PHILIPPINES
‘Anti-corruption drive to draw more foreign investors’
The Philippine economy may grow 80 percent larger within nine years as anti-corruption efforts build momentum and translate into greater foreign direct investment inflows, according to DBS Group.
In a research titled “Asia 2020,” the Singapore-based financial service group said that over the coming decade, economic growth will be respectable and trending toward 6 percent.
Such growth will depend much “on policy and whether the large labor pool and resource endowment—which include gold, nickel and copper—can be effectively tapped upon,” the paper said.
“We hold a cautiously optimistic view of the economy and expect reform to proceed at a moderate rate,” DBS added. “By 2020, GDP will (in today’s dollars) likely be 80 percent larger, and income levels 45 percent higher than at present.”
The group said that the Aquino administration has so far done a credible job in introducing reforms focused on fiscal discipline and public-private partnership (PPP) on infrastructure investments as well as population management and anti-corruption reforms.
Amid criticism that the government is not spending enough, Malacañang has limited deficit-spending to P34.5 billion in the eight months to August, or about a seventh of the P228.1 billion recorded in the same period of 2010.
Also, Malacañang expects to auction off the first of big-ticket PPP projects before yearend.
“A new structure for project approvals and implementation is being established, which should complement the launch of PPP projects,” DBS said. “Measures to counter corruption should raise investor confidence.”
DBS noted that the savings rate has grown to 18 percent from 11 percent in 2004 adding that investment is beginning to follow the same path and that GDP should follow.
“In short, the reform momentum is building, and this should translate into greater FDI inflows and complement the rising domestic savings rate already apparent in the data.
Further, DBS said the country’s young population could prove to be an advantage although the still-high birth rate remains a challenge, with an additional 19 million people seen within the next nine years.
“To some extent, resources have been spent in accommodating a rise in population at the expense of other investment, and this may have impeded GDP growth,” DBS said.
WORLD
U.S. Stocks Advance on European Debt Optimism, Economic Data
By Kaitlyn Kiernan and Inyoung Hwang
U.S. stocks rose this week, driving the Standard & Poor’s 500 Index up from the threshold of a bear market, amid optimism European leaders will tame the region’s debt crisis and after American economic data improved.
Equities fell yesterday after Fitch Ratings cut Italy and Spain’s debt ratings, overshadowing faster-than-estimated U.S. job growth. Raw-material producers in the S&P 500 surged 6.2 percent this week, the most among 10 groups, while energy stocks and companies reliant on discretionary consumer spending climbed more than 3.4 percent. Hewlett-Packard Co. (HPQ) and Cisco Systems Inc. (CSCO) jumped at least 7.4 percent, leading gains in the Dow Jones Industrial Average.
The S&P 500 advanced 2.1 percent to 1,155.46, breaking a two-week losing streak. It surged 6 percent between Oct. 3 and Oct. 6, the biggest three-day rally since August. The Dow rose 189.74 points, or 1.7 percent, to 11,103.12 this week.
“Improved clarity and certainty that the Europeans are moving towards a solution was the main driver of markets for the week,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees about $110 billion in client assets, said in a telephone interview. “Even with the better-than-expected jobs number, the focus is entirely on European policy makers making the correct decisions over the next several weeks.”
20% Drop
Stocks rebounded as European Central Bank President Jean- Claude Trichet announced a bond-purchase program to tackle the debt crisis and European Commissioner Olli Rehn said there is an “increasingly shared view” that the region needs a coordinated approach. The S&P 500 closed under 1,100 on Oct. 3 for the first time in more than a year, leaving the gauge within 1 percent of a 20 percent decline since April.
Stocks halted a three-day rally yesterday after Italy and Spain, the euro region’s third- and fourth-largest economies, were downgraded by Fitch Ratings on concern they will struggle to improve their finances as Europe’s debt crisis intensifies.
The S&P 500 fell 0.8 percent yesterday. It had risen as much as 0.6 percent after American payrolls rose by 103,000 in September, beating the median economist projection of 60,000 in a Bloomberg survey. The jobless rate stayed at 9.1 percent.
“The jobs numbers were not spectacular by any stretch of the imagination, but they offered a little relief that we aren’t slipping back into recession,” Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion, said in a telephone interview. “Unless the economy moves above 1 percent growth rate, earnings are going to come under pressure next year.”
Economic Reports
Reports this week showed manufacturing in the U.S. unexpectedly accelerated in September as production picked up. The Commerce Department said construction spending in the U.S. rebounded in August, propelled by the biggest jump in state and local government outlays in more than two years.
Companies most-tied to the economy rallied this week, with the Morgan Stanley Cyclical Index advancing 4.4 percent. Raw- material producers rallied after the S&P GSCI Index of 24 commodities jumped 2.6 percent, rebounding from a 10-month low.
Hewlett-Packard surged 11 percent to $24.88, its biggest one-week rally since March 2009. Chief Executive Officer Meg Whitman said the company aims to decide whether to spin off its personal-computer division by the end of October and won’t look for big takeover targets in the software industry. Cisco, the largest maker of networking gear, climbed 7.5 percent to $16.66.
F5, Yahoo
F5 Networks Inc. (FFIV) gained the most in the S&P 500, adding 20 percent to $85.01. Jason Ader, an analyst at William Blair & Co., said he expects the software maker to report improved fourth-quarter earnings as demand for its website-performance products increases.
Yahoo! Inc. surged 17 percent to $15.47, the biggest weekly increase since November 2008, amid takeover speculation. Microsoft Corp. isn’t anywhere close to making an offer for Yahoo and senior executives of the software maker aren’t involved in discussions, two people familiar with the matter said. The shares rose 10 percent on Oct. 5 after Reuters said Microsoft may make an offer.
Monsanto Co. (MON) rose 18 percent, the second-biggest S&P 500 gain, to $70.93. The world’s largest seed company reported a smaller loss in the fiscal fourth quarter than analysts estimated and said 2012 earnings will rise as much as 16 percent. It was boosted to “overweight” from “neutral” by JPMorgan Chase & Co., which said the company has “a high probability of reporting sharply improved earnings” next year.
Apple, Alcoa
Apple Inc. (AAPL) slipped 3 percent to $369.80 as co-founder and former Chief Executive Officer Steve Jobs died a day after the company’s iPhone 4S was introduced. The world’s most valuable technology company declined for seven straight days through Oct. 4, its longest losing streak since January 2009.
Alcoa Inc. (AA), the largest U.S. aluminum producer, added 1.5 percent to $9.71. It will become the first Dow company to report quarterly results on Oct. 11. Third-quarter profits for S&P 500 companies are projected to have grown 12 percent, according to average analyst forecasts compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, also known as VIX, slumped 16 percent to 36.20 after advancing the prior two weeks. The gauge of S&P 500 options prices jumped a record 160 percent in the third quarter.
“We have the macroeconomic overhang from Europe, but the data from the U.S. is coming in a little better, so that’s the battle ground,” Donald Selkin, New York-based chief market strategist at National Securities Corp., which manages about $3 billion, said in a telephone interview. “We’re going to muddle along until we get the third-quarter earnings reports for more insight.”
COMMODITIES
Crude Oil Gains a Fourth Day on U.S. Jobs Growth, European Crisis Pledge
By Ben Sharples
Oil climbed for a fourth day in New York as investors bet that fuel demand may increase on signs of an economic recovery in the U.S. and a pledge by Europe to contain its sovereign-debt crisis.
Futures gained as much as 0.5 percent, after the biggest weekly gain in seven months. U.S. employers added more workers in September than forecast, a report showed Oct. 7. German Chancellor Angela Merkel said yesterday that European leaders will do “everything necessary” to ensure that banks have adequate capital. OPEC members are likely to keep their output target for oil unchanged when they meet in December, according to Iran’s representative.
“Better-than-expected U.S. data boosted the outlook for the broader economy and oil demand,” James McIntyre, an economist at Commonwealth Bank of Australia, said in a note.
Crude for November delivery advanced as much as 37 cents to $83.35 a barrel in electronic trading on the New York Mercantile Exchange and was at $83.29 at 10:32 a.m. Sydney time. The contract on Oct. 7 rose 39 cents to $82.98, for a weekly gain of 4.8 percent, the biggest since the week ended March 4. Prices are down 9 percent this year.
Brent oil for November settled was at $106.05 a barrel, up 17 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium of $22.76 to New York crude, compared with a record of $26.87 on Sept. 6.
U.S. payrolls increased by 103,000 after a revised 57,000 gain in August, the Labor Department said Oct. 7. The median forecast in a Bloomberg News survey of economists called for an increase of 60,000. The jobless rate held at 9.1 percent.
Three Weeks
Merkel and French President Nicolas Sarkozy have given themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance, they told reporters in Berlin.
Oil producers and consumers are satisfied with the current price level for crude, Iran’s Governor to the Organization of Petroleum Exporting Countries, Mohammad Ali Khatibi said, according to Shana, the Iranian Oil Ministry’s news website. OPEC is responsible for 40 percent of global oil output.
Hedge funds cut bullish bets on oil for a third week as concern that slowing economic growth will reduce fuel demand. The funds and other large speculators reduced wagers on rising prices by 5.5 percent in the week ended Oct. 4 to the lowest level since Aug. 23, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 7.
