Philippine Markets: 29 April 2011

29 April 2011

USD/PhP: 42.80 - 0.125 PSEi: 4319.51 + 40.68
USD/JPY: 81.56 PFINC: 955.89 + 6.40
EUR/USD: 1.4834 BDO: 54.30 + 0.25
GBP/USD: 1.6664 BPI: 58.80 + 0.95
PDSTF3M: 0.7842 MBT: 68.65 + 0.10
Prices as of 4:00pm Source: Bloomberg, Reuters

Philippine Interest Rate Outlook

Secondary market rates continued to head south boosted by the demand for short-term dated goverment securites. The ample market liquidity, perception that inflation is well under control and news that the 1Q budget short-fall of the goverment is well below its target continue to support the view that rates will remain on the low side. Expect interest rates to remain near the lows.

Philippine Equities Outlook

Local shares rose 1.05 percent week-on-week to 4319.51 as investor sentiment was boosted by the rise in Wall Street on positve 1Q corporate results.

Chartwise, the week's close at 4319.5 continues to support a near-term rise towards the 4,400 levels. Failure to clear the said level could call for a retest of the 4,200 levels.

Philippine Peso Outlook

The local currency rose 1.10 percent week-on-week to 42.80, as the greenback weakened further this week following S&P outlook downgrade on the USA to negative. Global investors continue shy away from the US Dollar denominated assets.

Chartwise, with the breach of 43.00 key support, expect further appreciation towards 42.50 levels.

BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

Morning Brief: 28 April 2011

Q1 budget deficit well under ceiling THE FIRST-QUARTER budget deficit came in well under the programmed ceiling, the government yesterday reported, on the back of strong tax collections and a reduction in spending. An P18.131-billion shortfall in March brought the tally for the first three months of the year to P26.197 billion, comfortably below the projected deficit of P111.986 billion. It was also significantly lower than the P134.179-billion fiscal gap recorded in the same period last year. Revenues totalled P323.078 billion, up 22% from a year earlier and surpassing the three-month goal of P319.271 billion. The primary boost came from the Bureau of Internal Revenue (BIR) -- responsible for over two-thirds of state tax collections -- which exceeded its P197-billion target by collecting P199.549 billion. Finance Secretary Cesar V. Purisima, in a statement, said the BIR had seen gains from "intensive tax campaign efforts." The Bureau of Customs (BoC), however, was hampered by a stronger peso and committed tariff rates reductions. The bureau -- the second-biggest revenue earner -- netted P62.618 billion in the first quarter, short of its P63.388-billion goal, even though collections for the period were higher than last year’s P60.581 billion. The Bureau of the Treasury put in P38.258 billion, more than doubling last year’s P13.822 billion. The three-month tally, however, was also short of the agency’s P40.522-billion goal. On the expenditure side, meanwhile, January to March disbursements of P349.275 billion were nearly P82 billion below the programmed P431.257 billion. March spending of P125.283 billion alone was down 22% from a year earlier. With the government having announced that it would be frontloading spending in a bid to boost the economy, Budget Secretary Florencio B. Abad said, "We are now looking deeper into the cause of slower disbursements ... So far, indications point to more caution exercised by agencies in planning and spending funds allotted to them." Agencies are also reviewing their projects and programs in an attempt to bring down costs and create savings, he claimed. "For example, the Department of Public Works and Highways has put on hold many of its infrastructure projects until they have finished their reassessment of road conditions and review of infrastructure cost assumptions," Mr. Abad said. "Per [Public Works] Secretary [Rogelio L. Singson], initial results show that government could save ...P6-7 billion that can be used for the rehabilitation of more roads and bridges," he added. University of the Philippines economist and former Budget secretary Benjamin E. Diokno slammed this as a "very poor excuse." "The review should have been done and completed during the first six months of the Aquino presidency... The government has a lot of catching up to do," he said in an e-mail to BusinessWorld. While part of the expenditure reduction can be traced to lower interest payments -- P90.720 billion compared to the programmed P101.247 billion -- Mr. Diokno said most of the cuts were in spending that would have benefited the economy. "This reflects a very slow moving bureaucracy if we believe DBM’s (Department of Budget and Management) press statement that it has already frontloaded the bulk of the 2011 budget," he said. The Budget department recently announced that it had released almost half of the P1.645-trillion national budget for 2011 during the first quarter. The government wants to keep this year’s budget deficit to 3.2% of gross domestic product (GDP), or P290 billion, from last year’s record of P314 billion or 3.7% of GDP. Economist Euben Paracuelles at Nomura in Singapore said the first quarter result had placed the government "on track to beating the full-year forecast." "My forecast is still 3% of GDP," Mr. Paracuelles said. Radhika Rao at Forecast Pte in Singapore, meanwhile, said: "taken in isolation, [the] marked improvement in Q1 deficit is commendable... Markets will take solace from the narrowing deficit picture, though below-target spending still remains a source of concern." -- D. C. J. Jiao with a report from Reuters Globe hits PLDT-Digitel deal GLOBE TELECOM, INC. wants the government to intervene in Philippine Long Distance Telephone Co.’s (PLDT) planned purchase of rival Digital Telecommunications Philippines, Inc. (Digitel), claiming the possible return of a monopoly. The National Telecommunications Commission (NTC), Globe counsel Rodolfo A. Salalima said in an April 26 letter to the agency, "cannot and must not shirk from its legal obligation to... regulate, if not forestall, the deal’s grave implications and impact on free competition and, in the long term, the common good." An NTC official said the planned purchase -- announced last month and targeted for completion by end-June -- was being reviewed following instructions from Malacañang. A PLDT executive, meanwhile, called Globe’s appeal "regulatory blackmail." The questioned P69.2-billion deal involves PLDT’s acquisition of a 51.55% stake in Digitel -- which owns the Sun Cellular brand -- from JG Summit Holdings, which in return will get a 12.8% stake in the dominant telco. The Globe letter, copies of which were distributed to reporters yesterday during the firm’s demonstration of a planned service, states that the NTC needs to act given its mandate to protect consumers and level the playing field under Republic Act (RA) 7925 or the Public Telecommunications Policy Act. The law, Globe said, was specifically passed in 1995 to end a monopoly enjoyed by PLDT. It noted that the PLDT-Digitel deal, if consummated, would give PLDT 70% of the cellular mobile market, leaving Globe with 30%. The frequency ratio of 1:3.5 is also in favor of PLDT, it added. The firm urged the enactment of antitrust laws and the issuance of NTC policies, among them a circular defining any entity with a minimum 50% share of the market as a "monopoly carrier." It called for aggressive enforcement of interconnection between telcos and also the implementation of a policy on "IP peering" -- interconnection between two internet service providers -- that would allow for a better Web experience for consumers. "The present PLDT/Digitel deal...strikes at the very core of free competition and, if not preempted or otherwise regulated, will...bring back this country to the dark ages of the old monopoly pre-RA 7925," Globe said. Sought for comment, NTC Commissioner Gamaliel A. Cordoba told BusinessWorld, "The deal will need an approval from NTC, and we are studying the deal on how we can prevent it from adversely affecting consumers." "President [Benigno S. C. Aquino III] has already given us instructions to study the whole deal in cooperation with economic managers and the [Justice department]." Public hearings, Mr. Cordoba added, will be scheduled once PLDT and Digitel submit details of the deal. Ray C. Espinosa, head of regulatory affairs and policy at PLDT, said in a statement that "these issues are being raised by Globe with much thunder and lightning in order to gain leverage and exact concessions from PLDT...Globe wants to use the NTC to deliver these concessions on a silver platter." "The monopoly issue being raised by Globe is a ruse. It is meant to weaken the resolve of the NTC to approve a deal that will bring enormous benefits to the public in terms of better service and accelerated high-speed broadband Internet service throughout the country," he added. Mr. Espinosa also claimed that Globe was also involved in "institutionalized combinations of restraint of trade," noting exclusive arrangements with property development projects. Globe shares closed P5 higher at P880 per yesterday, while PLDT’s ended the day P10 up at P2,466 apiece. Shares in Digitel were unchanged from Tuesday at P1.56 per share. Mediaquest Holdings, Inc., a unit of the Beneficial Trust Fund of PLDT, has a minority stake in BusinessWorld. -- K. A. Martin

U.S. Stocks Rally as Federal Reserve Signals Low Interest Rates; GE Gains U.S. stocks rose, giving the Standard & Poor’s 500 Index the fifth gain in six days, as the Federal Reserve renewed its pledge to stimulate growth with low rates and said a pickup in inflation is likely temporary. General Electric Co. (GE) added 2.7 percent after saying it wants to boost its dividend. Moody’s Corp. (MCO), whose founder John Moody created credit ratings more than a century ago, climbed 6.7 percent as profit beat estimates by 25 percent. Amazon.com Inc. (AMZN) gained 7.9 percent as the world’s largest online retailer reported sales that topped predictions and Deutsche Bank AG increased its share-price estimate to $215. The S&P 500 added 0.6 percent to 1,355.66 at 4 p.m. in New York. The Dow Jones Industrial Average gained 95.59 points, or 0.8 percent, to 12,690.96. The Russell 2000 Index of small companies rose 0.6 percent to 858.31, a record. The Fed left its benchmark interest rate in a range of zero to 0.25 percent and retained a pledge in place since March 2009 to keep it “exceptionally low” for an “extended period.” U.S. 30-Year Bond Falls 1st Time in 4 Days as Fed Ups Inflation Forecast Treasuries fell, pushing 30-year bonds down for the first time in four days, as Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is in a moderate recovery and policy makers raised their inflation estimate. Yields on the long bond rose the most in a week as Bernanke, in his first press briefing after a Fed policy meeting, wouldn’t predict when the central bank will start to tighten monetary policy. The central bank also lowered its forecast for economic growth, while Bernanke said inflation is likely to be “transitory.” The U.S. sold $35 billion in five- year debt in the second of three note auctions this week. “Bernanke didn’t back down on the idea that rates would stay low for an extended period and the Fed will err on the side of inflation, which is a negative for longer-end Treasuries,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management inMilwaukee. “The cost to that view may be more inflation down the road.” Thirty-year yields climbed six basis points, or 0.06 percentage point, to 4.45 percent at 5:10 p.m. in New York, according to Bloomberg Bond Trader prices. They rose as much as seven basis points, the biggest intraday jump since April 18. The price of the 4.75 percent security due in February 2041 slid 1 2/32, or $10.63 per $1,000 face amount, to 104 7/8. Ten-year note yields rose five basis points to 3.36 percent. Two-year note yields gained four basis points to 0.64 percent and touched 0.70 percent, the highest since April 15.

Oil Rises a Second Day After U.S. Fuel Stockpiles Fall More Than Forecast Oil climbed for a second day in New York after a government report showed gasoline stockpiles in the U.S. declined more than analysts estimated to the lowest since August 2009. Futures advanced from the highest settlement in more than two weeks after the Energy Department said gasoline inventories fell 2.51 million barrels to 205.6 million, declining for the 10th week. Supplies were projected to drop 1 million barrels last week, according to analysts surveyed by Bloomberg News. “Gasoline supplies are definitely on the light side,” said Kyle Cooper, director of research for IAF Advisors in Houston. “With gasoline supplies falling and prices climbing, refiners can pay more for oil. They are going to pay more to take delivery of extra barrels of crude because they know they will make money processing it into gasoline.” Crude oil for June delivery gained as much as 64 cents, or 0.6 percent, to $113.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $113.24 at 8:51 a.m. Sydney time. Yesterday, it climbed 55 cents, or 0.5 percent, to $112.76, the highest since April 8. Brent oil for June settlement increased 99 cents, or 0.8 percent, to end the session at $125.13 a barrel on the London- based ICE Futures Europe exchange yesterday. It was the highest close since April 8.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

BDO UNIBANK INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

OROCHAMBER conducts accounting series

OROCHAMBER conducts accounting series

The Cagayan de Oro Chamber of Commerce and Industry Foundation, Inc. (Oro Chamber) in cooperation with the Misamis Oriental Filipino Chinese Chamber of Commerce and PICPA Region 10 will be conducting a workshop series on “ACCOUNTING” to commence on April 28 (Thursday) at 1:00-5:00pm at the Grand City Hotel, this city.

“Upon noting that accounting and recording are major areas for improvement, we deemed it necessary to implement a practicum-type of learning the fundamentals of Accounting,” OroChamber President Antonio Uy shared.

More than taxation, proper recording of business transactions will help traders plot their growth performance and potentials.

“This is a collective effort along the goal of enhancing the competitiveness of local businesses,” quipped Efren Uy who acts as the Chamber’s Vice President for Trade and Commerce.

“We are lucky that we have partner organizations— PICPA, MOFCCCI, Syntactics and member accounting firms which believe in the same vision we have and commit to continually improve the way traders do business,” he said.

Relatedly, BPR Accounting Company and PILGRIM Christian College will also conduct a whole day seminar on Financial Accounting on April 27 at the Pilgrim College Executive Hall.

OROCHAMBER, COC-PHINMA offer scholarships

OROCHAMBER, COC-PHINMA offer scholarships

The country’s Hall of Fame Most Outstanding Chamber of Commerce (OROCHAMBER) in partnership with the COC-Phinma Education Network will extend 50% discount on tuition and miscellaneous fees to deserving elementary and high school students.

To qualify to the said scholarship grant, applicants should:

1. Be Grade 2-5 level pupils or 2^nd-3^rd year High School students
2. Have an average grade of 85%

Qualified students will have the option to renew for the next school year provided that they do not have failing grade and no disciplinary record.

For those who are interested, please call the ORO CHAMBER Office thru telephone numbers (088) 309-0951 or Telefax (088) 859-1426 or email us at orochamber@yahoo.com / orochamber@gmail.com and look for Ms. Mozell Nabua.

Philippine Markets: 27 April 2011

27 April 2011

USD/PhP: 43.215 - 0.065 PSEi: 4321.32 + 15.75
USD/JPY: 81.75 PFINC: 961.70 + 1.36
EUR/USD: 1.4658 BDO: 54.60 - 0.15
GBP/USD: 1.6446 BPI: 59.00 + 0.50
PDSTF3M: 0.8142 MBT: 69.75 unch
Prices as of 4:00pm Source: Bloomberg, Reuters

Philippine Deficit Narrowed as Revenue Rose, Spending Fell
By Clarissa Batino

April 27 (Bloomberg) -- The Philippines’ budget deficit
shrank in March as tax revenue rose and spending declined,
taking the first-quarter shortfall to less than a quarter of the
government’s ceiling.
The gap was 18.13 billion pesos ($420 million) last month
from 63.87 billion pesos a year earlier, the government said in
an e-mailed statement today. The first-quarter deficit was 26.2
billion pesos, less than both the administration’s limit of 112
billion pesos and the shortfall of 134.18 billion pesos in the
three months through March 2010. Revenue climbed 10.6 percent in
March while spending fell 22.1 percent.
President Benigno Aquino is going after tax evaders,
smugglers and corrupt officials to increase revenue and narrow
the budget deficit from a record 314.4 billion pesos in 2010,
even as he plans to boost public spending on roads, schools and
airports. Philippines beat its target for tax collection in the
first quarter and more people have filed returns this year, the
Bureau of Internal Revenue said April 16.
“It’s good that tax collections are improving but at this
point, I would rather see the government take the preventive
action of spending to preserve gains in the economy,” Jonathan
Ravelas, a strategist at Banco de Oro Unibank Inc. in Manila,
said before the report. “The government has so much leeway to
do targeted spending, kickstart the economy and provide a boost
to consumption that may be slowing due to inflation and as the
value of remittances are threatened by peso gains.”
The peso has climbed about 3 percent in the past year.
Consumer prices increased 4.3 percent from a year earlier in
February and March, the fastest pace since May 2010.
Moody’s Investors Service in January raised its outlook on
the nation’s debt rating to positive from stable and maintained
the rating at Ba3, three levels below investment grade. The $161
billion economy grew 7.3 percent last year, the fastest pace in
34 years.
The government expects revenue to improve because of
“better economic prospects” and the fight against corruption,
Finance Secretary Cesar Purisima said in a statement today.

BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

NOTICE to All CEPALCO Customers Subject: Brownout Schedules for April 26 to 28, 2011 DUE to NGCP’s Power Curtailments in Mindanao

NOTICE to All CEPALCO Customers

Subject: Brownout Schedules for April 26 to 28, 2011

DUE to NGCP’s Power Curtailments in Mindanao

Relative to the continuing power supply curtailments imposed by the National Grid Corporation of the Phils. [NGCP] all over Mindanao due to the limited power supply in the entire Mindanao area because of the maintenance shutdown of NPC’s Pulangi Hydro Plant in Bukidnon, below is the load shedding schedule [2 hours & 30 minutes rotating brownouts] within the CEPALCO service area covering April 26 to 29, 2011.

Again, CEPALCO would like to caution customers that the actual switch off and switch on time may vary from the announced schedule depending on the actual load curtailment levels imposed by NGCP on CEPALCO.

Time of Brownout :	Dates: April 26 [Tues] & 28 [Thurs]	Dates: April 27 [Wed] & 29 [Fri]
10:00am to 12:30 noon	Group 6	Group 2
12:30pm to 3:00pm	Group 5	Group 3
3:00pm to 5:30pm	Group 7	Group 4
5:30pm to 8:00pm	Group 1	Group 8

GROUP 1 Areas :

1. Portions of Carmen: along vicinities of Villarin St. towards portion of Canitoan-Pagatpat Road; including Cathedral School of Technology, Golden Village, City Hospital-DOH Area, COWD reservoir and Seriña St. from Villarin St. down to Madonna and Child Hospital.
2. M.Suniel St. from Villarin St. down towards portion of Mabolo St.; including Matilde Neri St., Dabatian St. and Cagayan de Oro College area; and; portion of Lirio St. area.
3. Portions of Upper Carmen, including SM CITY; PRYCE HOTEL; SPUM & SEARSOLIN.

GROUP 2 Areas :

1. Agora, Osmena, Lapasan all the way to the Gusa Overpass areas.

GROUP 3 Areas :

1. Puntod to Macabalan
2. Bulua to Iponan and Pueblo areas

GROUP 4 Areas :

1. Portions of Natumulan, greater Tagoloan proper, all the Barangays of Baluarte, Pulot, Sugbongcogon, and Gracia, Tagoloan
2. All the Barangays of Sta. Cruz, Mohon, Sta. Ana, and Sto. Rosario, Tagoloan including Kimaya, Villanueva.
3. All of Villanueva and Jasaan, Misamis Oriental.

GROUP 5 Areas :

1. Along Hayes St. from Camaman-an towards V.Roa St. up to corner J.Ramonal Ext., including Pinikitan, Adela, Balangiao area, Quirino St. and Yacapin Ext.; portions of Macasandig, XU Grade School areas.
2. Along J.Ramonal Ext. from Sto. Niño, Cogon towards V.Roa St., R.Chavez St. up to Corrales Ave. corner A.Luna St.; D. Velez St & Yacapin St.
3. Along Corrales Ave. towards FICCO, Nazareth, including Yacapin Street Towards Capistrano St..

GROUP 6 Areas :

1. Greater portion of the City Poblacion along and bounded by Hayes St., Mortola St., JR Borja St. including S.Daumar St. up to corner JR. Borja St., Aguinaldo St. up to corner Justo Ramonal St.,
2. Along Pabayo St.; including portions of C. Pacana St., JR Borja St., Gomez St., C.Taal St., T.Neri St., Abejuela St., Hayes St. and Gaerlan St. from Pabayo St..
3. Hayes St. from corner A.Velez St. towards City Hall area & Burgos St., along T.Chavez St. from Burgos St. up to Tiano Bros. St. - including portions of Tiano Bros. St., Rizal St., Capistrano St. from Hayes St.; and; Dolores St..
4. Along Burgos St. from T.Chavez St. up to corner Gomez St. including portions of Abejuela St., T.Neri St., Cruz Taal St. and Gomez St. from Burgos St..
5. Surroundings along Mabini St. from corner A.Velez St. towards Capistrano St. up to corner Gomez St. including portions of Tiano Bros. St. from Mabini St.; Yacapin St. from Capistrano St. towards Burgos St.; and; C.Pacana St., JR Borja St. and Gomez St. from Capistrano St.
6. Along Pabayo and T. Saco Streets from Dolores towards Clementino Chaves St. up to 15^th-26^th St., Nazareth; Greater portion of Macasandig, all of Tibasak, all the way to Taguanao

GROUP 7 Areas :

1. Portions of Carmen along Yacal St. towards Lirio St., Vamenta Blvd., Waling-waling St. upto GSIS area including Ferrabrel St., Mango St. and portion of Rosal St. and Marigold St.
2. All of Kauswagan proper including Fairlane Village and portion of Capisnon, Bonbon and Bayabas.
3. Isla de Oro.
4. Along Montalban St. from near Tiano Bros. St. towards Burgos St., del Pilar St. and Magsaysay St. including portions of Macahambus St. and Abellanosa St. from Burgos St..
5. Portions of A.Luna St. from corner Corrales Ave.; towards vicinities along A.Velez St. upto corner Mabini St. including portion of: Makahambus St. from A.Velez St. and Tiano Bros. St. from Macahambus St.

GROUP 8 Areas :

1. Greater portion of Carmen along Lirio St., from Trinity St., towards Oak St., Max Suniel St., Vamenta Blvd, up to cor. Jasmin St. including Waterlily St. and the Carmen market area.
2. Along Mabolo St. from Lirio St. towards corner Rosal St. including portion of Marigold St. .
3. Portions of Carmen: vicinities along Vamenta Blvd. from Fernandez St. towards greater part of Ilaya including Zayas St. up to Callos-Elloso St.: portions of Ipil St. and Mahogany St. from Fernandez St.; and; Seriña St. from COA towards Gumamela Ext.St., Guani Coliseum (former O.Roa’s) and Maharlika Police Station.
4. All of Macanhan, Carmen towards all of Lower Balulang.

We hope all CEPALCO customers & the public in general will be guided by this announcement. Thank you.

Released by:

Marilyn A. Chavez

Senior Manager

Customer & Community Relations Dept.

Morning Brief: 26 April 2011

Neda: 7-8% growth ‘still our fighting target’ Momentum seen in ’10 may carry over to 1st quarter MANILA, Philippines—Having taken into account the impact of recent world events, the National Economic and Development Authority (Neda) believes that the Philippines may yet post decent growth comparable to that seen in the first quarter of last year. “There’s still a possibility of positive growth because we had strong momentum from the fourth quarter of 2010,” Economic PlanningSecretary Cayetano W. Paderanga Jr. on Monday said in a phone interview. “Remember, it was already March 11 when disaster struck Japan, and the Mena [Middle East and North Africa] crisis was not really that bad until the latter part of February.” Paderanga noted that export figures for the early part of the first quarter were “good.” The country’s gross domestic product (GDP) grew 7.8 percent in the first quarter of 2010. Election spending spurred growth during the period. According to Paderanga, Neda is still in the process of completing a report on economic activity in the first quarter of 2011. The GDP report for the first quarter is set to be released on or before May 30. Economic managers are now monitoring the inflationary impact of oil price hikes brought on by the political turmoil in the Middle East and North Africa. The crisis in parts of the Arab world, Paderanga said, could have a longer lasting impact on “key variables” than the recent earthquake and tsunami in Japan. Before these events, the Philippines was benefiting from strong momentum coming out of 2010, especially given the growth experienced in the fourth quarter, Paderanga said. But in March 2011, the Philippines may find it “difficult” to post 7-8 percent economic growth, but that level is “still our fighting target,” Paderanga said. Economists have welcomed the government’s decision to stick to its growth target since it signals its determination to meet its goals despite the difficulties. Changing targets as soon as disturbances strike would not encourage the business sector and ordinary Filipinos to be more productive and rally behind the targets, said Dr. Arsenio M. Balisacan, dean and professor of the University of the Philippines School of Economics. Economists also agreed that the escalating tension in parts of the Arab world and the resulting speculations that may lead to higher oil prices present more sustained risks to economic expansion. Pricier fuel, they said, would eat up income margins for exporters, burdening industries with more expensive logistics. It all leads to higher food prices and erodes the purchasing power of consumers, said Dr. Rolando Dy, executive director of the Center for Food and Agribusiness University of Asia and the Pacific. Japan’s economy is also expected to recover quickly because of the Japanese people’s resilience, discipline and unity, economists said. An annual economic growth of 7-8 percent and the achievement of the Millennium Development Goals (MDGs) are among the key targets of the Philippine Development Plan 2011-2016. In listing its key targets, the Philippines hopes to achieve “inclusive” 7-8 percent growth from 2011 to 2016, reduce poverty incidence to 16.6 percent in 2015 from 33.1 percent in 1991, and create employment by an annual average rate of 1 million jobs. Other key medium-term goals are: 100 percent participation of school-age children in primary education; 1:1 ratio of girls to boys in primary education and 50-percent share of women in non-agricultural wage employment; 26.7 under-five mortality per 1,000 live births; 52 maternal mortality per 100,000 live births; zero prevalence of malaria and tuberculosis. Stiffer sanctions pressed CONGRESS should consider stiffer penalties for oil firms implementing unwarranted fuel price increases, a Cabinet official yesterday said, in line with a government move to take the industry to task for recent adjustments. "If there is going to be a study regarding the oil deregulation law, there should be a more ‘exciting’ penalty structure...if (the oil firm can] gain by a P1 million, [the] penalty should be times 100," Energy Secretary Jose Rene D. Almendras told reporters in Malacañan Palace. Fuel price hikes announced last week have been criticized by Mr. Almendras, who said monitoring by the Energy department showed the adjustments were more than what was warranted. Several oil firms have since implemented rollbacks in their pump prices. "We want every single oil importation in the country reported to DoE (Department of Energy), with penalties if you don’t do it within a certain point in time; we want to restrict ports of importation so that we can solve both the data [monitoring] and also the smuggling -- that’s one batch of steps to...improve the oil deregulation law," the Energy chief said. Last Tuesday, Pilipinas Shell Petroleum Corp., Chevron Philippines, Inc. and Total (Philippines) Corp. increased pump prices of regular gasoline by P0.70/liter, diesel by P0.25/liter, kerosene by P0.40/liter and unleaded gasoline by P0.60/liter, citing higher world prices. Chevron rolled back its prices a day after, pointing to market forces, while yesterday Shell said it was cutting diesel and kerosene prices by P0.40/liter. The oil firm’s regular gasoline price, however, will be increased by P0.25/liter. Seaoil Philippines, Inc. said it would be implementing the same adjustments announced by Shell. Mr. Almendras said an Energy and Justice department (DoE-DoJ) task force -- which last week ordered concerned oil firms to explain the price hikes -- would determine if "pricing abuse" had been committed. Even if Chevron had rolled back its prices immediately, Mr. Almendras noted that these had "increased for a few hours, so kumita sila dun (so they earned from that)." "If we see a price at di mapaliwanag ang price na ’yon (and they cannot explain it), we can also take them to court in the same way that the DoJ-DoE task force can cite an oil company for the increase...the localities that showed an increase," Mr. Almendras said. "We are also asking the DoJ-DoE task force to determine whether may (there was) abuse or not." There is no specific "pricing abuse" provision in the Downstream Oil Deregulation Act (Republic Act 8479), but refusal to submit any reportorial requirement and other prohibited acts are punishable with a two-year jail term and a fine ranging from P250 to P500,000. Predatory pricing -- defined as selling or offering to sell any oil product at a price below the seller’s or offeror’s average variable cost for the purpose of destroying competition, eliminating a competitor or discouraging a potential competitor from entering the market -- and cartelization carry penalties of three to seven years in prison and a fine of P1 million to P2 million. Mr. Almendras was careful to say that the government was not looking to again regulate the oil industry. "As far as re-regulation is concerned, that’s the decision of the legislative branch. Should they decide to do it, then we will comply -- we will need a lot of money to do that -- but we will comply with whatever decision has to be made," he said. More immediately, the government is looking to provide a slate of mitigation measures to alleviate the pressure of continuous fuel price hikes, the first being the Public Transport Assistance Program to be implemented next week. The scheme’s implementing rules, said Mr. Almendras, "will be ready in time for May 2. The potential is Friday at the latest". Other measures to alleviate the impact of rising world crude prices -- due to factors such as continued unrest in the oil-producing Arab world -- will be discussed by economic managers tomorrow, he said. Oil firms have implemented 13 price increases since the start of the year. Only four price rollbacks have been announced in the same period. As of April 19, diesel prices ranged from P47.15-49.15/liter and gasoline was at P53.95-60.22/liter, the Energy department said.

U.S. Stocks Fall on Retreat in Commodity Shares, Kimberly-Clark’s Forecast U.S. stocks fell, breaking a three- day winning streak for the Standard & Poor’s 500 Index, as lower commodity prices drove down energy and raw-material producers and Kimberly-Clark Corp. (KMB) cut its profit forecast. Marathon Oil Corp. (MRO) and Nucor Corp. (NUE) slumped as the Thomson Reuters/Jefferies CRB Index of commodities slipped 0.2 percent, the first drop in four days. Kimberly-Clark, the maker of Scott toilet paper and Huggies diapers, declined 2.7 percent to lead losses by consumer companies that sell necessities. Yahoo! Inc. climbed 1.5 percent following a report that board members may consider offers or other ideas to improve the company. The S&P 500 slipped 0.2 percent to 1,335.25 at 4 p.m. in New York. The Dow Jones Industrial Average declined 26.11 points, or 0.2 percent, to 12,479.88, retreating from the highest level since June 2008. “There’s enough to be concerned and cautious about in the market, but at the end of the day, we will be driven by corporate earnings, which need to continue to perform,” said Eric Mintz, who helps oversee about $5 billion at Eagle Asset Management in St. Petersburg,Florida. The S&P 500 rose last week to the highest level since Feb. 18 and the Dow climbed to an almost three-year high as earnings at companies from Apple Inc. (AAPL) to Morgan Stanley beat analyst estimates. S&P 500 profits are exceeding projections by 9.6 percent for the first quarter, according to data compiled by Bloomberg. The gauge has climbed 6.2 percent in 2011.

Crude Oil Extends Decline After Reaching 31-Month High as Equities Slide Oil fell in New York, extending yesterday’s decline after reaching a 31 month high, as a slide in U.S. equities raised concerns fuel demand will slump. Futures fell as much as 0.5 percent as investors reacted to the first drop in the Standard & Poor’s 500 Index in a week yesterday. U.S. crude inventories climbed 1.5 million barrels last week, according to the median estimate in a Bloomberg survey of analysts before a government report due tomorrow. Oil for June delivery fell as much as 47 cents to $111.75 a barrel on the New York Mercantile Exchange. It was at $111.77 at 7:26 a.m. Singapore time. The contract yesterday slipped 1 cent to settle at $112.28 after reaching $113.48, the highest since Sept. 22, 2008. Futures have risen 33 percent in the past year. Brent crude oil for June settlement yesterday fell 33 cents, or 0.3 percent, to $123.66 a barrel on the London-based ICE Futures Europe exchange. The contract was at a premium of $11.38 a barrel to New York futures settling in the same month. The premium shrank $2.54 from a week earlier as supplies fell at Cushing, Oklahoma. Inventories at the delivery point for West Texas Intermediate futures dropped 770,000 barrels to 41.1 million in the week ended April 15, the Energy Department said on April 21. National crude inventories fell 2.32 million barrels to 357 million, the first drop since February.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

BDO UNIBANK INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001

Philippine Markets: 19 April 2011

19 April 2011

USD/PhP: 43.33 + 0.075 PSEi: 4245.21 - 23.98
USD/JPY: 82.53 PFINC: 938.61 - 9.32
EUR/USD: 1.4255 BDO: 53.00 - 0.15
GBP/USD: 1.6263 BPI: 57.40 - 1.35
PDSTF3M: 1.0481 MBT: 68.40 - 0.40
Prices as of 4:00pm Source: Bloomberg, Reuters

PH stock prices stumble amid US credit rating jitters

MANILA, Philippines—The bloodbath on Wall Street amid threats of the U.S. losing its triple-A sovereign credit rating halted local stocks' four-day run-up on Tuesday.

The main-share Philippine Stock Exchange index lost 23.98 points or 0.56 percent to finish at 4,245.21. The downturn was tempered by hefty gains posted by the mining/oil counter which surged by 2.86 percent.

"The market was relatively resilient, ending down in sympathy but not in magnitude to the Dow. Foreign funds still continue to pour into emerging markets given S&P's negative outlook on the US," said PNB Securities deputy chief Manuel Lisbona.

Mining stocks led by Philex were favored by investors' turning to commodities like gold as a safe haven following the outlook downgrade by S&P on the US sovereign credit rating. On the other hand, holding firms led by AGI were seen benefiting from a diversified portfolio.

Semirara, Lepanto and Nickel Asia were among the mining stocks that gained.

PLDT, Metrobank, ICTSI, EDC, Megaworld, BPI, Ayala Land, First Gen, Banco de Oro, Aboitiz Power and Metro Pacific Investments traded in the red. There was also further profit-taking on gaming stock LR as partner Belle announced that the opening of their casino venture had been pushed back to the second quarter of 2012.

Following S&P's "negative" outlook on the US sovereign's AAA credit rating, the closely watched Dow Jones industrial average incurred its sharpest loss since mid-March, falling by 140.24 points or 1.1 percent, to close at 12,201.59 overnight. The broader S&P 500 and tech-heavy Nasdaq likewise fell by 1.1 percent.




BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
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Morning Brief: 19 April 2011

T-bill rates fall to historic lows By Michelle Remo Philippine Daily Inquirer MANILA, Philippines—Treasury bill rates fell to historic lows across all maturities on Monday as substantial liquidity prompted banks to scramble for the virtually risk-free government securities. The significant volume of bids not only brought down rates to new lows, but also made Treasury officials decide to open a tap facility wherein additional bills will be sold to banks that failed to get allocations from the auction on Monday. The tap facility will be open on Tuesday and the government targets to sell P9 billion worth of bills through this venue on top of the P9.6 billion auctioned on Monday. “There is quite a big improvement in the government’s fiscal performance and this partly led to the decline in the rates sought by investors,” Deputy Treasurer Eduardo Mendiola said in a briefing after Monday’s auction for the short-term government securities. He said confidence in the government’s fiscal standing and ability to pay liabilities gave no reason for investors to seek higher rates, especially since they have substantial cash in their hands. The bellwether 91-day bills fetched only 0.68 percent, falling 22 basis points from the previous low of 0.90 percent registered in the auction two weeks ago. Tenders for the three-month government securities reached P7.57 billion, but the government’s auction committee decided to sell only P2.1 billion worth of bids to avoid going significantly beyond the originally programmed three-month borrowing of P1.5 billion. The rate for the 182-day bills settled at 0.898 percent, down 30.7 basis points from 1.205 percent. Bids for the six-month bills amounted to P11.87 billion, but the government observed its borrowing program for Monday and sold only P3.5 billion worth. The 364-day bills fetched 1.968 percent, also down 22.3 basis points from 2.191 percent. Bids for the one-year bills amounted to P11.5 billion, although the government sold only P4 billion to stick to its borrowing program. The government decided to sell additional securities through the tap facility to get an even lower interest rate. Securities to be sold through the tap facility carry a rate equivalent to the average of the best 50 percent of bids that were not serviced during the regular auction. Mendiola said another factor that prompted investors to accept lower rates was the slightly improved inflation scenario. Inflation in the first quarter stood at 4.1 percent, still within the 3- to 5-percent target for the full year. May 1 package being finalized by Malacañang NON-WAGE BENEFITS could be announced by Malacañang on Labor Day, a Cabinet official yesterday said, with the package likely to include health care and housing assistance for workers. "We are exploring non-cash [benefits] with Pag-IBIG Fund and PhilHealth. We are looking on what they can offer and at the rate at which they can give it," Labor Secretary Rosalinda D. Baldoz said. Emma Linda B. Faria, Pag-IBIG chief executive officer, said the agency would soon be forwarding nearly P8 billion in dividends to members. "We have announced that we would give a total of P7.88 billion in dividends last year," she said in a telephone interview. "This will be credited to every member with a savings account with us and would result in 4.1% earnings for each member." With wage hike hearings unlikely to be finished in time for May 1 celebrations, Ms. Baldoz said President Benigno S. C. Aquino III could also announce his support for a two-tiered wage system comprised of floor pay and productivity incentives. "The National Tripartite Industrial Peace Council has agreed in principle to work out the operational guidelines," she said. The system will, however, take a while to be established. "I think this will not be implemented until after three years, or 2014, because we have to settle the technicalities of the productivity incentive tier," Ms. Baldoz said. Malacañang said Mr. Aquino planned to have a breakfast meeting with labor groups as part of May Day celebrations. The Trade Union Congress of the Philippines, which has asked the Metro Manila wage board for a P75 across-the-board adjustment, said it was waiting for its invitation.

U.S. Stocks Tumble After S&P Reduces Country's Long-Term Credit Outlook U.S. stocks slumped, sending benchmark indexes to their biggest declines in a month, after Standard & Poor’s Ratings Service cut the nation’s long-term credit outlook to negative. Caterpillar Inc. and United Technologies Corp. sank at least 2.1 percent to help pace the declines in the Dow Jones Industrial Average. The Morgan Stanley Cyclical Index dropped 1.2 percent as 26 of its 30 stocks tumbled. Exxon Mobil Corp. and Chevron Corp. dropped more than 1.4 percent amid concern that China’s efforts to cool inflation will hurt the economy. The S&P 500 declined 1.1 percent to 1,305.14 at 4 p.m. in New York, its biggest retreat since March 16. The Dow average tumbled 140.24 points, or 1.1 percent, to 12,201.59. “There are a lot of structural issues that need to be dealt with,” said Mike Ryan, the New York-based chief investment strategist for Wealth Management Americas at UBS Financial Services Inc., which oversees $741 billion. “Anytime you see anything that suggests that the rating could be subject to downgrade, it’s perceived negatively. If this were to raise funding costs for the government, then it would weigh on economic prospects. It’s clearly not positive for companies.” The S&P 500 had rallied 4.9 percent this year through April 15 amid higher-than-estimated corporate earnings and government stimulus measures. The Fed and U.S. agencies have lent, spent or guaranteed about $8.2 trillion to lift the economy from the worst slump since the Great Depression, according to data compiled by Bloomberg. Treasuries Advance on Speculation Greece May Default, Tumble in Equities Treasuries rose for a second day, pushing yields on 2- and 10-year notes to three-week lows, as speculation that Greece will be unable to avoid a default and declines in stocks boosted demand for refuge assets. U.S. 30- and 10-year securities gained after falling earlier as Standard & Poor’s lowered its outlook for the U.S. credit rating to negative from stable. The Treasury sold $28 billion in six-month bills at a rate that matched a record low. “The geopolitical concerns haven’t gone away, and we are seeing safety flows into Treasuries,” said Russ Certo, a managing director and co-head of rates trading at Gleacher & Co. in New York. “As the dust clears, we are in the here and now of geopolitical concerns rather than the future of uncertainty of what may happen with ratings.” Yields on 10-year notes dropped three basis points, or 0.03 percentage point, to 3.38 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices. They touched 3.36 percent, the lowest since March 24. The 3.625 percent securities maturing in February 2021 gained 1/4, or $2.50 per $1,000 face amount, to 102 1/32. Thirty-year bond yields slipped one basis point to 4.46 percent. The two-year note yield decreased four basis points to 0.65 percent and touched 0.64 percent, the lowest level since March 24. Ten-year yields are still down from 3.80 percent a year ago. They averaged 5.22 percent over the past two decades. The benchmark notes will yield 3.90 percent at year-end, according to the median forecast of 73 economists in a Bloomberg survey.

Oil Near Three-Day Low After China Bank Move Prompts Fuel-Demand Concerns Oil traded near a three-day low in New York after China, the world’s second biggest crude-consuming nation, increased banks’ reserve requirements to cool inflation, signaling fuel demand growth may slow. Futures slipped 2.3 percent yesterday after the country’s central bank governor, Zhou Xiaochuan, said monetary tightening will continue for “some time.” Reserve ratios will rise a half point from April 21, the People’s Bank of China said, pushing the requirement to a record 20.5 percent for the biggest lenders. “The fact that the Chinese are taking measures because their economy is so strong seems to be taking air out of the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. Crude oil for May delivery traded at $107.38 a barrel, up 26 cents, in electronic trading on the New York Mercantile Exchange at 8:33 a.m. Sydney time. Yesterday, it slid $2.54 to $107.12, the lowest since April 13. The more-actively traded June contract gained 21 cents to $107.90. Prices also declined yesterday after Saudi Arabian Oil Minister Ali al-Naimi said that the market is “oversupplied.” The kingdom is the world’s biggest crude exporter. Brent crude oil for June settlement dropped $1.84, or 1.5 percent, to $121.61 a barrel on the London-based ICE Futures Europe exchange yesterday.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

BDO UNIBANK INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001