ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXXI_August 1 to 5_TD 148-152

1 of 2

BACKDROP

FOR THE

WEEK:
BY LOCAL STOCKS IN THE LAST TWO WEEKS WILL BE PUT TO THE TEST AS GLOBAL MARKETS FACE THE INEVITABLE THE

THE RESILIENCY SHOWN AUGUST 2 DEADLINE FOR

US TO COME UP WITH A SOLUTION TO THEIR DEBT CEILING WOES. APPROACHING MIDNIGHT IN NEW YORK, SANS AN AGREEMENT ACCEPTABLE TO DEMOCRATS (WHITE HOUSE & SENATE), WHO FAVOR A LONGER TERM EXTENSION WITH TAX HIKES FOR THE WEALTHY AMERICANS ON ONE HAND AND THE REPUBLICANS (HOUSE OF REPRESENTATIVES) DEMANDING A SHORT-TERM PLAN WITH SPENDING CUTS AT THE CORE, THE US WILL DEFAULT ON ITS OBLIGATIONS FOR THE FIRST TIME IN ITS PROUD HISTORY AS A WORLD ECONOMIC POWER. A ONCE-UNTHINKABLE CREDIT RATING DOWNGRADE IS IMMINENT AS AT LEAST TWO RATINGS AGENCIES HAVE WARNED THE COUNTRY MAY LOSE ITS AAA RATING. BOTH, A DEFAULT AND A DOWNGRADE IS DESCRIBED BY BOTH POLITICAL AND ECONOMIC LEADERS AS DISASTROUS. LAST WEEK'S GLOBAL MARKETS' ACTION AGREES.
THE STATUS QUO REMAINS.

RED

NUMBERS

DOMINATED

THE

BOARDS

IN

MOST

EXCHANGES

IN

FOUR

CONTINENTS.

IN THE NORTH AND SOUTH AMERICAN REGION, MARKETS FROM TORONTO TO ARGENTINA SLUMPED, LED BY THE DOW'S AND THE S&P/TSX (TORNONTO) BOTH DROPPING AT LEAST 4% ON THE WEEK. THE THUMP WAS HEARD ACROSS THE ATLANTIC, WITH THE THREE MAJORS, FTSE100, DAX50 AND CAC40 LOSING AT LEAST 2.0%. THE REGIONAL BENCHMARK OF 50 BLUE CHIP STOCKS, EURO STOXX 50, SLIPPED -2.1% TO 2,670.37. A
COUPLE OF

SOUTHEAST ASIAN

MARKETS

MANILA

AND

JAKARTA --

ESCAPED THE BROAD DECLINE IN THE WIDER CONTINENT, INCLUDING THE

PACIFIC. SINGAPORE CONFIDENCE

THE FUNDAMENTALS.

WAS PRACTICALLY UNCHANGED.

GLOBAL MARKETS: WEEK-ON-WEEK REGION MARKET INDEX % CHANGE AMERICAS DJIA 12,143.24 -4.20% S&P 500 1,292.28 -3.90% IBOVESPA 58,823.45 -2.40% MERVAL 3,321.85 -1.00% S&P/TSX 12,945.63 -4.10% EUROPE CAC40 3,672.77 -4.40% DAX50 7,158.77 -2.30% FTSE100 5,815.19 -2.00% ASIA-PACIFIC AORD 4,500.50 -3.70% NZ50 3,395.63 -1.60% NIKKEI 9,833.03 -3.00% KOSPI 2,133.21 -1.80% SSEC 2,701.73 -2.50% HANG SENG 22,440.20 0.00% TSE 8,644.18 -1.40% BSESN 18,197.20 -2.80% JCI 4,130.80 0.60% SOUTH-EAST ASIA Straits Times 3,181.26 0.00% KLCI 1,548.81 -1.00%

PSEI

4,503.63

0.60%

IN THE LOCAL ECONOMY, AND HENCE, THE STOCK MARKET MAY BE TRACED TO THE SUSTAINED STRENGTH OF DOMESTIC

ALTHOUGH

NOT COMPLETELY IMMUNE FROM EXTERNAL SHOCKS, SUCH AS BUT NOT LIMITED TO A POSSIBLE

US

DEFAULT,

PHILIPPINE

ECONOMY HAS CONSISTENTLY RECEIVED AN UPGRADE ON BOTH ITS FOREIGN- AND LOCAL-CURRENCY LONG TERM BOND TO

JUST ONE OR TWO NOTCHES BELOW INVESTMENT GRADE FROM

MOODY'S, STANDARD & POORS

AND

FITCH RATINGS.

GROSS DOMESTIC PRODUCT

EXPORTS INTEREST RATES HAVE RISEN A TOTAL OF 50 BASIS POINTS SO FAR THIS YEAR, STILL BELOW WHAT MARKET-WATCHERS PROJECT FOR THE YEAR. IN ITS LATEST MEETING, THE BSP KEPT POLICY RATES STEADY AT 4.5% AND 6.5% FOR RP AND RRP, RESPECTIVELY . YEAR-ON-YEAR EMPLOYMENT LEVELS HAVE LIKEWISE RISEN, WITH UNEMPLOYMENT RATE AS OF THE LATEST SURVEY PERIOD SHOWING A 0.2 PERCENTAGE POINT DROP. INFLATION HOWEVER EMERGES AS THE MOST IMMEDIATE CONCERN. CONSUMER PRICES HAVE GENERALLY RISEN SINCE OCTOBER 2010 3.8% (YOY) TO LAST JUNE'S 5.2% (USING THE ADJUSTED BASE YEAR OF 2006.) THE MARKET WILL BE KEEPING CLOSE TABS ON JULY INFLATION WHICH IS DUE TO COME OUT THIS WEEK.
HAVE LAGGED BUT REMITTANCE FLOW AND INVESTMENTS IN

CONTINUES TO GROW, ALBEIT SLOWER THAN LAST YEAR'S ELECTION SPENDING SPURRED NUMBERS.

BPO

HAS KEPT THE ECONOMY AFLOAT.

BASED ON LATEST FIGURES, THE REAL INTEREST RATES REMAIN NEGATIVE WITH SHORT-TERM TREASURIES YIELDING 2.88%. STOCKS, ON THE OTHER HAND, POSTS A 7.2% GAIN ON A YEAR-TO-DATE, TRANSLATING TO AN EQUITY RISK PREMIUM OF 4.3%. THE PE HIGHER, AT 15.9X, LOCAL STOCKS RANK 13 IN A LIST OF SELECTED INDEXES. (SEE TABLE) WE REMAIN CHEAPER, HOWEVER, COMPARED TO SEA NEIGHBORS MALAYSIA AND INDONESIA AS WELL AS MAJOR PEERS IN THE REGION, INDIA AND JAPAN. A MERE 10% RISE IN LISTED-FIRMS' EARNINGS COULD LIFT THE INDEX TO THE - 4,950LEVEL OR A PE OF 17.5X.
JOINING THE RELATIVELY EXPENSIVE LOT.
TH

MARKET'S SUSTAINED RUN HOWEVER HAS PUSHED THE COMPOSITE

COUNTRY Brazil Singapore Argentina France China (Hongkong) Germany Taiwan United States South Korea UK United States China (Mainland)

IBOVESPA Straits Times MERVAL CAC40 HangSeng DAX50 TAIEX DOW KOSPI11 FTSE100 S&P 500 SSEC

PE(TTM) 9.26 10.71 10.72 10.96 11.76 11.84 12.52 13.32 13.53 14.01 14.38 15.03

Philippines
India Malaysia Japan Indonesia New Zealand Australia

PSEI
BSESN KLSE Nikke i 225 JKSE NZ50 All Ordinaries

15.93
16.42 17.19 18.05 18.94 21.38 22.14

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.

ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXXI_August 1 to 5_TD 148-152

2 of 2

TECHNICAL CONDITIONS: THE

LOCAL MARKET HAS BEEN PULLING SURPRISES OVER THE LAST TWO WEEKS. SIXTH

FIRST,

IT DEFIED GLOBAL TRENDS, AS IT POSTS A

WEEK OF GAINS. SINCE CLOSING AT 4,153.11 IN THE WEEK-ENDING JUNE 17, THE PSEI HAS ADDED 350.52 POINTS OR 8.4% IN THE ENSUING WEEKS, 7X THE RETURN ON THE DOW AVERAGE OVER THE SAME PERIOD. SECOND, IT WENT AGAINST CONVENTIONAL BELIEF WHICH HELD THAT THE INDEX, TRADING NEAR ITS HIGH AND EXPERIENCING CONSECUTIVE FURTHER PUSH FROM SPECULATIVE TRADES WILL FALL AS PART OF THE CYCLE. TO

LAST
THE

WEEK, THE MARKET HELD UP AS TRADES AND OF TOP-LINE EARNINGS COUNTERS, NUMBERS. POSSIBLY

SHIFTED

SECOND-

ANTICIPATING

RELEASE

THIRD,
AT LEAST

INVESTORS APPEAR TO BE BY AND LARGE UNAFFECTED BY THE SAME CONCERNS SHAKING CONFIDENCE IN GLOBAL EQUITIES AS OF EVEN DATE. ABOVE THE

LAST

BUT NOT THE LEAST, THE INDEX PUSHED MAYBE SOONER THAN EXPECTED.

4,500-LINE

WE HAVE MAINTAINED OUR INITIAL INDEX YEAR-END TARGET AT GREAT CAUTION, ANTICIPATING A SNAP TO THE AROUND THE

WHILE 4,600-4,800 RANGE, WE HAVE AT THE SAME TIME, PROCEEDED WITH RALLIES. WE HAD BEEN CAUGHT FLAT-FOOTED WAITING FOR THE MEASURE TO RETREAT

4,370-4,390

RANGE.

ALL

UNDERLYING TECHNICAL MEASURES APPEAR TO SUPPORT A VIEW THAT POSITS A FURTHER RUN-UP IN LOCAL SHARE PRICES, AT LEAST

OVER THE NEAR TERM.

RSI(14)

RESPECTIVE OVERBOUGHT LINES. EVENTUALLY REFLECTS ON

AND STO(14,3,3) BOTH INDICATE SUSTAINED MOMENTUM EVEN AS IT TRADES MACD(12,26,9) HOWEVER, CAUTIONS AGAINST THIS, SOMEWHAT BALANCING PROSPECTS OF A BASING ACTION.

NEAR OR AT THEIR SENTIMENT WHICH

THE INTERNALS CONTINUES TO SHOW IMPROVEMENTS. AVERAGE NET DAILY VOLUME TURNOVER INCREASED BY 38.4 MILLION OR 1.23% TO 3.114 BILLION ON A YEAR-TO-DATE BASIS. AVERAGE NET DAILY VALUE TURNOVER WAS PRACTICALLY UNCHANGED AT PHP4.635 BILLION COMPARED TO THE PRIOR WEEK'S LEVEL. OF THE GROSS VOLUME AND VALUE, BLOCK SALES ACCOUNTED FOR 4.23% AND 13.2%, RESPECTIVELY . THE ADVANCE-DECLINE LINE -549. A BETTER VIEW IS PRESENTED BY THE BREADTH MEASURE HOWEVER, WHICH SHOWS -0.0215 FROM -0.0218, AD RATIO ROSE TO 0.95 FROM 0.94. ACTIVITY LIKEWISE INCREASED WITH TRADED ISSUES PER SESSION RISING TO 188 FROM 185 IN THE PRECEDING WEEK. FOREIGN ACTIVITY REFLECTED IN AN ACCUMULATED YEAR-TO-DATE AVERAGE OF PHP173.3 MILLION DAILY, SLIGHTLY LOWER THAN THE PHP172.1 MILLION.
SLIPPED TO THE NEGATIVE SPREAD HAS NARROWED FURTHER TO

-13

OUTLOOK GLOBAL

FOR

WEEK 31:

US AS THE WEEK BEGINS, PARTICULARLY AT IT OPENS ON THE EVE OF THE DEADLINE FOR CONGRESS. THE MOMENTUM OF LAST WEEK'S GENERAL DECLINE, IN THE ABSENCE OF A CLEAR DIRECTION IN THE CRISIS OVER THE WEEKEND, MAY CARRY OVER TO THE FIRST TWO DAYS. TUESDAY WILL BE THE MAKE-OR-BREAK POINT. WE CAN THUS EXPECT INVESTOR TO HOLD IN ABEYANCE MAJOR TRADING AND PORTFOLIO DECISIONS. THEORETICALLY, WE WOULD BE MORE CONFIDENT IN POSITING A POSSIBLE SELL-OFF TO GREET MONDAY'S TRADES. HOWEVER, WE CANNOT, AND WILL NOT, DISCOUNT ANOTHER SURPRISE . IN FACT, THE PREVAILING CONSENSUS THROUGH MUCH OF LAST WEEK IS THAT THE US WILL EVENTUALLY PASS THE NEEDED LEGISLATION TO AVERT A DEFAULT, ALTHOUGH THERE IS AN EQUALLY WIDE AGREEMENT THAT A DOWNGRADE IS INEVITABLE. SUCH DOWNGRADE WILL PULL US RATING LOWER BUT WILL NONETHELESS CONTINUE TO BE OF INVESTMENT GRADE. THUS, THE SHORT-TERM MAY BE BEARISH, BUT WE
MARKETS WILL REMAIN FOCUSED ON THE A SOLUTION TO BE PASSED BY REITERATE OUR BELIEF THAT A SNAP OF THE RALLY PRESENTS INVESTORS WITH AN OPPORTUNITY TO REDEFINE THEIR PORTFOLIO BY BEEFING UP THEIR EQUITY COMPONENTS.

MOVING

FORWARD, WE GIVE MORE WEIGHT TO DOMESTIC ECONOMIC FUNDAMENTALS OVER THE MEDIUM-TERM AND TO CORPORATE EARNINGS

OVER THE NEAR-TERM. DEADLINE.

NOTE

THAT OUR OUTLOOK IS BASED ON OUR EXPECTATIONS THAT THE

US

CRISIS WILL BE RESOLVED BEFORE THE

CONTRARY DEVELOPMENT WILL COMPEL US TO REVISIT OUR TARGETS.

(JC)

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.