Diesel prices have breached P100 per liter
From AB Capital's The Opening Bell: Three Moves
Event
Domestic diesel prices have breached P100/liter, reflecting the sustained spike in global oil prices driven by escalating Middle East tensions. This marks a key psychological and economic threshold, signaling that the oil shock is no longer transitory but feeding directly into domestic cost structures.
View
We see this as a broad negative for consumption and margin sensitive sectors, particularly discretionary, transport, and logistics heavy names. The move above P100 reinforces the risk that the shock persists into month 3, where formal GDP and EPS downgrades typically follow. Staples may initially hold but face margin pressure if cost pass through lags, while property becomes more vulnerable given rate sensitivity. On the other hand, energy names such as SCC and defensives like MER and AP remain relative outperformers given pricing pass through and earnings visibility.
Catalyst
This accelerates the second phase transmission of the oil shock into the Philippine economy. Higher transport and logistics costs lead to rising food and goods prices, adding to inflation pressure and delaying BSP easing. Corporates begin to face margin compression, particularly in fuel intensive sectors, while consumer purchasing power starts to weaken.
Action
Reinforce a defensive portfolio stance. Overweight energy, utilities, and banks. Selective on staples with close monitoring of margins. Underweight discretionary, property, and transport. At this level above P100, the narrative is shifting from valuation de-rating to earnings risk, and positioning should reflect a more cautious oil shock environment.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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