January 28, 2019

Global equities ended mixed, with investor optimism lingering on a resolution in the US-China trade war spat and solid US corporate earnings. Gains in US markets however, were capped by fears of a global economic slowdown. Consequently, global yields broadly declined as appetite for safe haven assets increased. Lastly, oil prices declined on an oil output surge amid demand concerns.

Global Equities  US equities ended mixed as investors weigh solid corporate earnings in the US and growing fears of a global economic slowdown. Also, 2.0% President Trump's temporary agreement with Congress to reopen the government helped improve sentiment. The DJIA closed at 24,737.20 1.21% (+0.12% WoW) while the S&P 500 closed at 2,664.76 (-0.22% WoW). 1.0%  European equities closed marginally higher on lingering hopes for a resolution in the US-China trade spat, coupled with a boost from the ECB's decision to hold fire on rates. Gains were limited however, on 0.05% 0.12% 0.12% ECB President Draghi's bearish economic outlook on the Eurozone. 0.0% The MSCI Europe closed at 120.72 (+0.21% WoW).  Asian equities managed to end higher despite worries on the -0.22% Chinese government's planned stimulus measures and reports that -1.0% the White House cancelled a trade planning meeting with China, with MSCI MSCI MSCI Asia DJIA S&P 500 investors still managing to be mildly optimistic. The MSCI APxJ ended at 504.83 (+1.21% WoW). World Europe ex-Japan

US Treasuries German Bunds

4.000 1.000 18-Jan 25-Jan 18-Jan 25-Jan -3.1 bps 0.500 -9.5 bps 3.000 -2.4 bps +0.8 bps -2.6 bps 0.000 -9.2 bps -2.0 bps -0.8 bps 2.000 -6.9 bps -0.500 +3.7 bps +1.1 bps +0.1 bps 1.000 -1.000

0.000 -1.500 3m 6m 2y 5y 10y 30y 1y 2y 5y 10y 20y 30y  US Treasury yields declined as investors sought safe-haven assets amidst expectations of a global economic slowdown. On average, yields Japanese Government Bonds declined by 1.68bps WoW.  German bund yields ended lower amid ECB President Draghi's negative 0.700 outlook on Eurozone economy. On average, yields declined 3.45bps WoW. -1.1 bps 0.500 18-Jan 25-Jan  Japanese bond yields moved slightly lower on the back of stronger demand for safe-haven assets. On average, yields dropped 0.9bps WoW. 0.300  Key events that transpired during the week: -1.6 bps  International Monetary Fund (IMF) downgraded its estimates on global 0.100 growth to 3.5% YoY (-0.2%) in 2019 and 3.6% YoY (-0.1%) in 2020. -0.6 bps -0.7 bps  European Central Bank (ECB) kept its key interest rate unchanged and -0.100 reaffirmed that rates will remain at current levels through the summer of 2019 or longer, if necessary. -0.300 -1.2 bps -0.2 bps  President Trump signed a temporary deal with Congress to reopen the US government for three weeks until Feb 15. -0.500 3m 6m 2y 5y 10y 30y Commodities  Global oil prices dropped as an output surge increased US fuel stocks, with crude inventories rising by 8 million barrels last week. A $bbl 25-Jan-2019 % Change report from energy services firm Baker Hughes said that 10 oil rigs were added, bringing the total count to 862. While a global economic Brent 61.64 -1.69% slowdown amid US-China trade disputes heightened concerns on oil WTI 53.69 -0.20% demand, supply cuts led by OPEC and sanctions on Venezuela lend support to oil prices. Brent crude fell 1.69% WoW to USD61.64/bbl, BBG Commodity index 81.07 -0.38% while WTI crude dipped 0.20% WoW, closing at USD53.69/bbl.

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The Philippine Stock Exhange Index was flat while local fixed income yields fell after the release of 4Q18 GDP print. Meanwhile, the USD/PHP pair weakened and the EUR/USD pair strengthened as President Trump reached an agreement to resume the Federal government.

 The Philippine Stock Exchange Index (PSEi) was flat with a slight upward bias as market participants digested the slower-than-expected 4Q18 GDP print at 6.1% YoY (est. 6.3%). While consumer spending and PSEi Snapshot exports recovered, capital formation led by durables dragged growth. This Total Net Foreign Flows (USD Mn) PCOMP leads the full year 2018 GDP at 6.2%, still lower than consensus estimates 30 8,100 of 6.3% YoY. The PSEi closed at 8,053.2 (+0.08% WoW). 20  The top performer of the week was San Miguel Corporation (PSE Ticker: SMC) which rose 8.36% WoW as it started construction activities 10 on the New Manila International Airport project worth P735.6bn. The 0 8,000 company plans to tap South Korea’s Incheon International Airport as a -10 partner for the project. Meanwhile, Aboitiz Equity Ventures (PSE Ticker: -20 +0.08% WoW; AEV) was the worst performer after rising 13.17% last week. Investors -30 Net Foreign Buying: $57.99 Mn 7,900 took profit, leading AEV to -8.25% WoW. 1/18 1/21 1/22 1/23 1/24 1/25  Key events that transpired during the week:  PLDT Inc. (PSE Ticker: TEL) is open to participate in the government's PSEi Top/Bottom Performers push for shared telecommunications infrastructure. The Department of Information and Communications Technology (DICT) signed five tower SMC 8.36% companies to enter the Philippine market, where a number of these tower companies have approached PLDT if they are willing to cooperate on the TEL 6.50% new tower. URC 4.48%  SM Prime Holdings, Inc. (PSE Ticker: SMPH) plans to open 4 malls in the provinces, particularly SM Center Dagupan, SM City Olongapo Central, SECB -3.06% SM City Butuan, and SM Mindpro Citimall in Zamboanga City. With this, SCC -3.96% SMPH's shopping mall count is at 76 in the Philippines and 7 in China. The new malls with combined gross floor area (GFA) of 179,000 square meters AEV -8.25% are part of the company's focus on locating new malls in provinces as part of its strategy to take advantage of economic growth in such areas. -20% -10% 0% 10% 20% Local Bond Market Movements  Local fixed income yields fell across the board after the release of the GDP print at 6.1% for 4Q18 and 6.2% for the full year, both 7.0 weaker-than-expected. On average, yields fell 6.21bps.  Key events that happened during the week:  The Philippine Statistics Authority (PSA) announced that the country's 6.548 6.482 6.500 6.500 6.470 6.478 gross domestic product (GDP) grew by 6.1% YoY in 4Q18, bringing the 6.5 fulll-year 2018 GDP to 6.2%, the slowest in the past three years. This was attributed to sluggish growth in the agricultural and manufacturing sectors and also the high inflation rate, among other things. 6.216 6.221 6.215 6.220  The Bank of the Philippine Islands (PSE Ticker: BPI) and IBM signed a 6.230 6.216 US$260 million multi-year services agreement under which the latter will 6.0 provide BPI information technology (IT) infrastructure services. The 1/18 1/21 1/22 1/23 1/24 1/25 agreement will help BPI achieve its digital transformation agenda which 2Y PDST-R2 10Y PDST-R2 includes the continual upgrades for bank branches with new technology as  The Philippine Peso weakened marginally against the US Dollar well as other financial services applications for customers. after the release of Philippine GDP, but it recovered when the US Foreign Exchange Dollar fell amid resumption of the Federal government. The USD/PHP Previous Close 01/18/19 52.515 USD/PHP pair closed at 52.535 (-0.04% DoD). Closing 01/25/19 52.535  The Euro recovered last Friday in a risk-on environment after an agreement has been reached to temporarily end the US government EUR/USD Previous Close 01/18/19 1.1363 shutdown. The EUR/USD pair closed at 1.1406 (+0.38% DoD). Closing 01/25/19 1.1406

Foreign Exchange USD/PHP EUR/USD 53.00 1.1500

1.1400

52.00 1.1300 21-Jan 22-Jan 23-Jan 24-Jan 25-Jan

Sources: BPI, Business World, PDI, Phil Star, Manila Bulletin, Reuters, Briefing, Bloomberg, CNN, Dow Jones, The Wall Street Journal, CNBC