Stock Commentary

Quick Take: Inflation accelerated in September and 2 more market updates

Merkado Barkada
Quick Take: Inflation accelerated in September and 2 more market updates

Aboitiz Equity Ventures [AEV 56.90 1.97%] [link] entered into an agreement with a company called EdgeConnex to create two joint ventures for the purpose of “building, operating, and maintaining a platform of data center facilities in the Philippines”. The agreement was signed through AEV’s subsidiary, Aboitiz InfraCapital (AIC).

MB Quick Take: The Aboitiz Family seems to be doing whatever it can to make business hay while the political sun is shining. I think that “data centers” are kind of an amorphous business at this stage, much like the concept of a “cell tower”. How much does a data center cost? How profitable is one to run? Is there a market for common data centers, as there is for cell towers? My feeling is that there is, and that we may one day see a PSE REIT focused on acquiring and running data centers. These are just the seeds being planted for later harvest.

AyalaLand Logistics [ALLHC 3.25 1.56%] [link] entered into agreements with a company called FLOW Digital Infrastructure to develop and operate “carrier-neutral” data centers across the country. The two parties had signed a framework agreement back in May, but this agreement is the implementing agreement of the joint venture. No specific details were made available.

MB Quick Take: Looks like everyone is leveling up their capacity by grabbing a foreign dance partner to build supply into this market for data centers. How deep the market is for data centers, and how profitable the business plan for their operation, I do not know yet. But it’s clear that the bigshots think there’s some gold at the end of the data center rainbow.

Inflation [link] for September “quickened” to 6.9%, up from 6.3% in August. While this was within the BSP’s “expected range” of between 6.6% to 7.4%, the average inflation from January through September was at 5.1%, which is well above the central bank’s annual target range of 2.0% to 4.0%. The most significant driver of September inflation was the cost of food.

MB Quick Take: There are enough people calling for even higher inflation in October that it seems highly unlikely that this ugly inflation showing is the “peak”. How bad will October be? Will the storm’s impact be negligible, as the Asian Development Bank seems to think, or will the supply chain disruptions work to drive prices up even further? If October’s inflation is worse than September’s, how aggressive will the BSP be in raising rates? Some have said that the September result makes a “twin raise” of 50 basis points in November and December much more likely. With the peso at/near all-time lows, what the BSP does over the next couple of months could have a dramatic impact on our currency’s value. An aggressive BSP raise will continue to hold the REIT sector’s head in the toilet, while a limp or underwhelming response might take the peso out at the knees and further expose PSE companies with US debt to even more pain.


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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.





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