EQUITY FUND. May 31, 2013

Transcription

1 EQUITY FUND The PSE index eased 0.69% in May to close at 7, points. Local stocks succumbed to profit-taking after the index hit an intra-day high of 7, points mid-month on concerns of steep valuations. The sell-off was prompted by weakness in regional markets after the US Federal Reserve hinted it would scale back on its quantitative easing following signs of recovery in the US economy. Locally, macroeconomic fundamentals remain intact with 1Q13 GDP coming in strong at 7.8%, way ahead of consensus expectations of 6%. Early in the month, credit rating agency Standard and Poor s upgraded Philippines credit rating to Investment Grade, following in the footsteps of Fitch which had upgraded the sovereign in late-march. May inflation remains benign coming in at 2.6% YoY, lower than consensus expectation of 2.8%. Year-to-date inflation stands at 3%, still within the government s 3-5% inflation target for The Bangko Sentral ng Pilipinas (BSP) kept policy rates unchanged but recently issued a circular which states that only trust accounts and unit investment trust funds will be allowed to place in Special Deposit Accounts (SDAs) effective January 1, Among the PSEi subindices, mining and gaming sectors continue to lag the index as regulatory uncertainties remain. The MSCI re-weighting which took effect last May 31 also explained some of the big moves in the index toward the end of the month. For the month, net foreign buying was recorded at P18.6bn, accounting for 53% of turnover. Further weakness is expected as foreign investors continue to pare down Emerging market assets. Given the recent run-up in local equities, investors will be tempted to lock-in some gains. We believe that any significant corrections can be viewed as an opportunity to increase exposure in equities given the country s strong economic growth trajectory. Support levels are seen at the 6,100 and 5,900 levels. 5-Apr-00 Fund Size Php 15,349,094, Net Asset Value Per Share Php Top 10 Equity Holdings Company % to Total Assets Phil Long Distance Telephone Co. 6.6% Ayala Land Inc 6.4% SM Investments Corp. 5.7% Ayala Corporation 5.1% Banco de Oro Universal Bank 4.5% Metropolitan Bank & Trust Company 3.6% Rizal Commercial Banking 3.4% Alliance Global Group Inc 3.4% DMCI Holdings Inc 3.3% JG Summit Holdings Inc 3.3%

2 BALANCED FUND The PSE index eased 0.69% in May to close at 7, points. Local stocks succumbed to profit-taking after the index hit an intra-day high of 7, points mid-month on concerns of steep valuations. The sell-off was prompted by weakness in regional markets after the US Federal Reserve hinted it would scale back on its quantitative easing following signs of recovery in the US economy. Locally, macroeconomic fundamentals remain intact with 1Q13 GDP coming in strong at 7.8%, way ahead of consensus expectations of 6%. Early in the month, credit rating agency Standard and Poor s upgraded Philippines credit rating to Investment Grade, following in the footsteps of Fitch which had upgraded the sovereign in late-march. May inflation remains benign coming in at 2.6% YoY, lower than consensus expectation of 2.8%. Year-to-date inflation stands at 3%, still within the government s 3-5% inflation target for The Bangko Sentral ng Pilipinas (BSP) kept policy rates unchanged but recently issued a circular which states that only trust accounts and unit investment trust funds will be allowed to place in Special Deposit Accounts (SDAs) effective January 1, Among the PSEi subindices, mining and gaming sectors continue to lag the index as regulatory uncertainties remain. The MSCI re-weighting which took effect last May 31 also explained some of the big moves in the index toward the end of the month. For the month, net foreign buying was recorded at P18.6bn, accounting for 53% of turnover. Likewise, peso government bonds succumbed to a massive sell down amid speculations that the US Fed would gradually reduce slowly its monthly bond purchases perhaps as early as September this year. The sudden spike in US Treasury yields prompted foreign funds to hastily dump stocks and bonds to pare down currency losses as the peso depreciated sharply to Ps42.27 at the end of the month. Further weakness is expected on bonds and equities as foreign investors continue to pare down Emerging market assets. Given the recent run-up in asset prices, investors will be tempted to lock-in some gains. We believe that any significant corrections can be viewed as an opportunity to increase exposure in equities given the country s strong growth trajectory. PSEi support levels are seen at the 6,100 and 5,900 levels. Top 5 Equity Holdings Company % to Total Assets Phil Long Distance Telephone Co. 5.1% Ayala Land Inc 5.0% SM Investments Corp. 4.4% Ayala Corporation 3.8% Banco de Oro Universal Bank 3.4% 5-Apr-00 Fund Size PHP 17,544,314, Net Asset Value Per Share Php Security Maturity Date % to Total Assets Special Savings Account 3-Jun % Treasury Notes 29-Sep % Treasury Notes 16-Dec % Special Savings Account 4-Jun % Treasury Notes 19-Jan %

3 BOND FUND Peso government bonds succumbed to a massive sell down amid speculations that the US Fed would gradually reduce slowly its monthly bond purchases perhaps as early as September this year. Markets have been gingerly anticipating a taper in the US monetary stimulus (QE) following the recent positive economic data releases. The sudden spike in US Treasury yields prompted foreign funds to hastily dump stocks and bonds to pare down currency losses as the peso depreciated sharply to Ps42.27 at the end of the month. Remarkably, the Philippines registered the highest growth in the ASEAN region with a GDP of 7.8% y-o-y for 1Q2013, following the revised GDP of 6.8% growth for full-year The 1st quarter print was stronger than expected and surpassed the Bloomberg market call of 6.1%. Further, Standard and Poor s (S&P) raised the Philippines sovereign credit rating to investment grade, from BBB- from BB+. The upgrade came in the wake of the Fitch s investment upgrade last March. However, the Moody s rating for the Philippines remains at a notch below investment grade. Finally, the Bangko Sentral announced that it would restrict participation of trust entities in its Special Deposit Account (SDA) facility. SDA placements under trust investment management accounts (IMA) shall be reduced by 30% on or before July this year, with the balance fully winded down by November Return on investments (ROI) was lower at 15.77% y-o-y from 16.64% in April. Further, the NAVPS was lower at Ps compared to Ps for the same period. Security Maturity Date % to Total Assets Treasury Notes 16-Dec % Treasury Notes 29-Nov % Treasury Notes 29-Sep % Treasury Notes 26-Jan % Treasury Notes 24-Oct % 5-Apr-00 Fund Size PHP 6,479,237, Net Asset Value Per Share Php Inflationary pressures should remain subdued just as headline inflation eased off to 2.6% in May. Against this backdrop, the Bangko Sentral will likely keep its policy rates unchanged on the back of robust growth performance. On the other hand, the Bangko Sentral could further slash the Special Deposit Account (SDA) rate in the next Monetary Board meeting in June to accelerate the planned wind down of the SDA facility before yearend. With close to Ps1.9 trillion of SDA funds expected to flood the system, the Bureau of Treasury is planning to issue Retail Treasury Bonds (RTBs) to mop up excess liquidity and keep inflationary pressures in check.

4 GS FUND Peso government bonds succumbed to a massive sell down amid speculations that the US Fed would gradually reduce slowly its monthly bond purchases perhaps as early as September this year. Markets have been gingerly anticipating a taper in the US monetary stimulus (QE) following the recent positive economic data releases. The sudden spike in US Treasury yields prompted foreign funds to hastily dump stocks and bonds to pare down currency losses as the peso depreciated sharply to Ps42.27 at the end of the month. Remarkably, the Philippines registered the highest growth in the ASEAN region with a GDP of 7.8% y-o-y for 1Q2013, following the revised GDP of 6.8% growth for full-year The 1st quarter print was stronger than expected and surpassed the Bloomberg market call of 6.1%. Further, Standard and Poor s (S&P) raised the Philippines sovereign credit rating to investment grade, from BBB- from BB+. The upgrade came in the wake of the Fitch s investment upgrade last March. However, the Moody s rating for the Philippines remains at a notch below investment grade. Finally, the Bangko Sentral announced that it would restrict participation of trust entities in its Special Deposit Account (SDA) facility. SDA placements under trust investment management accounts (IMA) shall be reduced by 30% on or before July this year, with the balance fully winded down by November Return on investments (ROI) was lower at 14.41% y-o-y from 16.29% in April. Moreover, the NAVPS slid to Ps from Ps for the same period. Security Maturity Date % to Total Assets Treasury Notes 29-Nov % Treasury Notes 4-Oct % Treasury Notes 24-Oct % Treasury Notes 24-Apr % Treasury Notes 26-Jan % Inflationary pressures should remain subdued just as headline inflation eased off to 2.6% in May. Against this backdrop, the Bangko Sentral will likely keep its policy rates unchanged on the back of robust growth numbers. On the other hand, the Bangko Sentral could further slash the Special Deposit Account (SDA) rate in the next Monetary Board meeting in June to accelerate the planned wind down of the SDA facility before yearend. With close to Ps1.9 trillion of SDA funds expected to flood the system, the Bureau of Treasury is planning to issue Retail Treasury Bonds (RTBs) to mop up excess liquidity and keep inflationary pressures in check. 1-Mar-05 Fund Size Php 653,851, Net Asset Value Per Share Php

5 MONEY MARKET FUND The Bangko Sentral announced that it would restrict participation of trust entities in its Special Deposit Account (SDA) facility. SDA placements under trust investment management accounts (IMA) shall be reduced by 30% on or before July this year, with the balance fully winded down by November Further, the rate on the Special Deposit Accounts (SDA) could be reduced by another 50 bps in the next Monetary Board meeting in June to accelerate the planned wind down of the SDA facility before yearend. With close to Ps1.9 trillion of SDA funds expected to flood the system, the Bureau of Treasury is planning to issue Retail Treasury Bonds (RTBs) to mop up excess liquidity and keep inflationary pressures in check. Return on investment (ROI) was 0.15% y-o-y while the NAVPS closed at Ps Top Holdings Security Maturity Date % to Total Assets Special Savings Account 3-Jun % Special Savings Account 7-Jun % 1-Jul-04 Fund Size Php 191,293, Net Asset Value Per Share Php

6 DOLLAR ADVANTAGE FUND Global equities eased 0.60% in May after the US Fed signaled that it may start tapering its quantitative easing (QE) as early as September The 10yr US Treasury increased by 0.46% to 2.129% in May. Japan (-2.3%) corrected the most after rising 36% during the first four months of the year as investors locked-in gains from the recent rally. Recent data coming out of US and Europe still show weakness in the jobs market. May non-farm payroll was less than 200K, a threshold when breached will indicate that the economy will have sustainable growth. US unemployment rate crept up to 7.6% in May from 7.5% in April, and still above the US Fed s target of 6.5% before US policy rates may rise. In Europe, unemployment topped 12% for the region and even double for peripheral nations Greece and Spain. In Japan, investors are still on the look-out if Prime Minister Abe s three-pronged plan dubbed as Abenomics can indeed pull out the economy from decades of deflation. The plan sets an inflation target of 2% which can be achieved thru massive monetary stimulus, fiscal stimulus via deficit-financed public works spending, and a growth program to boost competitiveness. Currently, the global macro-backdrop is in a Goldilocks environment -- a state of moderate economic growth with low inflation, and allowing for a market-friendly monetary policy. Investors will continue to flock to risk assets for higher yields amid reasonable valuations. US will continue to show snippets of recovery while headwinds will persist in Europe. Asset prices will show volatility and will be largely dependent on news flow focusing on unemployment figures, inflation, and growth indicators coming out of developed markets. Top 5 Offshore MF Holdings Fund Name % to Total Assets Franklin U.S. Opportunities Fund 9.5% Morgan Stanley U.S. Advantage Fund 9.3% Templeton Global Bond A 7.5% Aberdeen Global Asia Pacific Equity Fund 7.4% PIMCO GIS Total Return Bond Fund 7.2% Security Maturity Date % Total Assets Special Savings Account 02-May % Special Savings Account 23-Oct % ROP34 23-Oct % PLDT17 06-Mar % ROP30 02-Feb % 2-Jul-02 Fund Size USD 37,367, Net Asset Value Per Share USD

7 DOLLAR ABUNDANCE FUND Emerging Market credits including ROPs reeled from a broad based sell down largely driven by the sharp spike in US treasury yields. The uptrend in US housing prices and higher consumer confidence levels reduced safe-haven purchases and propelled the US 10-year bond benchmark past the psychological 2% level and closed at 2.129% at end-may. Selling pressure was quite palpable in the longer-dated tenors of sovereign and quasi- sovereign bonds. Also, broad hints over the US Fed tapering off its monthly bond purchases that could portent an exit from monetary easing (QE3) has spooked investors into a defensive stance. There was a conspicuous change in mood by some governors of the US Fed who indicated their readiness to reduce the volume of asset purchases in the coming months, perhaps as early as September this year. Market anxiety was further exacerbated by the bleak prognosis for the Purchasing Managers Index (PMI) data from the US and China for the month of May. International credit rating agency Standard and Poor s (S&P) raised the Philippines sovereign credit rating to investment grade, from BBB- from BB+. The upgrade came in the wake of the Fitch s investment upgrade last March. However, the Moody s rating for the Philippines remains at a notch below investment grade. Finally, the Philippines registered the highest growth in the ASEAN region with a GDP of 7.8% y-o-y for 1Q2013, beating China s 7.7% GDP for the same period. The 1st quarter print was stronger than expected following the revised GDP of 6.8% for full-year 2012, and surpassed the Bloomberg market call of 6.1%. Return on investments (ROI) dropped to 2.5% y-o-y from 6.87% in April. Moreover, the NAVPS declined to US$ from US$ for the same period. Security Maturity Date % to Total Assets ROP34 23-Oct % ROP25 16-Mar % ROP30 2-Feb % ROP20 20-Jan % ROP37 13-Jan % 1-Mar-05 Fund Size USD 24,509, Net Asset Value Per Share USD Heightened market volatility can be expected as investors contemplate on improvements in US economic data and indications of the US Fed tapering its monthly bond purchases. As seen recently, the local bid could barely provide any sustained buying support due to mostly overweight positions in ROPs and the lack of any compelling themes. Markets would continue to consolidate and trade in a new range at least until more clarity on the US Fed s intentions come into view. For now, Philippine cash bonds will remain hostage from US treasury movements.