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Despite lower bond yields, investors plunk funds in PHL – report


Despite falling bond yields, trading in Philippine bonds and equities remains active, according to a joint report of a local investment house and a university think tank. Investors are continuing the search for safe havens, feeding on what emerging markets are offering as the United States’ contends with its economic woes, said First Metro Investment Corporation (FMIC) and University of Asia and the Pacific (UA&P) in The Market Call, released Friday. The Market Call contains FMIC and UA&P’s assessment of the Philippine securities market, in which the think tank and investment house said they are also wary of the Aquino administration’s low public spending in the first half and the economic slowdown in the same period. “Nonetheless, we are increasingly nervous looking ahead. Philippine Gross Domestic Product (GDP) eased to 3.4% in the 2nd quarter, while local company fundamentals remain robust… valuations are not that encouraging, so is the activity of foreign investors," FMIC and UA&P said. “Foreign investors have sold our local equities market in August, and we believe that they will continue to do so in the near-term. Reason being is that the Philippine Stock Exchange Index’s resiliency presents an opportunity to take profits and at the same time compensate losses from other markets," FMIC and UA&P noted. “Turnover for the month of August increased by 37.1 percent mainly buoyed by activities in the Industrial and Mining and Oil sectors — each accelerating by 126.8 percent and 57.2 percent, respectively, according to The Market Call. FMIC and UA&P observed that trading volume for debt papers “surged from previous levels as more investors chose to cling on bonds. The second week of August showed an increase of almost 320 percent, the highest weekly growth of traded papers for the year." Yields fall across the curve “The Philippines likewise saw yields fall across the curve with decreases of 55.6, 12, and 32.6 basis points in 1-, 5-, and 10-year bonds. Spread change between 1-year and 10-year registered an increase of 23 bps due to the larger fall of yields in the short end," according to The Market Call. Tracking the volume swings before and after the US credit downgrade from Standard & Poor’s, FMIC and UA&P saw that the “last week of July showed 27.4 a percent decline in volume… Once the downgrade was confirmed by the start of August, investors in developed markets reduced exposure to US assets and turned to (Philippine) debt papers and weekly volume hit 171.72-B worth of papers." The August 2011 Market Call also saw strong interest in local corporate debt issues. “The Power Sector Assets and Liabilities Management once more led the corporate trading market, hitting P252.7 million worth of papers, albeit significantly lower than last June’s P529.8 million," the report said. Debt papers of Ayala Corporation drew P105 million “followed by San Miguel Corporation and Aboitiz Power which traded P99.5 million and P68.9 million, respectively." In particular, they cited the offerings of United Coconut Planters Bank and the Development Bank of the Philippines. UCPB offered this month its P3-billion, five-year negotiable certificates the proceeds of which will be “used to increase the bank’s long-term deposit base and finance expansion of long-term assets." The DBP also sold P7 billion in Tier 2 notes for its capital base and as prelude to participation in the Aquino administration’s public-private partnership projects. — Earl Victor Rosero/VS, GMA News

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