Market Event

Inflation slowed in March to 4.5% year-on-year (YoY), down from February’s 4.7%. BSP Gov. Diokno said current monetary policy settings remain appropriate.

Opinion

Slight easing of inflation on a month-on-month basis was due to decline in food & non-alcoholic beverage inflation to 5.8% (vs. 6.7% in Feb) which has a ~38% weight in the CPI basket. This more than offset the huge climb in transport inflation at 13.8% (vs. 10.4% in Feb) that was caused by a 9% month-on-month (MoM) increase in Dubai crude oil.

April CPI print will likely remain tempered due to lockdown measures dampening demand, and as the pork & chicken price ceiling will remain in effect until tomorrow. The PH 10-year bond yield also offer a clue that inflation expectations has somewhat eased as it fell to 4.2%, a 50 bps drop from the high last March 23.

This offers a welcome respite for the PSEi. While one data is not yet a trend, the consumer discretionary sector may continue to recover. We reiterate our preference on the sector: URC (Target Price: P160), FB (Target Price: P77.00), PIZZA (Target Price: P8.80), and HOME (Target Price: P9.80)

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