INCOME TAX FORUM ON JAN. 27 @ 1:30-5:00PM at OROCHAMBER OFFICE

TO ALL MEMBERS:

Your Chamber-- the OroChamber, in partnership with the Bureau of Internal Revenue (BIR) Regional Revenue Office No. 16 will hold a forum on Income Tax this Thursday, January 27, 2011 at 1:30-5:00pm at the OroChamber-PUM Conference Room, Macapal Drive, Pueblo de Oro Township, this city.

The half-day Forum will highlight the most recent regulations and guidelines on Income Taxes to update businessmen and accounting professionals.

The event is FREE OF CHARGE for Chamber members in Good Standing. For more details and related queries, please call the ORO CHAMBER Office and look for Ms. Mozell Nabua.

Morning Brief: 24 January 2011

Exporters see catch-up year EXPORTERS OF FOOD, garments and furniture expect faster sales growth this year contrary to forecasts of a general correction, industry officials said late last week. Trade barriers, raw input shortages and foreign exchange costs, they explained, had prevented these sectors from mimicking last year’s sharp rebound by the electronics sector. Roberto C. Amores, president of the Philippine Food Processors and Exporters Organization, said 2011 food export sales could grow by a brisker 10-15% this year versus the 8.6% increase to $846 million as of November 2010. Garment export sales could similarly rise by 12-15% in 2011, possibly surpassing the 12% increase seen with a month left to last year, Confederation of Garment Exporters of the Philippines Executive Director Teresita Jocson-Agoncillo said in a separate interview. Furniture shipments are also expected to enjoy faster sales growth this year, Chamber of Furniture Industries of the Philippines President Joy C. Cancio said. This contrasts with government projections of a slower 13% growth in total export sales this year from the 34.5% surge seen as of November 2010. The official target tracks the performance of electronics, the top export earner, which is expected to post just 10% sales growth versus the 42% spike seen so far last year. "Semiconductor exporters do not use indigenous raw materials. We have very low supply of raw materials [in comparison]. That’s why we didn’t grow much last year and we have more room to grow now," Mr. Amores said, noting that weather disturbances had caused a shortage in farm crops. "We have many problems with raw materials. Our local source of wood is limited," Ms. Cancio echoed. Mr. Amores added: "we’re very sensitive to foreign exchange movements and non-tariff measures." Exporters that use locally made inputs transact mainly in peso and were thus hurt when the currency strengthened against the dollar in the second half of 2010, making their goods more expensive. Electronics, in contrast, are assembled from imported components. Food, garment and furniture exports are also slapped with higher tariffs and stricter product safety standards while electronics enjoy duty-free entry under the World Trade Organization’s Information Technology Agreement. Coming from a low base, faster growth is likely this year, the officials said. "I expect it will be better because we came from a slump," Ms. Cancio said. "These goods are basic necessities," Ms. Jocson-Agoncillo said. Gov’t eyes tax cuts for foreign airlines MANILA, Philippines—The government is studying the reduction of airline tax rates to make the country a cheaper destination and attract more foreign airlines to fly to the country, thus resulting in increased competition in the country’s air travel market. But as with other policies aimed at developing the industry, tax perks will only be given to airlines from countries that do the same for carriers from the Philippines. Deputy Executive Director Porvenir Porciuncula of the Civil Aeronautics Board (CAB) said the regulator recently met with the Bureau of Internal Revenue (BIR) to discuss the taxes imposed on foreign airlines operating in the Philippines. The government earns an estimated P3.2 billion by imposing a 3-percent common carriers tax on gross receipts and a gross Philippine billings tax of 2.5 percent. The duties have made the country an unattractive market for foreign airlines, especially those from Europe, which operate longer flights and have higher ticket prices, in turn requiring them to pay more taxes. The European Chamber of Commerce of the Philippines has called on the government to scrap the “onerous” taxes. By doing so, the group said more airlines from Europe would consider flying to the Philippines, which would support the government’s programs to increase tourist arrivals and spur investments. “We’ve had meetings with the BIR and the Bureau of Customs. They seem willing to cut the taxes,” Porciuncula said. “But it will have to be on a case-to-case basis because some countries also charge similar taxes on foreign airlines,” he said. “It will have to be reciprocal.” Earlier, the CAB said it would also prioritize reciprocity in implementing the government’s planned “open skies” regime, which would make it easier for foreign airlines to gain rights to fly to the Philippines. The CAB said this privilege would only be extended to airlines that come from countries that are just as open to Philippine carriers. Today, Dutch flag carrier KLM is the only European carrier with direct flights to the Philippines. No local airline has flights to Europe. The route is currently dominated by Middle Eastern carriers, which are able to offer lower ticket prices because they are able to buy fuel at a discount. There is also a standing ban on Philippine carriers from flying to Europe—a result of the government’s inability to enforce minimum international safety standards.

Earnings onslaught coming - but Wall Street may not care NEW YORK (CNNMoney.com) -- Nearly half of the companies in the Dow Jones industrial average are scheduled to release quarterly reports this week, and expectations are very high. But don't be surprised if stocks have a muted reaction to stronger-than-anticipated profits and sales. The stock market has grown "complacent," traders say, and it's going to take more than blockbuster earnings and strong economic data to move it higher. What that could be, though, no one was certain. At the same time, many analysts also believe the market has run out of steam and needs to "rest" for a while. After climbing steadily since the start of December, stocks hit some resistance last week. The Dow added 1.2%, while the S&P 500 ended last week flat. The Nasdaq, which is looking particularly tired, fell 1.7% over the last five trading days. "There's a level of complacency in the market, and some of the contrary indicators suggest the market is overbought," said Nick Kalivas, vice president of financial research at MF Global. "Even if the news next week is favorable, it might not translate to higher prices." The weakness in tech last week -- which came despite blowout quarterly reports from IBM (IBM, Fortune 500), Apple (APPL) and Google (GOOG, Fortune 500) -- is indicative of the market's fatigue, said Kalivas. This week investors will have a slew of top-tier reports to sort through, including numbers from 13 Dow components. Investors are also expecting this week's statement from the Federal Reserve to be a snooze. The central bank is widely expected to leave its benchmark interest rate unchanged when it wraps up a two-day meeting on Wednesday. "I would be shocked if they said anything," said Abigail Doolittle, founder of Peak Theory Research. "The markets are moving ahead and the economy is doing better; they don't want to upset the apple cart." Still, she said the stock rally that started in August has been driven largely by the Fed's stimulus efforts. In the weeks ahead, she added, "the smart money" will be looking for signs the economy can stand on its own two feet. On the economic front, reports are due this week on housing and consumer confidence, as well as an early reading on fourth-quarter gross domestic product. The economy has been showing signs of strength recently, with many economists raising their forecasts for 2011. But there is still much skepticism about how the economy will fair as government stimulus programs fade. "If it turns out that the economy needs another round of government aid in the form of liquidity, I think you'll start to see the market decline into the summer as investors send a message to the Fed," said Doolittle. Monday There are no economic reports on the agenda, but quarterly results are due in the morning from fast food giant and Dow stock McDonalds (MCD, Fortune 500). Three challenges to McDonald's growth After the market closes, fellow Dow company American Express (AXP, Fortune 500) is scheduled to release results. In addition, transporter CSX (CSX, Fortune 500) and technology company Texas Instruments (TXN, Fortune 500) are among the others scheduled to report. Tuesday The Case-Shiller November index of home prices in 20 major U.S. markets comes out before the market opens. The Conference Board, a business research group, will release its January report on consumer confidence shortly after the opening bell. There are five Dow stocks scheduled to report earnings in the morning, including 3M (MMM, Fortune 500), DuPont (DD, Fortune 500), Johnson & Johnson (JNJ, Fortune 500), Travelers (TRV, Fortune 500) and Verizon (VZ, Fortune 500). Yahoo (YHOO, Fortune 500) is one of the companies slated to report after the bell. Wednesday The Federal Reserve is widely expected to hold its benchmark interest rate near rock-bottom when it concludes a two-day meeting Wednesday. A policy statement is expected around 2:15 p.m. ET. New home sales data are due after the market opens from the Commerce Department. Economists expect sales rose to an annual rate of 300,000 in December from 290,000 in November, according to consensus estimates from Briefing.com. Also before the bell, results are due from blue chips Boeing (BA, Fortune 500) and United Tech (UTX, Fortune 500). ConocoPhillips (COP, Fortune 500), US Airways (LLC) and Xerox (XRX, Fortune 500) are some of the other companies scheduled to release earnings and sales figures. After the close, coffee chain Starbucks (SBUX, Fortune 500) is slated to report. Thursday The government's weekly report on initial claims for unemployment benefits comes out at 8:30 a.m. ET, along with data on durable goods orders in December, and pending home sales in November. AT&T (T, Fortune 500) and Caterpillar (CAT, Fortune 500) are the Dow stocks reporting results Thursday morning, along with DR Horton (DHI) and Eli Lilly (LLY, Fortune 500). Microsoft (MSFT, Fortune 500) and Amazon (AMZN, Fortune 500) are up after the bell. Friday An advance reading on fourth-quarter U.S. gross domestic product is due before the market opens. Economists are forecasting a 3.8% annual rate of growth, up from 2.6% in the third quarter. Chevron (CVX, Fortune 500), a Dow stock, and Ford (F, Fortune 500) and Honeywell (HON, Fortune 500) report results in the morning. After the market opens, the University of Michigan will release its final report on consumer sentiment in January.

Oil Falls a Fourth Day in New York on U.S. Supplies, Chinese Rate Outlook Crude oil fell in New York for a fourth day, the longest losing stretch in nine weeks, on rising U.S. stockpiles and speculation China will increase interest rates to curb inflation. Oil dropped 0.5 percent after the Energy Department said that U.S. crude and fuel supplies rose last week. Prices climbed earlier as German business confidence unexpectedly climbed to a record in January amid booming exports to Asia and French business confidence surged. “There were a lot of people betting on $100 oil, but it looks like they were a little optimistic,” said Kyle Cooper, director of research for IAF Advisors in Houston. “Oil at $90 is actually looking a little high, given that inventories are in pretty good shape and demand isn’t that great.” Crude for March delivery slipped 48 cents to settle at $89.11 a barrel on the New York Mercantile Exchange. The contract fell as much as 72 cents to $88.87 earlier. Futures are up 17 percent from a year ago. The March contract in New York declined 3.7 percent this week. The February contract expired yesterday after dropping 2.2 percent to $88.86, the lowest settlement since Jan. 7.

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