Alerts

   John Martin Luciano, CFA

The US Federal Reserve, in an inter-meeting move, announced an emergency rate cut on Tuesday of 50 bps. This is in response to a growing economic risk from the COVID-19 outbreak. This brings the US benchmark funds rate to a new target range of 1.0% to 1.25%. The Fed said that the fundamentals of the US economy remain strong. However, it believes it is the time to act as the spread of the virus has led to a material change in the growth outlook of the US economy. US markets responded in a volatile manner as stocks rallied after the announcement, but tumbled back later in the day with investors being rattled instead of comforted by the emergency rate cut.

   Adrian Alexander Yu

TEL’s innovation laboratory, Innolab, has signed a partnership agreement with artificial intelligence platform provider Senti AI to co-create more relevant solutions to meet the evolving demands of today’s businesses. Management said that the collaboration between the two would empower Philippine start-ups to reach greater scale. The company also noted that President Duterte’s Innovative Start-up Act, which was signed on April 26, 2019, supports Innolab and Senti AI’s initiatives. The implementing rules and regulations for the Start-up Act was signed last November 2019. (Source: BusinessWorld)

   Frances Rolfa Nicolas

MAC and its Chinese partner struggle to complete the post-qualification requirements for the Sangley Point International Airport project due to the corona virus outbreak, after receiving the notice of award from the Cavite provincial government last February 15. According to management, Chinese travelers from China Communications Construction Co. Ltd. (CCCC) are still unable to visit Manila. The Cavite government gave the consortium 60 days upon receipt of award to comply with all requirements before the joint venture contract can be signed. If ever there is a need for an extension, the Public-Private Partnership (PPP) committee will assess the situation and validate the consortium’s reason.

   John Martin Luciano, CFA

The IHS Markit Philippines Manufacturing PMI registered a 52.3 reading for February, the fastest pace since December 2018’s 53.2. The growth was attributable to the modest rise in output backed by sustained growth in new orders from both domestic and overseas clients. The IHS Markit noted that while COVID-19 poses a downside risk, the effects seems to be isolated to the supply side so far, as exports grew at the fastest rate in over one and a half years.

   Adrian Alexander Yu

Socioeconomic Secretary Ernesto Pernia said that the Philippine economy could take a one percentage point reduction in its 2020 GDP group if the COVID-19 outbreak persists until the end of 2020. Mr. Pernia said that the NEDA has revised its preliminary estimates of the COVID-19 outbreak and its impact to the economy from the previous 0.7 percentage point loss to GDP. The NEDA’s assessment takes into account that inbound Chinese tourists will be cut by 100% and total foreign tourist arrivals would decline by 10%. Furthermore, it also took into account that trade will drastically reduce and these will all have an indirect effect and multiplier effect to the economy.

   John Martin Luciano, CFA

BSP Governor Benjamin Diokno said that another 25bps rate cut is still possible for the year as they plan to assess anew the impact of the corona virus on the economy during the Monetary Board’s policy-setting meeting on March 19. Recall that on February 6, the Monetary Board already cut rates by 50bps as a preemptive move to address the public’s fears caused by the outbreak. The government targets GDP growth to be 6.5%-7.5% this year, following the 5.9% growth in 2019.

   John Martin Luciano, CFA

According to BSP, February 2020 inflation may have settled at the range of 2.4% to 3.2% due to lower fuel, utility and food prices. The central bank also mentioned that inflation could have been tempered by lower prices of petroleum products, electricity, rice, and other food products. Inflation in February 2019 and January 2020 was at 3.8% and 2.9%, respectively. The PSA is set to release February inflation results on March 5.

   Justin Richmond Cheng, CFA

Maintain BUY rating. We are maintaining our BUY rating on RRHI with FV estimate of Php102/sh. We continue to like RRHI given its well-diversified portfolio of retail formats. This puts the company at the forefront in benefiting from the favorable growth opportunities in the retail sector. In addition, RRHI has made good progress in integrating and rationalizing Rustan’s. Going forward, RRHI is still expected to unlock more efficiencies from realigning the operations of Rustan’s, and this bodes well for RRHI’s growth prospects for the years to come.

   John Martin Luciano, CFA

BSP Governor Benjamin Diokno said that the central bank may cut rates by another 25bps as early as 2Q20 as the government tries to boost economic growth amid fears of the corona virus outbreak. Last February 6, the monetary board trimmed key policy rates by 25bps, bringing the reverse repurchase rate, overnight deposit rate, and lending facilities rate to 3.75%, 3.25%, and 4.25%, respectively. Diokno also mentioned that a cut worth more than 25bps, around 50 or 75bps, is still possible this year. However, the central bank is still confident that GDP growth for the year will hit 6% as the government focuses on their massive infrastructure program, which is not heavily affected by the corona virus. (

   Justin Richmond Cheng, CFA

Maintain BUY rating. We currently have a BUY rating on URC with a FV estimate of Php177/sh. We believe URC’s prospects are brighter this 2020 coming from an inflection point in 2019, as profits have started to grow arresting the decline over the last three years. The recovery of the coffee business looks promising. Furthermore, we are more confident that URC can revitalize its other businesses under the leadership of the new management team.