PHILIPPINES
BSP prods banks to boost lending
By: Michelle V. Remo
The Bangko Sentral ng Pilipinas has urged banks to increase lending some more to help the economy grow faster, saying there was still room for credit expansion even if loan growth was at double-digit rates.
According to the BSP, significant levels of liquidity in the banking sector made banks able to extend more loans to consumers and businesses. Banks should better perform their role of helping accelerate growth of the economy through more lending, the central bank said.
“There is still room for additional lending. Banks can further boost the growth of the economy,” BSP Governor Amando Tetangco Jr. said in a forum.
The appeal came as the economy posted a slower growth in the first half even if credit has been growing at a double-digit pace.
The economy, measured in terms of the gross domestic product, grew 4 percent in the first semester from a year ago, slowing down from the 8 percent registered in the same period last year.
Latest BSP data on lending showed that outstanding loans of universal and commercial banks grew 19.1 percent in July from a year ago, registering the fastest pace of credit growth in about two years.
Despite this, banks still had a lot of resources that were not lent out and were just kept as deposits in the BSP. Money placed in the BSP’s special deposit account (SDA) facility is at a historic high of about P1.6 trillion.
Some economists said banks could help accelerate the growth of the economy if some of the funds parked at the SDA facility would be used for more lending.
Banks are encouraged to park a significant portion of their funds at the SDA facility because doing so helps them earn without the risks that usually accompany the granting of loans. The BSP pays SDA deposits an interest of 4.5 percent a year across all maturities.
The BSP, however, stressed that while banks were being encouraged to extend more loans, they should maintain prudent lending standards. Keeping exposure to soured loans at a minimum was important in keeping banks stable, the regulator said.
The banking industry, however, said that the sharp rise in credit growth indicated that it was doing its role of intermediating funds to help boost the growth of the economy
WORLD
U.S. Stocks Tumble to 2011 Low on Debt Concern
By Rita Nazareth
U.S. stocks tumbled, sending the Standard & Poor’s 500 Index to a one-year low, as concern over Greece’s debt crisis and Bank of America Corp. (BAC)’s slump outweighed a rebound in manufacturing and construction spending.
Financial shares had the biggest drop in the S&P 500 as Bank of America fell 9.6 percent to the lowest level since March 2009. Alcoa Inc. (AA) lost 7 percent amid concern about slower demand for commodities. American Airlines parent AMR Corp. (AMR) slid 33 percent on concern the U.S. is nearing a return to recession and that the carrier may be forced to seek bankruptcy protection.
The S&P 500 lost 2.9 percent to 1,099.23 at 4 p.m. New York time, its lowest close since Sept. 8, 2010. The Dow Jones Industrial Average declined 258.08 points, or 2.4 percent, to 10,655.30, also the lowest level in more than a year.
“The focus will be on Europe until they get their house in order,” Tom Wirth, who helps manage $1.5 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. “There’s a tremendous amount of pessimism built into stocks as the market prices in a recession. In the U.S., we had a good ISM number which shows the economy is growing slowly, but not going into a recession.”
The S&P 500 came within 1 percent of extending its decline from this year’s high to 20 percent, the common definition of a bear market. Losses accelerated in the S&P 500 after the gauge fell below a series of prices considered significant by analysts who base investment decisions on charts. The index slipped below 1,119.46, its previous lowest close of the year, just before 12:50 p.m. and breached 1,114.22, the worst intraday level of September, about 15 minutes later.
‘Accelerated Selling’
“There’s reason to think that the bears will take control,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati said in a telephone interview. “We violated that low for the year. It could definitely lead to some accelerated selling here.”
Global stocks slumped as European officials prepared to meet in Luxembourg today to consider how to shield banks from the debt crisis and boost the region’s rescue fund after Greece missed a deficit target for 2012. Euro region finance chiefs will meet again on Oct. 13 to decide whether the austerity push is enough to win a sixth bailout payment.
European governments are close to resolving Finland’s demand for collateral to underpin bailout loans, removing an obstacle to Greece’s second rescue package, three people familiar with the discussion said.
Economic Reports
Earlier today, stocks rose as a report showed that manufacturing in the U.S. unexpectedly accelerated in September as production picked up, easing concern the world’s largest economy is stalling. Separately, the Commerce Department said construction spending in the U.S. rebounded in August, propelled by the biggest jump in state and local government outlays in more than two years.
U.S. stocks fell last week as the sovereign debt crisis in Europe and fears of a global slowdown overshadowed improving economic reports in the U.S. The S&P 500 tumbled 14 percent in the third quarter, the worst drop since the three months ending December 2008. The index declined in nine out 13 weeks during the quarter. For the year, the S&P 500 is down 13 percent.
Bill Gross, the manager of the world’s biggest bond fund, said the global economy risks lapsing into recession with the pace of growth falling below the “new normal” level the firm has predicted since 2009.
‘Overweight Diabetic’
“Sovereign balance sheets resemble an overweight diabetic on the verge of a heart attack,” Gross wrote in a monthly investment outlook posted on Newport Beach, California-based Pacific Investment Management Co.’s website today. “If global policy makers could focus on structural as opposed to cyclical financial solutions, new normal growth as opposed to recession might be possible.”
Financial shares in the S&P 500 fell 4.5 percent as a group. Bank of America declined 9.6 percent to $5.53. Financial shares are under pressure as European regulators struggle to quell concern that their lenders may be hurt by the sovereign debt crisis.
Citigroup Inc. (C) slumped 9.8 percent to $23.11. The bank may be penalized by regulators in Japan for the third time since 2004 after its Japanese retail banking unit possibly breached rules by failing to fully explain product risk to customers, two people familiar with the situation said.
The Morgan Stanley (MS) Cyclical Index of companies most-tied to the economy declined 3.6 percent. The index has dropped 7 percent over the past two sessions. The Dow Jones Transportation Average, also a proxy for the economy, slipped 3.6 percent.
AMR, Alcoa
AMR tumbled 33 percent to $1.98, the most since 2003. A Chapter 11 filing “is certainly not our goal or our preference,” said Andy Backover, an American spokesman. “We know we need to improve our results, and we have a sense of urgency as we work to achieve that.”
The S&P GSCI Index of commodities lost 0.9 percent on investors’ concern about slower demand for energy and raw materials. Alcoa, the largest U.S. aluminum producer, dropped 7 percent to $8.90.
Arch Coal Inc. slipped 9.3 percent to $13.22. The St. Louis-based coal miner cut its forecast for 2011 adjusted earnings to no more than $1.40 a share, from a previous prediction of at least $1.75. Analysts had estimated adjusted profit $2.01 a share, on average.
Yahoo, Alibaba
Yahoo! Inc. rallied 2.7 percent to $13.53, after Alibaba Group Holding Ltd. Chairman Jack Ma said he was “very interested” in buying the Web portal. “Alibaba Group is so important to Yahoo, and Yahoo is also very important to us,” Ma said, when asked if he would buy the company. The executive, whose company is 40 percent owned by Yahoo, spoke at an event at Stanford University near Palo Alto, California, on Sept. 30.
The rout that erased $2.9 trillion from U.S. equities has pushed valuations in the S&P 500 25 percent below the average level from the last nine recessions, even as profit estimates fall.
Companies in the benchmark gauge for American equities started today’s session trading at 10.2 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year by 2.6 percent to $110.78 a share, the biggest eight-week drop since 2009, the data show.
Bears say analysts have just started paring earnings estimates and that shares will prove expensive when gross domestic product shrinks. Bulls say stock prices have fallen so much that even should earnings fail to increase in 2012, equities are inexpensive.
“What you’re seeing is a growth scare,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a telephone interview on Sept. 29. His firm oversaw $643 billion as of Aug. 31. “The question is, how much of that is priced in. I’d say that if we don’t have a double-dip recession, if earnings just stay flat, these valuations are reasonable. The market already expects those downgrades.”
COMMODITIES
Commodities Drop to 10-Month Low as Slowing Global Growth May Crimp Demand
By Debarati Roy and Maria Kolesnikova - Oct 3, 2011
Commodities fell to a 10-month low on increasing concern that stagnant global growth will crimp demand for metals, energy and agriculture.
The Standard & Poor’s GSCI Spot Index dropped 5.38, or 0.9 percent, to close at 585.62, after touching 580.22, the lowest since Dec. 1. The gauge tumbled 12 percent in the third quarter, the most since the final quarter of 2008.
Global equities slumped on concern that Europe’s debt crisis will worsen and derail expansion. The GSCI Index has lost more than 20 percent since reaching an almost three-year high in April as slowing growth reduced the chances of shortages for raw materials. Money managers cut bets on a commodity rally 26 percent in the week to Sept. 27, the most in almost three years, government data show.
“People are worried about a global slowdown and a double dip,” Donald Selkin, the chief market strategist at National Securities Corp. in New York, said today in a telephone interview. “Funds are selling.”
Investors withdrew $1.08 billion from commodity funds in the week ending Sept. 28, the most in more than a month, according to data from EPFR Global, a Cambridge, Massachusetts- based research company.
Declines in crude oil, coffee and gasoil lead losses in commodities today.
Crude-oil futures for November delivery fell $1.59 to $77.61 a barrel on the New York Mercantile Exchange, the lowest settlement since Sept. 28, 2010. Prices have dropped 15 percent this year.
Arabica coffee for December delivery dropped as much as 4 percent to $2.198 a pound on ICE Futures U.S., the lowest since Dec. 17.
