Thursday, February 10, 2011
Morning Brief: 10 February 2011
| Gov’t commits to targets ECONOMIC MANAGERS yesterday vowed to address inflation risks and investment barriers to ensure that growth targets will be met. The central bank chief hinted at using monetary policy in case consumer price growth exceeds the projected 3-5%, while officials at other state agencies said they were streamlining approval processes and mulling new economic zones to attract investments. These should allow the economy to hit the targeted 7-8% growth this year via job generating activity largely in agriculture, tourism and the business process outsourcing industries, officials said at a briefing on the economy. "Uncertainties ... could potentially influence inflation expectations," Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said, citing possible commodity price volatility as recovering global demand plays against supply conditions that have been influenced by bad weather and unrest in the Middle East. "Against this global backdrop, as our economy and our country carry out its own domestic adjustments to what is happening around us, we remain watchful and ready to take action to address any emerging risk," Mr. Tetangco said. Trade Secretary Gregory L. Domingo said the National Price Coordinating Council would be meeting on Friday to decide on voluntary price ceilings, particularly for sugar, while Finance Secretary Cesar V. Purisima said the government would continue a strategy of keeping rice stocks as a buffer against price spikes. The government, however, would tend to allow market forces to determine prices, Mr. Domingo later told reporters, especially for goods where competition is tight. Inflation concerns Representatives of financial institutions yesterday similarly warned of commodity price spikes and food shortages. "The threat of inflation in global commodity prices is something we need to [address]," Banco de Oro President Nestor V. Tan said at the briefing. World Bank country director Bert Hofman was less downbeat, but nevertheless urged the government to work on food security. "The rice market internationally looks good," Mr. Hofman said, explaining that inflation rates in the country could still be manageable. "But medium-term [challenges] in ... farmers’ productivity [should be addressed]," he said. Mr. Hofman went on to point out that direct investments in the Philippines "remain too low if you want to base rapid growth on these." "Out of sync" policies between national and local government are partly to blame for investor hesitation, Philippine Chamber of Commerce and Industry President Francis C. Chua added. To address this, Mr. Domingo said the Trade department was spearheading a proposal to put up economic zones in poor provinces next year in a bid to limit local governments’ prerogatives over investment policies. "The concept is to come up with certain areas that won’t be subject to local government rules and regulations," he said. Incentives will be less generous than those granted to exporters regulated by the Philippine Economic Zone Authority and the proposal will consider inputs from the Finance department and Congress, Mr. Domingo said. The Trade department is also planning to draft a "magna carta for investors" which will be submitted to Congress, he said. Macroeconomic targets Finance Secretary Cesar V. Purisima, for his part, said: "We are mindful of the challenges ahead but we are committed on meeting our goals." He pointed to this year’s lower deficit target -- 3.2% of gross domestic product (GDP) from last year’s 3.9% -- and said this would further be lowered to 2% by 2013. "If we manage to cut our deficit to 2% of GDP, it would allow us to have a debt-to-GDP [ratio] lower than 50%," he added. The debt ratio, at 56.5% in 2010, is expected to be slashed to 56% this year. Based on data presented during yesterday’s briefing, the ratio will only dip below 50% -- at 49% from 51% the preceding year -- starting 2015. Mr. Purisima stressed that the government was "aspiring" for 7-8% growth this year, higher than 2010’s 5-6% target which was surpassed when the economy ended up expanding by 7.3%. Final targets for 2012 -- officials have said the 5-6% target adopted last year could be maintained -- will be set by the interagency Development Budget Coordination Committee when it meets this Friday. The National Economic and Development Authority (NEDA), for its part, will be detailing infrastructure priorities needed to grow the economy, Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said. These will come on top of the 10 public-private partnership projects expected to be bid out this year. "When the medium-term Philippine development plan is finished, we will come up with the medium-term Philippine investment program where major thrusts will be implemented in the form of projects," Mr. Paderanga said. In preparation for an expected investment influx, the NEDA is "streamlining the process while making sure safeguards remain," he added. These efforts should attract investors and allow growth "to be driven by business process outsourcing, tourism and agro-industrial processes," he said. China rate hike With China having raised interest rates for the second time in six weeks last Tuesday and the Monetary Board set to meet today to discuss policy, the BSP’s Mr. Tetangco said: "We recognize the upside risk [to inflation] and we will continue to monitor but at this point there is no urgency to increase interest rates." "Looking at this development [in China], one should consider not only global developments but also country specific conditions. So based on our assessment the inflation outlook for the Philippines continues to be manageable," he added. Most analysts do not expect the Monetary Board to raise overnight borrowing and lending rates -- kept at a record low of 4% and 6%, respectively, since July 2009 -- despite inflation rising to 3.5% in January. The rise in consumer prices, higher than December’s 3%, remains within the BSP’s 2011 target range of 3-5% and under its full-year forecast of 3.6%. -- with a report from L. D. Desiderio |
| Dow ends higher for 8th-straight day NEW YORK (CNNMoney) -- U.S. stocks lifted from session lows Wednesday and ended a lackluster trading session mixed. The Dow inched higher for an eighth straight session, but the S&P 500 and Nasdaq finished lower as investors took a breather following four consecutive days of gains. After spending most of the day in the red, the Dow Jones industrial average (INDU)managed to add 7 points, or 0.1%, led by a 5% jump in shares of Walt Disney Co. (DIS, Fortune 500) following strong fourth-quarter earnings. The blue-chip index rose to 12239.89, the highest level since June 16, 2008. Energy and financial companies were among the biggest laggards. Chevron (CVX, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Exxon Mobil (XOM, Fortune 500) were among the Dow's biggest losers. Meanwhile, drops in shares of Southwestern Energy Co. (SWN), Cliffs Natural Resources (CLF) andWells Fargo (WFC, Fortune 500) weighed on the S&P 500. Investors directed their attention to Capitol Hill, as Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee. The central bank chief said that despite a strengthening economic recovery, the unemployment rate remains high while inflation is "still quite low." Bernanke also told lawmakers that they need a "credible program" to reduce the nation's growing deficit.
Indirect bidders bought 71.3 percent of the notes, compared with 53.6 percent in January and an average of 46.4 percent for the past 10 sales. Yields had climbed the most in more than two weeks yesterday after the Treasury’s three-year note auction attracted the lowest indirect bids since 2007 amid concern inflation is accelerating. “The major severe selloff in the last couple of days provided some value for investors, and they came in at remarkable levels,” said Thomas Simons, a government debt economist in New York at Jefferies Group Inc., one of 20 primary dealers that trades with the Fed. “This is the polar opposite of yesterday’s auction and was pretty remarkable. The biggest story is the indirect bid and dealers missed as bad as any kind off dealers can miss.” The yield on the 10-year note dropped nine basis points, or 0.09 percentage point, to 3.65 percent at 5:02 p.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 rose 22/32, or $6.88 per $1,000 of face value, to 91 20/32. The yield earlier touched 3.77 percent, the most since April 29. It rose 11 basis points yesterday, the most since Jan. 20. |
Oil Falls as U.S. Crude, Gasoline and Distillate Supplies Gain Oil declined in New York after an Energy Department report showed that U.S. crude stockpiles rose for a fourth week and fuel inventories climbed. Oil slipped 0.3 percent after the department said inventories of crude added 1.9 million barrels to 345.1 million last week. Supplies were forecast to increase 2 million barrels, according to the median of 15 analyst projections in a Bloomberg News survey. Inventories of gasoline and distillate fuels, including diesel and heating oil, also gained. “The market is trying to digest the big builds in today’s reports,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. Crude oil for March delivery slipped 23 cents to $86.71 a barrel on the New York Mercantile Exchange, the lowest settlement price since Jan. 27. Futures are up 18 percent from a year ago. Stockpiles of crude oil at Cushing, Oklahoma, the delivery point for West Texas Intermediate, the grade traded in New York, fell 927,000 barrels to 37.4 million. Supplies in the week ended Jan. 28 climbed to the highest level since the department started keeping records at the storage hub in 2004. Cushing is landlocked in the central U.S. “The Cushing situation has to be turned around,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “There’s a bottleneck there which has resulted in a bizarre crack spread and WTI trading at a discount to other grades.” |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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