BSP sees RP credit-rating upgrade The Bangko Sentral ng Pilipinas expects Standard & Poor’s, whose representatives concluded last week an evaluation visit, to upgrade the country’s credit rating given the economy’s “favorable” fundamentals. BSP Governor Amando Tetangco Jr. said the country deserved a raise in its credit score, noting that evaluators should take notice of the country’s much-improved economic performance so far this year, as well as vital indicators that pointed to stability. The country’s credit rating with S&P is three notches below investment grade. “If you look at the indicators, those that are supposed to go up were actually up, and those that are supposed to be down are actually down,” Tetangco told reporters when asked about whether the Philippines should get a credit-rating upgrade. He made the comment following the visit of S&P officials in the last week of October to assess the state of the country’s financial sector and its overall economy. The indicators Tetangco was referring to were inflation, growth in gross domestic product, exposure of banks to bad debts and the country’s foreign exchange reserves. He said inflation has been slowing down, averaging 3.5 percent in September. This should encourage businesses, which would benefit from affordable capital goods if they decided to invest. Average inflation in the first nine months of the year settled at 4.1 percent, well within the official target of 3.5 to 5.5 percent for the full year. The BSP likewise noted the declining non-performing loans (NPL) ratio, which measures the level of exposure of banks to bad loans. The central bank earlier reported that the NPL ratio for commercial and universal banks fell to 3.31 percent in August from 3.5 percent in the same month last year. Tetangco and other monetary officials also cited the country’s improving external liquidity, as indicated by the rise in the gross international reserves (GIR)—or the country’s total reserves of foreign currencies—which reached a historic high of $53.4 billion in September. The GIR determines the country’s ability to engage in commercial transactions, such as to pay for imports and settle foreign debts, with the rest of the world. On the overall economy, the Philippines posted a record growth so far this year. Its GDP expanded 7.9 percent in the second quarter from a year ago, the fastest pace in more than 30 years. The latest GDP growth prompted economic managers to predict that the official growth target for 2010, set at 5 to 6 percent, would be surpassed. Tetangco said he shared the opinion of other economists who believed the Philippines’ credit ratings should be upgraded. |
Fed Likely to Announce $500 Billion of Purchases, Survey Shows Tony Crescenzi, a market strategist and portfolio manager at Pacific Investment Management Co., talks about the prospects for Federal Reserve monetary policy. The Fed will probably begin a new round of unconventional monetary easing this week by announcing a plan to buy at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. Crescenzi also discusses the outlook for Treasuries and his investment strategy. He speaks from Newport Beach, California, with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg) Julia Coronado, chief economist for North America at BNP Paribas, talks about the outlook for the financial markets following this week's meeting of Federal Reserve policy makers and the congressional elections, the state of the U.S. labor market and her expectations for the size of the latest round of quantitative easing by the Fed. Coronado speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg) The Federal Reserve will probably begin a new round of unconventional monetary easing this week by announcing a plan to buy at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. Policy makers meeting tomorrow and Nov. 3 will restart a program of securities purchases to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed last week. Twenty-nine estimated the Fed will pledge to buy $500 billion or more, while another seven predicted $50 billion to $100 billion in monthly purchases without a specified total. The remainder said the Fed would buy up to $500 billion or didn’t quantify their forecast. The varied responses reflect differences among Fed officials over the total amount of purchases needed to bolster the recovery. Policy makers, pursuing unprecedented stimulus, have cut the benchmark rate almost to zero and bought $1.7 trillion in securities without generating growth fast enough to bring down unemployment from near a 26-year high. “There’s no silver bullet right now,” and central bankers have “very few options left in terms of lowering interest rates,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. He predicted $500 billion of Treasury and mortgage-backed securities purchases over the next six months. Shock-and-Awe Plan Disagreements among policy makers over whether to incrementally expand the balance sheet or stage a so-called shock-and-awe program of big asset purchases has created confusion among investors over the likely size and duration of any new easing, said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. “There has not been a uniformity of opinion emanating from the multitude of public appearances from Fed officials,” McCarthy said. He predicts the Fed will buy $500 billion of securities over the next six months and was among 13 economists who said the purchases would include mortgage-backed bonds in addition to Treasuries. New York Fed President William Dudley set expectations for $500 billion in purchases when he said in an Oct. 1 speech that purchases totaling about that amount would add as much stimulus as lowering the Fed’s benchmark rate by 0.5 percentage point to 0.75 percentage point. |
Oil Rises a Second Day on Chinese Manufacturing, U.S. Stimulus Speculation Crude oil rose for a second day, trading above $83 a barrel after climbing to a two-week high on growth in Chinese manufacturing and expectations the Federal Reserve will take steps to stimulate the U.S. economy. Oil rose 1.9 percent yesterday as China’s Federation of Logistics and Purchasing said the country’s purchasing managers’ index climbed to 54.7 in October from 53.8. Fed policy makers meeting today and tomorrow will likely announce a program to buy at least $500 billion of long-term securities in a monetary- stimulus strategy known as quantitative easing, according to economists surveyed by Bloomberg News. “The combination of the strong Chinese data and expectations for quantitative easing this week is giving traders good reasons to be long,” said Phil Flynn, vice president of research at PFGBest in Chicago. Oil for December delivery rose 27 cents, or 0.3 percent, to $83.22 a barrel on the New York Mercantile Exchange at 10:36 a.m. in Sydney. Oil advanced $1.52 to $82.95 yesterday, the highest settlement since Oct. 18. Brent crude oil for December settlement increased $1.47, or 1.8 percent, yesterday to end the session at $84.62 a barrel on the London-based ICE Futures Europe exchange. The Chinese purchasing managers’ index exceeded a forecast of 53.8, the median estimate of 13 economists surveyed by Bloomberg News. The country overtook the U.S. last year as the biggest energy user. U.S. Factory Index The Institute for Supply Management’s factory index rose to 56.9 in October from 54.4 a month earlier, the Tempe, Arizona- based group said yesterday. Readings greater than 50 signal growth. Economists forecast the ISM manufacturing gauge would decline to 54, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from 52 to 56.8. The ISM’s U.S. new orders climbed to 58.9 from 51.1, while the production index jumped to 62.7 from 56.5. Saudi Arabia has the capacity to continue supplying crude for another 80 years even if no new discoveries are made, Oil Minister Ali al-Naimi said in Singapore. The country is adding new reserves equal to the amount it is extracting each year, he said in a speech at the Singapore Energy Summit yesterday. Consuming countries are happy with oil between $70 and $90 a barrel, al-Naimi said. In April he said prices in the $70- to-$80 range are “as close to perfect as possible” and that he hoped oil would remain in that range. Hedge funds and other large speculators increased wagers on rising crude prices by 9.3 percent in the seven days ended Oct. 26, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. French Stockpiles France will need to increase gasoil imports and boost refinery production after last month’s workers’ strikes left the country with reduced fuel inventories, Credit Agricole CIB said. French inventories of gasoil, fuel that includes heating oil and diesel, fell below 53 million barrels at the end of last month, Christophe Barret, a London-based oil analyst, wrote in an e-mailed report yesterday. That’s 8.6 million barrels below the five-year average from 2003 to 2008. Labor unrest across France last month caused 10 refineries to halt operations, leaving some service stations without fuel and pushing up wholesale prices. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
Jonathan Ravelas
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Rhys Cruz
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