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.”

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler

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