Morning Brief: 11 April 2011

Japan bucks unnecessary testing of food exports www.bworldonline.com JAPAN HAS CALLED on trade partners including the Philippines to abide by trade rules amid fears of radiation-contaminated shipments from the disaster-hit nation. An official of the Japanese embassy, in particular, expressed concern over a testing requirement recently imposed by Manila on fish and fishery products imported from Japan. Shinsuke Shimizu, head of chancery at the embassy, told BusinessWorld last Friday that instead of requiring tests which are "not necessary and impossible", a fair measure would be to ask for a certificate of origin. "If they keep on doing this, imports have to be stopped." Mr. Shimizu said. Japan continues to struggle to stabilize the damaged Fukushima nuclear plant, which has released unknown amounts of radioactive material into the environment. One particular concern is the leak of highly radioactive water into the sea near the plant. Last month, the Bureau of Fisheries and Aquatic Resources (BFAR) required samples of fish and fishery products not certified by Japanese authorities as radiation-free to undergo tests at the Philippine Nuclear Research Institute (PNRI). "[A] better [measure is a] certificate of origin instead of radiation test," Mr. Shimizu said, noting that this approach was requested by the European Union. A government agency, however, insisted that the test was necessary. "The place of storage in Japan prior to shipment mentioned as origin may be different from fishing grounds. It’s safer to have a PNRI test," BFAR director Malcolm I. Sarmiento, Jr. said in a text message last Friday. "In the absence of a certification from Japanese authorities that it (a shipment) is radioactive free then samples must be sent to the PNRI for testing and upon negative findings [the goods] can be released," he added. A World Trade Organization (WTO) spokesman said international agreements allow governments to restrict imports deemed unsafe, and that Japan had also asked that the disaster’s dangers not be overblown. "Here at the WTO, Japanese officials have urged their trading partners... not to exaggerate the dangers and thus use the catastrophe in Japan as a pretext for employing protectionist measures," said Keith Rockwell, director of the WTO Information and External Relations Division. "It is true that in the past, governments have employed measures to restrict imports on safety grounds and later had those measures overturned by the WTO’s Dispute Settlement Body...," he added. Despite the trade concerns, Mr. Shimizu said Japan would not seek concessions when the Japan-Philippines Economic Partnership Agreement is reviewed later this year. -- A. M. G. Roa Intramuros redevelopment eyed for PPP Project to showcase country’s cultural heritage By Doris Dumlao Philippine Daily Inquirer MANILA, Philippines—The Department of Tourism (DoT) plans to offer for potential public-private partnership (PPP) a master-planned redevelopment of the five-hectare “Walled City” of Intramuros, the oldest district in the Philippine capital of Manila built during the Spanish colonial period. In a roundtable forum with the Inquirer business staff, Tourism Secretary Alberto Lim said Intramuros would be spruced up to better showcase the country’s cultural heritage. The DoT also plans to attract retail businesses over the next two years and to redevelop some areas into a mixed-use commercial and residential hub over a five-year period using financial muscle from the private sector. Lim said a feasibility study would be undertaken soon and the government might bid out the Intramuros redevelopment project under the PPP framework by early 2012. The DOT is making a timely move to draw in a private sector participation for this major project given the huge interest among the country’s biggest property developers like Ayala Land, SM of taipan Henry Sy, JG Summit of the Gokongweis and Alliance Global of tycoon Andrew Tan on tourism-oriented real estate. As part of the redevelopment, Lim said Intramuros’ Maestranza Wall, used as a shipping warehouse during the Spanish occupation, would be fixed using a P250-million grant from Japan’s official development assistance arm Japan International Cooperation Agency. This stretch of wall lies near the mouth of Pasig river on its southern bank. “We will make it look like what they have as store fronts in Clarke Quay,” Lim said, referring to a historic riverside quay in Singapore that now houses a bustling pedestrian retail row. The redevelopment shall also include the rebuilding of the San Ignacio Church, which is currently in ruins. “It will become the Museum of Intramuros, where we will put the Ecclessiastical art collected by Jimmy Laya (governor of the Marcos-era central bank). This refers to art produced during an era in the Middle Ages in which the influence of the Church was practically paramount.

Investors focus on earnings and oil NEW YORK (CNNMoney) -- This week, corporate earnings return to the forefront. Earnings season kicks off Monday afternoon with results from Alcoa (AA, Fortune 500) and later this week, investors will get results from Google (GOOG, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) among others. With congressional leaders and President Obama reaching a budget agreement late Friday night to keep the government open, the attention should be squarely on corporate profits. Investors head into one of the most highly-anticipated earnings seasons in years. A weak jobs picture and surging commodity prices have made investors nervous. Profit margins are also beginning to get squeezed after several quarters or rising profitability. Fred Dickson, chief market strategist with D.A. Davidson & Co., said the earnings conference calls -- when executives typically talk about the future -- may be even more important than the actual results. "While we expect a fairly good earnings season, the company guidance is going to be key, partially with how commodities have been performing," said Dickson. Outside of earnings, investors remain focused on the rally in commodity prices - particularly oil. Oil jumped to over $113 a barrel on Friday, rising more than 4.5% last week. Stocks ended last week mostly lower following the surge in commodity prices. Opinions on what oil prices mean for stocks are mixed. Dickson said high oil prices may negatively impact both corporate earnings and consumer spending later this year, while others feel high oil prices could help the stock market in the long run because it means the Federal Reserve will continue to keep rates near zero. "Oil's drag on the economy keeps the Fed from raising short term interest rates," said Bill Vogel, senior analyst with Merlin Securities. On the Docket Monday - Aluminum producer Alcoa will release its first quarter results after the closing bell on Monday. Analysts surveyed by Briefing.com expect the Dow component to report a profit of 27 cents a share, up from 10 cents a share last year. Tuesday - The Commerce Department is scheduled to release the U.S. trade balance for February at 8:30 a.m. ET. China reported a small surplus for March, but a more than $1 billion trade deficit for the first quarter on Sunday. The Federal Reserve will release its Beige Book at 2 p.m. on Tuesday. The report is a collection of the anecdotal observations about the state of the U.S. economy by the Federal Reserve's 12 regional banks. Wednesday -- Banking giant JPMorgan Chase is on deck to release its quarterly results some time before the opening bell. Analysts are looking for the bank to earn $1.16 a share, compared to 74 cents a share a year ago. Investors will get the government's March retail sales report at 8:30 a.m. ET, followed by the business inventories report for February at 10 a.m. ET. Economists are looking for March retail sales to rise 0.5% compared with the 1% rise in February. Business inventories are expected to increase 0.8%. Thursday -- The Labor Department is scheduled to release weekly initial jobless claims and the producer price index for March, both at 8:30 a.m. ET. Wall Street expects initial claims edged higher by 3,000 to 385,000 claims last week while producer prices rose 1% in March. Google reports its quarterly results after the bell. Analysts expect the Internet search giant's profits will jump to $8.13 share, compared to the $6.76 a share Google earned last year. Friday -- Dow component Bank of America will report its earnings before the bell, with analysts expecting a profit of 28 cents a share. Other companies reporting on Friday include broker Charles Schwab (SCHW, Fortune 500) and toy maker Mattel (MAT, Fortune 500). In economic data, the Labor Department puts out its March consumer price index, one of the primary gauges of inflation. Economists expect March CPI to rise 0.5%. Also on Friday, investors will get the University of Michigan's consumer sentiment survey for April, industrial production and capacity utilizations figures from the Commerce Department, and the Empire State manufacturing index from the New York Federal Reserve.

Oil Advances a Fourth Day in New York on Libyan Conflict, Mideast Unrest Oil advanced for a fourth day in New York as NATO escalated its air campaign over Libya and on concern unrest may spread to other energy-exporting countries in the Middle East. Futures rose as much as 0.6 percent today after warplanes from the North Atlantic Treaty Organization destroyed Libyan government tanks around the cities of Ajdabiya and Misrata. A Syrian army officer was killed after tanks were deployed to contain protests spreading across the country. Unrest has toppled leaders in Egypt and Tunisia and spread to Bahrain, Yemen and Oman. Crude oil for May delivery gained as much as 67 cents to $113.46 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $113.33 at 8:19 a.m. Sydney time. The contract rose $2.49, or 2.3 percent, to $112.79 on April 8. Futures are 34 percent higher the past year. Brent oil for May settlement traded at $126.90 a barrel, up 25 cents, on the London-based ICE Futures Europe exchange. The contract increased $3.98, or 3.2 percent, to end the session at $126.65 on April 8.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

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Morning Brief: 8 April 2011

Hunger keeps rising, poverty also up -- SWS MORE FILIPINOS are going hungry and consider themselves poor, the Social Weather Stations (SWS) said in a new report, the details of which highlight the challenges facing the Aquino administration. A March 4-7 poll, the results of which were made exclusive to BusinessWorld, had 20.5% of respondents -- or an estimated 4.1 million families -- claiming to have gone hungry at least once in the past three months. This was up from the 18.1% (an estimated 3.4 million families) recorded in November 2010 when the rate again began climbing from that year’s 15.9% low. The result is also almost seven points above the 12-year average of 13.8%, the SWS said. Last month’s poll, moreover, found that 51% -- an estimated 10.4 million families -- consider themselves mahirap or poor, two points up from November’s 49%. Also, 40% (8.1 million families), consider themselves food-poor, higher than the 36% notched in the previous survey. A senior government official said external shocks likely contributed and added that the Aquino administration remained committed to its promise of alleviating poverty. The rise in overall hunger, the SWS said, resulted from increases for both moderate and severe hunger. The area comprising Balance Luzon was the hardest hit, with hunger rates hitting record highs. Nationwide, moderate hunger -- experiencing it only once or a few times -- rose to 15.7% (an estimated 3.2 million families) from 15% (2.8 million families) in November. Severe hunger -- experiencing it often or always -- increased to 4.7% (950,000 families) from 3.1% (588,000 families). By area, overall hunger hit a record 25% (2.2 million families) in Balance Luzon from 18.3% (1.5 million families). The new rate topped the previous high of 22.3% in September 2007, and offset declines in Mindanao (16.7% from 18%), Metro Manila (20.7% from 21.7%) and the Visayas (14.7% from 15.3%). Broken down, moderate hunger hit a record 18.7% in Balance Luzon, overtaking record of 18.1% in March 2010. This also cancelled out improvements in the Visayas (9.7% from 12.7%), Metro Manila (16.7% from 17.7%) and Mindanao (14.7% from 16%). "The new moderate hunger rates are still higher than their 12-year averages for all areas, except in the Visayas where the latest ... is lower than the 12-year average of 10.2%," the SWS said. Severe hunger also hit a record high of 6.3% in Balance Luzon, surpassing the 6% hit in December 2008. The rate stayed at 4% in Metro Manila and at 2% in Mindanao but rose to 5% from 2.7% in the Visayas. The latest rates were also higher than the 12-year averages for all areas except for Mindanao where it is some two points lower. Self-rated poverty, meanwhile, rose in all areas except Metro Manila, where it fell 10 points to 34% from 44%. This, however, was overwhelmed by an eight-point increase in the Visayas (61% from 53%), a five-point gain in Mindanao (49% from 44%), and by a three-point rise in Balance Luzon (54% from 51%). It rose by four points to 59% in rural areas and by three points to 45% in urban areas. Self-rated food poverty fell by four points to 24% in Metro Manila but increased elsewhere: 12 points to 51% in the Visayas, four points to 42% in Balance Luzon and by four points to 38% in Mindanao. The self-rated poverty threshold -- the monthly budget that poor households need in order not to consider themselves poor in general -- remained sluggish despite inflation. Compared to the previous quarter, the median poverty threshold for poor households stayed at P15,000 in Metro Manila, P9,000 in Balance Luzon and P8,000 in the Visayas; it rose to P7,000 from P5,000 in Mindanao. These amounts had been surpassed in the past in those areas, the SWS said. As of March 2011, the median food-poverty threshold for poor households in Metro Manila fell back to P8,000 after a record-high P9,000 in the previous quarter. It went up to P5,000 from P4,000 in Balance Luzon, stayed at P4,000 in the Visayas, and rose to P3,850 from P3,000 in Mindanao. These amounts had also been surpassed in the past, the SWS said. As a measurement of belt-tightening, the SWS said Metro Manila’s median poverty threshold of P15,000 in Metro Manila was barely above the P10,000 in 2000 even though the Consumer Price Index (CPI) had risen by over 60%. The P15,000, it said, is equivalent to just P8,886 in base year 2000 purchasing power and is a throwback to living standards of over fifteen years ago. At the March 2011 cost of living, the 2010 median of P10,000 is equivalent to P16,880, and deducting the current P15,000 means households cut living standards by P1,880. In terms of food poverty, food-poor Metro Manila households tightened belts by P42. Sought for comment, Social Welfare Undersecretary Celia C. Yangco said: "During the last quarter, we’ve experienced a lot of shocks ... such as the troubles arising in the Middle East ... we’ve also seen an increase in food prices over the past quarter." She noted, however, that the government was continuing to undertake "sustainable livelihood" schemes such as conditional cash transfers and the KALAHI-CIDSS community development program. The SWS polled 1,200 adults nationwide for the latest survey, which used sampling error margins of ±3% for national and ±6% for area percentages. -- J. D. Poblete Reserves hit $66.2B as of end-March GROSS international reserves (GIR) continued to increase in March due mainly to proceeds from government bonds, the central bank yesterday reported. GIR rose to $66.2 billion from February’s $63.9 billion, just short of the $68-70 billion target for this year. The increase was due to "foreign exchange inflows coming from the proceeds of the national government’s global bond issuance on March 30, 2011, foreign exchange operations and income from investments abroad of the BSP [Bangko Sentral ng Pilipinas], and revaluation gains on the BSP’s gold holdings on account of rising gold prices," the central bank said in a statement. The government raised $1.5 billion from an offering of 15-year dollar-denominated bonds last month. It earlier raised $1.25 billion from a January sale of 25-year global peso bonds. The inflows, the central bank said, were partly offset by payments for the government’s maturing foreign exchange obligations. Foreign exchange holdings rose to $418.29 million in March from $309.76 million the month before, the BSP said. Other components of GIR such as the central bank’s holdings of gold and foreign exchange also increased. The central bank’s foreign investments -- which comprise the bulk of the GIR -- grew to $57.19 billion from $55.11 billion. These are placements in money market instruments abroad, such as interest-earning deposits with foreign correspondent banks and government-backed securities such as US Treasury bills. Gold holdings grew to $7.08 billion from $6.97 billion, while Special Drawing Rights remained unchanged in March. The central bank’s reserve position inched up to $361.16 million from $358.32 million month on month. The government’s net international reserves (NIR), including the revaluation of reserve assets and reserve-related liabilities, rose to $66.2 billion from $63.9 billion the month before. The central bank said end-March GIR was enough to cover 10.2 months worth of imports. It was also equivalent to 10.5 times the country’s short-term external debt based on original maturity and 5.9 times based on residual maturity. -- ASOA

U.S. Stocks Drop on Japan Earthquake, Government Budget Impasse U.S. stocks fell, dragging the Dow Jones Industrial Average down from an almost three-year high, as another earthquake shook Japan and a dispute over the federal budget threatened to shut down the American government. Caterpillar Inc., the largest maker of construction equipment, slid 1 percent to lead declines in the Dow. The iShares MSCI Japan Index Fund (EWJ), an exchange-traded security tracking the nation’s equities, fell 0.8 percent. Gap Inc. (GPS) dropped 1.5 percent as the largest U.S. apparel chain reported a 10 percent slump in same-store sales. KLA-Tencor Corp. (KLAC) sank 4.6 percent after Citigroup Inc. advised selling rival semiconductor-equipment maker Lam Research Corp. (LRCX) The S&P 500 lost 0.2 percent to 1,333.51 at 4 p.m. in New York, after dropping as much as 0.7 percent. The Dow, which climbed yesterday to the highest level since June 2008, slipped 17.26 points, or 0.1 percent, to 12,409.49 today. “It’s body blow after body blow,” said Matt McCormick, a Cincinnati-based money manager at Bahl & Gaynor Inc., which oversees $3.6 billion. “The market has faced a series of black swans. We don’t know the impacts of the Japan situation. We don’t know what will happen in the Middle East. In addition, people are skittish because of all the budget discussion and concern about the future of monetary and fiscal policies.” Shorter-Term Treasuries Rise 1st Time in 3 Days on Shutdown, Bill Scarcity Treasury notes due in seven years and less rose for the first time in three days as a partial government shutdown looms and the supply of the shortest-term U.S. government securities dwindles. Investors bought notes after rates on six-month bills fell to a record low this week with the Treasury reducing issuance to avoid exceeding a federal debt limit. Lawmakers are seeking to reach a compromise on the budget and avert a shutdown. Notes also rose after another earthquake in Japan. Thirty-year bonds fell ahead of next week’s sale of the securities. “It’s a pricing in of the risk that the government actually does end up being shut down for a certain period,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “If they do shut down, it’s a front-end bullish curve-steepening event. The long end is priced in a supply concession.” Two-year note yields decreased five basis points, or 0.05 percentage point, to 0.78 percent at 5 p.m. in New York. It was the lowest level since April 5. The price of the 0.75 percent security due in March 2013 rose 3/32, or 94 cents per $1,000 face amount, to 99 30/32. Thirty-year bond yields advanced two basis points to 4.62 percent. The yield on the benchmark 10-year note was little changed at 3.55 percent.

Crude Oil Climbs Above $110 a Barrel in N.Y. on Libya, Middle East Unrest Crude rose above $110 a barrel for the first time in 30 months as a fire burned at Libya’s Sarir oilfield, bolstering concern that unrest in North Africa and the Middle East will spread, curbing shipments. Futures climbed 1.4 percent after NATO said forces loyal to Muammar Qaddafi caused a fire at the field, according to Al Arabiya television. The conflict in Libya is currently in a stalemate, said Army General Carter Ham, the U.S. commander for Africa. Revolts have led to the overthrow of governments in Egypt and Tunisia and targeted regimes from Syria to Bahrain. “The situation in Libya, and issues elsewhere in the Middle East, offer a chance to buy the rumor,” said Sarah Emerson, managing director of Energy Security Analysis Inc. in Wakefield, Massachusetts. “There’s a tremendous upward momentum and I see nothing in the near-term to stop the rally.” Crude oil for May delivery rose $1.47 to $110.30 a barrel on the New York Mercantile Exchange, the highest settlement since Sept. 22, 2008. Futures are up 28 percent from a year ago. Brent oil for May settlement increased 37 cents, or 0.3 percent, to end the session at $122.67 a barrel on the London- based ICE Futures Europe exchange. It was the highest settlement price since Aug. 1, 2008.

Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com

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Philippine Markets: 6 April 2011

06 April 2011

USD/PhP: 43.13 - 0.229 PSEi: 4212.52 + 45.43
USD/JPY: 85.15 PFINC: 942.37 + 3.24
EUR/USD: 1.4296 BDO: 53.95 + 0.40
GBP/USD: 1.6345 BPI: 60.50 + 0.40
PDSTF3M: 1.1635 MBT: 67.85 - 0.15
Prices as of 4:00pm Source: Bloomberg, Reuters


PH stock prices resume upward track
By Doris Dumlao
Philippine Daily Inquirer

MANILA, Philippines—Local stocks resumed their climb above 4,200 on Wednesday, led mostly by large-cap stocks as investors' risk appetite improved.

The main-share Philippine Stock Exchange index added 45.43 points or 1.09percent to finish at 4,212.52.

News about China's fresh monetary tightening, which in the past was a sentiment dampener, was shrugged off and instead read as a sign of confidence in favorable growth momentum across the region.

The property, services and mining/oil counters led the day's upswing, respectively up by 3.2percent, 1.4percent and 2.3 percent, although all other counters were also up.

Value turnover amounted to P5.5 billion.

There were 89 advancers versus 46 decliners and 40 unchanged stocks.

Overnight, the closely watched Dow Jones Industrial Index was slightly down by 6.13 points to 12,393.90. Wall Street traded with caution on news that members of the Federal Reserve were split on whether it needs to tighten credit later this year to curb inflation.

Tycoon Andrew Tan's AGI, the most actively traded stock, bounced from the previous day's selldown (up by 0.2 percent to P11.30 each) as earlier concerns that the foreign institutional investors that had bought into the company may only flip their shares fizzled out. UBS which arranged a P9.7-billion equity deal that brought in new foreign investors said these funds were staying in AGI for the long haul.

EDC, Aboitiz Power, PLDT, DMCI Holdings, First Gen, Metro Pacific Investments, SM Investments, Filinvest Land, Lepanto Mining, ICTSI, Leisure & Resorts, Megaworld, FPH, Nickel Asia, SM Prime, Banco de Oro were likewise among the day's gainers.

On the other hand, Metrobank and Aboitiz Equity traded in the red.

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