A PROPOSAL FOR CHARTBOOK. Market Indicators

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1 A PROPOSAL FOR CHARTBOOK Market Indicators DECEMBER 2016

For more information, contact: Janlo de los Reyes Manager Research and Consultancy janlo.delosreyes@ap.cushwake.

2 For more information, contact: Janlo de los Reyes Manager Research and Consultancy Leo De Leon Senior Analyst Research and Consultancy Cushman & Wakefield Philippines 9/F Ecotower 32nd Street corner 9 th Avenue, Bonifacio Global City Taguig City, Metro Manila 1634 Philippines Cushman & Wakefield P a g e 1

3 Summary MACROECONOMY The Philippine economy surpassed expert projections and grew by 7.1% in the third quarter of The service sector continues to be the largest contributor to growth, while the industrial and agricultural sectors experienced a resurgence, improving their year-on-year (YoY) growth figures to 8.6% and 2.9%, respectively. On the expenditure side, capital formation grew by a robust 20.0%. Inflation remains largely in check, within the Bangko Sentral ng Pilipinas (BSP) targeted 2-4% range. The Philippine peso continues its depreciation against other currencies, which is something to monitor in the coming year, while gross international reserves (GIR) have dropped slightly to US$ 85.1 billion. EQUITY The PSEi peaked in July, breaching the 8,000-mark within that month, but has since been on the decline, closing at 7,404.8 at the end of October. Investors continue to observe the short-term and long-term effects of the policy direction of the Philippines new administration, weighing these with the impact of other major global events. Investment agencies were still able to attract PHP 40.4 billion in approved foreign investments in the second quarter, besting the amount raised in the same period in 2015 by 11.5%. DEBT As of the end of September 2016, total bank lending amounted to PHP 6.1 trillion, while real estate exposure rose to PHP 1.4 trillion. Despite the rise in loans, the nonperforming loans (NPL) ratio has decreased to 1.6. Interest rates remain steady, with the overnight repo rate set at 3%, and the overnight deposit and lending rates fixed at 2.5% and 3.5%, respectively. The BSP will continue to monitor both local and global economic activity, as the short-run and long-run impact of a number of events in the year (the Brexit vote, the Trump US election win, new Philippine foreign policy direction, among others) are still uncertain. BUSINESS Firms expressed greater concern regarding the macroeconomy, resulting in a sharp fall in expectations (39.8%) in the final quarter of 2016 coming from a more optimistic third quarter (45.4%). Risk factors such as the foreign policy direction and economic reforms of the new administration, and weaker global demand, to name a few, affected both outlooks on the current and future quarters. Meanwhile, general wholesale price and producer price indices have dropped slightly as of August 2016, which should also benefit business owners. CONSUMER Household consumption improved in the third quarter of 2016 to 7.3% growth YoY compared to 6.1% in the third quarter of Healthy spending in the areas of transport, recreation and culture, restaurants and hotels, and miscellaneous goods and services helped buoy growth. Consumer confidence became positive in the third quarter at 2.5%, a first since the creation of the Consumer Expectations Survey (CES) in The shift was due in large part to the perceived improvement in peace and order, optimism for the new administration, availability of more jobs, and steady prices. Consumer outlook also improved due to similar factors. Auto sales continue to grow; the year-to-date (YTD) growth in October 2016 was recorded at 24.5%. The growth of remittances from January to September 2016 is also positive at 4.0% YoY. Cushman & Wakefield P a g e 2

4 TABLE OF FIGURES FIGURE 1.1 QUARTERLY GDP INDEX (MAR 1981 = 100)... 6 FIGURE 1.2 QUARTERLY GDP (IN PHP MILLIONS)... 6 FIGURE 1.3 QUARTERLY GDP INDEX: INCOME BY SECTOR (MAR 1981 = 100)... 6 FIGURE 1.4 QUARTERLY GDP: INCOME BY SECTOR (IN PHP MILLIONS)... 7 FIGURE 1.5 GDP COMPONENTS INDEX: GROWTH OF SELECTED INDUSTRIES... 7 FIGURE 1.6 GDP COMPONENTS: SELECTED INDUSTRIES, % OF GDP... 7 FIGURE 1.7 INFLATION RATE: HEADLINE AND CORE... 8 FIGURE 1.8 INFLATION RATE: NCR AND AONCR... 8 FIGURE 1.9 CROSS RATES WITH SELECTED CURRENCIES (PHP PER FOREIGN CURRENCY; JAN 2002 = 100)... 8 FIGURE 1.10 GROSS INTERNATIONAL RESERVES INDEX (JAN 2000 = 100)... 9 FIGURE 1.11 GROSS INTERNATIONAL RESERVES (IN USD MILLIONS)... 9 FIGURE 2.1 PHILIPPINE STOCK EXCHANGE INDICES (JAN 2006 = 100) FIGURE 2.2 PHILIPPINE STOCK MARKET CAPITALIZATION FIGURE 2.3 PSEI HISTORICAL PRICE-TO-EARNINGS RATIO FIGURE 2.4 TOTAL PSEI CAPITALIZATION-TO-GDP RATIO FIGURE 2.5 NET FOREIGN PORTFOLIO INVESTMENTS INDEX (JAN 1999 = 100) FIGURE 2.6 APPROVED FOREIGN DIRECT INVESTMENTS (IN PHP MILLIONS) FIGURE 3.1 SELECTED BSP INTEREST RATES FIGURE 3.2 SELECTED BANK INTEREST RATES FIGURE 3.3 BANKS OUTSTANDING LOANS INDEX (SEPT 2008 = 100) FIGURE 3.4 BANKS OUTSTANDING LOANS (IN PHP MILLIONS) FIGURE 3.5 REAL ESTATE EXPOSURE (MAR 2013 = 100) FIGURE 3.6 REAL ESTATE LOANS (IN PHP BILLIONS) Cushman & Wakefield P a g e 3

5 FIGURE 3.7 REAL ESTATE INVESTMENTS (IN PHP BILLIONS) FIGURE 3.8 NON-PERFORMING LOANS INDEX (JAN 2010 = 100) FIGURE 3.9 NON-PERFORMING LOANS VS. TOTAL OUTSTANDING LOANS (IN PHP MILLIONS) FIGURE 3.10 INTEREST RATE SPREAD: 2-YEAR VS. 10-YEAR TREASURY BILLS (IN BPS) FIGURE 4.1 BUSINESS EXPECTATIONS: CURRENT QUARTER FIGURE 4.2 BUSINESS EXPECTATIONS: NEXT QUARTER FIGURE 4.3 INDUSTRY EXPECTATIONS: CURRENT QUARTER FIGURE 4.4 INDUSTRY EXPECTATIONS: NEXT QUARTER FIGURE 4.5 BUSINESS CONSTRAINTS FIGURE 4.6 PRODUCER PRICE INDEX (2000 = 100) FIGURE 4.7 WHOLESALE PRICE INDEX (1998 = 100) FIGURE 4.8 TOURISTS BY REGION OF ORIGIN INDEX (1996 = 100) FIGURE 4.9 TOURISTS BY REGION OF ORIGIN FIGURE 5.1 CONSUMER EXPECTATIONS: CURRENT QUARTER FIGURE 5.2 CONSUMER EXPECTATIONS SURVEY: NEXT QUARTER FIGURE 5.3 CONSUMER EXPECTATIONS: NEXT YEAR FIGURE 5.4 HOUSEHOLDS THAT CONSIDER CURRENT QUARTER AS GOOD TIME TO BUY FIGURE 5.5 BUYING INTENTIONS WITHIN A YEAR FIGURE 5.6 CONSUMER PRICE INDEX (2006 = 100) FIGURE 5.7 RETAIL PRICE INDEX (2000 = 100) FIGURE 5.8 UNEMPLOYMENT RATE FIGURE 5.9 CAR SALES INDEX (JAN 2006 = 100) FIGURE 5.10 MONTHLY CAR SALES (UNITS SOLD) FIGURE 5.11 OF REMITTANCES INDEX (JAN 2008 = 100) FIGURE 5.12 OF REMITTANCES BY SOURCE (IN USD THOUSANDS) Cushman & Wakefield P a g e 4

6 FIGURE 6.1 NEW CONSTRUCTION PROJECTS INDEX (MAR 2001 = 100) FIGURE 6.2 NEW CONSTRUCTION PROJECTS FIGURE 6.3 CONSTRUCTION VALUES INDEX (MAR 2001 = 100) FIGURE 6.4 CONSTRUCTION VALUES (IN PHP THOUSANDS) FIGURE 6.5 AVERAGE VALUE PER PROJECT INDEX (MAR 2001 = 100) FIGURE 6.6 RESIDENTIAL REAL ESTATE PRICE INDEX (RREPI) HIGHLIGHTS FIGURE 6.7 RREPI SINGLE DETACHED/ATTACHED HOUSE PRICE INDEX FIGURE 6.8 RREPI DUPLEX PRICE INDEX FIGURE 6.9 RREPI TOWNHOUSE PRICE INDEX FIGURE 6.10 RREPI CONDOMINIUM UNIT PRICE INDEX FIGURE 6.11 CONSTRUCTION MATERIALS WHOLESALE PRICE INDEX (2000 = 100) Cushman & Wakefield P a g e 5

Macroeconomic Environment The Philippine economy bested many of its regional counterparts like Vietnam, Indonesia, Malaysia, and China, posting a GDP growth rate of 7.

Growing imports has increased its share of GDP to 63.8% from 59.8% in the third quarter of 2015. FIGURE 1.

7 Macroeconomic Environment The Philippine economy bested many of its regional counterparts like Vietnam, Indonesia, Malaysia, and China, posting a GDP growth rate of 7.1% YoY, with capital formation growing by 20.0% YoY. FIGURE 1.1 QUARTERLY GDP INDEX (MAR 1981 = 100) Household expenditure still comprises the lion s share of total GDP at 68.3%. Growing imports has increased its share of GDP to 63.8% from 59.8% in the third quarter of FIGURE 1.2 QUARTERLY GDP (IN PHP MILLIONS) On the production side, agriculture growth in the third quarter of 2016 became positive for the first time since the first quarter of 2015, moving up to 2.9% YoY. The industry sector also performed better than in the previous quarter, posting a growth rate of 8.6% YoY. FIGURE 1.3 QUARTERLY GDP INDEX: INCOME BY SECTOR (MAR 1981 = 100) Cushman & Wakefield P a g e 6

The service sector leads all production side determinants of GDP with a share of 58.9%, while the share industry sector increased slightly to 32.9% from 32.4% in the same quarter last year.

5% YoY, helping Construction and Real Estate Renting and Business Activities to grow by 11.0% YoY. FIGURE 1.

8 The service sector leads all production side determinants of GDP with a share of 58.9%, while the share industry sector increased slightly to 32.9% from 32.4% in the same quarter last year. Meanwhile, the share of the agriculture sector fell to 8.2% from 8.5% last year. FIGURE 1.4 QUARTERLY GDP: INCOME BY SECTOR (IN PHP MILLIONS) Construction in the third quarter expanded by 15.5% YoY, helping Construction and Real Estate Renting and Business Activities to grow by 11.0% YoY. FIGURE 1.5 GDP COMPONENTS INDEX: GROWTH OF SELECTED INDUSTRIES The share of the Construction and Real Estate Activities continued its upward trend, now taking an 18.7% share of total GDP, as opposed to 18.0% a year ago. Manufacturing is still the biggest contributor to GDP at 21.9%. FIGURE 1.6 GDP COMPONENTS: SELECTED INDUSTRIES, % OF GDP Cushman & Wakefield P a g e 7

As of October 2016, both headline and core inflation were measured at 2.

7 INFLATION RATE: HEADLINE AND CORE The rise of prices in areas outside of the National Capital Region (AONCR) continues to outpace that of the National

8 INFLATION RATE: NCR AND AONCR The Philippine peso broke the PHP 48.0-mark in terms of period averages as of October 2016 against the US Dollar.

9 As of October 2016, both headline and core inflation were measured at 2.3%, as prices continue their upward trajectory, in stark contrast to the declining trend of inflation in FIGURE 1.7 INFLATION RATE: HEADLINE AND CORE The rise of prices in areas outside of the National Capital Region (AONCR) continues to outpace that of the National Capital Region (NCR), with the former registering an increase of 2.4% YoY compared to a 2.1% YoY growth of the latter. FIGURE 1.8 INFLATION RATE: NCR AND AONCR The Philippine peso broke the PHP 48.0-mark in terms of period averages as of October 2016 against the US Dollar. Some experts are projecting that the strengthening of the dollar is likely to continue into next year, which should bode well for overseas Filipino (OF) remittances and the BPO sector. FIGURE 1.9 CROSS RATES WITH SELECTED CURRENCIES (PHP PER FOREIGN CURRENCY; JAN 2002 = 100) Cushman & Wakefield P a g e 8

GIR took a small dip to a revised amount of US$ 85.

Outflows were offset by the reclassification of the Chinese Renminbi-denominated accounts from non-reserve

10 GROSS INTERNATIONAL RESERVES INDEX (JAN 2000 = 100) Foreign investments still comprise majority of total

10 GIR took a small dip to a revised amount of US$ 85.1 billion, owing to the depreciation of gold, and other foreign exchange operations conducted by the BSP. Outflows were offset by the reclassification of the Chinese Renminbi-denominated accounts from non-reserve to reserve to prepare for increased economic activity with China. FIGURE 1.10 GROSS INTERNATIONAL RESERVES INDEX (JAN 2000 = 100) Foreign investments still comprise majority of total GIR as of October 2016 at 84.2%. Foreign exchange has improved its position to 4.4% from 2.9% in September this year. FIGURE 1.11 GROSS INTERNATIONAL RESERVES (IN USD MILLIONS) Cushman & Wakefield P a g e 9

11 Equity Environment The PSEi closed at 7,404.8 at the end of October 2016, resulting in a three-month decline, considering end-of-month PSEi values. Experts have reported that jitters on the US Presidential Elections and the Federal Reserve s policy setting are among the major reasons for the recent decrease. FIGURE 12.1 PHILIPPINE STOCK EXCHANGE INDICES (JAN 2006 = 100) Total Market Capitalization also fell to PHP 14.7 trillion as of October 2016, from a high of PHP 15.4 trillion in July All indices fell in capitalization value in that same time frame except for Mining and Oil. FIGURE 13.2 PHILIPPINE STOCK MARKET CAPITALIZATION Cushman & Wakefield P a g e 10

The PSEi s price-to-earnings ratio remains unchanged at 19.80x as of September month-end.

to 767.0% as of the end of the third quarter of 2016.

reported net foreign portfolio investments having an inflow of US$ 367 million, making the

12 The PSEi s price-to-earnings ratio remains unchanged at 19.80x as of September month-end. FIGURE 143 PSEI HISTORICAL PRICE-TO-EARNINGS RATIO The PSEi capitalization to GDP ratio rose to 767.0% as of the end of the third quarter of FIGURE 15 TOTAL PSEI CAPITALIZATION-TO-GDP RATIO As of the second quarter of 2016, BSP reported net foreign portfolio investments having an inflow of US$ 367 million, making the net YTD amount an outflow of US$ 591 million. FIGURE 16 NET FOREIGN PORTFOLIO INVESTMENTS INDEX (JAN 1999 = 100) Cushman & Wakefield P a g e 11

Approved foreign investments (FI) from the various government investment agencies generated PHP 40.

This is due to a sizable increase in investments from the Board of Investments (PHP 21.4 billion), almost doubling the amount generated in Q2 2015.

and Overnight Lending Facility (OLF) rates as the floor and ceiling, with the Key Policy Rate in between. The key policy rate is still 3.0%, with the corridor set at 2.

13 Approved foreign investments (FI) from the various government investment agencies generated PHP 40.4 billion worth of pledges in the second quarter of 2016, registering growth of 11.5% YoY and 53.9% QoQ. This is due to a sizable increase in investments from the Board of Investments (PHP 21.4 billion), almost doubling the amount generated in Q FIGURE 17 APPROVED FOREIGN DIRECT INVESTMENTS (IN PHP MILLIONS) The BSP switched to an interest rate corridor (IRC) system, using the Overnight Deposit Auction Facility (ODF) and Overnight Lending Facility (OLF) rates as the floor and ceiling, with the Key Policy Rate in between. The key policy rate is still 3.0%, with the corridor set at 2.5% for the ODF and 3.5% for the OLF. FIGURE 18 SELECTED BSP INTEREST RATES The Bank Average Lending Rate as of September has dropped to 5.5%, the second-lowest average for the year. Short-term and longterm time deposit rates remain relatively steady as of October, at 1.5% and 3.0%, respectively. FIGURE 19 SELECTED BANK INTEREST RATES Cushman & Wakefield P a g e 12

The universal and commercial banking systems loans grew by 16.4% YoY to PHP 5.9 trillion in September 2016. Construction and real estate-related activities loans dipped slightly, growing from 21.

FIGURE 20 BANKS OUTSTANDING LOANS INDEX (SEPT 2008 = 100) Construction and real estaterelated activities increased their share of outstanding loans to 21.

14 The universal and commercial banking systems loans grew by 16.4% YoY to PHP 5.9 trillion in September Construction and real estate-related activities loans dipped slightly, growing from 21.4% YoY in September 2015 to 19.5% YoY in September FIGURE 20 BANKS OUTSTANDING LOANS INDEX (SEPT 2008 = 100) Construction and real estaterelated activities increased their share of outstanding loans to 21.9% in September 2016, an increase of 34 basis points (bps) from a year before. FIGURE 21 BANKS OUTSTANDING LOANS (IN PHP MILLIONS) Total real estate loans (REL) amounted to PHP 1.4 trillion at the end of the second quarter of 2016, growing by 18.1% YoY. This was lower than the 25.8% YoY growth posted in the same period last year. FIGURE 22 REAL ESTATE EXPOSURE (MAR 2013 = 100) Cushman & Wakefield P a g e 13

Commercial REL still make up the bulk of total REL at almost PHP 908.0 billion, but growth has slowed down in recent quarters (average QoQ growth of 2.7% in the first half of 2016).

15 Commercial REL still make up the bulk of total REL at almost PHP billion, but growth has slowed down in recent quarters (average QoQ growth of 2.7% in the first half of 2016). Residential REL, at PHP billion, has begun to pick up slightly after a period of sluggish growth from September 2015 to March FIGURE 23 REAL ESTATE LOANS (IN PHP BILLIONS) Real Estate Investments (REI), in turn, have been growing at an aggressive pace, hitting 27.8% YoY growth in the second quarter of 2016, amounting to PHP billion. QoQ growth of REI was 4.8%. FIGURE 24 REAL ESTATE INVESTMENTS (IN PHP BILLIONS) Total loans for the entire banking system grew by 17.2% YoY to PHP 6.1 trillion pesos as of September this year. In spite of this, the growth of nonperforming loans has been more subdued, at just 3.3% YoY. FIGURE 25 NON-PERFORMING LOANS INDEX (JAN 2010 = 100) Cushman & Wakefield P a g e 14

The gross NPL-to-total loans continues to drop, measured at 1.6% share as of September this year, as opposed to 1.8% last year. FIGURE 26 NON-PERFORMING LOANS VS.

16 The gross NPL-to-total loans continues to drop, measured at 1.6% share as of September this year, as opposed to 1.8% last year. FIGURE 26 NON-PERFORMING LOANS VS. TOTAL OUTSTANDING LOANS (IN PHP MILLIONS) The interest rate spread between 2-year and 10-year treasury bills narrowed to just 75 basis points as of the end of October 2016, which may be indicative of how investors view the short-term and long-term economic conditions of the Philippines. FIGURE 27 INTEREST RATE SPREAD: 2-YEAR VS. 10-YEAR TREASURY BILLS (IN BPS) Cushman & Wakefield P a g e 15

Business Environment For two straight quarters, businesses have been less optimistic about macroeconomic conditions, with survey shares of 45.4% in Q3 and 39.8% in Q4, relative to the 2016 high of 48.

A number of respondents cited the uncertain direction of foreign policies and economic reforms, slow global demand, and the depreciation of the Philippine peso as some of the reasons for the unusual

17 Business Environment For two straight quarters, businesses have been less optimistic about macroeconomic conditions, with survey shares of 45.4% in Q3 and 39.8% in Q4, relative to the 2016 high of 48.7% in the second quarter of the year. A number of respondents cited the uncertain direction of foreign policies and economic reforms, slow global demand, and the depreciation of the Philippine peso as some of the reasons for the unusual drop in the fourth quarter. FIGURE 28 BUSINESS EXPECTATIONS: CURRENT QUARTER As was expected, a drop in optimism is seen for the first quarter of 2017, with an overall score of 34.5%. This is due to various reasons such as the slowdown of business activities following the holiday season, uncertainty on foreign policies and economic reforms, and the waitand-see attitude of investors for the ascent of US President-elect Donald Trump to power, which may affect interest rates in the Philippines. FIGURE 29 BUSINESS EXPECTATIONS: NEXT QUARTER Cushman & Wakefield P a g e 16

For the final quarter of 2016, only hotels and restaurants, and transportation, saw increases in their survey scores.

only construction improving in its survey score, from 39.6% in Q3 to 55.3% in Q4.

18 For the final quarter of 2016, only hotels and restaurants, and transportation, saw increases in their survey scores. Hotels and restaurants business outlook improved from 27.6% in Q3 to 46.0% in Q4. Transportation improved marginally from 46.1% in Q3 to 50.3% in Q4. FIGURE 30 INDUSTRY EXPECTATIONS: CURRENT QUARTER Industry expectations for the first quarter of 2017 did not fare much better, with only construction improving in its survey score, from 39.6% in Q3 to 55.3% in Q4. FIGURE 31 INDUSTRY EXPECTATIONS: NEXT QUARTER Most businesses are weary of market competition, according to survey results, as 52.6% of respondent businesses mentioned it as a factor for the final quarter of the year. Insufficient demand came second with a score of 24.8%. FIGURE 32 BUSINESS CONSTRAINTS Cushman & Wakefield P a g e 17

The Producer Price Index (PPI) declined slightly from 133.5 to 132.9 in August 2016, though this marks the lowest PPI score registered since 2004.

FIGURE 33 PRODUCER PRICE INDEX (2000 = 100) The General Wholesale Price Index (GWPI), in turn, also fell from 226.9 in July to 226.

FIGURE 34 WHOLESALE PRICE INDEX (1998 = 100) From January to August 2016, roughly 4.

19 The Producer Price Index (PPI) declined slightly from to in August 2016, though this marks the lowest PPI score registered since The drop was caused by notable decreases in the prices of basic metals, nonferrous metals, and fabricated metals. FIGURE 33 PRODUCER PRICE INDEX (2000 = 100) The General Wholesale Price Index (GWPI), in turn, also fell from in July to in August, as prices for Crude Materials (except fuel) and Mineral Fuel, Lubricants, and Related Materials fell significantly. FIGURE 34 WHOLESALE PRICE INDEX (1998 = 100) From January to August 2016, roughly 4.0 international visitors have come into the Philippines, topping the total of 3.6 million international arrivals in the same period last year. This translates to a growth rate of 12.6% YoY, and implies that the country is on pace to once again surpass its previous year s total. FIGURE 35 TOURISTS BY REGION OF ORIGIN INDEX (1996 = 100) Cushman & Wakefield P a g e 18

20 East Asia persists as the top tourist market of the country with a share of 51.3% of total tourists from January to August this year. This is driven by the high number of Korean visitors, who accounted for more than 976,000 arrivals so far this year. FIGURE 36 TOURISTS BY REGION OF ORIGIN Cushman & Wakefield P a g e 19

21 Consumer Environment Consumer expectations for the third quarter of 2016 ventured into optimistic territory, with a score of 2.5%. This positive shift is rooted in the perceived improvement of order and peace, availability of more jobs, stable prices, potential salary increases, and the beginning of the new administration and its war on drugs, among other reasons. NCR respondents were far more positive, with a score of 7.3% compared to AONCR respondents at 1.8%. FIGURE 37 CONSUMER EXPECTATIONS: CURRENT QUARTER The improved consumer sentiment positively affects outlooks on the next quarter, where households index scores leaped to new highs of 27.3% (overall), 28.5% (NCR), and 27.1% (AONCR). In addition to the increased spending from the holiday season, the reasons for the higher scores are similar to the reasons given for their views on the current quarter. FIGURE 38 CONSUMER EXPECTATIONS SURVEY: NEXT QUARTER Cushman & Wakefield P a g e 20

Households have similarly high hopes for the year, as they expect many of the improvements in the economic and political environment

2% in Q3 implies a stable outlook on spending in the current quarter.

FIGURE 40 HOUSEHOLDS THAT CONSIDER CURRENT QUARTER AS GOOD TIME TO BUY Big-ticket item spending is expected to improve in the next

22 Households have similarly high hopes for the year, as they expect many of the improvements in the economic and political environment to continue well into FIGURE 39 CONSUMER EXPECTATIONS: NEXT YEAR A marginal decline from 28.9% in Q2 to 28.2% in Q3 implies a stable outlook on spending in the current quarter. Only consumer durables reflected a significant decrease in index score from 30.9% to 28.5%. FIGURE 40 HOUSEHOLDS THAT CONSIDER CURRENT QUARTER AS GOOD TIME TO BUY Big-ticket item spending is expected to improve in the next year as scores for consumer durables, motor vehicles, and house and lot all increased relative to the second quarter (third quarter scores are 15.3%, 7.2%, and 10.3%, respectively). FIGURE 41 BUYING INTENTIONS WITHIN A YEAR Cushman & Wakefield P a g e 21

Consumer Price Index (CPI) rose further to 144.9, as prices for a number of goods went up. Alcoholic beverages and tobacco have the highest YoY growth rate at 6.

1 in September, thanks in part to 1.5% month-on-month (MoM) increase in food prices and a 1.8% rise in mineral fuel, lubricant, and related materials prices.

23 Consumer Price Index (CPI) rose further to 144.9, as prices for a number of goods went up. Alcoholic beverages and tobacco have the highest YoY growth rate at 6.1% as of October FIGURE 42 CONSUMER PRICE INDEX (2006 = 100) On the Retail Price Index (RPI), the index moved up once again from in August to in September, thanks in part to 1.5% month-on-month (MoM) increase in food prices and a 1.8% rise in mineral fuel, lubricant, and related materials prices. FIGURE 43 RETAIL PRICE INDEX (2000 = 100) As of July 2016, the unemployment rate has hit an 11-year low at 5.4%, meaning approximately 41.0 million Filipinos are currently employed. FIGURE 44 UNEMPLOYMENT RATE Cushman & Wakefield P a g e 22

Car sales remain robust up to October 2016, with the YTD total of 292,508 vehicles translating to a 24.

9% of the 31,132 vehicles sold were passenger cars, while 63.

types. FIGURE 46 MONTHLY CAR SALES (UNITS SOLD) OF remittances in September 2016 improved by 6.7% YoY to US$ 2.

24 Car sales remain robust up to October 2016, with the YTD total of 292,508 vehicles translating to a 24.5% YoY growth rate. FIGURE 45 CAR SALES INDEX (JAN 2006 = 100) For the month of October, 36.9% of the 31,132 vehicles sold were passenger cars, while 63.1% were commercial vehicles, which is fairly consistent with the historical sales performance of these vehicle types. FIGURE 46 MONTHLY CAR SALES (UNITS SOLD) OF remittances in September 2016 improved by 6.7% YoY to US$ 2.4 billion. Remittances from key countries continue to be stable, resulting in an overall YTD growth rate of 4.0% as of September. FIGURE 47 OF REMITTANCES INDEX (JAN 2008 = 100) Cushman & Wakefield P a g e 23

The United States (US) is still the top contributor of remittances, accounting for 33.9% of the total for September. The Middle East followed suit at 28.7%.

25 The United States (US) is still the top contributor of remittances, accounting for 33.9% of the total for September. The Middle East followed suit at 28.7%. As recent as 2014, the gap was wider, at 30.1% for the US and 21.7% for the Middles East. The narrowing gap between these two major sources of remittances emphasizes the growing importance of OFs employed in the Middle East. FIGURE 48 OF REMITTANCES BY SOURCE (IN USD THOUSANDS) Cushman & Wakefield P a g e 24

Real Estate Environment For the second quarter of 2016, total number of construction projects amounted

5% improvement on the total for the first half of 2015. Total number of projects grew by 20.9% QoQ.

comprised of 30,366 residential projects (76.6% of total), 4,548 commercial projects (11.

26 Real Estate Environment For the second quarter of 2016, total number of construction projects amounted to 39,635, while the total number of projects for the first half of 2016 was 72,414 projects, a 15.5% improvement on the total for the first half of Total number of projects grew by 20.9% QoQ. FIGURE 49 NEW CONSTRUCTION PROJECTS INDEX (MAR 2001 = 100) Projects for the second quarter are comprised of 30,366 residential projects (76.6% of total), 4,548 commercial projects (11.5%), and 4,721 additions, alterations, and repair projects (11.9%). FIGURE 50 NEW CONSTRUCTION PROJECTS Cushman & Wakefield P a g e 25

Overall construction values increased by 48.0%% YoY. Nonresidential project values rose by 69.

FIGURE 51 CONSTRUCTION VALUES INDEX (MAR 2001 = 100) In September 2016, construction values of non-residential projects eclipsed

Residential project values made up 43.4% of all projects.

27 Overall construction values increased by 48.0%% YoY. Nonresidential project values rose by 69.0% YoY, and residential projects shot up by 38.3% YoY. QoQ growth in overall value of projects was 56.7%. FIGURE 51 CONSTRUCTION VALUES INDEX (MAR 2001 = 100) In September 2016, construction values of non-residential projects eclipsed residential projects slightly, increasing non-residential value share to 50.2% of all construction projects. Residential project values made up 43.4% of all projects. FIGURE 52 CONSTRUCTION VALUES (IN PHP THOUSANDS) Quarter-on-quarter (QoQ) average value per project decelerated for residential projects to 15.6%, but is still trending upwards. Nonresidential QoQ average value per projects skyrocketed by 51.5%. FIGURE 53 AVERAGE VALUE PER PROJECT INDEX (MAR 2001 = 100) Cushman & Wakefield P a g e 26

Based on the latest Residential Real Estate Price Index (RREPI) by the BSP (second quarter of 2016), overall residential

FIGURE 54 RESIDENTIAL REAL ESTATE PRICE INDEX (RREPI) HIGHLIGHTS For single detached/attached house prices, overall growth

FIGURE 55 RREPI SINGLE DETACHED/ATTACHED HOUSE PRICE INDEX Duplex prices are less aligned for the NCR and AONCR, as YoY

28 Based on the latest Residential Real Estate Price Index (RREPI) by the BSP (second quarter of 2016), overall residential property prices shot up once more by 11.3% YoY, driven largely by growth in AONCR prices, which rose by 18.4% YoY. FIGURE 54 RESIDENTIAL REAL ESTATE PRICE INDEX (RREPI) HIGHLIGHTS For single detached/attached house prices, overall growth was measured at 18.6% YoY, NCR prices rising by 13.8%, and AONCR prices rising by 19.3% YoY. FIGURE 55 RREPI SINGLE DETACHED/ATTACHED HOUSE PRICE INDEX Duplex prices are less aligned for the NCR and AONCR, as YoY growth was just 0.6% overall. NCR prices decreased by 22.5% YoY, while AONCR prices rose by 24.7%. FIGURE 56 RREPI DUPLEX PRICE INDEX Cushman & Wakefield P a g e 27

2% YoY, and condos outside of the metro growing by a meagre 0.1% YoY.

29 Townhouse prices growth was more robust, as the overall rate of 14.7% YoY was supported by 9.2% YoY growth in the NCR, and 24.3% YoY growth in AONCR. FIGURE 57 RREPI TOWNHOUSE PRICE INDEX As for condominium units, overall YoY growth was -0.1%, the contraction resulting from condos in NCR falling by 0.2% YoY, and condos outside of the metro growing by a meagre 0.1% YoY. FIGURE 58 RREPI CONDOMINIUM UNIT PRICE INDEX Finally, the Construction Materials Wholesale Price Index (CMWPI) rose to in October The most significant price increase came from fuel and lubricants, which posted a QoQ growth of 4.6%. FIGURE 59 CONSTRUCTION MATERIALS WHOLESALE PRICE INDEX (2000 = 100) Cushman & Wakefield P a g e 28

30 Summary Table FIGURE NAME FREQUENCY LAST UPDATE SOURCE MACROECONOMIC ENVIRONMENT 1.1 Quarterly GDP Index Quarterly September 2016 Philippine Statistics Authority (PSA), Cushman & Wakefield calculations 1.2 Quarterly GDP Quarterly September 2016 PSA 1.3 Quarterly GDP Index: Income by Sector Quarterly September 2016 PSA, Cushman & Wakefield calculations 1.4 Quarterly GDP: Income by Sector Quarterly September 2016 PSA 1.5 GDP Components Index: Growth of Selected Industries Quarterly September 2016 PSA, Cushman & Wakefield calculations GDP Components: Selected Industries, % of GDP Inflation Rate: Headline and Core Inflation Rate: NCR and AONCR Quarterly September 2016 PSA Monthly October 2016 Bangko Sentral ng Pilipinas (BSP) Monthly October 2016 BSP, PSA 1.9 Cross Rates with Selected Currencies Index Monthly October 2016 BSP, Cushman & Wakefield calculations 1.10 Gross International Reserves Index Monthly October 2016 BSP, Cushman & Wakefield calculations 1.11 Gross International Reserves Monthly October 2016 BSP EQUITY ENVIRONMENT 2.1 Philippine Stock Exchange Indices Monthly October 2016 Philippine Stock Exchange (PSE), BSP, Cushman & Wakefield calculations Philippine Stock Market Capitalization PSEi Historical Price-to- Earnings Ratio Monthly October 2016 BSP Monthly September 2016 BSP 2.4 Total PSEi Capitalization-to- GDP Ratio Quarterly September 2016 PSE, BSP, Cushman & Wakefield calculations 2.5 Net Foreign Portfolio Investments Index Annual / Year-to-date June 2016 BSP, Cushman & Wakefield calculations 2.6 Approved Foreign Direct Investments Quarterly June 2016 PSA Cushman & Wakefield P a g e 29

31 FIGURE NAME FREQUENCY LAST UPDATE SOURCE Debt Environment 3.1 Selected BSP Interest Rates Monthly October 2016 BSP 3.2 Selected Bank Interest Rates Monthly October 2016 BSP 3.3 Banks Outstanding Loans Index Monthly September 2016 BSP, Cushman & Wakefield calculations 3.4 Banks Outstanding Loans Monthly September 2016 BSP 3.5 Real Estate Exposure Index Quarterly June 2016 BSP, Cushman & Wakefield calculations 3.6 Real Estate Loans Quarterly June 2016 BSP 3.7 Real Estate Investments Monthly June 2016 BSP 3.8 Non-Performing Loans Index Monthly September 2016 BSP 3.9 Non-Performing Loans vs. Total Outstanding Loans Monthly September 2016 BSP 3.10 Interest Rate Spread: 2-Year vs. 10-Year Treasury Bills Monthly October 2016 Asia Development Bank Asian Bonds Online BUSINESS ENVIRONMENT Business Expectations: Current Quarter Business Expectations: Next Quarter Industry Expectations: Current Quarter Industry Expectations: Next Quarter Quarterly December 2016 BSP Quarterly December 2016 BSP Quarterly December 2016 BSP Quarterly December 2016 BSP 4.5 Business Constraints Quarterly December 2016 BSP 4.6 Producer Price Index Monthly August 2016 BSP, PSA 4.7 Wholesale Price Index Monthly August 2016 BSP, PSA 4.8 Tourists by Region of Origin Index Annual / Year-to-date August 2016 Department of Tourism (DOT) Philippines, PSA, Cushman & Wakefield calculations 4.9 Tourists by Region of Origin Annual / Year-to-date August 2016 DOT, PSA CONSUMER ENVIRONMENT 5.1 Consumer Expectations: Current Quarter Quarterly September 2016 BSP Cushman & Wakefield P a g e 30

32 FIGURE NAME FREQUENCY LAST UPDATE SOURCE Consumer Expectations: Next Quarter Consumer Expectations: Next Year Households that Consider Current Quarter as Good Time to Buy Buying Intentions Within a Year Quarterly September 2016 BSP Quarterly September 2016 BSP Quarterly September 2016 BSP Quarterly September 2016 BSP 5.6 Consumer Price Index Monthly September 2016 BSP 5.7 Retail Price Index Monthly September 2016 BSP, PSA 5.8 Unemployment Rate Quarterly September 2016 BSP 5.9 Car Sales Index Monthly October 2016 Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI), Cushman & Wakefield calculations 5.10 Monthly Car Sales Monthly October 2016 CAMPI 5.11 OF Remittances Index Monthly September 2016 BSP, Cushman & Wakefield calculations 5.12 OF Remittances by Source Monthly September 2016 BSP REAL ESTATE ENVIRONMENT 6.1 New Construction Projects Index Quarterly June 2016 Philippine Statistics Authority (PSA), Cushman & Wakefield calculations 6.2 New Construction Projects Quarterly June 2016 PSA 6.3 Construction Values Index Quarterly June 2016 PSA, Cushman & Wakefield calculations 6.4 Construction Values Quarterly June 2016 PSA 6.5 Average Value per Project Quarterly June 2016 PSA, Cushman & Wakefield calculations Residential Real Estate Price Index (RREPI) RREPI Single Detached/Attached House Index Quarterly June 2016 BSP Quarterly June 2016 BSP 6.8 RREPI Duplex Index Quarterly June 2016 BSP 6.9 RREPI Townhouse Index Quarterly June 2016 BSP 6.10 RREPI Condominium Unit Index Quarterly June 2016 BSP Cushman & Wakefield P a g e 31

33 FIGURE NAME FREQUENCY LAST UPDATE SOURCE 6.11 Construction Materials Wholesale Price Index Monthly April 2016 PSA NB: All data updated as of November 29, Cushman & Wakefield P a g e 32

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