governors left policy ASEAN + 1 rate unchanged at 7.25%. It also decided to keep lending and deposit facilities steady at 7.25% and 5.50%. CPI US: Fed Decides to Continue QE3 after Shutdown eased to 8.4% in September (y-o-y) from 8.8% in August. Failure of the two houses of congress to agree on a new According to BI, inflation eased because of an abundant budget led to a partial US government shutdown. This supply in the wake of horticultural harvest. It also corrected has been marked in US history as the first shutdown in 17 after the fasting month of Ramadan, following the impact years. More than 700,000 federal employees were forced of fuel price hikes. In the same month, the BI agreed to to take a leave without pay and without a guarantee of an extension of its bilateral swap agreement with PBoC back pay. Meanwhile, the FOMC minutes released in the amounting to CNY100 B (IDR 175 Tr). Meanwhile, the last week of October, the week after the termination of Indonesian government raised IDR20.2 Tr from the sale of the partial shutdown, described the Feds insistence on retail bonds. The sold bonds carry a coupon of 8.5% and a continuing its QE3 and seeking to find stronger evidence 3-year maturity. This was the 10th series of retail bonds. of US recovery. Only Esther L. George voted against the Malaysia: Inflation Accelerates FOMC monetary policy action. She was concerned that In September, inflation accelerated to 2.6% from 1.9% continued accommodation would increase risks of future in August. This reading was highest in twenty months. economic and financial imbalances. Inflation in August Meanwhile, the Bank of Korea and Bank Negara Malaysia rose by 1.2% and unemployment stood at 7.2% as of (BNM) announced the establishment of a 3-year KRW-MYR September, both still way off from Fed targets. swap agreement. The bilateral currency swap arrangement

The Market Call - November 2013

Fixed Income Securities

Moodys Investors Service upgraded Philippines sovereign currency and local currency long term ratings to Baa3 from Ba1, with a positive outlook.

14
is sized up to KRW 5 Tr- MYR 15 B. This agreement aims to foster further financial cooperation between the Republic of Korea and Malaysia. In the same month, Malaysia announced its 2014 budget. The Securities Commission will utilize the Framework of Socially Responsible Sukuk Instrument that aims to fund sustainable investments. On October 1, BNM, together with Monetary Authority of Singapore (MAS) and Securities and Exchange Commission of Thailand, inked a Memorandum of Understanding to establish an ASEAN Collective Investment Scheme (CIS) Framework that would facilitate cross-border offerings to retail investors in the said countries. Thailand: Current Account Surplus in August The Bank of Thailand (BoT) kept its benchmark interest rate at 2.5%, after changing it in May. For Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong, this was still high although he accepted this level as long as the currency was stable near current levels. The higher-thandesirable interest rate might further attract speculative capital. Moreover, Thailand recorded a current account surplus of $1.3 B in August after a deficit of $1.6 B in July. This was driven by the increase in merchandise trade surplus from $257.6 M to $2.2 B in August. Philippines: Moodys Raises PH to Investment Grade Moodys Investors Service upgraded Philippines sovereign currency and local currency long term ratings to Baa3 from Ba1, with a positive outlook. The countrys inflation, however, hit a three-month high of 2.7% in September from a year earlier. This was above the market consensus
Figure 15 - ASEAN + 1

Source: Asian Development Bank (ADB)

of 2.4%. The unexpected increase in inflation in September spurred some speculation that the BSP would be open to adjust rates to temper inflation by adjusting overnight policy rate or increase SDA rates by year-end. We do not share this view.

Outlook

As the bond markets here and abroad recovered after the partial US government shutdown (which implied a delay in Feds tapering), the respite is now expected to last as late as March 2014, or even further back, with a more dovish Fed Chairperson in Janet Yellen, the first woman to be appointed as Fed Chairperson.

Spreads between 10-year and 2-year T-Bonds Country US PRC Indonesia Malaysia Thailand Philippines 2-year Rate 0.313 3.940 6.399 2.99 2.817 1.95 10-year Rate 2.538 4.220 7.635 3.602 3.842 3.388 Projected Inflation Rates 1.6 2.6 7.7 2.2 2.3 2.8 Real 10-year Yield 0.94 1.62 -0.07 1.40 1.54 0.59 10-year to 2-year Spread Oct. 1, 2013 232 22 98 54 105 101 Oct. 30, 2013 223 28 124 61 102 144 Spread Change (bps) -9 6 26 7 -3 43 Latest Policy Rate 0.25 6 7.25 3 2.5 3.5 Real Policy Rate -1.35 3.4 -0.45 0.8 0.2 0.7

Sources: Asian Development Bank (ADB), UA&P

The Market Call - November 2013

Equity Markets Fixed Income Securities

We think financial markets will prepare for the eventual Fed tapering only slowly, and so long-term US interest rates should rise only moderately up to early Q2 2014.

15
The BSP is expected to keep the low interest environment in order to have a positive response to super typhoon Yolandas devastation well into 2014. Thus, despite the very growth of M3 (as more funds exit from SDAs), which is expected to continue unto Q1 2014, we do not see any tightening of monetary policy any time soon. We think financial markets will prepare for the eventual Fed tapering only slowly, and so long-term US interest rates should rise only moderately up to early Q2 2014. And despite the improving outlook for the Eurozone, neither can we expect a rise in interest rates from that part of the world. Thus, world interest rates will not provide much pressure on domestic rates. What may influence bond yields more is if the inflation rate accelerates towards the mid-point of the BSPs 3-5% target. While we do expect higher average inflation rates in Q4, we do not think this would be sustainable as food prices stabilize and world crude oil prices are only being supported by uncertainties in the Middle East, as the US, Canada and Eastern European countries step up production. We expect a rush for corporate bond issuances until the end of the year, and probably into Q1 2014. We also think new names will emerge in this rush to catch what many see as a bottom in interest rates during that period.

The Market Call - November 2013

Equity Markets

PSEi Cheers PH Robust Macro Backdrop


16 The Philippine equity market sustained its rebound in October. The PSEi was up by 6.36% for the month. Investors have slowly refocused attention towards the countrys sound macro backdrop over neighbors frail economic conditions and negative externalities from developed markets (DM). Furthermore, the re-opening of the US government and rhetoric about taper delay lifted investors sentiments that the party in emerging markets would be extended. The Philippines strong macro fundamentals will continue to remain a bright spot and warrant staying long on local equities. But against this background, one should not be over confident. We reiterate our view that the strong growth is priced-in and positive catalysts are still very much needed to justify another multiple expansion.
Figure 16 - PSEi Net Foreign Flows (In Million PhP)

we see more funds reallocated into DM equity markets. Hence, we maintain our tactical strategy of a long-term approach rather than focusing on short-term risk events. Moving forward in November, downside risks are likely to proliferate and offset third quarter earnings results. We see lower liquidity on the back of Travellers and Robinsons Retail IPOs to be aggravated by the Morgan Stanley Capital International (MSCI) semi-annual rebalancing. Furthermore, the taper talks are expected to resurface as the US economy reported stronger GDP in Q3 and job gains in October.
Monthly Sectoral Performance
30-September-13 Sector PSEi Financial Industrial Holdings Property Services Mining and Oil Index 6,191.80 1,534.33 9,181.94 5,473.27 2,369.42 1,993.33 12,250.69 % Change 1.92% 4.52% -1.93% 3.57% 2.15% 2.45% -11.60% 31-October-13 Index 6,585.38 1,618.26 9,280.11 5,983.26 2,652.51 2,004.20 12,824.29 % Change 6.36% 5.47% 1.07% 9.32% 11.95% 0.55% 4.68%

Sources: Technistock, First Metro Securities

Despite the strong performance in October, foreign investors remain net sellers. This was a reversal of the strong foreign buying in September. Foreign flows toward Philippine equities have been erratic, gyrating from net buying and selling. It hardly gives a clear indication as to whether foreign investors will be coming back in a strong way. Outlook and Strategy In the long-term, robust macro backdrop should be supportive of the Philippine equity markets. However, in the next 12 months, we see higher odds of volatility picking up. The delay of the Fed taper is not necessarily positive for the Philippine equity markets, as it creates more uncertainties. And as DM economies improve,

Source of Basic Data: PSE Quotation Reports

The PSEi ended in the green as investors cheered the countrys stable economic fundamentals alongside other positive news from developed markets (DMs). The index added 393 points to close at 6,585.38, almost 15 points short of the 6,600 level. The bourse was largely buoyed up by the Property sector as real estate prospects remain upbeat amid robust demand.

The Market Call - November 2013

Equity Markets

Low interest rate environment supports demand and investments in the real estate market.

17
Company Metrobank Banco de Oro Bank of the Philippine Islands Symbol MBT BDO BPI 09/30/13 Close 83.00 75.00 96.40 10/31/13 Close 89.00 81.00 100.00 % Change 7.2% 8.0% 3.7% Metro Company Ayala Corporation Pacific Investments Corporation SM Investments Corporation DMCI Holdings, Inc. Aboitiz Equity Ventures GT Capital Symbol AC MPI SM DMC AEV GTCAP 09/30/13 Close 604.50 4.50 780.00 46.00 45.00 760.00 10/31/13 Close 603.00 4.88 856.00 51.80 50.85 856.00 % Change -0.2% 8.4% 9.7% 12.6% 13.0% 12.6%

Source of Basic Data: PSE Quotation Reports

The anticipation of strong banking performance throughout the year drove up banking stocks share prices. A more inclusive financial system (being responsive to the needs of varied stakeholders) and strong growth in loans bode well for the banking sectors growth trajectory. Share prices of BDO Unibank, Inc. (BDO) and Metrobank (MBT) rose following a broad-based rebound due to a positive jolt in confidence. Meanwhile, Bank of the Philippine Islands (BPI) recovered from its previous steep losses recorded last month.
Company Meralco Aboitiz Power Energy Development Corp. San Miguel Corporation Jollibee Foods Corp. Symbol MER AP EDC SMC JFC 09/30/13 Close 286.00 31.50 5.45 74.80 168.50 10/31/13 Close 304.00 34.00 5.80 76.00 177.40 % Change 6.3% 7.9% 6.4% 1.6% 5.3%

Source of Basic Data: PSE Quotation Reports

The Holding sector bounced back from the previous months drop. Prices of six listed companies increased. GT Capital (GTCAP) recently made a partial acquisition of Charter Ping An Insurance Corporation, a leading noninsurance firm. This purchase would harmonize well with the auto business of GTCAP. Meanwhile, Metro Pacific Investments Corporation (MPI) announced that it would conduct a feasibility study for a possible project, a third bridge connecting Cebu and Mactan. SM Investments Corporation (SM) recovered from last months slump due to market optimism.
Company Ayala Land, Inc. SM Prime Holdings, Inc. Robinsons Land Corporation Megaworld Corporation Symbol ALI SMPH RLC MEG 09/30/13 Close 27.25 16.02 20.60 3.26 10/31/13 Close 29.45 19.18 22.70 3.84 % Change 8.1% 19.7% 10.2% 17.8%

Source of Basic Data: PSE Quotation Reports

Share prices of the stocks in the Industrial sector all recorded gains on the back of the still-robust consumer demand. Aboitiz Power (AP) led the pack after incurring losses last month. Meralco (MER) rose by 6.3% after JG Summit acquired San Miguels Meralco stake for P72 B. This implied a 16% purchase price discount at P236.6 apiece. Jollibee Foods Corporation (JFC) is still on track with its international store expansion, having Indonesia (2014) and Canada (2015) as its next targets.

Source of Basic Data: PSE Quotation Reports

Prospects in the Property sector remained positive as the low interest rate environment supports demand and investments in the real estate market (i.e. residential, office spaces, shopping malls). Evidently, building constructions have become more dispersed with new projects now being developed outside Metro Manila. Notable gainer in this sector is SM Prime Holdings, Inc. (SMPH) on disclosures that the companys weight in PSEi has increased due to the consolidation. Share prices of Megaworld Corporation (MEG) and Robinsons Land Corporation (RLC), likewise posted hefty gains as investor sentiment picked up. MEG plans on continuing its focus on niche segments (middleincome residential and BPO office space projects) in the

The Market Call - November 2013

Equity Markets

The previous two trading months showed that PSEi has regained some of its swagger but value turnover fell below the P11 B daily average.

18
property market. Meanwhile, RLCs stock price increased on the back of strong residential and mall revenues and the upcoming IPO of Robinsons Retail Holdings Inc., which owns the Robinsons department and supermarket stores, Handyman, Ministop, Toy R Us, among others.
09/30/13 Close 2,978.00 1,600.00 41.70 10/31/13 Close 2,870.00 1,740.00 45.10 % Change -3.6% 8.8% 8.2%

Total Turnover
Monthly Turnover (in Million Pesos)
Total Turnover Sector Financial Industrial Holdings Property Services Mining and Oil Total Foreign Buying Value 22,545.81 48,088.10 37,626.76 21,445.40 31,573.43 3,154.65 164,435.77 94,901.23 % Change -21.21% -25.36% -17.93% -24.58% -23.75% -10.59% -22.53% -21.12% Average Daily Turnover Value 1,073.61 2,289.91 1,791.75 1,021.21 1,503.50 150.22 7,830.27 4,519.11 % Change -21.21% -25.36% -17.93% -24.58% -23.75% -10.59% -22.53% -21.12%

Company Philippine Long Distance Tel. Co. Globe Telecom Puregold

Symbol TEL GLO PGOLD

Source of Basic Data: PSE Quotation Reports

In the Service sector, share price of Puregold (PGOLD) has sustained its gains due to a positive outlook in the company amid its aggressive store expansion program. Meanwhile, rivals Philippine Long Distance Telephone Company (TEL) and Globe Telecom (GLO) continue to race for the roll-out of high-speed internet services. TEL shed some points as it fell victim to the foreign sell-off in anticipation of some positive developments abroad.
Company Philex Mining Corporation Semirara Mining Corporation Lepanto Consolidated Mining Corporation Symbol PX SCC LC 09/30/13 Close 7.95 240.00 0.42 10/31/13 Close 8.75 276.00 0.42 % Change 10.1% 15.0% ---

Source of Basic Data: PSE Quotation Reports

The previous two trading months showed that the PSEi has regained some of its swagger. However, trading turnover remained sparse as the average value turnover fell below the P11 B daily average, partly due to the US government shutdown concerns. Foreign investors were seen to track uncertainties in the developed market as they took a net selling stance with a net outflow of P7.5 B.

Source of Basic Data: PSE Quotation Reports

Semirara Mining Corporation (SCC) posted hefty gains after it had secured SECs approval on the incorporation of SEM-Balayan Power Generation Corporation and St. Raphael Power Generation Corporation needed in its planned power plant expansion in Calaca and Balayan. World coal prices also recovered. Share price of PX surged by 10%, poised for its largest gain since August, after it scrapped its plans to issue new shares at a discount.

The Market Call - November 2013

Recent Economic Indicators


19 NATIONAL INCOME ACCOUNTS, CONSTANT PRICES (In Million PhP)
2011 Annual Levels G.R. 663 1,860 3,179 (0.2%) 11.6% 7.2% 2012 Annual Levels G.R. 678 1,577 2,537 2.4% (15.2%) (20.2%) 1st Quarter 2013 Quarterly Annual Levels G.R. G.R. 178 478 992 (13.5%) (4.7%) (5.6%) 3.1% 10.9% 6.8% 2nd Quarter 2013 Quarterly Levels Annual G.R. G.R. 992,279 1,149 225 11.4% 5.2% 22.5% 7.4% 5.2% 17.0%

Production Agri, Hunting, Forestry and Fishing Industry Sector Service Sector Expenditure Household Final Consumption Government Final Consumption Capital Formation Exports Imports GDP NPI GNI

3,946 570 1,184 2,886 2,884 5,702 1,860 7,561

3.4% 4.0% 31.6% 21.0% 22.5% 7.6% 10.0% 8.2%

4,186 567 1,340 2,765 2,968 5,921 1,849 7,770

6.1% (0.6%) 13.2% (4.2%) 2.9% 3.9% (0.6%) 2.8%

1,093 184 313 807 782 1,715 310 2,025

(13.5%) 22.5% (19.3%) 12.5% (1.8%) (6.2%) 1.8% (5.0%)

5.5% 13.2% 44.5% -6.5% 2.0% 7.7% 8.2% 7.8%

299 807 782 1,715 310 2,025 490 2,084

(4.7%) 13.7% 9.4% 7.2% -0.8% 5.9% (2.9%) (5.6%)

13.2% -6.5% (3.0%) 7.5% 2.7% 6.8% 3.2% 7.1%

Source: National Statistical Coordination Board (NSCB)

NATIONAL GOVERNMENT CASH OPERATION (In Million PhP)


2011 Levels Revenues Tax BIR BoC Others Non-Tax Expenditures Allotment to LGUs Interest Payments 1,359,942 1,202,055 924,146 265,108 11,885 157,612 1,557,696 315,114 278,996 Growth Rate 12.7% 9.8% 12.3% 3.6% n.a. 45.8% 2.8% 13.12% 1.3% Levels 1,534,932 1,360,849 1,057,716 289,866 12,833 173,980 1,777,977 298,322 312,799 2012 Growth Rate 14.2% 13.6% 14.9% 9.7% 8.0% 36.6% 14.0% (4.8%) 13.8% Levels 131,089 113,320 88,761 23,253 1,306 17,764 139,540 27,643 18,418 Jun-2013 Monthly Annual G.R G.R. (14.9%) (18.5%) (20.7%) (10.3%) (13.3%) 17.9% (19.5%) (35.8%) (29.5%) 13.7% 7.2% 9.1% (0.2%) 20.9% 12.7% 9.9% 4.0% (3.2%) Levels 144,622 129,160 100,098 27,674 1,388 15,462 197,844 28,463 53,510 Jul-2013 Monthly Annual G.R G.R. 10.3% 14.0% 12.8% 19.0% 6.3% (13.0%) 41.8% 3.0% 190.5% 17.3% 18.5% 19.9% 13.5% 27.8% 8.0% 21.7% 11.5% 4.3%

Overall Surplus (or Deficit)

(197,754)

(281.3%)

(243,045)

(13.1%)

(13,164)

(135.8%)

(33.9%)

-53,222

529.8%

35.6%

Source: Bureau of the Treasury (BTr)

POWER SALES AND PRODUCTION INDICATORS Manila Electric Company Sales (In Gigawatt-hours)
2012 Annual Levels TOTAL Residential Commercial Industrial 32,471 9,775 12,602 9,964 Growth Rate 7.2% 4.8% 6.1% 11.5% Levels 2,913.3 880.6 1,135.3 886.7 Jul-2013 Growth Rate 4.6% 8.1% 6.7% (1.0%) YTD 3.9% 4.7% 5.0% 1.9% Levels 2,867.4 869.0 1,116.1 871.6 Aug-2013 Growth Rate 7.6% 11.3% 8.9% 2.8% YTD 4.4% 5.5% 5.4% 2.0%

The Market Call - November 2013

20 BALANCE OF PAYMENTS (In Million US$)


2011 Levels I. CURRENT ACCOUNT Balance of Trade Balance of Goods Exports of Goods Import of Goods Balance of Services Exports of Services Import of Services Current Transfers & Others II. CAPITAL AND FINANCIAL ACCOUNT Capital Account Financial Account Direct Investments Portfolio Investments Financial Derivatives Other Investments III. NET UNCLASSIFIED ITEMS OVERALL BOP POSITION Use of Fund Credits Short-Term Memo Items Change in Commercial Banks Net Foreign Assets Basic Balance 7,078 (11,857) (15,450) 62,681 74,538 3,593 15,450 11,857 17,642 5,228 171 5,057 1,253 5,524 1,002 (2,722) (2,127) 10,179 0 (1) Annual G. R. (20.7%) (44.1%) (40.9%) (3.3%) 2.0% 31.4% 9.6% 4.4% 6.0% -29.2% 74.5% (30.6%) 83.7% 26.6% 624.6% (211.8%) 6.2% (28.9%) 0.0% 0.0% Levels 7126 (12,046) (15,205) 46,284 61,489 3,905 18,600 14,695 2012 Annual G. R. 2.2% (5.6%) 10.4% 20.9% 11.3% 31.4% 9.6% 4.4% 4th Quarter 2012 Levels 2,208 (3,031) (4,701) (10,991) (15,692) (1,441) (5,121) (3,680) Annual G. R. (0.8%) (15.4%) 4.2% 27.4% 16.0% (15.7%) 5.3% 16.8% 1st Quarter 2013 Levels 3,439.0 (1,017.0) (2,733.0) 11,152.0 13,885.0 1,819.0 5,136.0 3,317.0 4,456.0 Annual G. R. 775.1% 74.0% 42.9% 7.9% (8.2%) 18.8% 6.3% 0.5% 3.5%

(5,995) 136 (6,131) (952) (3,523) (13) (1,643) (2,127) 10,179 0 (1)

9.4% % (9.3%) 25.5% 19.7% 98.7% (255.1%) (217.3%) (19.0%) 0.0% 0.0%

2,494 48 -2542 -92 -1851 27 -626 (1,393) 3,405 0 (11)

(54.5%) 60.0% (158.5%) 73.3% (311.5%) 130.7% (116.0%) (154.7%) 643.4% 0.0% 0.0% 23.0 (1,489.0) (814.0) (3,123.0) 52.0 2,396.0 (3,416.0) 1,535.0 0.0 11.0 (8.0%) 69.1% 9.4% (150.2%) 186.7% 191.6% 14.5% 23.5 % 0.0% 10.0%

5,622 8,655

11.7% (25.5%)

(4,049) n.a.

19.9% n.a.

249 n.a.

479.1% n.a.

1,546.0

23.4%

Source: Bangko Sentral ng Pilipinas (BSP)

MONEY SUPPLY (In Million PhP)


2012 Average Levels RESERVE MONEY Sources: Net Foreign Asset of the BSP Net Domestic Asset of the BSP MONEY SUPPLY MEASURES AND COMPONENTS Money Supply-1 Money Supply-2 Money Supply-3 MONEY MULTIPLIER (M2/RM) 1,279,614 Annual G. R 13.9% Jun-2013 Average Levels Annual G. R. 1,540,178 21.1% Jul-2013 Average Levels Annual G. R. 1,538,474 26.6%

3,323,054 (2,043,440)

9.5% 6.9%

3,497,010 (1,956,832)

9.3% 1.5%

3,601,127 (2,062,653)

8.5% (2.0%)

1,464,490 4,584,972 4,668,872 3.58

13.5% 9.3% 8.0% (3.58%)

1,737,684 5,611,566 5,699,722 3.64

20.0% 21.1% 20.3% 0.0%

1,856,486 5,818,614 6,033,935 3.78

29.9% 29.2% 31.0% 2.0%

The Market Call - November 2013

The Market Call - Capital Markets Research

November 2013

CONTRIBUTORS
Roberto Juanchito T. Dispo Dr. Victor A. Abola Viory Yvonne T. Janeo Tyrone Dale R. Agas Gilleane Julia V. Altuna Reuben Mark A. Angeles Augusto M. Cosio, Jr. President, FMIC Senior Economist, UA&P Research Associate, UA&P Research Assistant, UA&P Research Assistant, UA&P Department Head Research, FMSBC President, FAMI

Views expressed in this newsletter are solely the responsibilities of the authors and do not represent any position held by the FMIC and UA&P.

FMIC and UA&P Capital Markets Research

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