Singapore slashed down Philippine inflation forecast – PHL market seen resuming climb

Philippines—The country's largest mutual fund group, Bank of the Philippine Islands-managed ALFM Mutual Funds, sees the local stock market hurdling the fresh turmoil in the eurozone and resuming its climb to new heights this year.

In the last two weeks, Philippine stocks have retreated due to the negative sentiment prevailing in the European region, which had spilled over to local markets. Last week, the main Philippine Stock Exchange index suffered its steepest weekly drop this year. It fell by 5.4 percent to 4,879.42 on Friday (May 18, 2012), on escalating risks that the eurozone will break up.

"But we remain constructive of the domestic market given our healthy macroeconomic fundamentals. We think cyclical stocks such as banks and property, which are expected to benefit from the low interest rate environment and improving incomes, will continue to lead the Philippine stock index to higher levels," ALFM director Maria Theresa Marcial-Javier said in a report to stockholders.

"Downside risks are plenty, with the external factors having a hand in shaping the domestic economy. Nevertheless, our confidence in the economy has not wavered," said ALFM chairman Romeo Bernardo.

"We still expect above-trend GDP [gross domestic product] growth, supported by benign inflation. We anticipate the government's fiscal and external position to continue improving. We anchor hopes on the sustained strength of remittance flows, high business process outsourcing sector growth, improved confidence in the government and on the economy, the government's commitment to fiscal prudence, and the priority given to infrastructure development," Bernardo said.

Javier, who heads BPI's asset management and trust group, said in an interview after the ALFM stockholders meeting that the stock market's support level at 4,750 should hold and levels close to this barrier would be an opportunity to increase position.

BPI asset management is sticking to its view that the PSEi would hit 5,500 to 5,800 levels this year.

"As of the end of April 2012, the Philippines is the third-best performing equity market in the region, with a return of 19 percent, driven by strong liquidity flows attracted by the country's favorable growth prospects and generally strong first quarter 2012 corporate earnings. Net foreign buying amounted to $909 million, already more than half of the 2011 level of $1.33 billion," Javier reported to stockholders.

In her report, Javier said 2011 turned out to be a year of opportunities as well as challenges for the economy, the financial markets and investment management industry.

"We expect 2012 to be as exciting and thought-provoking. Nevertheless, we look to the future with optimism, with our expectations strongly anchored on the resilience of our domestic economy, yet remaining mindful of the difficulties that still lie ahead as we confront the challenges in the global financial markets," she said.

Malacañang says welcomes DBS cutting of inflation forecast

Malacañang on Sunday  (May 20, 2012) welcomed the reported cutting by Singapore-based DBS Bank Ltd. of its inflation forecast for the Philippines for 2012 and 2013, saying it may result in lower prices of goods and services.

Presidential spokesman Edwin Lacierda said this is "good news" for the Philippines, even as he noted world oil prices are starting to soften.

"That's good news for us.... Then considering world oil prices are softening, mababa ang ating inflation (our inflation is low), which is good for us," he said on government-run dzRB radio.

He also noted that while world oil prices had risen in past months, prices of basic goods in the Philippines did not soar drastically due to the efforts of Philippine economic managers.

Earlier reports said DBS lowered its inflation forecast for the Philippines due to lower-than-expected consumer prices in the first four months of the year as well as softening oil prices.

The report said DBS slashed its inflation forecast to 3.5 percent instead of four percent this year and 4.3 percent instead of 4.8 percent in 2013.

National Statistics Office data showed inflation rose to three percent in April from 2.6 percent in March.