The fact that rice accounts for 9% of the local consumer basket and that the country imports most of its rice requirements makes the Philippines vulnerable to rice price upswings in the global market.<\/p>\n\n\n\n
The price of well-milled rice has risen recently (to P55.5\/kilo versus P54.76 in the second half of December) amid the risk of El Nino expected this year \u2013 among the reasons why we believe \u201cwe are not out of the woods yet\u201d in terms of inflation.<\/p>\n\n\n\n
Improved production and increased importation of rice assure the country of enough supply to meet demand until the next harvest season in March this year. In this, we highlight the commitment from Vietnam to supply the country with 1.5-2 million metric tons of rice per year over the next 5 years which was just signed during the President\u2019s visit to Vietnam. This should ease concerns about any possible supply shocks specially with El Nino in the horizon.<\/p>\n\n\n\n
The BSP targets 3.7% inflation for 2024, still on the higher end of its original target range of 2%-4% as it is cognizant of the risks that remain. The govt\u2019s efforts to prepare for El Nino and ensure that the country has enough food supply should help to keep inflation well anchored as expected this year. Our own inflation expectation this year is in-line with the govt\u2019s target and is premised on lower petroleum price and high base effect year-on-year.<\/p>\n\n\n\n
Our View: <\/strong>We have an overweight rating on the Consumer Sector as one of the ways to play the theme of slowing inflation. Consumer confidence should get further boost as food inflation peaks. <\/p>\n\n\n\n We emphasize our preference for consumer names that offer relatively higher operating leverage as they stand to benefit the most from a combination of rising top line and easing input costs \u2013 JFC, MONDE, CNPF and URC.<\/p>\n\n\n\n