| Upgrade factors cited THE GOVERNMENT must show more gains from sustained prudent fiscal management and structural reforms to enable the country to eventually bag its coveted investment-grade debt rating.“Continued prudent monetary and fiscal policy management, combined with reforms to address some of Philippines’ key rating weaknesses -- low fiscal revenues, fairly low investment rate, underdevelopment reflected in low average income -- would support the case for an upgrade,” Andrew Colquhoun, Fitch Ratings Asia-Pacific Sovereigns head, wrote in an e-mail on Wednesday. Similarly, Takahira Ogawa, Standard & Poor’s (S&P) director for Sovereign and International Public Finance Ratings, said in a separate e-mail on Tuesday that “...measures to sustainably enhance the government’s revenues are important factors for the future stability of the Philippines’ fiscal position and strategic use of public funds -- the latter which enhances the country’s growth prospects.” The Philippines under the current administration has garnered a host of rating upgrades from debt watchers since late last year. Just last month, Fitch raised the country’s credit category from BB to BB+, one notch below investment grade, signaling that the country can repay its debt unless a major economic shock occurs. Earlier, Moody’s Investors Service raised the Philippines’ rating to Ba2 from Ba3 in June, while S&P upped the country’s grade to BB from BB- in November. Both ratings are two notches below investment grade, which means the country’s debt papers still have speculative elements, but are no longer considered as high-credit risk. Finance Secretary Cesar V. Purisima had said earlier that the government aims to bag investment grade rating within the first half of the Aquino administration, or by 2013. This, debt watchers said, means the economy’s performance will be under closer scrutiny. “Generally speaking, the higher the rating, the more stringent is Standard & Poor’s assessment of various aspects of sovereign credit risk factors,” Mr. Ogawa said. Reforms designed to increase revenues, investments and growth will also take some time to have an impact on the economy, hence, the stable outlook given to the Philippines, Mr. Colquhoun explained. S&P and Moody’s had also given the country stable outlooks along with their upgrades. At the same time, Mr. Ogawa cited the steady improvement in the country’s fiscal situation, with the government registering a budget shortfall of only P9.54 billion as of May from the P162.107-billion deficit a year ago. “The Philippine government’s fiscal condition has been improving in the last several years and the central government has never recorded fiscal deficits higher than 4% of GDP (gross domestic product) since 2004,” Mr. Ogawa noted. Fitch likewise does not expect any “fiscal policy slippage,” which could otherwise put negative pressure on ratings, Mr. Colquhoun said. “For us, the question is whether fiscal policy is managed sustainably. The upgrade reflected our view that the administration’s fiscal management is proving quite prudent,” he explained. While S&P downplayed fears that the country’s fiscal consolidation has been buoyed largely by state underspending, Mr. Ogawa stressed the need for quality spending -- for example, in social services -- to help fuel growth. The Philippines must now press ahead on other indicators to bring it to the same level as investment-grade counterparts. “In 2010, the Philippines recorded $2,015 of GDP per capita, while the median ‘BB’ and ‘BBB’ (investment grade) categories were $5,575 and $9,441 respectively,” Mr. Ogawa pointed out. Moreover, the Philippines’ revenue-to-GDP ratio of 14.2% in 2010 was lower than those of similarly-rated sovereigns, while its 57% debt-to-GDP ratio that same year was higher than those of others, he added. The Department of Finance aims to increase revenues to 15.1% of GDP this year and further to 15.3% next year. Mr. Purisima has said that the department will work to expand the tax base by plugging leakages from tax evasion and smuggling, as well as monitoring self-employed sectors. Reserves inch closer to goal by end-June GROSS INTERNATIONAL reserves (GIR) inched up to $69 billion in the first half, just a billion dollars shy of the official $70-billion projection for 2011, the central bank said yesterday. Data released by the Bangko Sentral ng Pilipinas (BSP) showed GIR rising by $100 million from the $68.9 billion recorded as of end-May on the back of the central bank’s earnings from its foreign exchange operations and investments overseas. “These inflows were partially offset by payments by the National Government and the BSP of their maturing foreign exchange obligations, as well as revaluation losses on the BSP’s gold holdings on account of the month-on-month modest decline in gold prices in Jne 2011,” the central bank said in a statement. The GIR, which cushions the economy against external shocks, is a key indicator of the country’s ability to pay for imports and service its foreign debts. The central bank said foreign reserves by end-June could cover 10.3 months worth of imports of goods and payments of services and income. The first-half amount was also equivalent to 10.2 times the country’s short-term external debt, or those falling due within 12 months. BSP Governor Amando M. Tetangco Jr. had said on Wednesday that international reserves this year could breach the central bank’s $70-billion target for 2011. |
U.S. Stocks Advance as Job Data, Retail Sales Bolster Economic Optimism U.S. stocks jumped, sending the Standard & Poor’s 500 Index close to a three-year high, as retail and job market data bolstered confidence in the economy.Target Corp. (TGT), the second-largest U.S. discount retailer, and Kohl’s Corp. (KSS) rose at least 6.6 percent as June retail sales surpassed analysts’ projections. Urban Outfitters Inc. (URBN) rallied 6 percent after Morgan Stanley recommended investors buy the shares. JPMorgan Chase & Co. (JPM) climbed 1.9 percent as banking shares soared. The S&P 500 Index (SPX) climbed 1.1 percent to 1,353.22 at 4 p.m. in New York, its highest closing level since May 10. The Dow Jones Industrial Average rose 93.47 points, or 0.7 percent, to 12,719.49, as a report by ADP Employer Services showed U.S. companies added more jobs than forecast in June. Volume on U.S. exchanges totaled about 6.8 billion at 4:30 p.m., 4 percent less than the three-month average through yesterday. Treasuries Snap Two-Day Rally as Employment Outlook Boosts Bets on Economy Treasuries ended a two-day rally as a private report said U.S. companies added more jobs than forecast and economists said government data tomorrow will show nonfarm payrolls gained, fueling bets economic growth is accelerating. Ten-year yields rose from a one-week low as stocks climbed after the European Central Bank signaled it will ease Portugal’s access to emergency funds. ADP Employer Services said U.S. firms’ payrolls increased by 157,000 jobs in June, and unemployment claims fell for the first time in three weeks. The U.S. said it will sell $66 billion in notes and bonds next week. “It’s all about the data,” Siddharth Joshi, an interest- rate strategist in New York at Citigroup Inc., said in an interview. The firm is one of 20 primary dealers that trade with the Federal Reserve. “People are waiting for a good number on NFP and if so, we’ll see a sharp sell-off.” Yields on benchmark 10-year notes increased three basis points, or 0.03 percentage point, to 3.14 percent at 5 p.m. in New York, according to Bloomberg Bond Trader prices. Earlier they rose as much as seven basis points. The 3.125 percent securities maturing in May 2021 dropped 1/4, or $2.50 per $1,000 face amount, to 99 7/8. The 10-year note yields touched 3.07 percent yesterday, the lowest level since June 29. Two-year note yields climbed five basis points to 0.47 percent today and touched 0.48 percent, the highest since July 1. They fell to 0.32 percent on June 24, a seven-month low. Treasuries have returned 2.6 percent this year after gaining 5.9 percent in 2010, according to a Bank of America Merrill Lynch index. |
Oil Trades Near Three-Week High on Economic Outlook, U.S. Stockpile Drop Oil traded near the highest in more than three weeks in New York as investors bet that shrinking crude stockpiles and signs of economic recovery in the U.S. indicated fuel demand may increase.Futures were little changed after advancing 2.1 percent yesterday following data from ADP Employer Services that showed a 157,000 gain in the number employed by businesses last month. An increase of 70,000 was projected, according to the median forecast by Bloomberg News. U.S. crude supplies fell 889,000 barrels to 358.6 million last week, the lowest level since April, an Energy Department report showed. “We had good news on jobs today, which is more important than anything else,” said Sean Brodrick, a natural resource analyst withWeiss Research in Jupiter, Florida. “People in the energy pits are now looking at sustained economic strength.” Crude for August delivery was at $98.78 a barrel, up 11 cents, in electronic trading on the New York Mercantile Exchange at 8:34 a.m. Sydney time. The contract yesterday climbed $2.02 to $98.67, the highest settlement since June 14. Prices are 31 percent higher the past year. Brent oil for August settlement rose $4.97, or 4.4 percent, to end the session at $118.59 a barrel on the London-based ICE Futures Europe exchange yesterday. The European benchmark contract was at a premium of $19.92 to U.S. futures. The difference reached a record $22.29 on June 15. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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