ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXVIX_July 18 to 22_TD 138-142

1 of 2 OVERVIEW & REVIEW: The long-term picture, stretched back to the 2009 and bear market bottom of 1,745.39, remains generally bullish as shown in the accompanying chart. The positive slope over the last 121 weeks to July 15, 2011 is still intact, albeit we have seen it challenged over the last 24 weeks, or since it first fell below the trend-line in week 98 (end February 4, 2011.) Undoubtedly, even without the benefit of a chart, we can expect STO(14,3,3) and RSI (14) at or near overbought territories. The indicators read 92.34 and 65.11, respectively in the weekly chart. This is particularly true as the index ended the week on a fresh alltime high at 4,458.74. It in fact re-wrote history thrice in the last two weeks as it breezed past the erstwhile record high of 4,413.42 established roughly eight months back. The market is in uncharted territory with a lot of uncertainties clouding over the fundamentals horizon. It is in fact a welcome surprise that the local market has found and sustained confidence amid the backdrop of negative developments overseas. To wit:

Europe continues to debate a second bail-out package for Greece even as fears of a contagion spreading to Italy and Spain, the only two other PIIGS economy's yet to take centerstage in the unfolding regional debt crisis. More than a score of banks failed regulators' second round of stress tests, raising pressures for them to show ability to raise capital funds. The results indicated eight banks combining for a short-fall of 2.5 billiion euros. Around 16 entities posted Tier 1 Capital ratio dropped below 6.0%, the de-facto pass rate. Most of the capital shortfall was traced to Spanish banks. Theoretically, the numbers suggests the banks that failed do not have sufficient capital to survive a recession scenario. More stringent capital requirements under the Basel III accord aims to boost confidence in the industry in light of the sovereign debt crisis facing a number of the zone's economies. The US is facing its own fiscal challenge that of raising a borrowing ceiling before August 2 nd to avert a technical default. Moody's has already placed the country's Aaa credit-rating on review with a possible downgrade, a first since 1917, if the political leaders fail to achieve a balance between the contentious points of raising revenue and spending cuts. S&P Ratings Services issued a similarly toned announcement Friday. At present, we have not quantified the impact of such an event, except to say that it could prove disastrous to confidence in the financial markets. Easily, this could send bond yields to spiral north and equity prices in the opposite direction. Closer to home, China has made good on its commitment to adopt a more restrictive monetary policy stance as it shifts focus on reining in inflation. This year alone, the PBOC has raised overnight borrowing rates three times to an aggregate 75 basis points while increasing big lender's reserve requirements at least once. Consumer prices in June rose 6%, but observers note that the trend will reverse in the second half of the year, or at the very least, hold steady. Despite these interventions however, the Chinese economy continued to grow, surprising markets with a 9.5% pace in the Second Quarter, better than the estimated 9.3%. Money supply also keeps growing as the rising interest rates serve to attract funds in search of better yields.

These were the same uncertainties we have factored in at the end of last year when we made an end-2011 index forecast of between 4,600-4,800. And though we were presented with an unanticpated factor the MENA tensions towards the end of the first quarter, we had not made any tweaks to those targets. These are the same principal factors we are keeping tabs on moving forward, believing that the local market is poised to make a big run once these uncertainties have been satisfactorily resolved as we believe they eventually will be before the year is out. One good thing going for the local market so far is the relative stability in the political front. We recall that in the bull market of 2003 to 2007, the political backdrop was rather messy. There were coups of various proportions and measures of success and failure practically every year. Then President Gloria Macapagal Arroyo, who never gained a positive trust rating in the surveys, was threatened with impeachment in every Congress since her re-election in 2004. Yet, the economy kept growing at record pace and the market reflected this in an equally-record 63% year-on-year gain in 2007. Just last year, when the global economy was on wobbly feet off the 2008 recession, the local market posted a 37.6% rise, among the world's best. All these can be summed up in a phrase all-too-familiar form both technical and fundamental perspective: the local economy remains healthy and the negativity is largely borrowed from external influences. To paraphrase an oft-quoted admonition to traders and investors and defining a buying proposition, we have a good economy undergoing bad times.

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.

ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)

WEEKLY OUTLOOK_ XXVIX_July 18 to 22_TD 138-142

2 of 2 The domestic front draws a balance between positive and negative sentiments, albeit at present, investors appear to be biased toward the former. The government's successful completion of a php323.4 billion bond swap eases the pressure off the government's fiscal management efforts. The savings from the shift to longer-term maturities frees up to php152.6 billion which may now be utilized for the administration's economic pump-priming efforts. Remittances of US$1.688 billion for May is the highest since December 2010's US$1.694 billion, bringing the January to May aggregate to $7.899 billion, 6% higher year-on-year and roughly 40% of the full-year projection of between US$19 and 20 billion. This despite earlier concerns that the tensions in the Middle East and North African region and the Japanese earthquake early in the year may have caused a dent as outlook for deployment slipped; While both these developments lend optimism that all is well with the domestic economy, there were some numbers that raises a bit of a worry moving forward: Both the BIR and the Bureau of Customs missed their first semester collection targets by php2.3 billion and php11.8 bilion, respectively. Nevertheless, balancing this is the fact that collection levels were 13.5% higher for both agencies compared to the same period last year. The BIR contributes 70% while the BoC adds 20% to the government's aggregate revenue pie. Hot money inflow for June slowed month-on-month to US$354 million compared to May's US$364 million. The May number is slower than April's US$674 million total. A little over half of the six-month aggregate went to PSE-listed companies (51.2%). Government securities cornered 45.5% while other vehicles such as UITFs, peso Time Deposits and money market instruments accounted for the balance. The was a marked increase in GS flow by over 300% while equities' share expanded by 57%, year-on-year. More inflows can be expected in the ensuing months as the returns in the US and Europe fall, threatened by the fiscal problems facing both regions. It becomes than a question of how much inflow the economy can handle without distorting and/or weighing heavily on interest rates and inflation. We recall that it was one of the factors that pushed the Chinese economy higher even as practically all major economies in the world slipped into a recession in 2008. Heading into week 29, the market may sustain its optimism as focus shifts from cross border concerns to domestic corporate earnings. Over the recent weeks we had attributed a part of the rise in equity prices to early positioning in anticipation of earnings reports expected towards the close of the month to early August. As we draw closer to those dates, its influence on trading decisions will loom larger and the market may, for the time being, appear to ignore the fluctuations in global markets. Thus, the question entering this week is which of the companies will report growth and to what extent. Thus far, we have had only a few clues on a handful of stocks, most notable of which is Petron Corporation [pse: PCOR.] The stock rallied 27% for the first seven sessions of July following a breakout from the php13.30-13.60 trading band that started in early May. However, as the Company revealed a flat earnings outlook for the second quarter, the stock plummeted -8.1% to Friday's php15.88 close, slightly higher than the intra-day low of php15.80, which in turn was marginally higher than the first support line as drawn by the Fibonacci retracement principle at php15.70. Yet, despite this development, and even in the face of our short-term SELL recommendation, we keep the stock in the list of possible buy-ins over the longer-term, particularly if it manages to hold the php15.70 support line. To summarize, the reasons for buying the stock over the short-term (Q2 earnings) may have fizzled out, but the prospects for the rest of the year remains positive. We therefore adjust our recommendation from short-term sell to medium-term accumulate. The sustained rise in gold and oil prices will keep investors interest trained on the Mining and Oil sector, which as of last Friday, closed at its all-time high of 22,048.10, just notches below its intra-day peak of 22,314.70. Gold prices closed at US$1,593.80 per ounce, registering a rise of 7.5% since July 1st while crude prices climbed to US$97.24 per barrel, prompting local industry players to raise pump prices anew. Over-all, mining and oil shares, particularly recent favorites Philex Mining Corporation [pse: PX, php26.10], Atlas Conslidated Mining Corporaiton [pse: AT, php23.50] and Lepanto Consolidated Mining Corporation [pse: LC, php1.08; LCB, php1.15] will stay within investors' radars. We will, however, keep a close tab on the other issues comprising the Main Philippine Index as potential purchases particularly those in the Financial, Energy and Property sectors. The PSE index is seen to trade between the 4,340 to 4,470 range. (jc)

DISCLAIMER: THE MATERIAL CONTAINED IN THIS PUBLICATION IS FOR INFORMATION PURPOSES ONLY. IT IS NOT TO BE REPRODUCED OR COPIED OR MADE AVAILABLE TO OTHERS. UNDER NO CIRCUMSTANCES IS IT TO BE CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION TO BUY ANY SECURITY. WHILE THE INFORMATION HEREIN IS FROM SOURCES WE BELIEVE RELIABLE, WE DO NOT REPRESENT THAT IT IS ACCURATE OR COMPLETE AND IT SHOULD NOT BE RELIED UPON AS SUCH. IN ADDITION, WE SHALL NOT BE RESPONSIBLE FOR AMENDING, CORRECTING OR UPDATING ANY INFORMATION OR OPINIONS CONTAINED HEREIN. SOME OF THE VIEWS EXPRESSED IN THIS REPORT ARE NOT NECESSARILY OPINIONS OF ACCORD CAPITAL EQUITIES CORPORATION ON THE CREDITWORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.