Trading Outlook for March 15, 2010
Institutional investors might heed for directions whether or not China might consider new measures to cap growth in its economy, which could prompt continued profit-taking on Monday. Declines might be limited however, as the move is paralleled to FOMC's upcoming meeting on US interest rates on Tuesday (US time). With ample liquidity in the regional financial system, most will seize on equities' weakness to position, or realign their portfolios. Trade selectively & optimize on trading ranges. Immediate support is 3,040-3,050, resistance at 3,090-3,100.

Weekly Outlook for 15 - 19 March 2010
Local barometers scaled to an intra-week high of 3,130, even after Friday's profit-taking prompted the PSEi to finish at 3,072.91 (+1.05% week-on-week). Part of the support came from improved economic indicators in the US, as well as European Commission President Romano Prodi's mid-week assurance, that Greece's financial woes were 'over'. At home, players lauded the deceleration in February's inflation to 4.2% from January's 4.3%, as well as upbeat export performance in January (+42.5%). The local central bank also upheld their status quo on overnight borrowing rates, while gross international reserves reached $45.7bn last month, enough to support 9.3 months of import. Holding firms led the ascent (+14%), but was capped by declines in mining-oil (-10.3%). Among the roster of gainers were: DMC (+13.9% at P12.25/share); AEV (+13.3% at P12.75), after unit AP announced plans to raise P10bn via bonds & loans to prepare its cash chest for the bidding of state-owned power generation assets; JGS (+12.7% at P8); & FPH (+0.98% at P51.50), after confirming its $100mn investment for a solar wafer manufacturing facility in Batangas. VLL was also up (+4.2% at P1.98), following plans to spend P10bn in capex this year. Meanwhile, there were others that fell: MEG (-4.5% at P1.26); TEL (-4.3% at P2,560); PX (-3.6% at P13.50); & MER (-2.8% at P173), after energy regulators considered effecting higher but staggered implementation of generation charges in consumers' subsequent billings. Participation was relatively flat at P2.855bn on average (-3.8%), although prior week's net foreign selling of P34mn reversed to P328mn net foreign buying. Market breadth skewed in favor of optimists, 55-47.

Staying aloft 3,000
Balancing the odds.  China's headline inflation came in at 2.7% for February, higher than economists' 2.5% estimate, and faster than January's 1.5%. In recap, officials from China are eyeing to keep inflation at 3% for the entire stretch in 2010, even with increased liquidity in its system. Thus far, market players have anticipated additional measures might soon be considered by China's central bank to put a lid on excessive growth, especially after manufacturing production grew 21% in January-February this year. Overall, investors' sentiment along this direction will be balanced-out with results from the US Federal Reserve Open Market Committee's (FOMC) meeting on 16 March (US time). We anticipate 'minor blips' in case China implements additional tightening measures, as this would be doused-off by probabilities for the US FOMC to maintain rates to sustain the pace of recovery this year.

Proper timing for capex rollout.  The decision of local monetary authorities to maintain benchmark interest rate seems supported by the fact domestic liquidity (or M3) slipped 0.3% month-on-month last January. M3 was also down 8.1% for the month in review, following December's +8.3%. Meanwhile, although growth in lending slowed to 5% in January against December's +10%, results improved 1.8% from December 2009's level. This may be driven by select sector's aggressive capex rollout this year, especially for large-ticket projects of property & utility firms, among others. Moving forward, this gauge may gather steam towards 2Q10, as companies seize on prevailing low borrowing costs.

Eagerness for improved returns.  Supported by upside corporate earnings growth opportunities & strong liquidity within the region's financial system, local barometers are likely to stay above the 3,000 mark this week. Aggregate tenders in the Bureau of Treasury's latest auction for one, reached P37bn against P8.5bn offer, and 91-day TBill rates continued to trendlower (-5.8 basis points at 3.863%). With comparative yields deemed unappealing, fund managers' zest to search for better returns will continue. Immediate support is 3,000-3,020, resistance at 3,150-3,170.