Quick Take: Is the BSP clairvoyant? and 3 more market updates
Bangko Sentral ng Pilipinas (BSP) [link] expects the rate of inflation to fall to below 4% by the end of June, and to fall to below 2% in Q1 of next year. The BSP said that it expects to be “very successful in bringing down inflation”, and that because of its “very aggressive monetary policy”, it does not see any risk of “shocks propagating self-fulfilling inflation”. The BSP did note that it is “hard to rule out another supply shock”, but that its baseline scenario is that its “well into a target-consistent path of inflation” provided that the “Philippine agricultural shortage problems are addressed.”
MB Quick Take: One quick thing to get out of the way is that “inflation” is the rate of increases in prices over time. Lower inflation just means that prices are going up more slowly than before. Zoomed in, the specific prices of certain goods may rise and fall going forward, but the overall “cost of living” is going to go up. It’s not coming back down. For inflation to fall back to around 2% in 2024 means that the overall basket of prices in 2024 is 2% higher than the overall basket of prices was in 2023. Which, as we know, will be higher than the basket of prices from 2022, which itself was around 5.8% higher than the basket of prices from 2021. If your wage isn’t increasing faster than prices/inflation, your wage is actually shrinking. The other thing to note is that the BSP’s projections assume that food inflation is managed properly by the government, and that there are no additional “shocks” to the system. Remember this if the onion/egg/sugar/whatever problem persists much longer, or if we hear of another macro-level inflation-causing event.
Citicore Energy REIT [CREIT 2.4 1.3%] [link] P4.5 billion ASEAN Green Bond offering was approved by the SEC. The proceeds from the sale of the fixed-rate bonds must be used exclusively to finance or refinance new or existing green projects. CREIT plans to use the proceeds to buy a rooftop solar system for lease, and properties that will be leased to solar power developers and operators.
MB Quick Take: Green bonds usually get sold to institutional investors that have ESG mandates (environmental, social, governance) or some kind of environmental advocacy. They’re a great fit for CREIT, since almost anything that CREIT would want to do with the proceeds likely qualifies under the ASEAN Green Bonds framework. Once sold, CREIT should have around P5 billion in total liabilities, which is just around 35% of the value of its deposited properties. Under the REIT Law, as a default, REITs are permitted to carry a debt to a maximum of 35% the value of the deposited properties, but are allowed to double this to 70% if it has an “investment grade” credit rating. Since CREIT received a PRS Aa+ rating from PhilRatings (don’t visit the website: you might die of 90s web design) for its ASEAN Green Bonds, CREIT considers itself eligible to access that expanded leverage.
PH Government (PH Gov’t) [link] said, through comments made by President Marcos, that it “has no plans to privatize anything, rather the opposite”. Mr. Marcos made these remarks during a media briefing, seemingly in the context of statements made by the Jaime Bautista, the Transportation Secretary, that the PH Gov’t would look to privatize Ninoy Aquino International Airport. Mr. Bautista made those comments in December. Now, Mr. Marcos is saying that it’s not possible for the PH Gov’t to privatize an airport, since “a private firm cannot own the airport”, seemingly contradicting his Transpo Secretary.
MB Quick Take: Seems like Mr. Marcos is playing a game of semantics, because it’s certainly in the government’s control and authority to create a situation where it provides a long-term franchise contract for the operation and management of the airport that could assign beneficial ownership and control of the airport to a private company. Note that the administration did not pledge to not privatize anything, only that it had “no plans” to do so at this time. I’m only noting this as an update to the “Biz Buzz” rumor about the government potentially taking aim at nationalizing the National Grid Corporation of the Philippines. This is super speculative, and the politics of a moment or issue can change quickly, so I’ve found the best way to proceed in evaluating political risk is to zoom out and try to imagine trend-lines in terms of how a particular administration is most likely to think and act given the circumstances.
PSE Composite Index (PSEi) [link] rebalancing rumored to add Union Bank [UBP 93.0 1.0%] and DMCI [DMC 12.5 1.9%], delete Robinsons Land [RLC 15.0 1.2%] and Megaworld [MEG 2.1]. While speculative, the general consensus of analysts that follow the semi-annual rebalancing of the PSEi think that the index will swap RLC and MEG for UBP and DMC at its mid-February review of the liquidity and market-cap data from January to December of 2022. The index is rebalanced again in mid-August based on data from July 2022 to June 2023.
MB Quick Take: Both RLC and MEG underperformed in 2022, with RLC losing 20% of its value and MEG losing a shocking 33% over the past year. Multiplied out by the number of shares, we can determine the change in market capitalization (share price x outstanding shares), which reveals that RLC lost P19.5 billion in marketcap, while MEG lost an incredible P33.7 billion.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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