The Philippine Statistics Authority reported that headline inflation in April accelerated to 3.8% — better than the consensus expectation of 4.1% and within the BSP\u2019s forecast range of 3.5%-4.3%. Inflation slightly quickened, though, from 3.7% in March.<\/p>\n\n\n\n
The key drivers: (1) Food inflation (~35% of CPI basket) rose by 6% mainly driven by rice; and (2) Transport prices rose by 2.6% year-on-year (y-y) due to higher pump prices during the month.<\/p>\n\n\n\n
We see the base effect, which helped temper inflation earlier in the year, fading
from hereon with May to July last year showing easing inflation from 6.6% to 4.7%.<\/p>\n\n\n\n
We expect inflation to reach 4% in May and 4.2% in June. Thus, we expect the BSP to remain on hold during its next Monetary Board meeting on 16th May and likely maintain its hawkish rhetoric. We recently cut our expectations to a 50-bps (0.50%) rate cut (from 75 bps) in the 1nd half (2H) of 2024.<\/p>\n\n\n\n
Our View: <\/strong>Despite inflation risks remaining, we hold on for now to our our index target of 7,300 for the year, backed by 10.3% EPS growth for 2024\/2025 and factors in inflation of 3.7% and 3.2% for 2024 and 2025, respectively. <\/p>\n\n\n\n Given the current inflation and geopolitical risk, we focus on defensives while still favoring quality names with cyclical recoveries and clear upside to earnings growth expectations in the near term. <\/p>\n\n\n\n Our top stock picks are SM, MBT, JFC, ALI, ICT, AP, MWC.<\/p>\n\n\n\n