31 May 2011
USD/PhP: 43.28 (As of 12:00pm) PSEi: 4,2244.64 - 50.60
USD/JPY: 81.15 PFINC: 945.17 - 4.93
EUR/USD: 1.4374 BDO: 58.50 +0.70
GBP/USD: 1.6545 BPI: 55.65 - 1.35
PDSTF3M: 2.6923 MBT: 69.00 - 0.35
Prices as of 4:00pm Source: Bloomberg, Reuters
Philippines Seeks More Information on FX Forwards, Tetangco Says
By Clarissa Batino
The Philippine central bank seeks to have a clearer picture
of the non-deliverable forward transactions “while maintaining a liberal policy framework,”
Governor Amando Tetangco said in a mobile phone message.
“We want to better understand the NDF market in terms of size, direction
and timing of transactions,” Tetangco said today. the central bank had
issued a memo requiring banks to submit a daily report on their peso forwards transactions.
BDO UNIBANK, INC.
Jonathan Ravelas
Chief Market Strategist
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Rhys Cruz
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Tuesday, May 31, 2011
Morning Brief: 31 MAY 2011
Slower 4.9% Q1 GDP growth not alarming, say experts By: Christine O. Avendaño, Doris C. Dumlao, Ronnel W. Domingo Philippine Daily Inquirer LOWER THAN EXPECTED BUT NOT ALARMING. Workers are seen at a construction site in Manila on Monday. The Philippines said economic growth slowed to 4.9 percent in the three months to March as it was hit by a drop in global trade and less spending on infrastructure. AFP PHOTO/NOEL CELIS The slower growth of the country’s economy should not alarm investors as the Philippines just happens to be returning to its normal growth pattern after an extraordinary 2010, an economist at British banking giant HSBC said. HSBC economist Sherman Chan, in a commentary released shortly after the government announced the country’s first-quarter growth figure, also said that with private consumption remaining buoyant, inflation would not likely cool anytime soon. According to the economist, solid household demand suggested that underlying inflationary pressures were unlikely to recede anytime soon. “With inflation already in the upper half of the central bank’s target band and is set to breach the upper bound within the next two months, the [Bangko Sentral ng Pilipinas] will maintain its hawkish stance,” Chan said. She projected the BSP would continue its interest rate increases and end the year with the overnight borrowing rate at 5 percent. The 4.9-percent gross domestic product growth posted in the first quarter fell short of the market’s expectation of at least 5.1 percent. Still, it was above HSBC’s forecast of 4.8 percent for the period. HSBC is expecting further moderation in growth this second quarter, noting that household consumption would likely lose a bit of steam. In Malacañang, President Aquino remained optimistic that the economy’s growth would pick up despite the disappointing first-quarter growth figure. Speaking to reporters in the Palace, the President noted that the country did not fare badly despite the political unrest now affecting oil-producing countries in the Middle East and North Africa, as well as the string of disasters in Japan, the Philippines’ biggest trading partner and source of foreign assistance. Aquino said he remained optimistic over the country’s full-year prospects. In the second quarter, the government will again pump-prime the economy now that oil prices in the market have started to stabilize, Aquino said. “We believe our (growth) numbers will improve,” President Aquino said a few hours after economic officials announced the economy’s growth figure. Data from the National Statistics Office showed that the country posted a trade deficit of $3.368 billion in the first quarter, more than double the $1.441 billion recorded in the same period of 2010. “The wider trade balance is largely a function of a sharp jump in intermediate goods—imports—which implies a rise in inventories rather than booming consumption,” said UBS economist Edward Teather. |
| European Stocks Are Little Changed; BASF, Vestas Advance, Greek Banks Drop By Alexis Xydias European stocks were little changed after four straight weeks of losses for the benchmark Stoxx Europe 600 Index, as chemical makers and renewable-energy companies gained while banks fell amid sovereign-debt concern. BASF SE (BAS), the world’s biggest maker of chemicals, rose 1 percent. Renewable Energy Corp. ASA and Vestas Wind Systems A/S climbed more than 2.5 percent as Germany set 2022 as the final date to close its nuclear reactors. Alpha Bank SA tumbled 9.1 percent in Athens as the International Monetary Fund reviewedGreece’s efforts toward meeting fiscal targets. The Stoxx 600 slipped less than 0.1 percent to 278.82 at the 4:30 p.m. close in London. Trading volume was lower than normal as U.K. and U.S. exchanges were closed for holidays. Speculation that Greece will restructure its debt and concern the outlook for other economies in the region is worsening has weighed on stocks since February. The Stoxx 600 has dropped 4.2 percent from this year’s high on Feb. 17, bringing its valuation to 11.1 times the estimated earnings of its companies, near the cheapest since April 2009. “The debt issues come up again and again, but a lot of people are getting used to these ongoing concerns,” said Peter Braendle, who helps manage $68 billion at Swisscanto Asset Management in Zurich. “We are fairly optimistic on European stocks because of valuations and we are increasing exposure in Europe compared to other markets.” ‘Death Sentence’ Greek Prime Minister George Papandreou said he’ll press ahead with new austerity measures after failing to win backing from the main opposition parties. An international panel of inspectors has concluded that the debt-laden country has missed all the fiscal targets agreed in its rescue plan, Der Spiegel reported May 29, without saying how it obtained the information. IMF talks with Greek officials to assess the nation’s fiscal achievements continue, Conny Lotze, a Washington-based IMF spokeswoman, said in an e-mail. A debt restructuring would be a “death sentence” and have a dramatic destabilizing impact on the euro region, European Central Bank executive board member Lorenzo Bini Smaghi told the Financial Times. “The Greek song is the same one and it’s taking longer than hoped for,” said Jacques Porta, a Paris-based fund manager at Ofi Patrimoine, who helps oversee about $425 million in stocks. “We’re not pessimists, and declines in stocks present buying opportunities, but given how things are, we prefer to hold and wait.” Benchmark Indexes National benchmark indexes declined in 10 of the 17 western European markets open today. France’s CAC 40 slipped 0.2 percent and the Swiss Market Index lost 0.3 percent, while Greece’s ASE sank 2 percent to the lowest since 1997. Trading in Euro Stoxx 50 futures today was less than a fifth of the average daily volume over the past 20 sessions, according to Bloomberg data. Goldman Sachs Group Inc. (GS) equity strategists cut their earnings and price forecasts for the Stoxx 600, citing lower economic growth worldwide and higher commodity prices. Earnings for companies in the European benchmark may increase by 14 percent this year, down from a previous estimate of 20 percent, the strategists wrote in a report dated May 27. The Stoxx 600 may trade at 280 in three months and 300 in six months, down from forecasts of 290 and 310, respectively. BASF rose 1 percent to 61.92 euros, leading a measure of chemical makers to the biggest gain among 19 industry groups in the Stoxx 600. REC, Vestas Alternative-energy companies rose as German Chancellor Angela Merkel’s coalition resolved their differences over the timing of an exit from nuclear power following Japan’s Fukushima disaster, the worst nuclear crisis since 1986. Renewable Energy Corp., a maker of solar-energy wafers, cells and modules, gained 3.7 percent to 12.99 kroner. Vestas, the largest wind-turbine manufacturer, climbed 2.7 percent to 151 kroner. Gamesa Corp. Tecnologica SA, Europe’s second-biggest wind-turbine maker, surged 5.2 percent to 6.52 euros and Enel Green Power SpA (EGPW), a unit of Italy’s largest energy company, rallied 4.8 percent to 1.92 euros. RWE AG (RWE) and EON AG, Germany’s largest power companies, retreated 1.7 percent to 40.31 euros and 2.3 percent to 19.56 euros, respectively. A tax on spent fuel rods will remain even as the shutdown proceeds, German Environment Minister Norbert Roettgen said. Alpha Bank, Greece’s third-biggest lender, slumped 9.1 percent to 2.91 euros, the lowest since June 1995. EFG Eurobank Ergasias SA (EUROB), the country’s second-largest bank, declined 6.2 percent to 2.87 euros. ‘Increasingly Difficult’ “So far the Greek crisis has remained within certain limits, but as the situation deteriorates, the risk increases of starting to see the effect broadening,” said Elwin de Groot, senior market economist at Rabobank in Utrecht,Netherlands. “The situation looks increasingly difficult.” Banco Comercial Portugues SA (BCP), Portugal’s biggest non-state bank by assets, retreated 6.6 percent to 46.7 euro cents, the lowest since at least 1993. Rights that allow the purchase of shares for 36 cents each tumbled 33 percent to 1.1 cent, meaning investors must pay almost 10 cents to acquire one new share at that price. Athens-based Intralot SA, the world’s second-biggest gambling services provider, tumbled 22 percent to 1.64 euros, the largest drop in 12 years. Chairman Sokratis Kokkalis may face prosecution after an investigation into a technical services contract with Opap SA, Eleftherotypia newspaper said, without saying where it got the information. |
Oil Heads for First Monthly Drop Since August on European Debt Concerns By Ben Sharples Oil headed for its first monthly decline since August in New York as Europe’s continuing debt crisis stoked speculation that fuel demand may falter as the economy slows. Futures were little changed today and are down 11.9 percent this month. Greece’s main opposition party rejected the government’s austerity plans and called for bailout terms to be renegotiated as the European Union debates giving more aid. U.S. floor trading was closed yesterday for the Memorial Day public holiday. Electronic trades will be booked with today’s transactions for settlement purposes. “Concerns over European sovereign debt continued to weigh on markets, dragging prices lower,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today. Crude for July delivery was at $100.37 a barrel, down 1 cent, in electronic trading on the New York Mercantile Exchange at 9:31 a.m. Sydney time. The contract slid 21 cents to $100.38 yesterday. Prices are 36 percent higher the past year. Brent crude oil for July settlement lost 35 cents, or 0.3 percent, to $114.68 on the ICE Futures Europe exchange in London yesterday, the lowest settlement since May 24. The contract has dropped 8.3 percent this month. U.S. Economy Reports this week may show U.S. factory output and job growth slowed while home price declines accelerated. Manufacturing, which accounts for about 12 percent of the world’s biggest economy, will probably cool following its strongest showing in seven years, according to the median forecast in a Bloomberg survey of economists. The Labor Department may say on June 3 payrolls rose 185,000 after a 244,000 gain in April, a separate survey shows. The S&P/Case-Shiller index of property values in 20 cities is forecast to show prices fell 3.4 percent in March from a year earlier, compared with a 3.3 percent drop in February. The European benchmark contract traded at a premium of $14.30 a barrel to U.S. futures yesterday. The difference between front month contracts in London and New York surged to a record $19.54 on Feb. 21. It averaged 76 cents last year. Brent has advanced 21 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya, Iran and Syria. The death toll from an attack on protestors by Yemeni security forces rose to 57, with more than 1,000 in the city of Taiz injured, al-Jazeera television reported. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Thursday, May 26, 2011
Philippine Markets: 26 May 2011
26 May 2011
USD/PhP: 43.42 - 0.15 PSEi: 4230.56 + 39.58
USD/JPY: 81.93 PFINC: 949.75 + 3.61
EUR/USD: 1.4177 BDO: 56.55 unch
GBP/USD: 1.6296 BPI: 57.40 + 0.60
PDSTF3M: 2.1535 MBT: 70.00 - 0.05
Prices as of 4:00pm Source: Bloomberg, Reuters
Philippine stock prices bounce back
By: Doris C. Dumlao
Philippine Daily Inquirer
MANILA, Philippines – Local stock prices bounced back from a five-day slump on Thursday as bargain-hunters picked up selected blue chips, allowing the main index to climb back to the 4,200 level.
The main-share Philippine Stock Exchange index clawed back 39.58 points or 0.94 percent to finish at 4,230.56. The index is thus back in positive territory this year, up from the end-2010 level of 4,200.
All counters traded favorably, led by the property and services sub-indices which surged by 1.94 percent and 1.7 percent, respectively.
Turnover, however, was thin at P4.36 billion as many investors were still hesitant to come back to the market in a big way due to looming offshore and domestic economic challenges.
There were 85 advancers that edged out 48 decliners while 37 stocks were unchanged.
Bargain-hunters loaded up on index stocks like AGI, Aboitiz Power, EDC, PLDT, Ayala Land, SM Prime, Aboitiz Equity Ventures, Meralco, Philex Mining, SM Investments and First Gen. San Miguel Corp. and Philodrill were likewise up in heavy trade.
On the other hand, the index recovery was tempered by profit-taking on Metrobank, DMCI, URC, Lepanto “A” (open only to local investors) and Megaworld.
BDO UNIBANK, INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
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Wednesday, May 25, 2011
Morning Brief: 25 May 2011
Central bank exec sees inflation peaking in Q2 INFLATION should peak in the current quarter as food and commodity price pressures moderate, and further capital inflows that would support the peso were likely in coming months, a central bank deputy governor yesterday said. "Inflation appears to be peaking in the second quarter but will start stabilizing in the second half," Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said in the Dealing Room, a Reuters Messaging chat room. "Commodity prices, including those for oil and some key commodities, are coming down. The weather shocks are easing. Demand from advanced economies remain weak." Mr. Guinigundo later told Reuters annual inflation in May "would not be as high as other segments of the market would expect." Still, he said it was too early to consider a pause in rate increases, adding an increase in reserve requirements was a policy option. "Until such time we see actual commodity, oil prices starting to ease and affecting general level of market prices, we should remain cautious and vigilant," he said. Inflation, spurred by higher commodity prices, rising wages and capacity constraints, has become the top policy priority for most Asian central banks, against the backdrop of comfortable momentum in domestic demand and economic growth. The BSP said it raised rates because its inflation target of 3-5% for this year was at risk. The two 25 basis points hikes for this year have taken the overnight borrowing rate to 4.5%. A Reuters poll last month showed most analysts expected at least one more 25 basis point increase this year, with some expecting the policy rate to rise to 5.25% by the end of 2011. The annual inflation rate has risen to a one-year high of 4.5% in April from 2.8% in October, and policy makers have said it could top 5% in coming months. Gains in the peso have helped mitigate inflation pressures from rising prices of oil and other commodities, with the currency supported by remittances from Filipinos overseas of $4.6 billion in the first quarter of 2011, 6% higher than a year earlier. Mr. Guinigundo noted the peso had not moved as fast as other Southeast Asian currencies, and said the Philippines was not attracting as much inflows as its neighbors. "While the current account receipts remain strong, they are seasonally more modest," he said. "We expect more inflows shortly. That would have a telling impact on the peso." -- Reuters
The proposed Investments and Incentives Code of the Philippines, passed by the House ways and means committee yesterday, overhauls the criteria by which businesses can qualify for tax breaks. Incentives will be granted to enterprises depending on whether they are export-oriented or domestic, with more benefits to be extended to the former, committee director Donald Z. Marasigan told BusinessWorld yesterday. "Export-oriented businesses generate foreign revenue and usually have bigger investments because they have to compete in the international market," Mr. Marasigan explained. Under the ways and means committee’s still-unnumbered bill, a consolidation of four House proposals, export enterprises can enjoy a six-year income tax holiday. They will afterwards be subject to only a 5% tax on gross income earned (GIE) for 19 years, in lieu of all national and local taxes except the real property tax on land owned by private developers. Exporters can also choose to avail of a 5% GIE for 25 years or a 50% reduction in their corporate income tax for 25 years. To qualify, 70% of the business’ production should be for export. Domestic enterprises, meanwhile, can choose from an income tax holiday of four years, a 15-year 50% corporate income tax cut or a four-year income tax holiday, to be followed by a 10% corporate income tax rate for 10 years if the business is located in 1st to 3rd class municipalities or 12 years for those in 4th to 6th class municipalities. Strategic domestic enterprises as identified by the government under the annual Investments Priorities Plan can enjoy expanded benefits. They are qualified for an income tax holiday of eight years and a 50% corporate income tax cut for 17 years afterwards. Domestic enterprises located in less developed areas can also qualify for tax perks. Businesses located in Mindanao and the 30 poorest provinces in the country can get a six-year income tax holiday then a 10% corporate income tax rate for 19 years. Companies can also opt for a 5% GIE for a period of 25 years. An Enhanced Net Operating Loss Carry-Over (NOLCO) provision, meanwhile, allows businesses to deduct net operating losses during the first five years of commercial operation from their gross income for the next five consecutive taxable years following the loss. "Plant, machinery and equipment that are reasonably needed and actually used for the production and transport of goods and services may be depreciated..." the proposed bill adds. Lastly, expenses incurred for local training given to employees for the development of necessary skills can also be deducted. The consolidated bill’s approval puts the measure on track for a September passage at the House of Representatives, as earlier targeted by ways and means committee chairman Rep. Hermilando I. Mandanas (2nd district, Batangas). "When Congress opens in July, the fiscal incentives bill will be put on the business for the day," Mr. Mandanas told BusinessWorldyesterday. The Senate ways and means committee is likewise eyeing approval of the priority measure within the year, Senator Ralph G. Recto has said. -- DCJJ |
U.S. Stocks Drop as Slump in Industrial Shares Offsets Home Sales Report U.S. stocks retreated, sending benchmark indexes to one-month lows, as a drop in stocks most- tied to economic growth offset a government report showing that sales of new homes rose to the highest level this year. Shares of industrial, consumer-discretionary and technology companies led the declines in the Standard & Poor’s 500 Index. Goodyear Tire & Rubber Co. (GT) retreated 3.1 percent as China appealed a World Trade Organization ruling that backed U.S. duties on Chinese tire imports, saying the levies are “protectionist.” Freeport-McMoRan Copper & Gold Inc. (FCX) and Occidental Petroleum Corp. (OXY)rose at least 2.9 percent as Goldman Sachs Group Inc. signaled a positive outlook for commodities. The S&P 500 fell 0.1 percent to 1,316.28 at 4 p.m. in New York, reversing a 0.5 percent gain. The Dow Jones Industrial Averageretreated 25.05 points, or 0.2 percent, to 12,356.21. “Investors are trying not to be too heroic at this point,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which manages $14.8 billion. “People are just sliding to the sidelines. We’ve had a decent gain in stocks this year amid so many uncertainties. The earnings season is over. We need real catalysts at this point to push stocks higher.” The S&P 500 has fallen 3.5 percent since climbing to a three-year high on April 29 amid a commodity slump and concern about Europe’s debt crisis. Still, the benchmark has rallied 4.7 percent from the end of 2010 amid government stimulus measures and higher-than-estimated earnings.
Treasuries have gained on concern Europe’s debt crisis is worsening and signs the U.S. economy is weakening. Two-year notes drew a yield of 0.560 percent at today’s sale, compared with an average forecast of 0.562 percent in a Bloomberg News survey of nine of theFederal Reserve’s 20 primary dealers. The bid-to-cover ratio, a gauge of demand that compares total bids with amount of securities sold, was 3.46, the highest since it measured 3.47 four months ago. “The data’s been a little weak in the U.S., and the uncertainty in Europe is leading to a flight-to-quality bid in Treasuries,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. “The fear in the world economy is slowly but surely beginning to build up again.” The yield on the current two-year note dropped two basis points, or 0.02 percentage point, to 0.50 percent at 5:20 p.m. in New York, according to Bloomberg Bond Trader prices. The price of the 0.625 percent security maturing in April 2013 gained 1/32, or 31 cents per $1,000 face amount, to 100 7/32. The two-year note yield touched 0.495 percent yesterday, the lowest level since Dec. 7. The benchmark 10-year note yield fell two basis points today to 3.11 percent after touching 3.09 percent on May 18, the lowest level since Dec. 7. |
Oil Declines as Industry Report Shows Surging Gasoline Supplies in U.S. Oil dropped from the highest in almost a week in New York after an industry-funded report showed U.S. supplies of motor fuel surged in the world’s biggest crude- consuming nation, which may indicate weakness in demand. Futures slipped as much as 0.4 percent today after the American Petroleum Institute said gasoline stockpiles climbed 2.44 million barrels last week, the biggest increase in almost four months. An Energy Department report today may show inventories increased 450,000 barrels, according to a Bloomberg News survey of analysts. Crude supplies fell 860,000 barrels, compared with a median forecast of 1.5 million barrels in the Energy Department report. Oil for July delivery slid as much as 45 cents to $99.14 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.20 at 8:18 a.m. Sydney time. The contract yesterday rose $1.89, or 1.9 percent, to $99.59, the highest since May 18. Prices are up 44 percent the past year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Tuesday, May 24, 2011
Philippine Markets: 24 May 2011
24 May 2011
USD/PhP: 43.40 - 0.03 PSEi: 4227.08 - 36.11
USD/JPY: 81.88 PFINC: 961.00 - 1.31
EUR/USD: 1.4083 BDO: 58.00 + 0.40
GBP/USD: 1.6141 BPI: 58.00 + 0.35
PDSTF3M: 2.1904 MBT: 71.85 - 0.55
Prices as of 4:00pm Source: Bloomberg, Reuters
PH stock prices continue falling
By: Doris C. Dumlao
Philippine Daily Inquirer
MANILA, Philippines—Local stock prices tumbled further on Tuesday as investors were jittery over recent financial uncertainties.
The main-share Philippine Stock Exchange index was down by 36.11 points or 0.85 percent to 4,227.08. This reflected the gloomy sentiment across global markets given worries over the lingering European fiscal crisis.
The mining/oil counter and property counters led the day’s downturn, falling by 3.6 percent and 2.43 percent, respectively.
Value turnover was heavy at P8 billion.
There were only 31 advancers as against 110 decliners while 33 stocks were unchanged.
The index was led lower by AGI, Lepanto A, DMCI, Metrobank, Megaworld, First Gen and PLDT.
Non-index stocks Cebu Air and San Miguel Corp. also declined in heavy trade.
Among the few index stocks that bucked the downturn were Aboitiz Power, Banco de Oro, JG Summit, AEV and Globe Telecom.
BDO UNIBANK, INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
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Amendment of the 1987 Constitution
Dear Members:
The Committee on Constitutional Amendments will be conducting a public consultation and information campaign for Region X on May 27, 2011 (Friday) about the necessity of amending the Constitution.
Are you in favor of amending the 1987 Constitution? If yes, what are your proposed (specific) amendments?
Thank you for your prompt response.
- OROCHAMBER
Philippine Markets: 23 May 2011
23 May 2011
USD/PhP: 43.43 + 0.31 PSEi: 4263.19 - 21.97
USD/JPY: 81.54 PFINC: 962.31 - 6.89
EUR/USD: 1.4032 BDO: 57.60 - 1.30
GBP/USD: 1.6176 BPI: 57.65 - 0.25
PDSTF3M: 2.1238 MBT: 72.40 - 0.10
Prices as of 4:00pm Source: Bloomberg, Reuters
Philippines Reports April Budget Surplus as Revenue Climbs
By Max Estayo and Karl Lester M. Yap
May 23 (Bloomberg) -- The Philippines reported a budget
surplus in April as revenue rose and spending fell.
The surplus was 26.3 billion pesos ($606 million) last
month, compared with an 18.1 billion-peso deficit reported
earlier for March, according to a government statement in Manila
today. Revenue climbed 11.1 percent and spending declined 8.03
percent, according to the statement.
President Benigno Aquino is going after tax evaders,
smugglers and corrupt officials to increase revenue and narrow
the budget deficit from a record 314 billion pesos in 2010.
Moody’s Investors Service may raise the Philippines’ credit
rating “sooner rather than later,” Assistant Vice President
Christian de Guzman said last month after the government kept
its first-quarter budget shortfall below target.
“A rating upgrade soon is very likely because our fiscal
accounts are getting better,” Luz Lorenzo, an economist at ATR-
Kim Eng Securities in Manila, said before the report. “This
administration has proven itself in being able to contain the
deficit. The increase in revenue is encouraging and the concern
now is spending.”
Benchmark three-year bond yields have risen 0.95 percentage
point this year. The peso has gained more than 7 percent in the
past 12 months.
Moody’s in January raised its outlook on the nation’s debt
rating to positive from stable and maintained the rating at Ba3,
three levels below investment grade.
The government will maintain its borrowing program this
year, Treasurer Roberto Tan said in a mobile-phone text message
after the report.
“We will monitor fiscal and financing developments” and
study “if there is a need for adjustments,” Tan said.
BDO UNIBANK, INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Morning Brief: 23 May 2011
Significant May inflation rise discounted by BSP MONETARY AUTHORITIES do not expect a substantial increase in inflation this month given stable supplies of basic commodities and a strong peso. "Price movements [have so far been]... relatively benign, so we don’t expect a significant rise in inflation," central bank Deputy Governor Diwa C. Guinigundo told reporters on Friday. "Some of the supply indicators, particularly key commodities such as sugar, rice, corn as well a meat products were generally stable, so prices did not move much," he added. The strengthening of the peso "will [also] definitely help" dampen imported inflation, said Mr. Guinigundo, who did not offer an estimate for the May rise in consumer prices. Headline inflation picked up to 4.5% in April, from 4.3% in March, due to higher commodity prices traced to unrest in the oil-rich Arab world. Sought for comment, University of Asia and the Pacific economist Cid L. Terosa yesterday said, "I agree with the BSP (Bangko Sentral ng Pilipinas) as oil prices went down in the period and supply of food commodities was steady. I expect it (inflation) to inch up to around 4.7% and 4.8% just because of price increases of products related to the opening of classes." The central bank, said Mr. Guinigundo, remains vigilant against risks such as the inflow of foreign capital and possible rise in commodity prices. "Continued capital inflow remains an upside risk as it increases domestic liquidity and contributes to demand side pressures, although its impact on exchange rate can be a counterweight," he said. "Commodity prices going up are also a risk on account of high demands from emerging markets and recovery of advanced economies." Mr. Guinigundo said the BSP still expected inflation to breach 5% in the third quarter, due to price increases and capital inflows, but the full-year average would stay within the 3-5% target. Policy rates have been adjusted twice this year -- by 25 basis points on each occasion -- as authorities moved to address rising inflation. The next rate review will be on June 16. -- A. S. O. Alegado
Joblessness among Filipinos at least 18 years old rose to 27.2% in March, up from 23.5% in November 2010, a poll by the independent survey research institution found. This means that an estimated 11.3 million -- split nearly evenly among those who resigned or were retrenched, plus an increase in first-time jobseekers -- are out of work from just 9.9 million four months earlier. The results of the SWS poll, made exclusive to BusinessWorld, compare to the official unemployment figure of 7.4% as of January, equivalent to an estimated 2.9 million Filipinos. The figure was up from 7.1% in October 2010. The SWS uses the traditional definition of joblessness: those "not working and at the same time looking for work." The official definition, meanwhile, since 2005 has included the concept of "availability for work": this takes away individuals looking for jobs but are not available and includes those available but not seeking work for reasons such as tiredness/belief no job is available, awaiting results of an application, temporary illness/disability, bad weather and waiting for rehire/recall. In calculating unemployment, the government also uses a lower labor force boundary of 15 years of age. Applying the official definition, the SWS said the jobless rate among adults 18 years old and above would be 16.8%, equivalent to an estimated 6.1 million Filipinos. Unemployment, the SWS said, has been high since May 2005, falling below 20% only three times -- the last being September 2010’s 18.9%. The new rate of 27.2%, it added, is similar to March 2010’s 27.1%. The SWS record is 34.2%, hit in February 2009. Over the last two surveys, adult unemployment was said to be primarily composed of those who quit or were retrenched. For the latest figure of 27.2%, the SWS said 9% had lost their jobs, 10% had voluntarily left and 7% were first-time jobseekers. Of the 9% who lost their jobs due to circumstances beyond their control, 7% did not have their contracts renewed (up from 5% in the previous survey), 1% saw their companies cease operations (unchanged from November) and 1% were laid off (down from 2% previously). Sought for comment, University of the Philippines economist Raul V. Fabella said that the latest numbers were seasonal, warning that unemployment could increase in the months ahead due to global developments. He also noted that the SWS survey was taken before the current school year ended, thus the rate could be higher in the next review round. "It depends on whether the new graduates decide to go on vacation or look for jobs... if the job market is very soft, chances are they will go [back to] school if they can’t find jobs," Mr. Fabella said. The SWS survey was conducted from March 4-7 using face-to-face interviews of 1,200 adults nationwide. The sampling error margins are ±3% for national and ±6% for area percentages. -- J. D. Poblete |
Stocks: 'Sell in May' likely to continue NEW YORK (CNNMoney) -- Investors have taken the old Wall Street adage of "Sell in May, then go away" to heart this year, and the stock market's slump is likely to persist during the last week of the month. The Dow (INDU), S&P 500 (SPX) and the Nasdaq (COMP) have each lost more than 2% during the past three weeks, pressured by the latest round of economic and corporate news, which are suggesting that the economic recovery may be slowing. Last week, reports on housing starts and existing home sales came in weaker than expected, and regional manufacturing activity slowed to the lowest level since October. "The economy hit a soft patch entering the second quarter, and the economic reports are showing this," said Patrick Newport, U.S. economist at IHS Global Insight. "We are expecting more soft numbers in the upcoming week." One of those numbers includes the government's second reading on first-quarter GDP. Economists are expecting economic growth to be revised to 2%, up from the initial estimate of 1.8%, but that's still lackluster, Newport said. For example, Hewlett-Packard (HPQ, Fortune 500) lowered its revenue forecast for this year because of weak PC sales. Wal-Mart (WMT,Fortune 500), Target (TGT, Fortune 500) and Gap (GAP) were also cautious in their outlooks. "Retailers in particular are concerned that higher gasoline prices are putting a constrain on consumer finances," said Peter Tuz, president at Chase Investment Counsel, adding that investors will continue to parse through earnings reports next week for company outlooks. Reports are due from 14 members of the S&P 500, including Campbell Soup (CPB, Fortune 500), Costco (COST, Fortune 500), and Polo Ralph Lauren (RL, Fortune 500). "Barring any surprising positive news on the economy or in earnings, it looks like investors will follow the old saying of 'Sell in May, then go away,'" Tuz said.
"We're at the beginning of the summer doldrums," said Kim Caughey Forrest, senior equity analyst at Fort Pitt Capital Group. On the docket Monday: Campbell Soup (CPB, Fortune 500) and Krispy Kreme (KKD) are on tap to report quarterly earnings before the bell. There are no scheduled economic reports. Tuesday: The new-home sales index for April from the Census Bureau is due at shortly after the opening bell. The index is expected to have remained unchanged from the previous month at an annual rate of 300,000 units. Wednesday: Before the market opens, earnings are due from Costco (COST, Fortune 500), Polo Ralph Lauren (RL, Fortune 500) and luxury homebuilder Toll Brothers (TOL). A report on durable orders in April is also out in the morning. Thursday: Wall Street will get a second reading on the U.S.'s first-quarter gross domestic product. Economists expect economic growth to be revised to 2%, up from the initial estimate of 1.8%. The weekly report on people filing for initial jobless claims is also due in the morning. Claims are expected to have fallen to 400,000 in the latest week, from 409,000 the previous week. Also on tap: quarterly financial results from Tiffany & Co. and Sony. Friday: Before the start of trading, investors will get data on personal income and spending for April. Economists expect income edged up 0.4% last month, while spending increased 0.5%. Shortly after the opening bell, the University of Michigan will put out its final reading on consumer sentiment in May. Economists expect the figure to remain unchanged at 72.4. National Association of Realtors is expected to show a 1.8% decline in pending home sales for the month of March. |
Oil Declines Amid Concerns Over U.S. Economic Growth, Greek Debt Default Oil declined in New York amid signs the economy is slowing in the world’s biggest crude-consuming nation and on concern Greece may default on its debt, stoking speculation fuel demand may slow. Futures slid as much as 0.7 percent today after U.S. stocks fell for a third week and Staples Inc. and Gap Inc. cut profit projections. A U.S. Commerce Department report on May 27 may show consumer spending cooled in April, according to economists surveyed by Bloomberg News. Greek Prime Minister George Papandreou is scheduled to brief his Cabinet today on added budget cuts and asset sales to keep European aid flowing. Crude for July delivery lost as much as 71 cents to $99.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $99.57 at 9:06 a.m. Sydney time. The contract rose $1.17, or 1.2 percent, to $100.10 on May 20. Prices are 42 percent higher the past year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Friday, May 20, 2011
Philippine Markets: 20 May 2011
20 May 2011
USD/PhP: 43.15 (as of 12:00pm) PSEi: 4285.16 - 12.77
USD/JPY: 81.65 PFINC: 969.20 + 2.91
EUR/USD: 1.4314 BDO: 58.90 - 0.05
GBP/USD: 1.6229 BPI: 57.90 - 0.25
PDSTF3M: 2.3038 MBT: 72.50 + 1.80
Prices as of 12:00pm Source: Bloomberg, Reuters
Philippine Interest Rate Outlook
Secondary market rates moved up by an average of 13 basis points as short-term rates continued its abrupt rise for the past two weeks, reflecting the normalization of rates after hitting historic lows during the previous months and mounting inflationary pressures.
The Bureau of Treasury rejected bids for the 182-day and 364-day Treasury bills during the recent auction. Rates would have risen sharply if bids were accepted. On the other hand, 91-day Tbill rate rose to 1.889 percent from the record low of 0.568 percent.
Moody’s Ratings commented that there is a strong case for Philippine credit rating upgrade however risks remain. Government needs to strengthen revenues and cut tax evasion. The agency is also expecting BSP to further tighten policy rate.
Continue to expect upward bias for short-term rates, while medium to long-term rates are expected to consolidate as market liquidity remains supportive.
Philippine Equities Outlook
Local stocks were almost unchanged week-on-week, closing at 4285.16 as volatility dominates the global equity markets as growth fears and rising interest rates overshadow postive first quarter corporate results in local markets. Profit-taking became the order of the day for local players after the benchmark index failed to make new highs.
Chartwise, the week’s close at 4285.16 continue to suggest that the market is about to top out as it struggles to stay above the 4,300 levels. A break below the 4,250 level will confirm further tests towards the 4,150 - 4,170 levels in the near-term. Only a break above the 4,330 levels will call the bulls back to play.
Immediate support and resistance is seen at 4,250 and 4,330 levels, respectively.
Philippine Peso Outlook
The local currency moved sideways this week after a two-week decline as major currencies recovered some of its losses against the greenback, after the Euro slumped against the US Dollar on sovereign debt concerns in the Euro zone.
Chartwise, continue to expect the currency to range between the 43.00 - 43.30 levels in the near-term.
BDO UNIBANK, INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Morning Brief: 20 May 2011
Country’s BOP stood at a surplus in April MANILA, Philippines—The flow of dollars and other foreign currencies into the country outstripped the outflows recorded in April, as remittances and portfolio investments remained robust. The Bangko Sentral ng Pilipinas said the surplus in the country’s balance of payments (BOP) would further boost the country’s foreign exchange reserves, which had been hitting record levels in recent months. BOP is the difference between inflows and outflows of foreign currencies. On Thursday, the BSP reported that the BOP in April stood at a surplus of $1.084 billion, up by 7 percent from the $1.013 billion in the same month last year. This brought the surplus in the first four months of the year to $4.577 billion—doubling the $2.289 billion registered in the same period a year ago. Remittances from Filipinos working abroad continue to grow this year as demand by employers offshore remains significant. Foreign portfolio investments, composed mostly of placements in stocks and bonds, also grew due to investors’ confidence in emerging economies in Asia. Earlier, the central bank reported that the country’s gross international reserves (GIR) in April hit a new record high of $67.8 billion. The reserves would be enough to cover 10.4 months’ worth of the country’s usual imports and would be equivalent to 6.1 times the country’s debts maturing within the short term. GIR indicates a country’s ability to purchase imports, pay its debts to foreign creditors, and engage in other commercial transactions with the rest of the world. The central bank considers the country’s current GIR level to be “comfortable,” and will help maintain confidence of creditors and bond investors in the country. In November, international ratings agency Standard & Poor’s lifted the credit rating it assigned to the Philippines from BB- to BB, citing several factors, particularly the rise in the country’s foreign currency reserves. That rating is two notches below investment grade. BSP Governor Amando Tetangco Jr. had said that the Philippines deserved better ratings, given its rising reserves of foreign currencies and the stability of its banking sector.
The IMF managing director, in a May 18 letter released yesterday, said he was quitting to concentrate on fighting charges that he had sexually assaulted a hotel maid in New York. His arrest last Saturday has sparked a debate over who gets to head the Washington-based global lender. The top IMF post is traditionally held by a European in the same way that an American is named president of the World Bank. "Given the urgent need for stable leadership in the IMF, coupled with the shifting global economic landscape, where in Asia increasingly plays a major role as a growth driver of the global economy, there is no time more fitting than now for an Asian leader to take the helm of such a distinguished organization," Finance Secretary Cesar V. Purisima said in a text message yesterday. There have been "great shifts" in the balance of economic powers and this should be reflected in the structure and composition of the new IMF leadership, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guiniguindo said in a separate text message. Messrs. Purisima and Guiniguindo called for a "new brand of leadership" to enhance the IMF’s legitimacy and relevance in a changing world. This could also be the solution for the Fund at a time when it is "in search of new modalities to prevent new crises," Mr. Guiniguindo said. Central bank Governor Amando M. Tetangco, Jr., for his part, said he did not expect the global lender’s operations to be disrupted the Strauss-Kahn case. "The IMF as an institution is bigger than one man, even its managing director. Its institutional framework is sound," he said in a text message. Still, he said it was time to consider changes to the way its executives are chosen. "I believe the way forward is to have a broader base for selection, not just in the representation at the executive director level at the IMF Executive Board, but also -- and even more so -- for the [managing director] position itself. Diversity should be made an important consideration," he said. The Philippines has 9,049 votes in the IMF, equivalent to 0.41% of the total held by the institution’s member countries. |
U.S. Stocks Advance as Decline in Jobless Claims Boosts Optimism U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second straight day, as a government report showing a bigger-than-forecast drop in jobless claims bolstered optimism about the economic recovery. LinkedIn Corp., the largest professional-networking website, more than doubled in the first day of trading after its initial public offering.Thermo Fisher Scientific Inc. (TMO) jumped 4.2 percent after agreeing to buy Phadia AB for about $3.5 billion to grow in testing for allergies and autoimmune diseases. Intel Corp. (INTC), KLA-Tencor Corp. (KLAC) and Applied Materials Inc. (AMAT) slumped at least 1.1 percent as Goldman Sachs Group Inc. cut their ratings amid increased competition and excess supply. The S&P 500 advanced 0.2 percent to 1,343.60 at 4 p.m. in New York after yesterday posting the biggest gain in three weeks. The Dow Jones Industrial Average gained 45.14 points, or 0.4 percent, to 12,605.32, erasing an earlier 27-point decline. “The rally will accelerate,” said Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., which oversees $358.2 billion. “We had an excellent jobless claims number, which tells me that we’re going to see a solid jobs report. The Fed has indicated that it will be vigilant and watching the pace of jobs recovery. I don’t believe we’ll see a QE3. Still, we’ll continue with easy policy.”
Benchmark 10-year note yields erased gains as New York Fed President William Dudley said the central bank is falling short of its goals because of the modest pace of the recovery, with unemployment too high and headline inflation likely to ease. The government’s $11 billion sale of 10-year inflation-indexed debt drew a lower yield than forecast. “The front-end strength is leading the market today as the economic data continue to underwhelm,” said Scott Graham, head of government bond trading at Bank of Montreal’s BMO Capital Markets unit in Chicago. “People are looking at the Fed, and the headwinds to growth continue to argue for them keeping rates lower for a longer period. We are at this level for a reason.” Two-year note yields dropped three basis points, or 0.03 percentage point, to 0.52 percent at 5:06 p.m. in New York, according to Bloomberg Bond Trader prices. The 0.625 percent security due in April 2013 gained 2/32, or 63 cents per $1,000 face amount, to 100 6/32. The yield touched 0.51 percent on May 17, the lowest level since March 15. The yield on the 10-year note fell one basis point to 3.17 percent after touching 3.24 percent, the highest level since May 12. While the yield dropped to the five-month low of 3.09 percent yesterday, it failed to break its 200-day moving average of 3.08 percent. |
Oil Climbs in New York Trading as Investors Bet U.S. Jobs Support Demand Oil rose in New York as investors speculated a decline yesterday was too much and that a bigger- than-forecast drop in jobless claims signals fuel demand may increase in the world’s biggest crude-consuming nation. Crude for July delivery climbed as much as 0.6 percent today, recovering from a 1.6 percent decline yesterday. Jobless claims fell 29,000 to 409,000 in the week ended May 14, according to the Labor Department. A gauge of the outlook for the next three to six months fell for the first time since June and sales of existing U.S. homes unexpectedly declined. “The market is still divided about the economic numbers out of the States,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney, who predicted oil will average $100 this year. “The data wasn’t that crash-hot either way. Oil has ‘‘been trying to consolidate all week,’’ he said. Crude for July delivery increased as much as 55 cents to $99.48 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.35 at 10:14 a.m. Sydney time. The June contract gained 43 cents to $98.87. Prices are 0.8 percent lower this week and up 45 percent the past year. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
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