12% float set for PSEi stocks; bourse to ease listing rules, too The Philippine Stock Exchange is bent on enforcing a 12-percent minimum public float as a prerequisite for top companies to merit a slot in the main-share index during the bourse’s next review this September.In a forum organized by The Asset magazine, PSE president Hans Sicat also said the bourse was working to ease listing rules to attract more companies to go public. The 12-percent minimum public ownership now required for inclusion in the PSEi is higher than the across-the-board 10-percent public float needed to remain listed. Sicat said these initiatives would be part of the PSE’s bid to address limited liquidity—identified as one of the two major issues hounding the market. The other issue, which Sicat said the PSE would address in order to attract more investors, was the perceived lack of good corporate governance. “As a result, all our efforts this year are really focused on driving these two major themes,” Sicat said. In increasing liquidity, Sicat said the initiative to integrate the equities markets of five Southeast Asian economies should also help. “That will make it easier for retail investors to get equities, buy and trade in their local currency.” The top 30 companies in the country will be among those to be promoted during an upcoming Southeast Asian equities cross-trading platform, which is targeted to start in the first quarter of 2012. But if only to remain listed, the minimum public float requirement is 10 percent. Sicat said it was a good thing that many companies were now encouraged to undertake follow-on equity deals to meet such requirement. Still, there are about 45 companies that fall short of this minimum public float. Palace OKs exports roadmap The Philippines Export Development Plan 2011-2013 has finally gotten Malacañang’s approval, paving the way for the implementation of strategies aimed at doubling exports to $120 billion by 2016. In the presentation of the plan in Malacañang, President Aquino reiterated support for the export sector, welcoming proposals on how to address common industry issues, using the PEDP as a guide. Under the approved roadmap, exports are not only envisioned to more than double by the end of the current administration’s term, but also to generate 9.1 million jobs and jack up the country’s gross domestic product by 58 percent. According to Trade Undersecretary Adrian Cristobal Jr., the country registered average export growth of $58 billion from 2008-2010. The export industry was expected to expand even more with the approval of the new PEDP, which focused on several core product and market strategies. The key focus sectors include information technology and business process outsourcing; electronics; agribusiness, including fresh, processed, and marine food products and coconut; minerals; shipbuilding; motor vehicle parts; garments and textile; home style and décor, and wearables. In terms of product strategies, the roadmap sought to enable exporters to move up the value chain, participate in higher-value processes in the global supply chain, and develop linkages for organic, natural, and certification-based offerings. The PEDP would not only focus on beefing up the country’s product and service offerings, however, but would also employ market access and promotions activities to ensure that local offerings reached as wide a market as possible. To expand the market for the country’s exports, efforts would be made exerted toward better utilization of currently effective free trade agreements, including those with Australia, New Zealand, China, Korea, and India via the Association of Southeast Asian Nations, and with Japan via the Philippines-Japan Economic Partnership Agreement. Non-traditional or emerging markets would likewise be targeted. Also part of the PEDP were efforts to encourage global companies to migrate their supply chain nodes to the country. Product and service promotion would be done mainly through high-impact and high-level inbound trade fairs and missions, which would also be tied to available tourism opportunities, as well as the adoption of a comprehensive and unified brand for the country. |
U.S. Debt Rating Placed on Review for Downgrade by Moody’s as Talks StallMoody’s Investors Service raised the pressure on U.S. lawmakers to increase the government’s $14.3 trillion debt limit by placing the nation’s credit rating under review for a downgrade. The U.S., rated Aaa since 1917, was put on review for the first time since 1996 on concern the debt threshold won’t be raised in time to prevent a missed interest or principal payment on outstanding bonds and notes, even though the risk remains low, Moody’s said in a statement yesterday. The rating may be reduced to the Aa range, and there is no assurance Moody’s would restore its top rating, even if a default is quickly “cured.” President Barack Obama is considering summoning congressional leaders to Camp David this weekend to work on a plan to raise the debt ceiling after yesterday’s negotiations on a deficit-cutting plan of at least $2 trillion stalled, according to two people familiar with the matter. A default resulting from a failure to raise the debt limit may lead to slower economic growth and another financial crisis. Stocks gained, while the dollar weakened and Treasuries fell. “It’s obviously very serious in so many different ways,” said James Caron, head of U.S. interest-rate strategy at Morgan Stanley in New York, one of 20 primary dealers that trade bonds with the Federal Reserve. “Most people still believe there will be some type of an agreement struck to avoid all this stuff, and that’s what the market’s banking on.” Market Reaction Government bonds yields are at about the lowest this year. Ten-year yields remain below 3 percent, compared with an average of 7 percent during the past four decades. U.S. stock gained as investors looked past the warning to government data that showed retail sales unexpectedly increased and jobless claims fell more than economists estimated, bolstering confidence in the economy. The Standard & Poor’s 500 Index increased 0.3 percent as of 10:43 a.m. in New York. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six U.S. trading partners, including the euro, yen and pound, slid for a third day, dropping 0.2 percent. The 10-year Treasury yield rose three basis points to 2.92 percent, according to Bloomberg Bond Trader prices. The price of the 3.125 percent security due in May 2021 declined 1/4, or $2.50 per $1,000 face amount, to 101 25/32. The cost of insuring Treasuries rose five basis points to 54.5 basis points, according to CMA prices for credit-default swaps. Other Ratings The Aaa ratings of financial institutions directly linked to the U.S. government, including Fannie Mae,Freddie Mac, the Federal Home Loan Banks, and the Federal Farm Credit Banks, were also put on review for cuts, Moody’s said. It also placed 7,000 municipal ratings on review for possible downgrade. “What we’re looking for is a raising of the limit. It doesn’t matter the process that they get there,” Steven Hess, the senior credit officer at Moody’s in New York, said in a telephone interview yesterday. Senate Republican Leader Mitch McConnell proposed a “last choice option” on July 12 that effectively would grant Obama power to raise the debt limit in installments. McConnell’s plan would let the president raise the limit in three stages unless Congress disapproves by a two-thirds majority, while Obama would also be required to propose offsetting spending cuts. The spending reductions would be advisory, and the debt- ceiling increase would occur regardless of whether lawmakers enact the cuts. Obama’s Exit Obama “abruptly” walked out of yesterday’s White House meeting with legislative leaders on the federal deficit, House Majority Leader Eric Cantor, a Republican from Virginia, told reporters. “This report underscores the warning I outlined months ago,” House Speaker John Boehner, Republican of Ohio, said in a statement yesterday. “If the White House does not take action soon to address our nation’s debt crisis by reining in spending, the markets may do it for us.” “I think it reflects what we all know -- that this is a serious time and serious discussions and we can’t continue to have people not contribute to solving this problem,” Senator Patty Murray of Washington, the No. 4 Democratic leader in the chamber, said in an interview in Washington yesterday. Reaching a Deal Standard & Poor’s put the U.S. government on notice on April 18 that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt. The firm said at the time that there’s a one-in-three chance that the rating might be cut within two years and that its “baseline assumption” is that Congress and the Obama administration will come to terms on a plan to reduce record deficits. S&P would lower its sovereign top-level AAA ranking to D, the last rung on its scale, if the U.S. can’t make its payments because of a failure to raise the debt ceiling, John Chambers, chairman of the sovereign rating committee, said June 30. The U.S. is among 17 countries, from Australia to Canada to Switzerland, rated Aaa by Moody’s. S&P gives 18 countries its top ranking. It’s likely that the debt ceiling will be raised without a credible plan for debt reduction, pushing yields higher for longer-term securities, according to Bank of America Corp. Debt Trajectory A debt-ceiling increase before Aug. 2 would lead yields on 30-year Treasury bonds to rise faster than five-year notes, reflecting increased concern that the long-term fiscal situation will worsen, wrote analysts led by Priya Misra, head of U.S. rates strategy in New York at Bank of America Merrill Lynch. “The rating outlook will be determined by the longer-term debt trajectory,” Hess said yesterday of the Moody’s rating. Treasury Secretary Timothy F. Geithner said he has taken steps to prevent a federal default until Aug. 2, using accounting measures that involve two retirement funds. The U.S. reached its borrowing limit on May 16. The Moody’s announcement is a “timely reminder” that Congress must “move quickly” to avoid default, the Treasury said in a statement. The risk of a default is causing concern in Asia. China is the biggest foreign holder of Treasuries andJapan ranks No. 2. Dagong Global Credit Rating Co., a Chinese company, said today that it was putting its A+ rating for the U.S., the fifth- highest level, on “negative watch,” citing the nation’s deteriorating ability to repay debt. Chinese Perspective China needs to “seriously assess the risks” of its holdings as the U.S. faces a “worrisome” economic outlook, Yu Bin, a senior government researcher, told reporters at a briefing in Beijing today. The nation hopes the U.S. will adopt “responsible policy to ensure investors’ interests,” Chinese Foreign Ministry spokesman Hong Lei said at a separate briefing. Demand has been higher than average this week at the Treasury’s auctions of three- and 10-year notes this week as investors continue to seek a U.S. refuge from Europe’s worsening sovereign-debt crisis. While yields remain low, investors remain concerned they will increase as the borrowing deadline approaches. Yields on 10-year notes would rise about 37 basis points if the U.S. government temporarily misses a debt payment while promising to make bondholders whole as soon as the debt limit was raised, according to the average estimate of 45 JPMorgan Chase & Co. clients that were surveyed by the firm. Foreign investors forecast yields would rise 55 basis points. An increase in Treasury yields of 50 basis points would reduce U.S. economic growth by about 0.4 percentage points, JPMorgan said in a report, citing Fed research and data. “It certainly underscores the importance of passing the debt ceiling and not putting us in default status, and making sure there’s a longer-term fiscal plan to contain spending and the deficit we’ve been running up over the last few years,” Anthony Cronin, a trader at primary dealer Societe Generale SA in New York, said yesterday. |
Oil Drops After Bernanke Says Fed Isn’t Planning More StimulusOil in New York fell, reaching a record discount to Brent crude, after Federal Reserve Chairman Ben S. Bernanke said the Fed isn’t planning more bond-buying to stimulate economic growth. Futures dropped 2.4 percent after Bernanke told Congress that the central bank would be cautious about initiating a third round of quantitative easing because of higher inflation this year. Oil climbed as much as 0.8 percent earlier when the Labor Department said applications for unemployment benefitsdecreased 22,000 to 405,000 last week. “The Bernanke comments took away some of the speculation that the Fed was about to commence with a third round of quantitative easing,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The comment had an immediate impact on both oil and the dollar.” Crude oil for August delivery declined $2.36 to settle at $95.69 a barrel on the New York Mercantile Exchange. The contract dropped as much as $3.52. Oil has risen 23 percent in the past year. Crude’s discount to Brent widened to $22.63 a barrel, exceeding the previous record of $22.29 set June 15. Brent for August settlement fell 46 cents, or 0.4 percent, to expire at $118.32 a barrel on the London-based ICE Futures Europe exchange. The more actively traded September futures declined $1.59, or 1.3 percent, to settle at $116.26. “We’re not prepared at this point to take further action,” Bernanke said today, in response to a question from Senate Banking Committee Chairman Tim Johnson, a Democrat from South Dakota. Mixed Signals Bernanke signaled yesterday that the Fed has more tools for monetary easing. He said the central bank could keep interest rates at a record low and hold its balance sheet at $2.87 trillion for a longer period. It may also buy more bonds, increase the average maturity of its securities holdings or cut the interest rate it pays banks on their reserves, he said. “People are reassessing what is going to happen with quantitative easing,” said Peter Beutel, president of Cameron Hanover Inc., a trading advisory company in New Canaan, Connecticut. “It seems Bernanke has put conditions on any additional easing, which make it unlikely in the short term.” The Standard & Poor’s 500 Index dropped 0.5 percent to 1,308.87 and the Dow Jones Industrial Average fell 0.4 percent to 12,437.12 at 4:04 p.m. in New York. Moody’s Review Moody’s put the U.S. on review for the first time since 1996 as concern grew that political gridlock will lead to default. The American government has held an Aaa rating with Moody’s since 1917. President Barack Obama may summon congressional leaders to a Camp David summit this weekend after the latest round of White House negotiations on the deficit deal ended on a tense note. Obama “got very agitated” and left the room after House Majority Leader Eric Cantor suggested a vote on a smaller deal, Cantor said in an interview. “The market is hanging onto every word Bernanke says,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The budget impasse is looking more and more like a train wreck. It looks like this will go right down to the wire.” Economists forecast the Labor Department would report 415,000 claims for jobless claims today, according to the median estimate in a Bloomberg News survey. U.S. wholesale costs dropped more than forecast in June, the department said in a separate report. Weaker Demand “There was strength earlier on the jobs number but the Bernanke comments changed that,” Beutel said. “We may be seeing a delayed reaction to yesterday’s demand number.” Total U.S. fuel demand dropped 0.4 percent to an average 18.9 million barrels a day over the past four weeks, 1.4 percent lower than the same period last year, an Energy Department report showed yesterday. Gasoline consumption slipped 1 percent to an average 9.23 million barrels a day over the past four weeks, 0.9 percent lower than a year earlier. Gasoline for August delivery declined 2.68 cents, or 0.9 percent, to settle at $3.1248 a gallon in New York. The Organization of Petroleum Exporting Countries will increase crude loadings this month, according to tanker-tracker Oil Movements. The group will ship 22.99 million barrels a day in the four weeks to July 30, up 0.7 percent from last month, the Halifax, England-based consultant said today. They calculate shipments by keeping a tally of tanker-rental agreements. Oil volume in electronic trading on the Nymex was 742,866 contracts as of 3:42 p.m. in New York. Volume totaled 718,474 contracts yesterday, 5.8 percent above the average of the past three months. Open interest was 1.55 million contracts, the most since June 15. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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