September 17, 2018 Globally, Equities Recovered on Easing Trade Tension Following News That the US Has Reached out to China for Fresh Trade Talks

September 17, 2018 Globally, equities recovered on easing trade tension following news that the US has reached out to China for fresh trade talks. This positive development also pushed fixed income yields higher in the US, Germany and Japan as demand for safe-haven debt weaken. Meanwhile, oil prices rose on lower US crude oil inventories.

Global Equities  US equities ended higher on easing trade tensions amid news that the US has reached out to China for another round of trade 1.6% negotiations. However, late on Friday, it was also reported that 1.36% 1.4% President Trump still wanted to impose tariffs on USD200Bn Chinese 1.16% goods. The DJIA closed at 26,154.67 (+0.92% WoW) while the S&P 1.2% 1.07% 500 closed at 2,904.98 (+1.16% WoW). 0.92% 1.0%  European equities recovered last week on easing trade tensions. 0.73% 0.8% Furthermore, optimism returned to markets on positive developments in Brexit negotations, and as Italy showed willingness to adhere to EU 0.6% fiscal mandates. The MSCI Europe closed at 127.23 (+1.07% WoW). 0.4%  Asian equities also recovered on easing trade tensions following the 0.2% US and Europe indices. The MSCI APxJ closed at 519.89 (+0.73% 0.0% WoW). MSCI MSCI MSCI Asia DJIA S&P 500 World Europe ex-Japan

US Treasuries German Bunds 1.500 3.500 +3.0 bps 7-Sep 14-Sep 7-Sep 14-Sep 3.000 1.000 +5.7 bps +7.5 bps+8.2 bps +6.3 bps +5.1 bps 2.500 0.500 +2.9 bps +5.1 bps 2.000 +1.3 bps 0.000 1.500 -0.500 +4.7 bps 1.000 +1.1 bps +1.4 bps 0.500 -1.000 0.000 -1.500 3m 6m 2y 5y 10y 30y 1y 2y 5y 10y 20y 30y  US Treasury yields climbed on continued expectations of higher Japanese Government Bonds economic growth despite soft US core CPI in August (Act.: +2.2% YoY, Est.: +2.4% YoY). Yields rose 4.76 bps on average week-on-week. 0.700  German bund yields rose as positive developments in Brexit and Italy +0.1 bps decreased the demand for lower risk debt. On average yields rose 3.95 0.500 7-Sep 14-Sep bps WoW.  Japanese government bond yields rose as Tokyo stocks climbed to 0.300 +0.7 bps seven-month highs. This can be attributable to easing global trade tensions reducing demand for lower risk debt. On average, yields rose 0.43 bps +0.5 bps 0.100 +1.6 bps WoW.  Key events that transpired during the week: -0.100  US August CPI +0.2% MoM, +2.7% YoY, core CPI +0.1% MoM, +2.2% YoY -0.2 bps -0.1 bps -0.300  ECB core inflation projection revised down by 0.1% pt to 1.5% in 2019 and 1.7% in 2020 -0.500  US reached out to China for fresh round of trade talks 3m 6m 2y 5y 10y 30y  President Trump still wants to impose tariff on USD200Bn Chinese goods Commodities  Global oil prices climbed following the US Energy Information $bbl 14-Sep-2018 % Change Adminsitration's (EIA) report that US crude oil inventories dropped by 5.3Mn barrels last week. Also, prospects of declining Iranian oil Brent 78.09 1.64% supply continued to put upward pressure on oil prices. Brent rose WTI 68.99 1.83% 1.64% WoW to USD78.09/bbl, while WTI crude rose 1.83% WoW to USD68.99/bbl. BBG Commodity index 82.46 -0.15%

This material, which is strictly for information purposes only, is for your sole use, does not constitute a recommendation or an offer to sell or a solicitation to buy any financial product. Any information is subject to change without notice and BPI is not under any obligation to update or keep current the information contained herein. You are advised to make your own independent judgment with respect to the matter contained in this document. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. All funds managed by BPI Asset Management and affiliates are Trust and/or Investment Management Funds, which do not carry any guarantee of income or principal, and are NOT covered by the Philippine Deposit Insurance Corporation. Past performance is not a guarantee of future results. BPI Investment Funds are valued daily using the marked-to-market method. September 17, 2018 Local equities continued to decline on a ballooning trade deficit, and mounting concerns that the BSP remains to be behind the curve on inflation. On the other hand, local fixed income yields rose as the government tries to suppress supply-side inflationary pressures with non-tariff measures. Lastly, the Philippine Peso depreciated on lingering worries over the country's twin deficits.

 The Philippine Stock Exchange Index (PSEi) declined week-on-week on mounting concerns that the BSP remains to be behind the curve, as PSEi Snapshot it called off an off-cycle meeting meant to discuss immediate future rate hikes. Furthermore, the Philippines registered a ballooning trade deficit Total Net Foreign Flows (USD Mn) PCOMP of US$3.55Bn (+171.7%) in July as import growth continued to 0 7,700 accelerate at a much faster rate than export growth. The PSEi closed at -5 7,600 7,413.15 (-2.44% WoW). -10  Globe Telecom, Inc. (PSE Ticker: GLO) was the best performer for the -15 7,500 week on foreign buying, as investors may have taken Pres. Duterte's -20 7,400 antagonistic rhetoric against the telcos as futher signs of delay for the -25 -2.44% WoW; 3rd player. Meanwhile, Aboitiz Equity Ventures, Inc. (PSE Ticker: Net Foreign Selling: $65.44 Mn AEV) was the second worst performer for the week (-9.38% WoW) as -30 7,300 market participants anticipate the FTSE rebalancing on Sept. 21. 9/7 9/10 9/11 9/12 9/13 9/14  Key events that transpired during the week: PSEi Top/Bottom Performers  The NAIA Consortium has been granted original proponent status for its unsolicited proposal to rehabilitate, upgrade, expand, GLO 4.18% operate, and maintain the NAIA for a period of 15 years. The NAIA FGEN 1.71% Consortium’s proposal shall be subject to review and approval by the NEDA Board and to a Swiss Challenge. ICT 1.45%  Megawide Construction Corp. (PSE Ticker: MWIDE) is looking to GTCAP -6.38% participate in the bidding for the Pasig River Expressway, with AEV -9.38% Philippine Skylanders International, Inc. (PSI) disclosing on Monday that it signed a memorandum of agreement with the latter. Although JGS -9.80% no details on the project were disclosed, the company previously said it was eyeing to secure Php24Bn of contracts by EOY. -15% -10% -5% 0% 5%  Local fixed income yields rose amidst efforts by the administration to start Local Bond Market Movements addressing supply side inflation, mulling the removal of all non-tariff barriers on 7.471 7.539 7.550 7.557 food imports. On average, yields rose 28.35 bps WoW. 7.5 6.673 6.875  Key events that happened during the week:  Official data released by the Bureau of Treasury (BTr) showed that the combined gross external and domestic borrowings of the government in July jumped 213% from P14.2 billion during the same month last year. 5.5 5.527 5.791 5.591 5.735  The Bangko Sentral ng Pilipinas (BSP) reported that the country's current 5.666 5.485 account deficit swelled to USD 3.1 billion in the first six months of 2018, higher than the USD 133 million shortfall recorded in the same period last year. The figure is estimated to be equivalent to 1.9% of GDP, hitting the central bank's 3.5 target for the full year of 2018. 9/7 9/10 9/11 9/12 9/13 9/14  The Economic Development Cluster (EDC) submitted a draft executive order to the President, dealing with the removal of the administrative constraints and 2Y PDST-R2 10Y PDST-R2 nontariff barriers on food items that were the most significant contributors to  The Philippine peso depreciated as the country maintains its twin inflation in the past two months. deficits, with the current account deficit widening to USD3.1 billion in Foreign Exchange 1H18 from USD133 million in 1H17. This is equivalent to 1.9% of GDP and hits the full year target of the BSP for 2018. The USD/PHP USD/PHP Previous Close 09/07/18 53.730 pair ended at 53.970 (+0.45% WoW). Closing 09/14/18 53.970  The Euro appreciated against the Dollar as the US posted softer- EUR/USD Previous Close 09/07/18 1.1553 than-expected economic data with CPI slowing down to 2.7% from 2.9% last month even as wage growth increased from 2.7% to 2.9%. Closing 09/14/18 1.1625 The EUR/USD pair ended at 1.1625 (+0.62% WoW).

Foreign Exchange USD/PHP EUR/USD 54.50 1.1700

54.00 1.1600

53.50 1.1500 10-Sep 11-Sep 12-Sep 13-Sep 14-Sep

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