Download equity fund - Sun Life Financial

March 27, 2013
EQUITY FUND
MARKET REVIEW
Despite trading in negative territory for most part of the month,
the PSEi was up 1.87% in March to close at 6,847.4 points,
bringing YTD gains to a solid 17.8%. During the last trading day
of the month, the index posted its 24th record close and biggest
one-day gain for the year as it surged 2.74% or 182 pts after
the Philippines bagged its very first investment grade credit
rating from Fitch. The credit watchdog raised the country's
rating to BBB- from BB+ with a stable outlook, owing to a
resilient economy and improved fiscal management. Across the
board buying was seen as investors anticipate increased
foreign inflows to Philippine assets, including stocks, as a result
of the upgrade.
Macro-indicators remained healthy with January OFW
remittances expanding 8.4% YoY to US$1.86bn. The Bangko
Sentral has a 5% growth projection for remittances this year.
Remittances hit $20.1 billion last year, up 7.2%. March inflation
came in slower at 3.2% from 3.4% in Feb, and lower than
consensus expectations of 3.4%. As a result, the BSP left
benchmark policy rate unchanged at 3.5%. Likewise, the SDA
rate was cut by another 50 bps to 2.5% from 3% to help temper
the peso’s rise. This is the second cut for the year. Despite the
SDA rate cuts, SDA placements rose 2.4% MoM to P1.86tn in
Feb, still up 10% from end-December. For the month, net
foreign buying was at US$204mn, helped by equity placements
of Ayala Land Inc. ($300M), Rizal Commercial Banking Corp.
($150m), and Century Properties Group ($40m).
OUTLOOK AND STRATEGY
At current levels, the PSEi trades at 20.4x this year’s earnings,
much higher than its historical average of 15x. We believe that
stock prices should take a temporary pause for base building in
preparation for the next leg up. First quarter corporate earnings
results will dictate market sentiment in the short-run.
Consensus expectation is for earnings to expand 12-15% this
year. Technical indicators also show that momentum has been
waning as profit taking ensues near the 7,000 index level.
Support levels are at 6,650 then 6,500.
Fund Details
Launch Date
Fund Size
Net Asset Value Per Share
5-Apr-00
Php
Php
12,990,791,818.70
4.1337
Top 10 Equity Holdings
Company
Ayala Land Inc
SM Investments Corp.
Phil Long Distance Telephone Co.
Ayala Corporation
Metropolitan Bank & Trust Company
Alliance Global Group Inc
DMCI Holdings Inc
Lafarge Republic, Inc.
Rizal Commercial Banking
Banco de Oro Universal Bank
% to Total Assets
7.0%
6.7%
5.6%
5.3%
4.7%
4.1%
3.9%
3.7%
3.6%
3.5%
March 27, 2013
BALANCED FUND
MARKET REVIEW
Despite trading in negative territory for most part of the month, the PSEi
was up 1.87% in March to close at 6,847.4 points, bringing YTD gains to a
solid 17.8%. During the last trading day of the month, the index posted its
24th record close and biggest one-day gain for the year as it surged
2.74% or 182 pts after the Philippines bagged its very first investment
grade credit rating from Fitch. The credit watchdog raised the country's
rating to BBB- from BB+ with a stable outlook, owing to a resilient
economy and improved fiscal management. Across the board buying was
seen as investors anticipate increased foreign inflows to Philippine assets
as a result of the upgrade. Likewise, peso government bonds continued its
robust rally gaining 10% in MoM, mostly on the 20 and 25-yr tenors.
Macro-indicators remained healthy with January OFW remittances
expanding 8.4% YoY to US$1.86bn. The Bangko Sentral has a 5% growth
projection for remittances this year. Remittances hit $20.1 billion last year,
up 7.2%. March inflation came in slower at 3.2% from 3.4% in Feb, and
lower than consensus expectations of 3.4%. As a result, the BSP left
benchmark policy rate unchanged at 3.5%. Likewise, the SDA rate was cut
by another 50 bps to 2.5% from 3% to help temper the peso’s rise. This is
the second cut for the year. Despite the SDA rate cuts, SDA placements
rose 2.4% MoM to P1.86tn in Feb, still up 10% from end-December. For
the month, net foreign buying was at US$204mn, helped by equity
placements of Ayala Land Inc. ($300M), Rizal Commercial Banking Corp.
($150m), and Century Properties Group ($40m).
OUTLOOK AND STRATEGY
At current levels, the PSEi trades at 20.4x this year’s earnings, much
higher than its historical average of 15x. We believe that stock prices
should take a temporary pause for base building in preparation for the next
leg up. First quarter corporate earnings results will dictate market
sentiment in the short-run. Consensus expectation is for earnings to
expand 12-15% this year. Technical indicators also show that momentum
has been waning as profit taking ensues near the 7,000 index level.
Support levels are at 6,650 then 6,500.
On fixed income, profit taking and rotational trading could stretch on, as
investors turn neutral on duration amid lack of fresh leads. Thus, any yield
curve compression particularly in the long end would be mild and modest,
at least in the near term. The reduction in the SDA rates has toned down
the peso appreciation. Against this backdrop, further cuts to the tune of
50-100 bps are on the cards in the next 9 months. While the cuts would
reduce Bangko Sentral’s sterilization costs, no meaningful decline in SDA
deposits are seen just as OFW and BPO dollar revenues are expected to
remain strong.
Top 5 Equity Holdings
Company
SM Investments Corp.
Ayala Land Inc
Phil Long Distance Telephone Co.
Ayala Corporation
Metropolitan Bank & Trust Company
% to Total Assets
5.4%
5.4%
4.2%
3.9%
3.6%
Top 5 Fixed Income Holdings
Fund Details
Launch Date
Fund Size
Net Asset Value Per Share
5-Apr-00
PHP
Php
15,528,975,832.87
3.9334
Security
Maturity Date
1-Apr-13
Special Savings Account
29-Sep-36
Treasury Notes
19-Jul-31
Treasury Notes
16-Dec-35
Treasury Notes
24-Oct-37
Treasury Notes
% to Total
Assets
7.1%
7.0%
4.6%
4.0%
2.4%
March 27, 2013
BOND FUND
MARKET REVIEW
Peso government bonds continued its robust rally in March
that was capped by a blistering finish just as Fitch raised the
Philippines’ sovereign credit rating to investment grade on
the last trading day. Specifically, the country’s foreign
currency sovereign rating and the local currency rating were
raised to BBB- from BB+ with stable outlooks. Remarkably,
Fitch was the first of the three major international rating
agencies to upgrade the Philippines to BB+ in June 2011.
The latest rating action leaves Fitch’s rating one notch
above Moody’s and S&P, both with a positive outlook.
Even before the ratings upgrade, bond yields have declined
following the release of the 2nd quarter auction schedule
that indicated the absence of long bond issues. The 20-year
bond dipped to 3.625% in the primary auction in March,
some 42.5 bps lower than a similar tenor in secondary
market rate.
Philippine headline inflation was 3.2% y-o-y in March, down
from 3.4% in February. Key price drivers were tobacco and
alcohol products following the passage of the Six Tax
Reform Law in January. Core inflation was flat at 3.8% amid
lower food and energy prices as well as the stronger
currency.
In the March Monetary Board meeting, the Bangko Sentral
kept its benchmark overnight borrowing rate steady at 3.5%.
However, the Bangko Sentral slashed the rate on its Special
Deposit Accounts (SDAs) by 50 bps to 2.5% across all
tenors. In the year-to-date, total SDA rate cuts has reached
162.5 bps since the first reduction in January this year.
Return on investments (ROI) leaped to 16.6% y-o-y
compared to 8.33% in February. Further, the NAVPS was
higher at Ps2.8165 from Ps2.6528 for the same period.
OUTLOOK AND STRATEGY
Top 5 Fixed Income Holdings
Security
Maturity Date
Treasury Notes
29-Nov-25
Treasury Notes
16-Dec-35
Treasury Notes
26-Jan-31
Treasury Notes
27-Jan-16
Treasury Notes
24-Apr-17
% to Total Assets
14.1%
12.2%
9.5%
8.5%
6.9%
Fund Details
Launch Date
5-Apr-00
Fund Size
PHP
Net Asset Value Per Share Php
5,957,167,157.33
2.8165
The robust liquidity driven rally and risk-on sentiment rally
following the Fitch rating upgrade appear to have drained
away much of the value in the long-dated bonds. Profit
taking and rotational trading could stretch on, as investors
turn neutral on duration amid lack of fresh leads. Thus, any
yield curve compression particularly in the long end would
be mild and modest, at least in the near term.
The reduction in the SDA rates has toned down the peso
appreciation. Against this backdrop, further cuts to the tune
of 50-100 bps are on the cards in the next 9 months. While
the cuts would reduce Bangko Sentral’s sterilization costs,
no meaningful decline in SDA deposits are seen just as
OFW and BPO dollar revenues are expected to remain
strong.
March 27, 2013
GS FUND
MARKET REVIEW
Peso government bonds continued its robust rally in March
that was capped by a blistering finish just as Fitch raised the
Philippines’ sovereign credit rating to investment grade on
the last trading day. Specifically, the country’s foreign
currency sovereign rating and the local currency rating were
raised to BBB- from BB+ with stable outlooks. Remarkably,
Fitch was the first of the three major international rating
agencies to upgrade the Philippines to BB+ in June 2011.
The latest rating action leaves Fitch’s rating one notch
above Moody’s and S&P, both with a positive outlook.
Even before the ratings upgrade, bond yields have declined
following the release of the 2nd quarter auction schedule
that indicated the absence of long bond issues. The 20-year
bond dipped to 3.625% in the primary auction in March,
some 42.5 bps lower than a similar tenor in secondary
market rate.
Philippine headline inflation was 3.2% y-o-y in March, down
from 3.4% in February. Key price drivers were tobacco and
alcohol products following the passage of the Six Tax
Reform Law in January. Core inflation was flat at 3.8% amid
lower food and energy prices as well as the stronger
currency.
In the March Monetary Board meeting, the Bangko Sentral
kept its benchmark overnight borrowing rate steady at 3.5%.
However, the Bangko Sentral slashed the rate on its Special
Deposit Accounts (SDAs) by 50 bps to 2.5% across all
tenors. In the year-to-date, total SDA rate cuts has reached
162.5 bps since the first reduction in January this year.
Return on investments (ROI) surged to 15.73% y-o-y from
8.35% in February. Moreover, the NAVPS jumped to
Ps1.6206 from Ps1.5441 for the same period.
OUTLOOK AND STRATEGY
Top 5 Fixed Income Holdings
Maturity
Security
Date
Treasury Notes
29-Nov-25
Treasury Notes
4-Oct-14
Special Savings Account
1-Apr-13
Treasury Notes
24-Apr-17
Treasury Notes
29-Nov-32
Fund Details
Launch Date
1-Mar-05
Fund Size
Php
Net Asset Value Per Share Php
% to Total Assets
12.7%
12.5%
10.8%
9.9%
8.1%
640,499,357.54
1.6206
The robust liquidity driven rally and risk-on sentiment rally
following the Fitch rating upgrade appear to have drained
away much of the value in the long-dated bonds. Profit
taking and rotational trading could stretch on, as investors
turn neutral on duration amid lack of fresh leads. Thus, any
yield curve compression particularly in the long end would
be mild and modest, at least in the near term.
The reduction in the SDA rates has somehow toned down
the peso appreciation. Against this backdrop, further cuts to
the tune of 50-100 bps are on the cards in the next 9
months. While the cuts would reduce Bangko Sentral’s
sterilization costs, no meaningful decline in SDA deposits
are seen just as OFW and BPO dollar revenues are
expected to remain strong.
March 27, 2013
MONEY MARKET FUND
MARKET REVIEW
In the March Monetary Board meeting, the
Bangko Sentral kept its benchmark overnight
borrowing rate steady at 3.5%. However, the
Bangko Sentral slashed the rate on its Special
Deposit Accounts (SDAs) by 50 bps to 2.5%
across all tenors. In the year-to-date, total SDA
rate cuts has reached 162.5 bps since the first
reduction in January this year.
Reductions in the SDA rates have somehow
helped the Bangko Sentral in curbing the peso
appreciation. Against this backdrop, further cuts
to the tune of 50-100 bps are on the cards in the
next 9 months. While the cuts would reduce
Bangko
Sentral’s
sterilization
costs,
no
meaningful decline in SDA deposits are seen just
as OFW and BPO dollar revenues are expected
to remain strong. Notably, headline inflation
trekked lower than consensus to 3.2% y-o-y in
March, down from 3.4% in February.
Return on investment (ROI) dropped to 0.1241%
y-o-y from 0.1596% while the NAVPS was flat at
Ps1.1298.
Top 3 Fixed Income Holdings
Security
Maturity Date
% to Total
Assets
Special Savings Account
4-Apr-13
39.2%
Special Savings Account
2-Apr-13
35.9%
Special Savings Account
1-Apr-13
19.7%
Fund Details
Launch Date
Fund Size
Net Asset Value Per Share
1-Jul-04
Php
Php
285,433,974.62
1.1298
March 27, 2013
DOLLAR ADVANTAGE FUND
MARKET REVIEW
Global equities continued to post gains on the back of
better than expected employment and manufacturing
data in the US, and after EU officials clinched a bailout
compromise with Cyprus. February non-farm payrolls in
the US beat expectations at 236k, bringing
unemployment rate lower to 7.7% from 7.9%. This was
very close to the 250k threshold which economists
believe is needed for a sustained recovery in the US jobs
market. Likewise, US Feb ISM non-manufacturing index
hit its highest level for the past 3 years at 56%,
suggesting that the US economy continues to expand. In
Europe, EU officials and Cyprus agreed to levy a tax on
bank account holders more than 100k euros, instead of
initial plans of including small depositors. This somehow
contained the bank runs and eventually calmed the
markets but fears of a déjà vu in other peripheral nations
still persist. By the end of the first quarter, the global
equities have posted decent gains of 6% led by US
(+10%) and Japan (+20%). Europe (+2%) and Asia-ex
Japan (+1%) were the laggards amid weak economic
date in EU and China cooling down its real estate
market.
OUTLOOK AND STRATEGY
Top 5 Offshore MF Holdings
Fund Name
% to Total Assets
Franklin U.S. Opportunities Fund
9.3%
Templeton Global Bond A
9.1%
Morgan Stanley U.S. Advantage Fund
9.1%
Aberdeen Global Asia Pacific Equity Fund
8.7%
PIMCO GIS Total Return Bond Fund
8.7%
Fund Details
Launch Date
Fund Size
Net Asset Value Per Share
2-Jul-02
USD
USD
30,976,645.17
2.9412
Interestingly, the US equity markets are now posting new
all-time highs with the S&P 500 and Dow Jones
Industrial Average trading near 1,600 and 15k levels,
respectively. Investors will continue to flock to equities,
from bonds, as central banks remain in a quantitative
easing mode amid anemic economic recovery in
developed markets. Focus had shifted from the Euro
zone debt crisis and into improvements in unemployment
and economic growth data. This can be seen on how the
Japanese government and US set targets on
unemployment and inflation in implementing their
respective QEs
Top 5 Fixed Income Holdings
Security
Special Savings Account
Special Savings Account
ROP34
PLDT17
ROP30
Maturity Date
02-Apr-13
01-Apr-13
23-Oct-34
06-Mar-17
02-Feb-30
% Total
Assets
8.1%
3.3%
3.0%
1.5%
1.1%
March 27, 2013
DOLLAR ABUNDANCE FUND
MARKET REVIEW
Philippine cash bonds remained hostage to US Treasury
movements and traded virtually in tandem with the 10-year
benchmark tenor. Speculations over an early withdrawal of
monetary stimulus on the back of positive macro-economic
data releases as well as soaring stock indices have put US
Treasuries under price pressure. Treasuries fell, pushing yields
on the 10-year note around the 2% level after better-thanexpected jobless claims.
Fitch raised the Philippines’ sovereign credit rating to
investment grade on the last trading day of March. Specifically,
the country’s foreign currency sovereign rating and the local
currency rating were raised to BBB- from BB+ with stable
outlooks. Remarkably, Fitch was the first of the three major
international rating agencies to upgrade the Philippines to BB+
in June 2011. The latest rating action leaves Fitch’s rating one
notch above Moody’s and S&P, both with a positive outlook.
In Europe, the notorious Cyprus bail-in package enforced at the
behest of the Troika has stoked investor concerns over the
security of deposits in European banks just as monetary
officials hinted that the Cyprus template could be replicated in
the future. Notably, cash-strapped Slovenia increasingly
appears to be the next bailout candidate.
Further, Fitch Ratings slashed Italy's sovereign credit rating by
one notch to BBB+ combined with a negative outlook, citing
political uncertainty after the country's inconclusive election and
rising debt. Fitch opined that the consequent political
uncertainty and non-conducive backdrop for further structural
reform measures constitute a further adverse shock to the real
economy amid the deep recession.
Return on investments (ROI) was slightly lower at 4.36% y-o-y
compared to 4.41% in February. Also, the NAVPS dropped to
US$2.8626 from US$2.8725 for the same period.
OUTLOOK AND STRATEGY
Top 5 Fixed Income Holdings
Security
ROP34
ROP25
ROP30
ROP20
ROP37
Maturity Date
23-Oct-34
16-Mar-25
2-Feb-30
20-Jan-20
13-Jan-37
Fund Details
Launch Date
1-Mar-05
Fund Size
USD
Net Asset Value Per Share USD
% to Total
Assets
22.5%
21.8%
9.0%
8.4%
6.3%
25,165,384.39
2.8631
ROP bond prices will continue to take its cue from US treasury
trends with the benchmark 10-year UST expected to hover
within the 2% level in the near term. While some Fed officials
hinted that the monthly bond purchase program could end in
December 2013, US economic growth has yet to gain full
traction.
Locally, the Fitch investment grade rating could set off a rerating by S&P and Moody’s within the year. A second
investment grade rating would certainly open the floodgates
and allow more foreign funds to enter the Philippine financial
markets. While geopolitical tensions in the Korean Peninsula
continue to simmer by the day, the risk and threat of a breakout
in hostilities that could cause capital flow reversal in Emerging
Asia are considered remote.