Since we last wrote, the good news is that (i) the domestic cycle has stabilized following fears of weakening credit and activity, and (ii) we continue to see gradual improvement on the external front in light of the Asian IT electronics boom of the past few months.

However, higher oil prices are now a meaningful risk. The country's "twin deficit" status already led to PHP and equity underperformance over the past year - and if oil prices stay elevated they would easily reverse the impact of recent export gains. As a result we remain on the sidelines here.