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The PH economy appears to have bottomed out in Q2-2020 as GDP took a deep dive, while more economic data showed monthly gains. With the National Government (NG) able to raise P601.0-B in July to August 7th largely with the P516.3-B Retail Treasury Bond (RTB-24) issue, there is less pressure for it to over borrow from the domestic money market, even as long-tenor ROPs yields hit record lows. This will enable NG to step further on the accelerator on infrastructure and capital spending. We may also see the peak of inflation year-on-year (y-o-y) in August due to a low base a year ago. In sum, the rally in the bond markets will likely continue, but equities may have to wait for better earnings to get back on an upward trajectory.



Foreign investors poured more than $6.0-B in corporate bond issuances abroad since mid-June signaling confidence in PH economy’s resilience, even as the economy takes steady steps towards normalization despite quarantine constraints. Manufacturing PMI continued its ascent almost to the 50 level and National Government (NG) spending remained robust. Inflation may have risen to 2.5% in June, much above expectations, but that will not move much since the main driver, spiraling crude oil prices, has limited upside. Exports and OFW remittances may have suffered, but the trade deficit has fallen sharply and enabled the peso to grow slightly stronger in June. The financial markets look fine, especially the bond market which has seen record tenders for auctions and all-time low for 10-year T-bond yields. Rising domestic liquidity, especially with the huge corporate issuances offshore, along with steady inflation give positive rating for the bond markets. The equities market has recovered to the 6,000 to 6,500 range and became one of the top performers in the world. However, the PSEi may hit a second bottom if domestic infections continue to rise, but still above 5,000 supported by robust corporate fundraising this year given the very liquid domestic and foreign markets.



As widely expected, negative economic data surfaced in April. These include the huge drop in manufacturing, exports and imports, as restrictions due to the strict Enhanced Community Quarantine (ECQ) curtailed movements of workers and some supplies. We see, however, some “green shoots” sprouting in May seen in the big jump in Manufacturing PMI to above-40 level after a record low of 31.6 in April and in National Government (NG) spending which rocketed by 108.1% in April. Besides, money growth accelerated further to faster than 15% pace despite slower loan growth. The bond market hailed in more investors shown in a surge in tenders and secondary market trading, sending bond yields lower across the board. PSEi gained another 2.4% in May, landed and stayed above 6,000 by early June.










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GDP Report: Economic Fallout

August 14, 2020


The Philippines has officially landed into a recession after the GDP fell in two consecutive quarters and this could put the BSP under more pressure to cut policy rates in their August 20 meeting to support the recovery. PH GDP posted a record slump of 16.5% in Q2 due to a quarter long lockdown that halted economic activity. This is a deeper dive from the downwardly revised -0.7% in Q1 and plunged the economy to a steep contraction of 9% in H1. First Metro expects the economy to shrink by 8% to 9% for full year 2020.

Philippine Banks

Philippine Banks: Provisions Hit

August 4, 2020


Provisions were the key weak point of operations, causing Php4.5bn worth of net loss in 2Q20, wiping out half of the 1Q20 earnings of Php8.8bn. As a result, BDO’s 1H20 net income shrank by 78% to just Php4.3bn. That was sharper than BPI’s 15% drop in income to Php11.7bn.


Meralco: Dividend Play

August 4, 2020


First half core earnings down 14% to Php10.6bn as 2Q20 earnings dipped 28%, hit by the lockdown.







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