Financial and business news and articles
Posts tagged economy
RP raises $1.1 billion from Samurai bonds
Feb 24th
MANILA, Philippines – The government raised yesterday $1.1 billion from the sale of Samurai bonds to plug its widening budget deficit expected to hit a record P293 billion this year.
With the bond issue, the government has completed its programmed $2.5-billion commercial borrowing requirements for the year, Finance Secretary Margarito Teves said yesterday.
Last month, the government raised $1.5 billion in dollar-denominated bonds.
The government earlier raised its 2010 commercial borrowing requirements to $2.5 billion from $2 billion previously following a revision in its budget deficit ceiling for the year to a whopping P293 billion from the already revised P233.4 billion. Borrowings from multilateral lenders will remain at $1.8 billion as earlier programmed.
The 10-year Samurai notes fetched a coupon rate of 2.32 percent and is 95 percent guaranteed by the Japan Bank for International Cooperation (JBIC).
The government represented by Philippine Ambassador to Japan Domingo Siazon Jr. and JBIC signed the framework agreement for the issue last Feb. 16.
Teves said Japanese investors showed strong interest for the placement following a series of one-on-one investor briefings in Tokyo early February led by National Treasurer Roberto Tan and Finance Undersecretary Rosalia de Leon.
“We are pleased with the positive response of Japanese investors to this bond issue. The proceeds will be helpful in providing for the needs of our people and enabling us to achieve modest economic growth this year,” Teves said.
The transaction, which was structured as private placement format targeting Japanese Qualified Institutional Investors (QIIs), attracted participation from banks, insurance companies, cooperatives and other financial institutions in Japan, the government said.
Total investor interest far exceeded the actual issue size of $1.1 billion, which represents by far the largest bond issue by any non-Japan Asian issuers in the Japanese market ever to date, the government also said but did not provide details.
The issue, which was originally slated for last year, is the government’s first yen-denominated bond sale in nine years.
The last time the Philippines tapped the Japanese Capital Market was in 2001 with the issuance of Shibosai bonds, also a form of Samurai bonds, amounting to ¥50 billion.
The government needs to raise funds through local and foreign commercial borrowings to plug its budget gap which already reached P298.5 billion last year, more than four times the P68.1 billion deficit registered in 2008 or an increase of 338.3 percent.
Suspension of listing by introduction rule may take weeks — PSE
Feb 23rd
The Philippine Stock Exchange (PSE) will need weeks to review its rules on listing by introduction before it allows companies to again take that route.
"We are reviewing the rule on listing by way of introduction. It will just be a matter of weeks. The PSE needs to make sure that the rules are consistent and clear so that issuers can be guided correctly and at the same time ensure that the investing public is fully informed of the developments with the issuers," PSE Chairman Hans Sicat said in a statement on Monday.
He also said the timing of the temporary suspension was "convenient" since there are no new applications from firms seeking to list by introduction.
The bourse temporarily blocked companies from listing by introduction last February 18. While it gave no explanation for the suspension, the move came as share prices of companies that had taken this route — listing stocks without necessarily selling these to the public — recently skyrocketed.
The action followed a similar move by the Hong Kong Exchange to halt listing by introduction unless issuers can show they have taken steps to ensure ample liquidity and an orderly market, and until the bourse finds ways of dealing with potential price fluctuations.
Listed companies, including those listed by introduction, are generally perceived to have higher governance standards, which add value to these firms.
Several companies that listed their stocks by introduction have seen dramatic increases in their share prices, raising concerns that a loophole was being used to drive up prices.
For example, the share price of IPE-Game Ventures, Inc., the online gaming arm of listed information technology company IPVG Corp., that listed on February 17 at P50 apiece, ended at P112 on Monday.
Since last year, four companies have listed by introduction, with only information technology company Ripple E-Business International, Inc. opting to go public outright.
Nickel miner Century Peak Metals Holdings Corp. closed on Monday at P3.30, up from P1 when it listed in October last year. Integrated Microelectronics, Inc., (IMI) is now worth P16 from its listing price of P6.20.
On the other hand, the share price of agricultural company AgriNurture, Inc. has dropped. Its shares closed at P17.75 apiece on Monday from P23.50 when the firm listed in May last year.
IMF sees GDP growth of 3.3% this year
Feb 20th
MANILA, Philippines – The International Monetary Fund (IMF) said yesterday it expects the economy to grow around 3.25 percent this year, slightly lower than a growth estimate it made in November, powered mainly by consumer spending.
In November, the IMF gave a forecast of 3.5-percent growth for the Philippines in 2010.
The IMF said in a statement the Philippines’ monetary policy should remain accommodative until it reaches a sustainable growth path.
“A timely return toward a sustainable fiscal path while avoiding a premature exit from a supportive monetary policy will be important, along with continued reforms to ensure sustained growth in the medium term,” the IMF said.
The growth forecast was also within the target set by economic managers through the Cabinet-level Development Budget Coordination Committee (DBCC) ranging between 2.6 percent and 3.6 percent this year.
In its Public Information Notice released yesterday, IMF said the country’s GDP growth this year would be fueled by private consumption on the back of robust overseas Filipino workers’ remittances.
“Recovery is expected in 2010, led by private demand as confidence and remittances improve,” the IMF said.
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that money sent home by Filipinos abroad went up by 5.6 percent to a new record level of $17.35 billion last year from $16.43 billion in 2008.
IMF said investment and exports would also benefit from the global recovery.
The international lender said output losses from the devastation caused by tropical storm Ondoy last September and typhoon Pepeng last October turned up to be larger than expected and resulted in a fiscal blowout.
“On the domestic side, the output losses from the devastation caused by the two recent typhoons could turn out to be larger than currently estimated, and fiscal slippage could raise investor concern,” the IMF said.
However, IMF said post-typhoon rebuilding efforst could spur higher investments.
The country’s GDP growth eased to 0.9 percent last year from 3.8 percent in 2008 due to the full impact of the global economic meltdown while the budget deficit swelled to a new record level of P298.5 billion or 3.9 percent of GDP last year from P68.1 billion or 0.9 percent in 2008.
The IMF expected the deificit to reach 4.5 percent of GDP last year overshooting the budget target of 3.75 percent of GDP after fiscal policy was loosened in response to the crisis that was aggravated by poor revenue performance.
This year, the IMF sees the country’s budget deficit narrowing to 3.3 percent of GDP.
The IMF likewise expects inflation to average 4.3 percent this year from last year’s 3.2 percent. The inflation forecast of IMF was well within the BSP inflation target of between 3.5 percent and 5.5 percent this year.
RP to grow by 4.3 percent this year — Barclays
Feb 19th
Investment bank Barclays Capital expects the Philippine economy to grow at a faster pace of 4.3 percent and inflation to pick up to 6 percent this year due to election-related spending, robust private consumption and higher investments.
Prakriti Sofat, regional economist of Barclays Capital, said in a market commentary that the investment bank’s growth outlook was more optimistic than the government’s 2.6-3.6 percent growth target.
Sofat said consumer prices would likely increase by 6 percent, above central bank’s target of 3.5-5.5 percent due to higher commodity and oil prices.
"We continue to expect inflation to average [at] 6 percent in 2010 given higher food- and fuel-related costs, with our growth projections of 4.3 percent also being more upbeat than the official forecast of 2.6 percent to 3.6 percent," she said.
Sofat said the economic growth would have to expand by 0.5 percent quarter on quarter through 2010 to achieve the lower end of the range and by 0.8 percent to achieve the top end of the target.
The economist said growth would be fueled by election-related spending and strong private consumption supported by money sent home by Filipinos working abroad.
She also cited a turnaround in investment inflows in line with improving business confidence.
The Philippine economy grew by a measly 0.9 percent last year from 3.8 percent in 2008 due to global economic slump, which was brought about by the financial crisis that started in the US in late 2008. The growth was slightly above the low end of the government 0.8-1.8-percent target.
RP to grow by 4.3 percent this year — Barclays
Feb 19th
Investment bank Barclays Capital expects the Philippine economy to grow at a faster pace of 4.3 percent and inflation to pick up to 6 percent this year due to election-related spending, robust private consumption and higher investments.
Prakriti Sofat, regional economist of Barclays Capital, said in a market commentary that the investment bank’s growth outlook was more optimistic than the government’s 2.6-3.6 percent growth target.
Sofat said consumer prices would likely increase by 6 percent, above central bank’s target of 3.5-5.5 percent due to higher commodity and oil prices.
"We continue to expect inflation to average [at] 6 percent in 2010 given higher food- and fuel-related costs, with our growth projections of 4.3 percent also being more upbeat than the official forecast of 2.6 percent to 3.6 percent," she said.
Sofat said the economic growth would have to expand by 0.5 percent quarter on quarter through 2010 to achieve the lower end of the range and by 0.8 percent to achieve the top end of the target.
The economist said growth would be fueled by election-related spending and strong private consumption supported by money sent home by Filipinos working abroad.
She also cited a turnaround in investment inflows in line with improving business confidence.
The Philippine economy grew by a measly 0.9 percent last year from 3.8 percent in 2008 due to global economic slump, which was brought about by the financial crisis that started in the US in late 2008. The growth was slightly above the low end of the government 0.8-1.8-percent target.
RP nets hot money inflows in January
Feb 13th
Foreigners increased their investments in the local stock market despite a sharp drop in the composite index in the latter part of January, with hot money posting net inflows of $170 million during the month.
Central bank-registered investments in locally listed shares went up by more than three-quarters to $437 million last month from a year earlier, bringing the total foreign portfolio investments to $576 million, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Thursday.
The balance of registered investments were in peso-denominated government debt paper (9 percent) and in peso deposits with maturities of at least three months (16 percent).
Portfolio investments or hot money flows are extremely volatile short-term capital that moves in a short notice to any country providing better returns. Unlike foreign direct investments, hot money can leave at the first sign of trouble.
The BSP said the US, Britain, Malaysia, Luxembourg and Singapore were the top investor countries, collectively contributing 85 percent of total registered investments.
Gross foreign portfolio investment outflows reached $406 million in January, the bulk of which were withdrawals from temporary peso deposits.
Registration of inward foreign investments with the central bank, which is voluntary, entitles the foreign investor to buy foreign exchange from authorized banks for repatriation of capital and payment of shareholders’ share in profits.
Last year, net hot money inflows of $388 million were posted amid the global economic slump. The inflows were a major turnaround from $1.8 billion in net outflows in 2008, when the US-led financial crisis reached its height.
Registered foreign portfolio investments for 2009 reached $6.3 billion. Investments in listed Philippine shares accounted for three-quarters of the total, while a fifth of the investments were placed in peso-denominated government securities. The balance was put in peso time deposits and money market instruments, the central bank said earlier.
Educational Article: Paying the Man
Jan 16th
The current financial situation in the
At some point in the near future, the Federal Reserve will be forced to decide whether to tighten the access to credit. In order to stem monetary inflation, the Federal Reserve will need to raise interest rates in order to contract the availability of money in the system. If this happens, it will result in a higher prime rate and higher credit card rates. This will increase the yield on short-term treasury notes, and will prompt many bond investors to sell their long-term bonds to purchase shorter term notes with higher yields. As more people sell their long-term bonds, it will push down prices and force up the yield.
Another option for the Federal Reserve is simply allowing price inflation to roll through the economy. This will happen as credit markets normalize, and more dollars end up chasing fewer goods and services. This will inevitably result in higher prices for consumer and capital goods, including housing. As prices continue to increase, a resurgence of the ‘bond vigilantes’ will occur as more people refuse to buy government bonds at the current low rates. As the government needs to discount their bond offerings to clear the inventory, it will push up effective interest rates on long-term bonds.
Regardless of which event transpires, there is an extremely high likelihood that long-term bond rates are headed up in the near future. This phenomenon will also push up mortgage rates since most mortgages are indexed against government bonds. As the mortgage rates continue to increase, the number of people in the pool of home buyers will decrease because higher rates translate into less buying power per dollar of monthly payment that a person can afford.
As more people transition out of the home buyer pool into the renter pool, it will increase demand for rental housing. This increase in demand will eventually manifest itself in higher rents as the supply of rental housing adjusts more slowly than the movement of people into the renter pool.
An important factor to consider is that income property owners will benefit greatly from this effect, as it will place upward pressure on rents. These increased rents will provide additional cash flow to people who bought at low fixed rates and locked-in their cost of borrowing for three decades. The most important point of this unfolding event is the fact that the window of opportunity to act will be closed very soon. Once inflation begins to occur, or monetary tightening commences, it will be too late to capture the best deals that are currently in the marketplace.
The reason is because either event will be quickly followed by a step-up in interest rates, which will decrease affordability for income property investors. Because of this, it is critical for prudent investors to act now and lock-in their cost of debt at the current low rates; this will protect you against the coming increases in interest rates by making them work to your advantage, instead of to your detriment.
Ultimately, we must ‘pay the man’ at some point by enduring the market correction that must eventually result from current government policy. By taking action now, you can benefit handsomely from the coming economic disruptions while many other people are enduring the problems implicit with trying to get something for nothing.
They say Economic downturn is over. Now what?
Oct 30th
I was going through an article by CNN which had different slide shows about the state of economy in the past years and the present condition. This post is basically to make you understand that this recession is the longest recession in the US, in fact the most grating one that US has faced since world war 2. Some kind of positive news is that the economy is actually showing some sign of improvement.
Reality Check on my Economic Fundamentals
Based on the slide shows of CNN, I would like to express my own views here. I guess the hangover is still on.
1.) Economic Growth and GDP: Not very Good, but Fair
The last growth which I saw was decent enough, but we should not be over confident in this case. I am sure lot of this is attributed to cut backs in the sectors like business, layoffs, even the stimulus plan, bailouts etc. I am still not sure about the true economic growth here. We can frame it like this way also i.e. is this growth actually justifies the correspondence recovery that we are seeing in the stock market? I know hard to answer.
2.) Situation of the Jobs: Very slow
In some locals of the US, the job loss numbers are touching the record high. But tell me this, how many laid off workers are ready to take their jobs? What I see in the US market is that people are enjoying the unemployment benefits more than anything else. They are happy sitting idle until and unless they find a job of their choice. I am not opposing this but the thing is the jobs are available in the market, but no one is ready to take these jobs. As it is they are collecting their unemployment checks.
3.) Stock Market Results: Really Ahead?
My online brokerage account is saying something else here. I have made some money with my investment recently. Anyone will think that I am so happy. But the possibilities of double dip recession in haunting me. It is a typical sign of premature exuberance. I hope at the end of the day we are not paying more than what it actually appears.
4.) Inflation: Somewhat okay
Inflation still looks tame to me. Just wait and watch, the inflation will definitely become the new Waterloo once the economy takes a big growth. At this point of time the saving accounts are creeping backups. As soon as spending takes a pace, the element of economy which appears to be good right now will become dull.
5.) Housing: Slow Recovery
Government has tried its best by offering relief to homeowners by the means of tax breaks and many other incentives. But this was folded long back when there was economic stimulus package. In some places foreclosures have been increased whereas in some areas it is still steady. Recovery of the real state market will take some time.
6.) Individual Spending: Somewhat improved
The best way to track this is that attribute few consumers who are spending on day to day basis. Keep a watch on their spending activities. It is advisable to watch a home budget right now.
My take on the whole scenario
I believe that the whole picture that has been pictured to us in a form of recovery is localized completely. There are still lot of people who are worried about their debts, credit cards, etc. I wish I could know the exact turning point of the economy.
RP firms face man-made, natural crises
Oct 9th
MANILA – Just when they thought that they were saddled enough by the effects of the economic crisis, a number of Philippine firms had to endure the impact of natural calamities on their day-to-day operations.
Utility companies, banks, airlines, and hotels, among many others, bore the brunt of tropical storm “Ondoy” (international code name Ketsana) and [...]
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Mortgages and Homeownership: A Mixed Bag of Curses and Blessings in the Current Economy
Jun 12th
Following is the guest post written by Michelle Studer from budgetpulse, an interactive, web-based budgeting utility. It reflects the rhythm and the flow of savings and spending goals.
Like other aspects of today’s economy, home ownership equals hardship for some and opportunity for others. On the one hand, the sub-prime mortgage mess was a major factor in last year’s economic meltdown and current foreclosure rates are through the roof. On the other, low selling prices and rock-bottom mortgage loan rates have created a fantastic market for potential home buyers. Courtesy of some recent industry data, here’s a closer look at both sides of the issue.
The Downside
The American Dream has always included the promise of home ownership, but for some the reality of owning a home has been nothing short of a nightmare. According to a recent Reuters article:
- 12 percent of U.S. homeowners paid late on their mortgage loans or were in the process of foreclosure during the first quarter of 2009.
- Data from Standard & Poor’s/Case-Schiller Indexes revealed that home prices have dropped 32 percent from their peak in 2006.
- Up to 40 percent of the houses with so-called “failing” mortgages are vacant homes, which seemingly indicates abandonment in many cases by homeowners unable to pay their mortgage bills.
In addition, the Wall Street Journal reports that the national average for foreclosures jumped 35 percent in the 12-month period between April 2008 and April 2009.
The Upside
Overwhelmingly, the economic news has been more bad than good this year. However, now is the perfect time to buy a house if you’ve managed to hang onto your money despite the recession. In fact, buying a home has become more affordable even in the priciest markets. One example of this is found in the WSJ’s coverage of First American CoreLogic’s LoanPerformance Home Price Index data, which reveals that home prices in the New York City metro area have fallen 10.6 percent within the past year. There are some additional upsides as well, such as:
- For existing homeowners, CNN Money reports there’s a “silver lining” when it comes to falling home value: lower property taxes.
- A few weeks ago, it was possible to get a mortgage loan at an interest rate of less than 5 percent. Since then, rates have started to inch up again, indicating that higher interest rates will become the norm again as the economy improves. However, there’s still no time like the present to take out a mortgage. Today’s rates are below 6 percent, which will seem like a steal a few months from now.
- To sweeten the home-buying pot a bit more, the federal government offers a first-time home buyer tax credit of $8,000 that applies to any first-time home purchase made between April 9, 2008 and December 1, 2009.
