Steady growth seen for RP, other Asian economies
THE ORGANIZATION of Economic Cooperation and Development (OECD) has given a favorable outlook on the Philippines, saying that the local economy seems poised to register a firm and sound recovery from the slowdown last year which was brought about by the global economic turmoil.“Most indicators suggest sound recovery,” OECD said of the Philippines in its quarterly report, “Asian Business Cycles Quarterly.”
The group, composed of more than 30 countries worldwide and which advocates developmental policies, said the outlook for the Philippines took into account rising sales posted by enterprises and improving business sentiment.
OECD said an environment of confidence among enterprises in the Philippines, which was anchored on improving revenues, supported a favorable outlook on the domestic economy.
It said the Philippines shared a positive outlook with its neighbors, including Singapore, Malaysia, Indonesia, and Thailand.
“Indicators for Asean economies point toward steady growth based on sound exports and strong domestic demand supported by improved business sentiment,” OECD said in the report.
The group expressed confidence that the robust growth rates posted by the countries mentioned could be maintained within the short to medium term.
In the first quarter, the Philippines grew by 7.9 percent, beating most forecasts including that of the government.
The growth was partly anchored on the recovery of the export sector, whose earnings have so far been growing by more than 30 percent this year. Last year, exports fell amid anemic global demand due to the global crisis.
Gov’t woos investors for 10 infrastructure projects
THE AQUINO administration has invited foreign and local investors to bankroll 10 priority government projects in 2011 through public-private partnerships.
The government has set a conference on November 18-19 with private investors from around the world to enlist support for the projects, which Malacañang hopes would spur economic growth through 2016.
Finance Secretary Cesar V. Purisima said participation in the 10 priority projects next year would be offered during the conference and that the government was expecting companies from the United States, Europe, Japan, the Middle East and elsewhere to attend.
“There are many investors who have expressed interest to attend,” Purisima said, adding that the initial plan was to hold the forum in October but had to defer it due to the unavailability of venues.
Without going into details, the finance chief added that the government was promising guarantee incentives for projects that face regulatory risks such as possible temporary restraining orders from the courts.
He said TROs on controversial projects have been the bane of well-meaning investors, who end up very reluctant to venture again in the Philippines.
“Aside from that, we may offer tax incentives for these projects, but only for those that may not be financially viable but make sense economically,” Purisima added.
The National Economic and Development Authority has identified for rollout next year 10 PPP projects worth an estimated P170 billion.
These include the P70-billion MRT/LRT expansion project; the P11.3-billion MRT Line 2 extension; the P7.54-billion new Bohol airport; the P36-billion Puerto Princesa airport; the P21-billion NLEx-SLEx link expressway; the P10.5-billion Cavite-Laguna expressway (Manila side section), and the P3.08-billion Daraga international airport.
Also in the list are the development of a city terminal for the Diosdado Macapagal International Airport, the privatization of the Laguindingan Airport operation and maintenance, and the supply of treated bulk water for Metro Manila, but costs for these have yet to be finalized.
Earlier this month, Budget Secretary Florencio B. Abad said the government was looking forward to generating P180 billion to P200 billion worth of PPP undertakings next year.
Abad said that as government counterpart, Malacañang included in its proposed “Reform Budget” for 2011 a total of P15 billion as a strategic support fund for PPP projects.
He said the strategic support would cover right-of-way purchases, horizontal land development and other facilities meant to encourage private investors to undertake public infrastructure projects with the government.
U.S. Stocks Advance as Fed Signals Willingness to Ease Policy
Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a four-month high, as investors bought Treasuries amid speculation the Federal Reserve will purchase more government debt to buoy the economy.
JPMorgan Chase & Co. and Morgan Stanley fell at least 1.5 percent, pacing a decline of financial companies. Equity Residential slumped 2.6 percent after the largest publicly traded U.S. apartment landlord had its stock rating cut by Stifel Nicolaus & Co. ConAgra Foods Inc., the maker of Banquet and Healthy Choice dinners, lost 3.6 percent after reporting profit that missed analysts’ estimates.
The S&P 500 slipped 0.3 percent to 1,139.78 at 4 p.m. in New York, wiping out earlier gains triggered by a higher-than- forecast increase in housing starts. The Dow Jones Industrial Average rose 7.41 points, or 0.1 percent, to 10,761.03 as gains in Caterpillar Inc. and Hewlett-Packard Co. led the measure to its highest level since May 13. About two stocks fell for each that rose on U.S. exchanges.
“We’re splitting hairs,” said Mark Bronzo, an Irvington, New York-based fund manager at Security Global Investors, which oversees $21 billion. The Fed’s willingness to ease monetary policy could be taken “as a sign that they are nervous about economic growth. People are also realizing there’s not a lot more the Fed can do. And the Fed said there’s no reason to do so right now, indicating that growth is OK.”
April High
The S&P 500 has fallen as much as 16 percent from its April 23 high amid concern American unemployment near the highest since the 1980s and less spending from indebted European nations would stall the global economic recovery. The gauge has gained 2.2 percent so far this year, leaving it 6.4 percent below its peak for 2010.
The Fed’s meeting took place a day after the National Bureau of Economic Research announced that the longest and deepest U.S. recession since the Great Depression ended in June 2009, lasting 18 months. U.S. growth slowed to a 1.6 percent pace in the second quarter from 3.7 percent in the first quarter, according to revised data released Aug. 27.
“The committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate,” the Federal Open Market Committee said today in a statement in Washington. The Fed reiterated that it would keep the benchmark lending rate in a range of zero to 0.25 percent “for an extended period.”
Treasuries Rally After Fed Statement, Pushing Two-Year Yield to Record Low
Treasuries rallied, pushing the yield on the two-year note to a record low, as the Federal Reserve said it’s willing to ease monetary policy further to boost the economy and lower unemployment.
The benchmark 10-year note yield briefly pared its drop as the central bank refrained today from stepping up purchases of U.S. debt to keep borrowing costs low. The extra yield investors demand to hold 10-year notes compared with 2-year securities dropped to the lowest level in almost two weeks, reflecting concern the economic recovery is stalling.
“The risk of economic relapse, while diminished, provides reasons for the demand for Treasuries to continue,” said Christopher Sullivan, who oversees $1.6 billion as chief investment officer at United Nations Federal Credit Union in New York. “No immediate quantitative easing doesn’t mean they might not act in the future if they see general price levels erode.”
The yield on the 10-year note fell 13 basis points, or 0.13 percentage point, to 2.58 percent at 4:16 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in August 2020 rose 1 2/32, or $10.63 per $1,000 face amount, to 100 3/8.
The 2-year note yield dropped 4 basis points to 0.43 percent after touching a record low 0.4155 percent. The difference between 10- and 2-year note yields fell to 2.16 percentage points, the narrowest on a closing basis since Sept. 8. The 30-year bond yield slid 9 basis points to 3.79 percent.
Oil Falls a Second Day as Industry Report Shows Higher U.S. Crude Supplies
Oil fell for a second day in New York after an industry report showed an increase in crude stockpiles and as analysts estimated that U.S. refineries operated at their lowest rate in five months.
Futures declined yesterday after the American Petroleum Institute said inventories increased 2.23 million barrels to 364.1 million, the highest level in almost four months. Refineries probably ran at 86.8 percent of capacity last week, according to a Bloomberg News survey of analysts before an Energy Department report today.
“We’re seeing some reluctance from the refinery sector to buy crude, given high product stocks,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We’re still waiting to get some news which suggests we’re getting a recovery.”
The November contract dropped as much as 32 cents, or 0.4 percent, to $74.65 a barrel in electronic trading on the New York Mercantile Exchange, and was at $74.71 at 8:35 a.m. Sydney time. Yesterday it lost $1.22 or 1.6 percent, to $74.97. Prices are down 5.9 percent this year.
Crude for October delivery dropped $1.34, or 1.8 percent, to $73.52 a barrel yesterday, the lowest closing price since Aug. 31. The contract expired at the end of floor trading.
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
