| Still difficult to do business in PH, says IFC The Philippines ranked 148th out of 183 economies in terms of ease of doing business, based on a recent study by the International Finance Corp. According to the unit of the World Bank group, the processes involved in starting a business in the Philippines and securing construction permits are the biggest roadblocks for entrepreneurs. In its Doing Business 2011 report, IFC said the Philippines ranked 156th in both the “starting a business” and “dealing with construction permits” categories of the survey. The country’s dismal showing in these categories was mainly attributed to the length of time it would take to secure relevant permits, the number of steps related to business and construction permit applications, and the costs associated with getting applications approved. In the “starting a business” category, the country had the most number of procedures, placed at 15, to secure all business registrations and permits. It tied with Brunei Darussalam, and stood behind China by just one procedure. The average for the East Asia and Pacific region was 7.8 steps. The cost entailed in starting a business—at 29.7 percent of income per capita—was higher than the regional average of 27.1 percent. The number of days it takes to secure construction permits in the Philippines is high at 169. In contrast, it takes only 25 days to secure the same permits in Singapore. The costs associated with securing construction permits in the country was the highest in the region, at 778.5 percent of income per capita, more than thrice the regional average of 168.7 percent. Reacting to the report, Trade Undersecretary and Board of Investments managing head Cristino Panlilio said the results were a cause for concern. “We are worried about all these things,” Panlilio said. “We’ve assigned a task force to get all the inputs and factors affecting the results of these ratings. We want to categorize which are immediately controllable, and those that will take longer, and are even impossible, to address.” He expressed optimism that the country would score better in all relevant competitiveness surveys by 2012. “Our goal is to get into the top 50 percent, to at least be in the midpoint, of the rankings,” Panlilio said.
THE BANGKO SENTRAL ng Pilipinas (BSP) joined counterparts in other emerging markets on Thursday in expressing concern over the Federal Reserve’s decision to further prop up the US economy through a move that involves printing billions of dollars. The US central bank announced on Wednesday that it would purchase $600 billion worth of government bonds, a plan that involves buying about $75 billion in longer-term Treasury bonds per month until the end of June next year. The move is designed to provide liquidity to the US system to spur economic activity. BSP Deputy Governor Diwa C. Guinigundo said via text yesterday the US Fed’s move could further increase capital flows to emerging markets. "[Quantitative easing] may, in fact, exacerbate what is going on in emerging markets, including the Philippines. More FX (foreign exchange) goes out in search of yield. Thus, FX flows can even be heavier and more destabilizing," he said. Signalling BSP’s response, Mr. Guinigundo said the "challenge is really to increase demand for FX and temper peso appreciation." Continuing portfolio fund inflows drove local financial markets to hit new highs on Thursday, with the peso strengthening further by six centavos to P42.53 -- the strongest since the P42.48 seen on May 9, 2008, and the Philippine Stock Exchange index rising to a fresh peak of 4,397.30. So far, the BSP has decided to further ease restrictions on dollar outflows but has ruled out capital controls. BSP Governor Amando M. Tetangco, Jr. said in a separate text message yesterday that while markets should be calmer now that details of the US Federal Reserve’s quantitative easing are out, the expected continuing low interest rate regime in the US will further prod funds to emerging market economies (EMEs) that offer better yields. "With the yields in the US expected to remain low for longer, the shift of funds to EMEs may continue," he said. Asked what BSP’s response would be, Mr. Tetangco replied that "the BSP doesn’t go against the fundamental currency trend, but we will make sure that any exchange rate volatilities arising from the inflows are moderated." "So far, the use of our expanded tool kit -- in other words the policy mix in addition to policy interest rates -- has been successful in keeping the rate movements in line with regional trends, but we continue to refine our use of these tools." BSP’s "tool kit" consists of building up gross international reserves, prepaying debt, allowing some appreciation of peso and managing capital flows. Benjamin E. Diokno, an economist of the University of the Philippines said in a phone interview that the situation for the Philippines is aggravated by the move of neighbors to slap capital controls. "Portfolio investment flows that are unwelcome in countries which have imposed exchange control or some form of Tobin tax, would naturally flow and seek opportunities in countries which are more hospitable like the Philippines." Hence, he said, it cannot be business as usual for the BSP. "Our monetary authorities are so much behind the curve. Policies that relax the outflow of dollars are simply too inadequate compared to the large and increasing inflow of ‘hot money’," he said. Policy makers in other emerging markets -- from Asia to Latin America -- pledged on Thursday to come up with fresh measures to curb capital inflows in the wake of the US Federal Reserve’s latest move. Emerging economies expressed displeasure at the Fed’s move, making any substantive deal on global imbalances and currencies at the Group of 20 meeting that Seoul is hosting on Nov. 11-12 even less likely. |
U.S. Stocks Rally on Earnings, Federal Reserve Stimulus U.S. stocks gained, sending the Standard & Poor’s 500 Index to its highest level since September 2008, as investors speculated the Federal Reserve will succeed in stoking growth and that banks will raise dividends. JPMorgan Chase & Co. and Bank of America Corp. gained more than 5.2 percent after the Wall Street Journal said the Fed is expected to let strong banks raise cash payouts. Freeport- McMoRan Copper & Gold Inc. and Monsanto Co. gained at least 5.5 percent as commodity prices surged. Qualcomm Inc., the biggest maker of mobile-phone chips, rose 5.8 percent after its profit and sales forecasts topped analysts’ estimates. The S&P 500 rose 1.9 percent to 1,221.05 at 4 p.m. in New York, finishing at the highest level since Sept. 19, less than a week after Lehman Brothers Holdings Inc.’s bankruptcy sent the economy into a tailspin. The Dow Jones Industrial Average gained 219.71 points, or 2 percent, to 11,434.84. The Nasdaq-100 Index jumped 1.4 percent to a three-year high. “This rally has a little different feel to it,” said Warren Koontz, chief investment officer for large-cap value stocks at Loomis Sayles & Co. in Boston, which oversees about $150 billion. “It might have more staying power than the ‘risk- on, risk-off’ trade. We have additional stimulus to the economy. The pendulum is swinging back to people being comfortable with the idea that we’re not going to see a double dip” recession.
The yield on the 30-year bond touched a three-month high after the central bank said yesterday it will buy fewer longer- term securities than analysts had expected. U.S. notes remained higher as the $10 billion auction of 10-year inflation-indexed debt produced a record low yield of 0.409 percent and a report showed initial jobless claims rose last week. “Even though the Fed telegraphed their move, we are still getting a very strong follow-through in Treasury prices,” said Christopher Sullivan, who oversees $1.6 billion as chief investment officer at United Nations Federal Credit Union in New York. “Investors weren’t invested as they should have been. The fundamentals are still supportive of bond investors given where inflation and growth expectations are.” The five-year note yield fell seven basis points, or 0.07 percentage point, to 1.03 percent at 5 p.m. in New York, according to BGCantor Market Data. The price of the 1.25 percent security maturing in October 2015 climbed 11/32, or $3.44 per $1,000 face amount, to 101 1/32. The yield on the 5-year note slid to an all-time low of 1.0148 percent. The 30-year bond yield rose three basis points to 4.07 percent after touching 4.0910 percent, the highest since July 29. The extra yield investors demand to hold 30-year bonds over 5-year notes widened to a record 3.05 percentage points. |
Oil Climbs to Six-Month High in New York as Dollar Tumbles on Fed Stimulus Oil rose to the highest level in six months in New York as the dollar tumbled after the Federal Reserve expanded bond purchases to spur the economy in the U.S., the world’s biggest crude consumer. Prices climbed for a fourth day, the longest move higher since September, as the dollar fell to a nine-month low against the euro, boosting the appeal of commodities as an alternative investment. The Fed said yesterday it will buy an additional $600 billion of Treasuries through June. “We continue to be completely dominated by views of the dollar,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based broker. “We’re breaking through to some new highs here, and the bulls have a lot of ammunition to test the upside.” Oil for December delivery rose $1.80, or 2.1 percent, to settle at $86.49 a barrel on the New York Mercantile Exchange, the highest price since April 6. Futures have gained 7.6 percent in the past year. Brent crude for December settlement advanced $1.62, or 1.9 percent, to $88 a barrel on the ICE Futures Europe exchange in London, the highest level since May 3. |
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
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