Philippine Bulls Turn Cautious as Economy Unexpectedly Slows

(Bloomberg) -- Philippine bulls expect further declines for the nation’s equities this month as weaker-than-expected economic expansion added to risks amid the U.S.-China trade war.

The Philippine Stock Exchange Index was little changed at 7,923.53 as of 12 p.m. in Manila, paring an earlier gain of as much as 0.3%. The government said second-quarter GDP grew 5.5% from a year ago, the slowest pace in two years and weaker than the 5.9% median estimate in a Bloomberg survey of economists. The benchmark stock is down 1.5% this month.

Philstocks Financial (Justino Calaycay)

• “This adds to the prevailing weak market sentiment because GDP data would have been a catalyst but now we can’t really say the economy is strong.”
• “This calls for a thorough review of our 8,500 target for the year and will likely lead to a downward revision to take into account of what’s coming out now including the worsening U.S.-China trade war.”
• “While the GDP number carries the impact of a delay in government budget approval, this is a big disappointment considering official pronouncements that spending has accelerated and put the economy back within its growth target range.”
• “It’s critical for government infrastructure to pick up going forward for it’s hard to see contribution from trade given the U.S-China trade tension. Agriculture could be weak because we have entered the typhoon season while investments could be on hold amid government’s push to revamp incentives”
• “Cash is king” and investors should “sell on rally” as PSEi will test 7,500 near-term.

Papa Securities (Manny Cruz)

• “While this is the bottom for GDP growth and things will improve in the second half, any rally will be short term.”
• Weak 2Q GDP data adds to headwinds facing Philippine stocks which include the MSCI Index rebalancing to raise the weighting of mainland China shares and threat of a currency war.
• While the PSEi will test its 7,500 to 7,600 support, “investors should buy on dips on the possibility the benchmark will still go back to 8,500 by year-end”.
• “GDP growth should improve from the second quarter on better government spending due to the budget approval and stronger consumer spending resulting from cooling inflation.”

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