FREE Market Commentary: February 2018 Inflation Surges to 4.5%

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Market Issue or Event

February Inflation Surges to 4.5%

The Philippine Statistical Authority (PSA) reported inflation data of 3.9% (using 2012 base year) and 4.5% (using 2006 base year).

The uptrend resulted from faster price growth of the heavily weighted food and nonalcoholic beverages index at 4.8%, and double-digit growth of alcoholic beverages and tobacco index at 16.9%. According to NEDA, the temporary impact of the TRAIN law and continued peso depreciation is seen to impact price movements over the next months.

 

Our Partner Broker’s View and Commentary

Inflation figures came out faster-than-expected as the median estimate was at 4.2% (note that the basis of the median forecast is the 2006 base year).

This led to another weak session yesterday, with the PSEi already hovering near its key support at 8,320. Meanwhile, the BSP said that they will not necessarily react to the quickening inflation. This means that a March 22 hike may not be on the table yet.

Higher inflation (slower consumer spending) and weaker peso (higher raw material costs) may temper earnings of consumer companies. Thus, for those looking at consumer stocks, we recommend to Buy on weakness PIZZA (Consensus Target Price: PHP 16.30) due to its high margins which provide buffer to rising costs and JFC (Consensus Target Price: PHP 286.00) due to its pricing power.

 

This report is prepared by PinoyInvestor’s partner broker below. Sign up to this stock broker to avail of their complete trading brokerage services:

AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

AP Securities (formerly Angping & Associates Securities) is one of PinoyInvestor’s partners in delivering superior and reliable stock research reports that help Filipino investors make smart stock investing decisions! Learn more about them here.