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Daily Edge Summary - September 3, 2015

Core Content

This document provides an overview of the Philippine stock market and economic outlook as of September 3, 2015. It includes key financial indicators, analyst insights, and market updates across various sectors.

Main Economic Outlook

Setting Up for Demographic Dividends

• Strong Domestic Economy: Despite external challenges such as China's devaluation, the U.S. interest rate hike, and Greece's debt crisis, the domestic economy remains resilient due to consistent current account surpluses, high international reserves, and reduced external debt.
• Sustained Domestic Demand: The combination of strong private consumption and investment spending supports a robust domestic demand, which is a key driver of economic growth.
• Infrastructure Spending: The government is expected to increase infrastructure spending, which will help boost economic growth and support the working-age population.
• Demographic Profile: With an average age of 23 and a declining total fertility rate, the Philippines is on track to benefit from a growing working-age population.
• IT-BPO Industry: The IT-BPO industry has shown significant growth, serving as a model for generating youth employment and reaping demographic dividends.
• Potential GDP Growth: The central bank estimates potential GDP growth at 6-7%, which could increase to 7-8% with the successful implementation of demographic dividends.

Market Talk

Property Sector

• ALI's Vermosa Estate: Ayala Land Inc (ALI-BUY) has allocated PHP70 billion for the development of a 700-hectare mixed-use estate along the Muntinlupa-Cavite Expressway. Residential developments will account for 60% of the project, with the remaining for commercial and institutional use.

Utilities Sector

• Reduced Water Allocation: The National Water Resources Board reduced water allocation for Metro Manila by 7% due to the El Niño dry spell, expected to persist until May 2016. The allocation for August was 41 cubic meters per second.
• ULGPP Bidding Failure: The rebid process for the Unified Leyte Geothermal Power Plant's bulk energy supply contract failed as only Unified Leyte Geothermal Energy Inc participated. The next step involves re-bidding or negotiating with the sole bidder.
• BatMan Pipeline Delay: The Batangas-Manila natural gas pipeline project faces further delays due to right-of-way concerns affecting the Philippine National Railways. The proposed substitute route may increase the project cost and length.

Telco Sector

• Globe GCash Beep Mastercard: Globe Telecom Inc (GLO-BUY) launched a new smart card that serves as a reloadable contactless tap-and-go card for MRT/LRT riders, as well as a payment option for online shopping and 33 million establishments globally. It also integrates with GCash for various financial services.

Earnings and Valuations

Banks

Consumer Sector

Property Sector

Utilities Sector

The Week Ahead

• Sept 4: Federal Resources Investment Group, Inc; Acesite (Philippines) Hotel Corporation
• Sept 10: IRC Properties, Inc; Mabuhay Holdings Corporation

Key Information

• The Philippines is expected to benefit from demographic dividends due to its favorable demographic profile and strong economic fundamentals.
• The IT-BPO industry is a success story in generating youth employment and boosting other sectors.
• The domestic economy is resilient despite external challenges, supported by consistent current account surpluses and high international reserves.
• Infrastructure spending is anticipated to boost demand and support growth.
• The property sector is showing strong potential with projects like ALI's Vermosa Estate.
• Utilities sector faces challenges such as reduced water allocation and project delays.
• The telco sector is innovating with the launch of the Globe GCash Beep Mastercard.