Accord Capital Equities Corporation: 2010 Review & 2011 Outlook

ACCORD CAPITAL EQUITIES CORPORATION
GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)
2010 Review & 2011 Outlook
Accumulated Accumulated Accumulated
PSE Index Pts Change % Change Volume (m) Value (phpm)
Advances Declines Unchanged
4,201.14 1,148.46 37.62% 399,639.58 971,301.89 14,041 14,549 12,610
THE YEAR THAT WAS: Brief Review of 2010

The tentativeness that marked the close of 2009 (evidenced by a doji candlestick for December) spilled over to the first month-
and-a-half of 2010. Posting a record 63% annual gain in '09, there were, understandably thick clouds of doubt on whether such
pace could be sustained with the global economy still struggling to emerge from the “ruins” of the subprime-induced recession
and still others attempted a “soft-landing.” The threats of strong aftershocks from the housing market originated crisis that pulled
down large, once-respected and industry leading institutions hung in the collective minds of the market. Domestically, there were
concerns on whether the local economy had followed the path of the developed world into the abyss of a contraction.
Much of these fears reflected on a rather “slow” start for
Philippine equities. In fact, through mid-February, share
prices tumbled to depths of a much as -265.02 points or -8.68
percent.
Adding to the strain in confidence were politically-induced
risks. The country was to have its first nationwide experiment
with automated polls, as the electorate were to choose the
successor for a controversy-peppered Arroyo administration.
Risks were heightened by talks of a “no-election” scenario.
Notably, the start of the official campaign period laid the
matter to rest, and, on the same day, February 9 th, the index
registered its lowest intraday and closing levels for the year.
The measure subsequently rebounded, with one source of
uncertainty removed.
Over the same period, the pessimism over the country's economic performance were appeased, as Q409 posted a 1.8% GDP
growth, pushing the full-year result to 0.90% from end-Q3's 0.70%. The figure was later revised to 1.1 percent. While the number
represented a substantial drop compared to 2008's 4.8% pace, it underscored the resiliency of our economic fundamentals. Note
that neighboring economies failed to keep their numbers in positive territory. The Philippines thus duplicated a feat it achieved
during the 1997-98 Asian Financial Crisis, which to my recollection, never saw the GDP number fall into negative except for a
single quarter. It thus spawned more confidence, sending the equity market to end the quarter with a decent 3.57% gain. This
was in line with the movements in global markets and those of our regional peers except for Singapore which closed the first three
months almost flat.
The run-up to the elections presented both hopes and fears.
With the “No-El” scenario written off, focus shifted to the
results. The usual staple of cheating, wheeling-and-dealing to
ensure victory at the polls, were magnified by a yet untested
counting machines. The reliability of the outcome invited
controversy. And indeed, there were. This, in turn saw
investor sentiments in Q2 swinging from positive to negative,
with index capped near the 3,330 resistance and supported at
3,100-3,150. Thus, even as optimism was tempered, the index
still managed to eke out a 6.7% advance, pushing the year-to-
date gains to 10.5 percent. Again, this offered proof of the
economy's strength, with Q1 data surprising everyone. GDP
rebounded strongly, growing 7.8% year-on-year even as
inflation remained under control, despite continued flow of
dollar remittances and election spending.
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 CREDIT-WORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE
INDUSTRIES MENTIONED.
DAILY Report Page 1 of 4
4,201.14 1,148.46 37.62% 399,639.58 971,301.89 14,041 14,549 12,610
As the world kept tabs on US economic data, searching for clues as to the timing of a sustainable recovery in the world's largest
economy, the European continent provided much reason for the sudden volatility in the markets. Debt-to-GDP ratio became a
buzzword as the Greece-crisis unraveled. The nation's economy was on the brink of collapse were it not for the timely provision
of a bail-out package by both the European Union and the IMF. Yet, even as the problem was addressed to the satisfaction of the
markets, with equity indexes returning to positive mode, the shadow of the crisis loomed large. The still weak US economy and
the dilemma that bogged the Eurozone, depressed those regions' currencies, widening the spreads in credit default swap
instruments and sent capital flowing more aggressively to the emerging markets. The impact of this flow was show up as another
problem later in the year.
BY the beginning of the second semester, the Philippines came under a new government, with the controversies and questions
over the automated polls set aside. There was much hope among the population of better times ahead – at least as reflected in
post-election and succeeding surveys of general sentiment, both on the new government and on their personal situation outlooks.
The new government's initial acts were not spared its share of criticisms, nonetheless but it failed to make a serious dent on the
trust ratings.
The US, on the other hand, also under a Democratic leadership with a fresh mandate, found some encouraging numbers from the
economic front. Nevertheless, intermittent drops in figures of some of its leading indicators such as housing and unemployment
claims, kept fears of a “double-dip recession” on the table. Europe's battle with its member economies' debt burdens lent further
ammunition to this unwanted, yet not unwarranted, expectation. From time to time, the market would be spooked. Yet, over-all,
the surging confidence in equities did not waver. Positive corporate results, both here and abroad, provided the counterbalancing
force to keep investors glued to the stock markets.
For much of the second half of the year, the local market
moved in a singular direction – upwards. After adding 5.4% in
the July-August trades, the PSE Index rocketed by 15% in
September, a pace not experienced since January 2002. Not
even the “Manila bus-hostage-taking” incident in the last week
of August and the consequent negative travel advisories
against the Philippines, dampened trades. At this point,
confidence was overflowing, particularly as Q2 GDP
duplicated Q1's performance, leaving no room in investors'
minds to doubt the country's current economic condition and
its bright forward prospects.
Yet, it was also around this time that the charts began to show
some weaknesses developing in the market's technical
conditions. Foremost of which was the ADL's divergent
movements. Nevertheless, with nothing on the newsfront to warrant a corrective sell-off, these warning signs were generally
ignored and investors bought more. By November 4, the market finally breached the 4,400-line although settling at day's end at
is all-time closing high of 4,397.30.
It was at this time the Europe once more took centerstage with Ireland going through a Greece-like process, culminating in a bail-
out. Yet, with two economies going through the wringer, focus shifted toward Spain, the continent's fourth largest economy and
Portugal. Credit default risks increased and the euro was seen by some to soon collapse. The zone's leadership has since agreed
to put up a fund that would aid, if not prevent, a recurrence of this experience but by 2013 yet. What it will do if and when Spain
takes the same path Greece and Ireland did, remains the sword of Damocles over the heads of investors. Finally, China, which has
been leading, and practically pulling the globe out of the slump, has began to put in place its avowed tightening monetary stance,
as it seeks to rein in inflationary pressures. At Christmas Day, the PBOC raised rates on one-year lending and deposit rates by 25
basis points. Market watchers expect more in the next six months.
4,201.14 1,148.46 37.62% 399,639.58 971,301.89 14,041 14,549 12,610
MARKET STATISITCAL HIGHLIGHTS: 80.00%
The PSEI booked gross gains of 37.62%, a strong follow-up to 60.00%
2009's 63%. This is the fourth biggest annual advance in the 40.00%
last 10 years, trailing 09's 63%, '06's 42.3% and '03's 41.6%.
20.00%
Noticeably, more than 40% gains have been registered every
three years. Further, the returns over each succeeding years 0.00%
came at at least half the rate. In 2004, also a Presidential
D
te
a
-20.00%
election year when GMA won over FPJ, the market returned
1
0
/4
2
0
/3
2
1
/0
2
1
3
/0
2
1
4
/0
2
1
5
/0
2
1
6
0
/4
2
1
7
0
/3
2
1
8
/0
2
1
9
/0
2
1
/0
2
1
63% of the prior year's gains. Meanwhile, 2007's 26.38% rise -40.00%
was 50% of the 2006 result. This year's figure is 60% of 2009's. -60.00%
30.00
25.00 A total of 423.9 billion shares changed hands throughout the
M
year valued at php1.187 trillion. Netting out block sales

ilo
n
s
20.00
15.00 however, which accounted for 5.72% and 18.19% of volume and
10.00 value respectively, the number are reduced to 399.6 billion
5.00
shares worth php971.3 billion.
- In the closing month of the year, we saw moneys flowing more
aggressively into all sectors, except Industrials, which saw
December total falling below the 12-month average. The
industrial sector however continued to dominate value turnover,
accounting for nearly 30% of the aggregate. Mining & Oil
DECEMBER MONTLY AVERAGE
counters combined for the least at 6.4 percent.
Although the last two months, November and December, saw 70,000,000,000.00
foreigners with net sales of php3.652 billion, the over-all NET ACCUMULATED FOREIGN FUND FLOWS [DAILY]
picture remained positive. Foreign funds remained invested 60,000,000,000.00
in local equities, with the year-end aggregate holdings valued

at net purchases of php53.75 billion. The figure peaked on 50,000,000,000.00
November 4, coincidentally the index' highest point, with

php57.368 billion. From this perspective, the “aggressive” 40,000,000,000.00
liquidations foreigners undertook, which spawned concern

amongst the locals, measured only 6.3% of their net 30,000,000,000.00
purchases through the cited peak level. This suggests that the
shift to the sell side in the latter part of the year were nothing 20,000,000,000.00
but sound portfolio management and not reflective of

anything negative that should turn sentiments around, as
10,000,000,000.00
some had feard. The chart to the right shows the “magnitude” -
and impact of foreign selling on the over-all picture. 1 21 41 61 81 101 121 141 161 181 201 221 241 261 281
TECHNICAL CONDITION AT YEAR END

THE market ended the year on a positive note, consistent with our expectations. And it in fact did better our year-end projected
level of between 4,130-4,160, resting by the closing bell marginally above the 4,200-line. Nevertheless, the surge in the final two
weeks of the year were no more than the traditional window-dressing trades as companies closed their books with higher
4,201.14 1,148.46 37.62% 399,639.58 971,301.89 14,041 14,549 12,610
investment valuations.
The Index cleared a 7-week downtrend traced back to the all-
time high in November. In the same breath, it sustained a
shorter-term (3 week) uptrend off the breach below the 4,000
line at the close of the same month. As mentioned on top, it
closed the year right on the 4,200-line, the lower edge of a
resistance range reaching up to 4,220. The last candlestick
drawn for the year showed up weaker, with sellers
dominating the final minutes, albeit not of sufficient strength
to send the measure lower. Seller were either less aggressive,
or the market clock ran out leaving them to hold the bag as
the year crosses over to another.
The weekly chart shows the market managing to stay within
the seven-week trading band between 4,060 and 4,200. At
the very least, this suggests stability in the price levels
resulting from the lack of fresher leads. The monthly chart remains encouraging with the December candlestick drawing a bullish
white candle with the lowest point remaining above November's low, even as it fell short of the highest level for the same month.
Nevertheless, positive momentum built up significantly towards the close of the year to bring the close nearer its high, a good sign
that it may spill-over to next year.
The underlying indicators provide a mix of bullish and bearish propositions. However, the latter suggestion is seen to be confined
over the near-term, with the long term prospects continuing to be biased towards the former.
STO, understandably, on a daily basis has reached into overbought territory which suggests a near-term sell-off to shed excessive
exuberance during the Santa Claus rally. However, MACD and the AccDist Line shows positive momentum still very much evident.
OUTLOOK FOR 2011:
Europe will continue to provide volatility to global markets while how Chinese policymakers deal with inflationary pressures may
temper optimism. Expectations of a stronger US economy this year will keep the bulls in the arena, however. Here at home, the
focus will be on the government's revenue generation, the containment of the budget deficit and levels of interest rates. Listed
firms are seen to continue to perform well with principal focus on energy, construction and real estate, and telco companies.
Financials and consumer staples (retail) will provide stability to equity portfolios while Mining & Oil will present some
opportunities for a quick buck along the way.
Among the initial impetus to the market next year will be the discounting of Q42010 and Full Year results. After posting a year-to-
date GDP (Q3) of 7.4%, government economists are confident the full-year target of 5.0%-6.0% will be achieved, or maybe even
surpassed. This eases pressure on the BSP to hike domestic rates when it first meets on February 10, 2011. More so, with
inflation not seen to shoot up prematurely, nor drastically. This will be a boon for companies contemplating on expanding their
businesses and production capacities with capital investments in anticipation of demand growth.
Political risks, which in the past years have adversely impacted on investor sentiments and consequently, lent volatility to stock
prices, remain relatively absent with the present leadership, despite intermittent criticisms, have kept high trust ratings. This
should allow it to be more daring in its policies and programs, without spending too much political capital, to realize the platform
it presented to the people last May.
WE peg our initial 2011 index projection, ceteris paribus, between a conservative range 4,630-4,660 and an optimistic band of
4,890 to 5,000. These figures are based on the 3-, 5- and 10-yr simple and compounded average growth pace.

Accord Capital Equities Corporation: 2010 Review & 2011 Outlook

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ACCORD CAPITAL EQUITIES CORPORATION

THE YEAR THAT WAS: Brief Review of 2010

MARKET STATISITCAL HIGHLIGHTS: 80.00%

The PSEI booked gross gains of 37.62%, a strong follow-up to 60.00%

year valued at php1.187 trillion. Netting out block sales

in local equities, with the year-end aggregate holdings valued

November 4, coincidentally the index' highest point, with

liquidations foreigners undertook, which spawned concern

but sound portfolio management and not reflective of

TECHNICAL CONDITION AT YEAR END

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