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ACCORD CAPITAL EQUITIES CORPORATION

GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)
Outlook for Week 37_September 13 to 17, 2010
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OUTLOOK:

Roughly five weeks ago (refer to Week 32 outlook) we set a year-end


index target of 3,790 at a time the index was treading the 3,400-3,500
range. Admittedly, in the context of those times, we had given such
target tongue-in-cheek, optimistic as it seemed. Such belief and
confidence however continued to build up, initially on the back of
strong q2 and 1h corporate results, and later by a surprise 7.9% q2
GDP pace.

Towards the end of August, we had adjusted such target to between


3,800-3,840. Along the way, we had been warning of a major
corrective action to allow base fundamentals to catch up on what had
become undeniably bullish sentiments even in the midst of global
concerns over the pace of reco veries in developed economies.

Yet, just as soon as we had made a third revision to 3,850-4,100, the


market shifts gears and accelerates, breezing past the 3,800-3,900
band in a single day.

It will be an interesting week at the market as investors return Monday


for a full-week of trades. The last two weeks have been shortened by
National Heroes Day and Eid'l Fitr, respectively. Last week's return
was a slower 4.5% compared to the preceding week's 4.9%.
Nevertheless, it has added a combined 9.66% to equity values,
opening the doors for possible profit-taking.

As we had continually pointed out in recent reports, the market has been generally ignoring, or at least paying minimal heed to
techinical indications of the market's relative position. For one, weekly STO (10,3,3) has been in overbought territory (>80) over the
last 14 weeks or since the index closed at 3,335.48. Though there have been intermittent drops, the measure has risen an aggregated
567.08 points since then with the indicator rising from 83.48 to last week's 93.63. Weekly RSI (14) however, barged into overbought
territory only two weeks ago. These two indications alone, should warn of the imminence of a pullback.

In this context, it would seem that we have been getting the wrong signals off the charts over the last 14 weeks. Nevertheless, as we
had been positing, trading decisions have focused more on fundamental valuations, particularly in taking positions on perceived
bargains relative to their q3 and year-end prospects. The over-all economy's encouraging performance over the first two quarters and
the promise it draws for the balance of the year heightens this argument.

At the end of last week, a commonly-used valuation tool, PE, puts the entire market at 13.44x (broad market) and 13.62x (psei). If my
recollection is accurate, the PE was at least 17x-20x during the 2007 market. This leaves some room for an upside. Thus, trades moving
forward shall be decided on the basis of what has remained undervalued in light of the substantial growth in market values.

All sectors have provided handsome returns on a year-to-date, except Mining & Oil which is sustaining losses of -4.24%. The Services
group is expanding at marginally higher than its three-year CAGR pace of +0.40% at +0.43%. Holding Firms and Property issues have
overturned their CAGR(3) negatives, rising 76.51% and 46.92%, respectively. The rest have more than quintupled their respective
CAGR(3). The main index has already passed its full-year 2007 pace of 21.43% but is just approaching half of last year's 63% gains.

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 CREDIT-
WORTHINESS 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)
Outlook for Week 37_September 13 to 17, 2010
2 of 3

The main question is whether there are still bargains given the market's extended advance? Based on the table of sectoral PE ratio (see
table) the answer appears to be on the affirmative. Specifically, the Financial, Industrial and Holding Firms sectors' respective PE's are
below the PSEI's. The food, beverage and tobacco subsector is
trading at an even less than its industry-level figure.
Furthermore, we find a host of subgroups with PE's way below
the Main Index' level.

Off-hand, from our 30-issue Stock Farm alone, we find 11


counters which are trading at below industry average PE ratio.
These are:

• AEV [php23.50, PE 5.19x, PBV 2.07x]


• EDC [php5.26, PE 9.44x, PBV 2.94x]
• TEL [php2,406.00 PE 10.37x, PBV 4.76X]
• AGI [php7.85, PE 10.35X, PBV 0.89X]
• AP [php21.50, PE 5.32x, PBV 1.40x]
• CHIB [php405.00, PE 10.05x, PBV 1.38x]
• JGS [php20.00, PE 8.77x, PBV 1.18x]
• MWC [php18.30, PE 9.32x, PBV 1.99x]
• URC [php38.75, PE 9.78x, PBV 2.01x]
• PSB [php53.50, PE 7.96x, PBV 1.23x]
• SHNG [php1.80, PE 11.73x, PBV 0.41]

Five of these issues stand out for further consideration after


applying the earnings growth, dividend yield and PE screens.
These five, AEV, SHNG, AGI, AP and MWC are trading at
multiples less than their assumed 2-yr compound earnings
growth. Incorporating dividend yields (based on 2009 figures), these issues, the list is further narrowed to the first three: Holding Firms
AEV and AGI and Property counter SHNG. (refer to separate reports)

NEWSFRONT:

The Philippines climbed two notches to 85 in the World Economic Forum Global Competitive rankings for 2010-2011. A welcome
development, we nevertheless point out that we continue to trail our Southeast Asian neighbors both in terms of actual rank, but also in
terms of the degree of improvements. Vietnam, a relatively young economy, surged 16 ranks higher to 59; Indonesia jumped to 44, 10 steps
above it prior year place; Brunei Darussalam improved 4 places while Singapore held steady at number three. Though Malaysia and
Thailand slipped, both ranks substantially higher at 38 and 26, respectively. The only country we did better among our peers in the
subregion was Timor-Leste at 133rd. Seven economies which missed the cut last year, entered the rankings, two of which did better than
RP: Iran at 69 and Rwanda at 80. This becomes a case of seeing the cup as half-full or half-empty. However one looks, the fact is we have
a long ways to go.

The country's merchandize export revenues sustained its double-digits growth for an eighth month. July receipts reached $4.5B, 36%
more than the same month last year. This pushes the seven-month aggregate to us$28.2B, a 37% improvement year-on-year.
Shipments of electronics, comprising nearly two-thirds of the country's outbound goods, grew by nearly half to us$2.86B in July,
bringing the January-to-July contribution higher by 45.9%. More than half of electronic exports are semiconductors. The US and
Japan, traditionally the two top destinations, slid to 2 nd and 3rd, respectively behind Singapore. Trade by economic bloc focused more
in East and Southeast Asia.

Citing sustained GDP growth, low and stable prices and a manageable inflation outlook as the backdrop for the surge in the peso as
well as stocks, the BSP ruled out a possible “bubble.” GDP has expanded by 7.9% through the first semester of the year, surpassing

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 CREDIT-
WORTHINESS 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)
Outlook for Week 37_September 13 to 17, 2010
3 of 3

early projections. Confidence is high that the full year target of between 5% to 6% -- at the rate the first two quarters have grown, it will
take a major slowdown in the 3rd and 4th quarters for the economy to miss this range. Inflation for the first eight months of the year
averaged 4.2%, still below the government's full year projection of 4.7%. While the peso's strength is beefed up by record remittance
levels, it has also benefitted from the weakness of the dollar, and the threats the euro brought about by the continent's debt problems. The
local currency, which rose further to php44.12, is seen to settle within the php45-47 per dollar range.

OVERSEAS:

The euro weakened, plunging to a record low, on concerns over Europe's economy, particularly its debt burden. This sent the Japanese
yen to at 15-yr high versus the us$ as investors sought safer havens. The continent's debt problem was the principal motive force that
sent global markets spiralling south last May, particularly those that burdened at least five (5) eurozone economies: Portugal, Italy, Ireland,
Greece and Spain – all showing double-digit debt-t0-GNP ratios, breaching the zone's “requirements.”

Canadian interest rates were raised by 25 bps to 1.0% despite slowing economic growth. This is the third increase in as many months
by the Central Bank. The adjustment came at the heels of reports about the troubles bugging European banks re-surfaced. In deciding
to hike rates, the Central Bank tempered optimistic expectations as growth in developed economies, particularly pointing out its
neighbor, the US, remained sluggish, at best.

Chinese exports grew 34.4% while imports exceeded forecasts expanding by 35.2% which nevertheless translated to a US$20 billion
surplus for a third consecutive month in August. This compares to a US$15.7 billion surplus a year ago. This has reawakened the US'
argument against an undervalued yuan which was heading towards its biggest weekly gain versus the American greenback since June.

US jobless claims fell to its lowest since July and second since May to a 451k annual pace off a revised 472k in the prior week.
Continuing claims totaled 4.478M, just a shade under the 4-week average of 4.488M. Unemployment rate for insured workers was
unchanged at 3.5%. This slight improvement in the jobs market is a welcome sign that at the very least, a primary pillar for a sustained
recovery is stabilizing, or at worst, stopped deteriorating. A sustained rise in this data series may lead to expectations of higher payroll
numbers, which in turn is seen to crank up consumer spending down the line.

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 CREDIT-
WORTHINESS OR INVESTMENT PROFILE OF THE COMPANY OR THE INDUSTRIES MENTIONED.