Quick Take: PSEi's ascent to lofty heights? and 5 more market updates
December CPI [link] in the US was “in-line” with expectations, with December inflation up 6.5% y/y (relative to December 2021), much lower than in November when the CPI data showed that prices were up 7.1% y/y. Month-to-month, CPI data showed that prices had fallen 0.1% from November to December. Core inflation (food and energy prices are removed) was the notable exception: it was up 5.7% y/y and 0.3% m/m.
MB Quick Take: American markets didn’t take the news and do anything coordinated with it; at the time of this writing, the various markets bounced around from positive to negative and back again. Looking forward, this result potentially supports the theory that peak inflation is behind us, but it also supports the theory that this period of “high inflation” could be more stubborn and long-lasting than people might expect. All eyes on the U.S. Federal reserve’s February 1st announcement of its next potential interest rate hike. Will it be 25 or 50 basis points?
World Bank (WB) [link] lowered world GDP growth to 1.7% from 3.0%, with US GDP predicted to rise just 0.5% for FY23. WB cited “Elevated inflation, higher interest rates, reduced investment, and the impacts of Russia’s invasion of Ukraine” as reasons for the revision.
MB Quick Take: Sentiment seems to be that the pains of 2023 will be disproportionately felt in the “developed world”. Basically, China and the emerging economies (like ours) will muddle through without too much struggle. Things might be especially painless for economies that are positioned to monetize China’s re-awakening (like ours).
HSBC [link] thinks that the BSP will raise rates by an aggregate of 75 basis points in the first half of 2023. Going further, HSBC specified that it believes the BSP will raise the interest rate by 25 bp in each of the three regularly-scheduled policy meetings. HSBC thinks that the high (and rising) cost of food, together with high (and rising) core inflation (which excludes food) will push the BSP to take further rate-based action against inflation.
MB Quick Take: The BSP’s monetary board is scheduled to meet three times over the next four months (Feb 16, Mar 26, May 18), and the BSP’s Governor has already signaled his interest in maybe not raising as much as he did before, and maybe not following the US too closely. DoF Secretary Diokno said that the PH economy gives the BSP “some space” to use rates to protect the peso.
First Metro Investment Corp (FMIC) [link] thinks the PSE could hit the 7,500 level this year, thanks to signs of improving investor sentiment. FMIC’s Head of Research, Cristina Ulang, said that the PSE might not hit that level at the end of the year (it could be earlier, or “anytime”, according to Ms. Ulang) since this year of trading is expected to be “volatile”. Ms. Ulang said that she expects companies with low debt and high capitalization to be better-off, as well as stock that have exposure to businesses that are linked to energy, fuel, and renewables.
MB Quick Take: Reading between the lines only slightly, Ms. Ulang is basically saying that we’ve got the gas to maybe make it up 9-10% from our current position, but that the conditions that could get us there are not the type that will slowly reveal themselves and steadily improve valuations throughout the year. Whether that's because the conditions are temporary, or because they're vulnerable to fluctuation she did not say.
COL Financial [COL 3.2 0.6%] [video link] Head of Research, April Tan, in an interview with Bloomberg, said that COL sees “substantial upside” in the market right now, with low valuations, high loan demand, and falling commodity prices leading Ms. Tan to predict a year of strong margin growth. Ms. Tan admitted that the country is vulnerable to the same external shocks as the rest of the world, but that our market is somewhat insulated. COL is looking for the PSE to reach 8,100 in 2023.
MB Quick Take: COL’s prediction is more aggressive. To reach that level, the PSE would need to increase over 18% from where we are today, which is nearly double the performance predicted by First Metro. In particular, Ms. Tan pointed to Universal Robina [URC 140.3 1.1%] and Monde Nissin [MONDE 13.4 3.2%] as two companies that should see a big boost from falling commodity prices.
Rumors [link] swirling about possible MSCI Index removals point to ACEN [ACEN 7.0 0.9%], Globe [GLO 2060.0], and Meralco [MER 300.0 1.3%] as potential removal targets in the rebalancing scheduled for February. April Tan, Head of Research at COL Financial [COL 3.2 0.6%], said that the potential removals (and the rumors of those removals) could lead to a sell-off of those stocks.
MB Quick Take: The MSCI Index is different from the PSEi Total Return Index, but inclusion (or removal) from either index does impact stock price. I don’t personally spend very much time thinking about inclusions and removals, but trading the potential candidates can be a profitable (if somewhat risky) enterprise.
--
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
- Latest
