March posts lower inflation as the PSE continues to break records.

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Cebu, PHILIPPINES, April 8, 2015 – The lower price of oil has begun to have a material effect on the lives of Filipinos. Following the February’s headline inflation rate of 2.5%, March figures released by NEDA yesterday showed a slight fall in inflation yet again to 2.4%, an 18 month low, and well within the BSP target of 2.1-2.9%

This has been mainly driven by cheaper food, a culmination of factors including a reduction in production costs due to the lower oil price, and the stockpiling of cheaper rice, the global market of which is still working through its system a glut of Thai rice supply following the end of subsidies last year.

Inflation in non-food items, however, rose marginally (0.6% to 0.9% Feb-Mar) due to the recent stabilization of the oil price, and the goods affected, electricity and fuel, more rapidly responding to these changes.

There are still issues with the capacity in electricity generation within the country, leading to particular sensitivity to rising costs, which risks putting upward pressure on inflation, but all factors combined, the Philippines economy continues to showcase strength.

In other news, this strength was reflected in the PSE’s (Philippine Stock Exchange) robust activity. Trading is up over 40% for the first quarter of 2015, largely driven by buoyant local investors and an influx of foreign cash.

Net foreign buying increased by 182% from the same period last year from P17.33 billion to P48.87 billion. This is likely to continue as monetary policies across the world continue to align towards more expansionary outlooks (all that money has to go somewhere, and emerging economies, showing strong fundamentals and growth potential are ripe to capitalize on that).

This has boosted the PSEi to it’s highest point in its existence reaching an intra-day high of 8,098.68 index points just yesterday.

The growth among the six sectors was as to be expected. Property and Holding Firms sectors grew at 13.6% and 12.3% respectively. Financials rose 9.9% and the Industrial sector grew by 7.1%. The Services and Mining and Oil sectors posted lower gains, 1.2% and 2.1% respectively.

While Li & Hungerford has previously stated that it was of the belief that the PSE showed signs of overheating, promising macroeconomic conditions, and the continued liberalization of the economy, combined with the still low base means, while this meteoric rise is unprecedented, and is likely to level off over the next 12 months, we believe these gains are sustainable, there is no reason to expect a major re-correction.

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