Friday, February 18, 2011
Philippine Markets: 18 February 2011
18 February 2011
USD/PhP: 43.34 - 0.08 PSEi: 3851.24 - 15.14
USD/JPY: 83.28 PFINC: 847.15 - 5.35
EUR/USD: 1.3598 BDO: 47.90 - 0.75
GBP/USD: 1.6164 BPI: 54.20 - 0.40
PDSTF3M: 3.1673 MBT: 59.85 - 0.30
Prices as of 4:00pm Source: Bloomberg, Reuters
Philippine Interest Rate Outlook
Secondary market rates moved sideways this week despite rising inflation risks haunting the markets. Short-term yields dropped while bonds with longer tenors moved up. Monetary authorities have hinted to the market that any future moves will be preemptive against any inflation risk.
Continue to expect interest rates to move sideways with upward bias in the week ahead.
Philippine Equities Outlook
Local shares rose by 2.72 percent week-on-week to 3851.24 for the first time in three weeks on bargain hunting activities after sell-off during the previous weeks. Strength in US equity markets also helped buoy the rebound. However, investors remained cautious as recovery remains fragile.
Chartwise, the week's close continues to suggest the market's recent uptick is a mere technical rebound and the rally could strech to the 3,900 levels. Near-term bias continues to support further tests towards the 3,600-3,650 levels in the coming weeks.
Philippine Peso Outlook
The local currency rose 1.10 percent to 43.34 as the dollar weakened against major currencies.
Chartwise, continue to expect the currency to range between the 43.25 - 43.70 levels in the week ahead. A confirmation close above the 44.00-44.10 level will confirm the bottom at the 43.34 levels and signal a retest of the 44.50 levels (the upper band of the 43.50-44.50 consolidation range. However, break of 43.34 suggests tests toward 43.00 / 43.25 levels.
BDO UNIBANK INC.
Jonathan Ravelas
Chief Market Strategist
(632) 858-3145
Rhys Cruz
Junior Researcher
(632) 858-3001
Morning Brief: 18 February 2011
| January deficit expected THE GOVERNMENT likely posted a deficit in January as it sought to jump-start projects before the onset of the rainy season. "Most likely we had a deficit because we are frontloading our expenses to take advantage of the good weather months," Budget Secretary Florencio B. Abad told BusinessWorld yesterday. He did not cite figures, however, saying the government will detail its fiscal performance for the start of the year later this month. Finance Secretary Cesar V. Purisima, meanwhile, told reporters that expenditures for January were higher than the P129.4 billion recorded 12 months earlier. But revenues came in strongly as well, he claimed, as the Bureau of Customs collected more than its P20-billion goal for January. The Bureau of Internal Revenue (BIR) has said it managed to exceed its January 2010 take of P64 billion but did not detail if its P71.9-billion target for last month was met. "Revenues are good. Customs is on target and I think BIR is doing good," Mr. Purisima said without elaborating. State firms also paid dividends totaling P30 billion, higher than their quota. Finance Undersecretary Gil S. Beltran, in a telephone interview, said the government may have incurred a January deficit "within the neighborhood of P37-38 billion," about the same as the P37.1-billion deficit recorded in the same month last year. "I do not have the data right now but the past administration also frontloaded [expenses] last year because [then President Gloria Macapagal] Arroyo wanted to finish her projects before leaving office," Mr. Beltran said. Disbursements last month, Mr. Abad said, included P717 million released to agencies to finance capital outlays, maintenance and operations, and to pay salaries. Frontloading will continue until June, Mr. Abad said, which will likely result in a "higher deficit" in the first semester that will be offset with "lower shortfalls" in the second half. "For instance, we may accommodate a [deficit] total of P190 billion for the first semester and then have only P100 billion for the latter part," he said. Mr. Purisima also stressed that the government would stick to its P290-billion deficit ceiling for the year, which is equivalent to 3.2% of gross domestic product (GDP). "We will keep that target and we will meet that. There’s no need to worry because what we are doing is we are frontloading expenses unlike before when we used to divide them on a monthly basis," he said. The Aquino government likely incurred a deficit of P309.8 billion -- corresponding to 3.6% of GDP -- last year based on initial figures, well below a P325-billion cap. -- P. P. Magtulis
Rental costs here were also the 12th most expensive in Asia, ECA said, based on September 2010 data on two-bedroom properties "commonly inhabited by international assignees". The Philippine capital, which ranked 13th in Asia in the previous report, surpassed neighboring capitals like Taipei, Kuala Lumpur and Shenzen. Tokyo topped the global and Asian rankings due to the strengthening of the yen even as actual rental prices dropped by 7% last year. Expatriates there had to fork over an average $4,352 a month. The Japanese capital was followed by Moscow, Hong Kong, London, Singapore, Caracas, Abu Dhabi, Bogota, San Francisco and Geneva. In Asia, Tokyo was joined by Hong Kong, Singapore, Seoul, Shanghai, Hanoi, Bangkok, Mumbai, Jakarta and Beijing as the top ten cities. The region saw leases rise by an average of nearly 7% in 2010 after falling by more than a tenth in 2009. "The strong rebound in rental rates in many cities reflects both the rapid economic recovery and the continued expansion of companies into the region," Lee Quane, regional director of ECA Asia, said in a statement. Rent in Metro Manila rose by 14% "due to the strengthening of the peso against the greenback", ECA said in an e-mail to BusinessWorld. This was based on properties mostly in Makati. Hong Kong, meanwhile, saw rents increase by 22% to $2,830 a month for a two-bedroom unit after prices fell by roughly a quarter the previous year, ECA said. -- Jessica Anne D. Hermosa |
U.S. Stocks Advance Following Higher-Than-Estimated Economic Data, Profits U.S. stocks rose, sending the Standard & Poor’s 500 Index to a 32-month high, as improving corporate earnings and manufacturing data overshadowed higher- than-forecast growth in consumer prices. Cliffs Natural Resources Inc. jumped 7.2 percent after profit beat analysts’ estimates. Nvidia Corp. added 9.8 percent as the maker of graphics chips forecast higher sales than analysts had predicted. American Express Co. slumped 2.3 percent amid investor concern about the impact of a proposed rule on interchange fees. Huntington Bancshares Inc. declined 2.5 percent after Bank of America Corp. cut its stock rating. The S&P 500 rose 0.3 percent to 1,340.43 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 29.97 points, or 0.2 percent, to 12,318.14. Both gauges are at the highest levels since June 2008. Stocks fell earlier as anti-government protests spread in the Middle East and Iran’s state-run Press TV said the nation is sending warships to use Egypt’s Suez Canal. “There’s economic momentum,” said Bruce McCain, who oversees $25 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland. “The consumer is back, businesses have been more optimistic, manufacturing has been expanding and earnings have been good. That’s enough to keep the stock rally going.”
Ten-year note yields fell to the lowest in almost two weeks after reports that Iran is sending two warships through the Suez Canal. Treasuries gained even after a government report showed consumer prices rose more than forecast last month. The Federal Reservepurchased $7.2 billion in notes maturing from May 2018 to August 2020 as part of its plan to pump $600 billion into the economy. “The uncertainty and geopolitical risks are supportive of Treasuries,” said Sergey Bondarchuk, an interest-rate strategist in New York at BNP Paribas, one of 20 primary dealers that trade Treasuries with the Fed. “People just don’t want to be short the market.” A short is a bet that prices will fall. Ten-year note yields fell five basis points to 3.57 percent at 5:02 p.m. in New York, according to BGCantor Market data, the lowest level since Feb. 4. The 3.625 percent security due in February 2021 rose 12/32, or $3.75 per $1,000 face amount, to 100 13/32. Thirty-year bond yields decreased two basis points to 4.66 percent. |
Oil Surges in N.Y. on Mideast Unrest, Shrinks Discount to Brent Oil surged the most this month amid mounting Middle East tensions, narrowing a record spread between U.S.-traded West Texas Intermediate and Brent in London. Crude oil in New York rose 1.6 percent after protesters clashed with police in Bahrain, Yemen and Libya, and Iranian state-run television said the country was sending two warships through the Suez Canal. Brent slipped from a two-year high as traders moved money into the U.S. contract. “The spread between Brent and WTI is coming in,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There’s some catch-up for WTI when it comes to the geopolitical situation taking place.” Crude for March delivery rose $1.37 to settle at $86.36 a barrel on the New York Mercantile Exchange, the biggest one-day increase since Jan. 31. Futures have gained 12 percent in the past year. April crude on the Nymex gained $1, or 1.1 percent, to $88.84. The March contract in New York expires on Feb. 22. Brent crude for April settlement fell $1.19, or 1.1 percent, to $102.59 a barrel on the ICE Futures Europe exchange in London. The contract increased to $103.78 yesterday, the highest settlement since Sept. 25, 2008. The difference between the April contracts in London and New York was at $13.75 a barrel, compared with $15.94 yesterday. The spread had widened amid a glut of oil at Cushing, Oklahoma, the delivery point for the New York-traded contract. Brent prices tumbled 1.3 percent and New York futures jumped 1 percent in the two hours before floor trading closed on the Nymex. |
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, February 17, 2011
Morning Brief: 17 February 2011
Finance dep’t offers REIT rule compromise THE FINANCE department has softened its stance on the public ownership level to be required of firms seeking perks under the Real Estate Investment Trusts (REIT) Act, a development that could finally lead to law’s implementation. Finance Secretary Cesar V. Purisima, who had wanted REITs to sell 51% of their shares to the public to make sure capital is "recycled" rather than used to repay debts, is now willing to bring down the initial public float requirement to below 50%. The REIT law’s implementing rules require only a public float of 33%. "We are open to a program where we start with less than 50% but move towards greater public ownership," Mr. Purisima yesterday told reporters on the sidelines of a Financial Executives Institute of the Philippines meeting in Makati. "Based on my discussions with [the Securities and Exchange Commission] they are open to that concept but we just have to fine-tune exactly what it is," he added. Mr. Purisima said the public float level would still "be higher than 33.3%" but did not go into details. He added that a working group composed of representatives from the Finance department, SEC and the Bureau of Internal Revenue would present the proposal to the public-private Capital Market Development Council (CMDC) in a meeting next quarter. "It will not be 33.3%. We are still finalizing the program to be presented to the [CMDC] in our next meeting. We plan to finish the REIT issue during that meeting," Mr. Purisima said. SEC Commissioner Ma. Juanita Cueto, in a phone interview, said the CMDC, as a policy-recommending group, "will greatly help" in the drafting of the rules since it is composed of "private players that may be affected." Republic Act 9856 or the REIT Law, which took effect in December 2009, establishes the framework for REITs -- corporations that use a pool of investor funds to purchase and manage real estate assets. REITs can raise money by going public and are entitled to tax incentives. The law, however, has yet to be implemented in the absence of tax rules from the BIR, which is under the Finance department. A REIT, as defined in the rules, is a stock corporation "owning income-generating real estate assets". It must be listed on the stock exchange and have at least 1,000 shareholders, each with at least 50 shares of any class and who, in the aggregate, must own a third of the REIT’s outstanding shares. A REIT should have a minimum capitalization of P300 million. It must dispense 90% of its distributable income -- defined as net income adjusted for unrealized gains or losses -- as dividends each year. Under the law, the sale or transfer of real properties to a REIT shall be levied only half the applicable documentary stamp tax (DST) as well as registration and annotation fees. Initial and secondary public offerings of securities will be exempted from the initial public offering tax while the sale or exchange of securities will be exempted from the DST. While he is willing to lower the initial public float, Mr. Purisima said this should eventually go up to 67% on a REIT firm’s third year. "That did not change. I still want 67% in the third year," he said. "In the first place, we in the government also want to develop the market and in doing so, we have to compromise [with other agencies]," he explained. Ms. Cueto declined to comment, saying she was not privy to the talks between SEC Chairman Fe B. Barin and Mr. Purisima. Ms. Barin and Philippine Stock Exchange officials were not immediately available for comment. -- PPM
Manufacturing projects accounted for roughly two-fifths of the commitments recorded by the Board of Investments, Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA) and Clark Development Corp. Filipino investors were behind two-thirds of the figure or P346.5 billion. This was a 79.9% increase from 2009. Foreign investors, meanwhile, pledged P196.1-billion worth of projects, up by 61%. Nearly a third (29.8%) of the foreign direct investment (FDI) pledges came from Japan. The Netherlands, Korea, Switzerland, the United States and Cayman Islands trailed behind as other top sources of proposed FDI. The committed projects from both Filipino and foreign investors are expected to generate 134,534 jobs once they come on stream. This, however, is 27% less than the employment figure forecast from investment pledges filed in 2009. Most of the new jobs will be seen in PEZA sites as investments registered with this state agency are projected to create nearly two-thirds of the forecast employment. -- J. A. D. Hermosa |
U.S. Stocks Advance as Federal Reserve Grows More Optimistic on Growth U.S. stocks gained, pushing the Standard & Poor’s 500 Index to a 32-month high, as a higher forecast for economic growth from theFederal Reserve, improving earnings and takeovers bolstered confidence in equities. Dell Inc. surged 12 percent, the most since December 2008, as earnings beat analysts’ estimates on business spending. Deere & Co. gained 2.4 percent to a record after boosting its full- year profit forecast. Genzyme Corp. rose 1.1 percent as Sanofi- Aventis SA agreed to buy the company for $20.1 billion and Family Dollar Stores Inc. soared 21 percent as Nelson Peltz offered to acquire the retailer for as much as $7.6 billion. The S&P 500 rose 0.6 percent to 1,336.32 at 4 p.m. in New York, the fourth gain in five days. The Dow Jones Industrial Average rallied 61.53 points, or 0.5 percent, to 12,288.17. The Nasdaq Composite Index added 0.8 percent to 2,825.56, while the Russell 2000 Index climbed 1 percent to 828.37. Both gauges rose to the highest level since October 2007. “The more optimistic view of the Federal Reserve is confirmed in part by the financial performance of major U.S. corporations,” said Richard Skaggs, senior equity strategist at Loomis Sayles & Co. in Boston, which manages $152 billion. “Frankly we’re encouraged to see the Fed take note of the improvement that is seen in some quarters.” The S&P 500 has gained 6.3 percent this year, adding to 2010’s 13 percent rally, amid government stimulus measures and higher-than-estimated corporate profits. The gauge needs to rise 1.3 percent to 1,353.06 in order to complete a 100 percent rally from its 12-year low in March 2009. Earnings topped estimates at 72 percent of the 371 companies in the S&P 500 that reported since Jan. 10, according to data compiled by Bloomberg. Fed Meeting Stocks extended gains today after minutes from the Fed’s last policy meeting showed officials “continued to express disappointment in both the pace and the unevenness of the improvements in labor markets,” while also judging the recovery to be on a “firmer footing.” Policy makers raised projections for economic growth this year and made little change to forecasts after 2011 or for unemployment and inflation. Stock-index futures rose before the open of exchanges as Commerce Department figures showed that housing starts climbed 15 percent to a 596,000 annual rate. The median forecast in a Bloomberg News survey called for a 539,000 rate. Work started on 78 percent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle. An index of homebuilders in S&P indexes rose 1.7 percent as all of its 12 members rallied. KB Home advanced 2.1 percent to $14.64.Lennar Corp. climbed 1.9 percent to $20.85. |
Oil Climbs as Israel Says Iranian Warships Heading for Syria Crude rose after Israeli Foreign Minister Avigdor Lieberman said two Iranian gunboats are planning to move through the Suez Canal toSyria, spurring concern that Middle Eastern oil shipments will be disrupted. Oil climbed 0.8 percent after Lieberman called the move he expects later today a “provocation.” The possible action by Iran comes five days after Egyptian President Hosni Mubarak stepped down. Brent crude, the European benchmark that is more sensitive to Middle East unrest, settled at the highest level since Sept. 25, 2008. “This is the latest addition to the Middle East risk premium,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a knee-jerk reaction to the headlines that Iran is planning to send two warships through the Suez Canal.” Crude oil for March delivery rose 67 cents to settle at $84.99 a barrel on the New York Mercantile Exchange. Prices are up 10 percent from a year ago. Brent crude oil for April settlement advanced $2.14, or 2.1 percent, to $103.78 a barrel on the London-based ICE Futures Europeexchange. The premium of April Brent to New York oil for the same delivery month rose to a record $15.94 a barrel today. The gap averaged 76 cents last year. “The tension in the Middle East is having a greater impact on the Brent market,” said Todd Horwitz, chief strategist at Adam Mesh Trading Group in New York. “This has a much bigger impact on Europe, we don’t get as much oil from the Middle East.” |
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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