Philippine Markets: 5 May 2011

05 May 2011

USD/PhP: 42.93 + 0.05 PSEi: 4248.68 - 49.53
USD/JPY: 80.32 PFINC: 957.58 - 7.25
EUR/USD: 1.4878 BDO: 57.45 unch
GBP/USD: 1.6537 BPI: 58.25 - 0.25
PDSTF3M: 0.8004 MBT: 68.85 - 0.55
Prices as of 4:00pm Source: Bloomberg, Reuters


Philippines Raises Key Interest Rate a Second Time This Year
By Karl Lester M. Yap and Max Estayo

May 5 (Bloomberg) -- The Philippine central bank raised
borrowing costs for a second time this year, joining Asian
nations from India to Vietnam in tightening policy as the region
intensifies the fight against inflation.
Bangko Sentral ng Pilipinas increased the rate it pays
lenders for overnight deposits to 4.5 percent from 4.25 percent,
according to a statement in Manila today. The decision was
predicted by 12 of 16 economists in a Bloomberg News survey.
“Rising price pressures and inflation expectations mean
that some amount of monetary policy tightening is needed to
contain domestic demand pressures,” said Prakriti Sofat, a
Singapore-based economist at Barclays Capital, who predicts
another increase in July.
Surging food and oil costs are escalating the danger of
inflation in Asia, prompting policy makers to accelerate
monetary tightening even at the risk of slowing growth. India
this week doubled the magnitude of interest-rate increases and
Governor Duvvuri Subbarao indicated he would raise borrowing
costs further.
Inflation in the Philippines accelerated to 4.5 percent in
April, a report showed today. The central bank targets average
inflation of 3 percent to 5 percent this year and in 2012.

Bond Yields

Benchmark three-year bond yields have risen almost 0.7
percentage point this year on concern inflation will accelerate.
The peso surged to a six-month high this week as rising interest
rates attract funds seeking higher-yielding assets.
Asia faces a “serious setback” from surging inflation
that threatens to push millions into extreme poverty, the Asian
Development Bank said last week. The region’s growth may be
reduced by as much as 1.5 percentage points should the pace of
gains in oil and food prices seen so far this year persist for
the rest of 2011, it said.
Vietnam yesterday raised its repurchase rate for the fifth
time this year to 14 percent, with the benchmark doubling from
November.
Philippine President Benigno Aquino this week implemented a
fuel subsidy for public transport and has ordered a minimum wage
increase in the capital to be approved by next week.
Jollibee Foods Corp., the nation’s largest restaurant
operator, said profit growth in the first half of 2011 may slow
as raw-material prices and operating costs rise. Crude oil
prices have surged past $100 a barrel this year as unrest in the
Middle East and North Africa threatens supplies.
Growth in the $161 billion economy accelerated to the
fastest pace in more than three decades in 2010, boosted by
business and consumer spending. Aquino aims to expand the
economy by as much as 8 percent annually from 2011.


Philippine Inflation Quickens to Fastest Pace in 24 Months

By Max Estayo and Karl Lester M. Yap
May 5 (Bloomberg) -- Philippine inflation accelerated in
April to the fastest pace in 24 months, adding to the case for
the central bank to raise interest rates.
Consumer prices increased 4.5 percent from a year earlier,
after a 4.3 percent gain in March, the National Statistics
Office said in Manila today. The median estimate in a Bloomberg
News survey of 16 economists was for a 4.4 percent gain.
Asia’s policy makers are intensifying their fight against
inflation as political unrest in the Middle East and war in
Libya boost crude oil prices. Bangko Sentral ng Pilipinas may
raise its benchmark rate a second time in 2011 today, according
to a Bloomberg News survey, joining India in raising borrowing
costs this month.
“It is too early for policy makers to hold fire as
inflationary pressures remain strong amid surging global oil and
food prices,” said Sherman Chan, a Hong Kong-based economist at
HSBC Holdings Plc. “We expect moderate steps along the
tightening path.”
The central bank will increase the rate it pays lenders for
overnight deposits by at least a quarter of a percentage point
to 4.5 percent today, according to 13 of 16 economists surveyed
by Bloomberg News.
Bangko Sentral may raise borrowing costs again this year
because of inflation risks coming from higher commodity prices
including oil, Governor Amando Tetangco said last month,
reiterating previous comments. Policy makers in March raised the
benchmark rate for the first time since August 2008.
“It is possible that we may have to take additional
monetary action,” Tetangco said April 11. “We need to monitor
the situation such that we will be preemptive. We would like to
make sure that the target of 3 percent to 5 percent average
inflation for this year is achieved.”



Philippine stocks close 1.15 pct lower Thursday

MANILA (Xinhua) – Philippine shares closed 1.15 percent lower Thursday.

The bellwether Philippine Stock Exchange index declined 49.53 points to 4,248.68.
The broader all-share index decreased 2.74 percent or 85.36 points to 2,968.80.

Trading volume reached 7.70 million shares worth 26.87 billion pesos (625.46 million U.S. dollars),
with 36 issues advancing, 94 declining, and 44 unchanged.

www.philstar.com

BDO UNIBANK, INC.

Jonathan Ravelas
Chief Market Strategist
(632) 858-3145

Rhys Cruz
Junior Researcher
(632) 858-3001