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ITCH Ratings on Monday said it kept its below investment-grade credit rating on the Philippines
and would likely hold on to this assessment until such time that the Aquino administration would improve its tax take and show it would stick to its budget deficit ceiling.
In a statement, the rating firm said it affirmed the Philippines’ long-term foreign-currency is- suer default rating at “BB” with a stable outlook. Fitch also kept its “BB+” long- term local-currency rating, like- wise with a stable outlook. The short-term foreign-currency rating still stood at “B,” while the country ceiling held at “BB+.” “While the credit profile has strengthened in some areas since the ratings were down- graded to current levels in 2003, Fitch waits for the newly elected Aquino administration to de- liver on promises to boost the chronically-low tax take and maintain fiscal discipline in the 2011 budget to support a case for any positive rating action,” said Andrew Colquhoun, head of Asia Pacific Sovereigns at the
Benchmark interest rates go sideways
BY LIKHA CUEVAS-MIEL ASSISTANT BUSINESS EDITOR
YIELDS on short-term government securities moved sideways on Monday as the market remains cash-rich and upbeat about the Philippines’ benign inflation outlook. “If you look at Bangko Sentral [ng Pilipinas] data, the SDAs [special depositary accounts] are awash with deposits,” National Treasurer Roberto Tan said. “There are no anticipated surprises as the US market is also not anticipat- ing any upward movement on their interest rates,” he said. The official said the benign outlook inflation also helped in fueling the investors’ appetite for such debt instruments. The interest rate on 91-day
Treasury bills (T-bills) slipped 2 basis points to an average of 3.965 percent from 3.985 percent when they were last auctioned off on July 26. The government offered P1.5
billion worth of these IOUs but demand was high as institutional investors were willing to buy as much as P5.78 billion. Yield on the 182-day debt papers inched up by one basis point to an average of 4.263 percent from 4.253 percent a fortnight ago. Total tenders reached P8.67 billion but the govern- ment was only set to accept P3 billion. The interest rate of one-year
government securities also saw a slight up tick as the average moved up by 1.6 basis points to 4.516 percent from the previous 4.500. Only P3.5 billion of these papers were on offer but investors were willing to buy as much as P9.66 billion. The government has P6.5 billion
worth of T-bills and P1.7 billion Treasury bonds maturing this week. Tan said the government has kept
to its domestic borrowing schedule for the quarter despite the retail treasury bond (RTB) sale set on August 10 to 17. He said the government is not inclined to upsize its P25-billion RTB issuance even if it has P100 billion worth of debt papers maturing this month until September. “The [balance from the] maturing P100 billion [debt] is covered by the bond sinking fund,” he said.
rating firm. “Raising the fiscal revenue share would directly address the Philippines’ main rating weakness, while generating resources to meet President Aquino’s campaign pledges to raise public investment,” Colquhoun said.
Tax effort below median The Philippines’ tax effort of
14.6 percent of gross domestic product (GDP) last year is “well below the median of 21 percent for ‘BB’ range countries,” he said. Fitch said that while peer countries like Guatemala had a lower tax effort of 11.6 percent, the Philippines’ had a higher government debt at 47 percent of GDP as against the “BB” me- dian of 39 percent in 2009. Effective use of higher gov-
ernment spending would also address another source of the Philippines’ rating weakness, namely the low average income and low investment rate, the rating firm said. Doing so would “potentially exert upwards pressure on the ratings in the medium-term,” Fitch said, even as higher spend- ing would put pressure on pub- lic finances in the near term. Having said the above, Colquhoun admitted that the Philippines’ strong external payments position helped the country weather last year’s glo- bal financial turmoil. “Solid remittance inflows
have helped the economy re- bound from 2009’s mild slowdown, while official re- serves are climbing and the cur- rency has been stable,” he said. The Philippine economy
slowed but avoided recession in 2009 and rebounded to a growth of 7.3 percent in the first quarter of this year, partly on the strength of domestic demand, which was propped up by a 5.6 percent increase in remittances by overseas Fili- pino workers (OFW).
Fitch said remittances had been responsible for the Philippines’ “persistent” cur-
manila
times@gmail.com August 10, 2010
Fitch keeps RP rating, awaits Aquino govt’s fiscal reforms F
B 1
This column will resume next week.
rent account surplus, which averaged 3.8 percent of GDP notwithstanding the col- lapse of merchandise export markets last year.
An indicator of economic per- formance, GDP is the amount of final goods and services pro- duced in the country
Global BPO center Besides OFW money, “the Phil-
ippines’ emergence as a global back-office process outsourcing center” also helped prop up the country’s current account sur- plus, Fitch said.
It said the Philippines became a net external creditor in 2009 of about 3 percent of GDP, a turnaround from the 40 percent net external debt ratio in 2003. The rating firm said the Bangko Sentral ng Pilipinas’ (BSP) “monetary manage- ment has delivered lower and less volatile inflation than rat- ing peers, contributing to lower dollarization—22 percent against the “BB” median of 54 percent—and supporting fi- nancial stability.” But “sustained growth with
low and stable inflation would support the Philippines’ ratings at their current levels” only, Fitch said.
Benign inflation seen until yearend BY LAILANY P. GOMEZ REPORTER
CONSUMER price increases are likely to trend lower for the rest of this year, but the Aquino government’s plan to withdraw subsidies for rice, commuter rail, and electricity may perk up infla- tion by just a little bit, pundits said. In a research note, Metropolitan Bank and Trust Co. said the down- trend in inflation would continue for the rest of the year amid the current oversupply of rice in the country. It said that the average increase in prices will further ease to 4.1 per- cent this year from an earlier pro- jection of 4.7 percent. The lender said the oversupply of rice—accounting for about 9.4 percent of the total consumer price index—cou- pled with low global oil and commod- ity prices would translate to slower price increases in the coming months. The Philippines, which is the
world’s largest importer of rice, started buying huge volumes of the staple in 2008 amid the global fi- nancial crisis, pushing world prices to historic highs, Metrobank said. This massive purchase has contin- ued this year, with rice imports surg- ing 153,599 percent in January alone in anticipation of the decrease in pro- duction due to the recently concluded El Niño dry spell.
“The expected supply disruptions
however did not have a significant im- pact on consumer prices as inflation figures in fact eased during the peak months of the dry spell. This clearly suggests that the ‘supply shortage’ the government was preparing for re- sulted [in] warehouses full of unused buffer stocks [or] worse, of rotten
rice,” Pauline Revillas, Metrobank re- search analyst, said.
Rick stock to last 56 days She said the stocks reserved for food
emergencies now last 56 days, up from the previous 30 days, with the delivery of 150,000 tons of rice from Vietnam pushed back from April to September. “Cost-push inflation mechanism coming from higher import costs would be muted on the back of the reduction of rice importation for the remaining months,” the analyst said. Metrobank said a stronger peso
toward the yearend would also con- tribute to lower import costs, and “thus lower inflation also.” “Demand-side pressure from the more than 90 percent rice-consuming part of the population would also be subdued once supplies start spilling into the market especially with gov- ernment plans of distributing the ex- cess supply to poor Filipinos. Price distortions linked to inefficiencies in rice trading are expected to decline as the government pursues measures in addressing the distortions in market- ing and pricing,” Revillas said. Despite its benign inflation outlook, Metrobank said offsetting factors are seen to come from the impending fare hikes at the state-run light rail transits, stronger than anticipated domestic economic activity and buoyant con- sumer and business sentiment.
2011 inflation up slightly Starting next year, inflation, however,
may pick up slightly, according to Global Source, which cited the impact of the possible withdrawal of state subsidies on rice and commuter rails,
as well as the increase in power rates. In a research note, the think tank said it brought down its inflation forecast to four percent this year amid softening oil prices, the muted impact of the El Niño on food costs, and a manageable increase in wages. Global Source however saw inflation inching up to 4.1 percent next year, or higher than the Bangko Sentral ng Pilipinas’ forecast of three percent. The think tank also cited an output
drag by the anticipated La Niña floods and the double-digit growth of money supply as possible upside factors. “This is counterweighed, however,
by the likelihood of peso appreciation and global recovery being weaker than expected,” Global Source said. A manageable inflation and low in- terest rates would help the Aquino ad- ministration keep its budget deficit be- low next year’s ceiling, the think tank said. It is keeping its budget gap forecast at 3.8 percent of gross domestic prod- uct (GDP) this year—slightly below the government target of 3.9 percent of GDP—and 3.5 percent next year, amid minimal fiscal reforms. “This to our mind is the inevita- ble direction if the present admin- istration wishes to achieve its defi- cit target of two percent of GDP by 2013 [and up to 2016] without sac- rificing social and infrastructure spending,” Global Source said. “Fortunately, the macro-environ- ment remains conducive to a downward path for the debt ratio,” the think tank said, citing higher growth, benign interest rates and some exchange rate appreciation. WITH REPORT FROM LIKHA CUEVAS-MIEL
Stocks improve despite dismal US data
BY KRISTA ANGELA M. MONTEALEGRE REPORTER
PHILIPPINE share prices posted modest gains to hit a new 31-month high, defying the slide in Wall Street because of last week’s report of poor US employment data. At the Philippine Stock Exchange, the local composite index rose 8.44 points, or 0.24 percent to 3,524.70, the PSEi’s best finish since closing at 3,617.29 on January 2, 2008. The broader all-shares index gained
4.24 points, or 0.19 percent to 2,234.19. Gainers beat losers, 73 to 43, while
49 stocks were unchanged. A total of 787.35 million stocks worth P3.03 billion changed hands. “Second line stocks rallied as expecta-
tions of favorable earnings continued to drive investors’ confidence. Disappoint- ments have been a minority as most companies have reported better than expected results,” said AB Capital. Local stocks bucked the mixed
performance of other Asian equities,
European equities,” Calaycay said. As the traditional “ghost month” is
which declined because of fears that the sluggish growth in the US will hurt demand for the region’s cars, consumer electronics and other exports. “US returns to broad economic fundamentals as the second quarter earnings season winds down. Index futures in both Europe and the US are not likewise encouraging,” said Jun Calaycay of Accord Capital. Wall Street tumbled on Friday after the US government announced that employers only hired 71,000 workers in July, lower than the level needed to bring down the unemployment rate which stood at 9.5 percent “There are no market-moving
economic news and/or reports expected today and the US will most probably take its cue from the movements in Asian and
about to start, analysts said the market’s momentum is already losing steam since the urge to take profits is getting stronger following the long winning streak. Asian currencies were mixed Monday, with the Philippine peso trading within range, after the poor US jobs report. “The US job data has been priced in.
Investors are now looking for fresh leads. This was evident on light trading and thin volume,” a trader said. At the Philippine Dealing System, the local unit moved sideways to close at 44.91 to a dollar from 44.89 last week. The exchange rate opened at 44.81
and steered weaker at a high of 44.93 to a low of 44.80. Total trading volume fell to $689.53
billion from $1.520 billion last Friday. Trading range for the peso was unchanged at 44.60 and 45.10 for the rest of the week.
WITH REPORT FROM LAILANY P. GOMEZ
UNITED KINGDOM HONGKONG
SWITZERLAND CANADA
SINGAPORE AUSTRALIA BAHRAIN KUWAIT
SAUDI ARABIA BRUNEI
INDONESIA THAILAND
UNITED ARAB EMIRATES
EUROPEAN MONETARY UNION KOREA CHINA
BRAZIL
DENMARK INDIA
MALAYSIA MEXICO
NEW ZEALAND NORWAY PAKISTAN
SOUTH AFRICA SWEDEN SYRIA
TAIWAN VENEZUELA
■ Philippine Airlines planes are parked at the Ninoy Aquino International Airport in Parañaque. FILE PHOTO BY MIGUEL DE GUZMAN
Management offer fails to break impasse at PAL
BY DARWIN G. AMOJELAR SENIOR REPORTER
A NEW offer from management failed to break the impasse at Philippine Airlines (PAL) after the flag-carrier’s flight attendants and stewards rejected the proposed settlement. PAL on Monday offered a “one- time” P80-million package to its 1,600 flight attendants and stewards to settle a labor dispute.
In a statement, the airline said the P80-million package is the only amount it could offer them for their collective bargaining agree- ment (CBA) covering the period 2005 to 2010. The Flight Attendants and Stew- ards Association of the Philippines’ (FASAP) CBA expired on July 2007.
PAL also promised to speed up the union’s 2010 to 2015 CBA. The offer was made at the re- sumption of talks between the air- line’s management and officers of FASAP at the National Conciliation and Mediation Board (NCMB). Jaime Bautista, PAL president,
said it was up to FASAP to determine how it will divide the P80 million among its 1,600 members. Andy Ortega, FASAP vice president,
however said that management’s pro- posal failed to address the real prob- lems raised by the organization. “It [PAL’s offer] doesn’t address the retirement age of the flight atten- dants,” he said, adding that the P80 million was way below what man- agement offered to the Philippine
➤PalB2
moneyVALUES Peso Foreign
Bangko Sentral currency reference rates Foreign
converted into foreign converted into foreign into pesos
currency converted currency currency
CURRENCIES A C CEPTED BY BSP UNITED STATES JAPAN
DOLLAR YEN
POUND DOLLAR FRANC
DOLLAR DOLLAR DOLLAR DINAR* DINAR RIAL
DOLLAR RUPIAH
BAHT**** DIRHAM EURO WON
YUAN**
PESO REAL
into US dollars
0.752276 1.000000 0.008799 0.011697 1.200331 1.595600 0.096910 0.128823 0.725085 0.963855 0.732498 0.973710 0.558565 0.742501 0.691567 0.919300 1.995796 2.653012 N/A
N/A
0.200602 0.266660 0.556499 0.739754 0.000084 0.000112 0.023479 0.031211 0.204812 0.272257 1.000000 1.329300 0.000648 0.000861 0.111147 0.147748
C U R R E N C I E S N O T C O N V E R T I B L E W I T H T H E B S P ARGENTINA
KRONER RUPEE
RINGGIT
NEW PESO DOLLAR KRONER RUPEE RAND
KRONER POUND
NT DOLLAR BOLIVAR***
0.191516 0.254582 0.427915 0.568828 0.134220 0.178418 0.016300 0.021668 0.239197 0.317965 0.059327 0.078864 0.548706 0.729395 0.126669 0.168381 0.008783 0.011675 0.104411 0.138793 0.106469 0.141529 0.016160 0.021482 0.023716 0.031526 0.175384 0.233138
SOURCE OF DATA: Reuters New York forex closing prices for August 09, 2010. *Various banks in Bahrain as quoted on Reuters’ screen
currency
44.9000 0.5252
71.6424 5.7842
43.2771 43.7196 33.3383 41.2766 119.1202 N/A
11.9730 33.2150 0.0050 1.4014
12.2243 59.6856 0.0387 6.6339
11.4307 25.5404 8.0110 0.9729
14.2766 3.5410
32.7498 7.5603 0.5242 6.2318 6.3547 0.9645 1.4155
10.4679
US dollar converted
MANAGING FOR SOCIETY
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