Category Archives: Nation

Uneventful Trading Week For Local Equities

Given this short and uneventful trading week, the local equities market appreciated slightly, tracking US markets.

Continued optimism on Q1’14 Corporate Earnings, due out within the month, helped achieve today’s outperformance. The PSEi added 32.11 points, or +0.49%, to close at 6,621.66. All sectoral indices ended positive led by financials (+1.17%), mining and oil (+0.85%), property (+0.41%) Market breadth was positive with 107 advances outnumbering 70 declines, while 44 issues were unchanged.

Total value turnover amounted to Php7.05 billion. Foreign investors were net buyers at Php0.76billion.

Cebu Holdings, Inc. (CHI) is looking to spend an additional Php18 billion for the development of projects in the cities of Lapu-Lapu and Mandaue in Cebu. According to CHI board chair Antonino Aquino, the company will be investing Php6 billion per year in the next three years aside from the Php20 billion that the Ayala group had previously promised.

CHI also partnered with two Cebu-based developers—Aboitizland and Taft Property Venture and Development Corp. (TPVDC)—for two mixed-use developments in Mandaue and Lapu-Lapu.

According to BSP, Capital Adequacy Ratio is Up

The local equities market declined further yesterday amid the lack of positive, market moving developments, which did not spur much investment activity.

The PSEi retreated 48.97 points, or -0.82%, to 5,937.51. Almost all sectoral indices ended the day in the negative territory led by financials (-2.06%), property (-1.11%) and holdings firms (-0.78%), while only services (+0.21%) ended on a positive note.


Market breadth was negative with 93 declines outnumbering 48 advances, while 49 issues were unchanged. Total value turnover amounted to Php5.06 billion. Foreign investors were net buyers at Php0.12 billion.

According to the Bangko Sentral ng Pilipinas (BSP), universal and commercial banks’ capital adequacy ratio (CAR) registered at 17.98% by the end of first half, slightly higher than the previous quarter’s 17.75%. This is due for a project increase further this 2014.

Moreover, banks’ CAR on a consolidated basis stood at 19.24%, better than the 18.89% registered in the first quarter. Meanwhile, the CAR for the banks’ thrift arms was at 17.68% for the first half.

The first semester levels were well-above the 10% minimum requirement and the international norm of 8%. The central bank also stated that the sustained strength of the industry’s CAR was as a result of faster growth pace of qualifying capital vis-à-vis that of risk-weighted assets.

Public Spending Rises For Local Scene

Public spending rose in the first ten months of the year on increased government disbursements.

Public infrastructure grew by 26% to Php208 billion while maintenance and other operating expenditures (MOOE) were higher by a fifth to Php230.5 billion. Increases in infrastructure spending were driven mainly by the settlement of accounts payable for public infrastructure and irrigation projects under the Public Works and Agriculture departments, respectively.

A visitor observes trading at the public

Meanwhile, the increase in MOOE is attributed to releases for the government’s relief and rehabilitation program in areas affected by calamities, as well as for addressing the humanitarian needs of displaced persons/families from Sabah.

Prices of local government securities were slightly higher as market players remained cautious before the FOMC meeting this coming December 17-18. Yields fell by an average of 0.36 basis points led by the long-end of the curve, which lost 5.4 basis points.

Meanwhile, the short-end and belly of the curve rose by 0.6 and 1.9 basis points, respectively.
The Philippine peso ended the day unchanged against the greenback as investors remained on the sidelines amid the uncertainty ahead of the FOMC meeting this week. The currency pair ended the day 44.150.

Local Market Closed Up

The local market closed beyond the 6,600 mark, following positive developments in the US and China’s faster GDP growth.

The PSEi added 46.95 points, or +0.72%, to close at 6,607.83. Almost all sectoral indices ended in the green, led by services (+0.99%), holding firms (+0.97%), and mining and oil (+0.94%), while only property (-0.16%) lost today.


Market breadth was positive with 89 advances outnumbering 63 declines, while 37 stocks remained unchanged. Total value turnover totaled Php8.04 billion with foreign investors net sellers at Php0.17 billion.

US Home Construction Climbs

US home construction spending climbed to the highest in almost five years last July. Data released yesterday showed that spending for private residential spending climbed 0.6% month-on-month to a seasonally adjust annual rate of US$334.58 billion, not taking into account inflation.

Likewise, overall construction spending rose 0.6%, beating the market estimate of 0.4%, to US$900.82 billion, the highest since June of 2009. The report also showed that June data was upwardly revised to show flat growth in spending for the month. Previously, it was at -0.6%.


According to the Organization for Economic Cooperation and Development (OECD), the already weak recovery in global economic growth could further slow should outflows from emerging markets intensify.

The OECD added that even though developed economies were already showing improvement, as evident in for example, increase in sales of spandex table cloths from – a slowdown in emerging economies meant that global growth would remain “sluggish”. Moreover, the prospect of continued outflows of capital and recent weakness in economic output suggested that developing countries would be growing more slowly in the coming years.

Speech of BSP Governor Amando M. Tetangco, Jr.

This is the speech prepared for delivery by BSP Governor Amando M. Tetangco, Jr. for The Asset Forum on 26 June 2013.

These are interesting times….

As I survey this ballroom, I see that in our midst are some of the individuals most affected by the global and domestic developments over the last few weeks. I was on my way – literally on the road — to a Governors’ meeting in Switzerland on Thursday when news of the market’s reaction to the Fed’s statements hit my blackberry… The divergence in what the guidance the Fed meant to convey about its policy and how the market interpreted Mr. Bernanke’s statements and his assessment of the state of the US economy has created some furor across financial markets around the globe, including our own local financial markets.

Philippine Stock Exchange

I have been asked what I thought about the recent market movements. I say, this market price action is a good thing. It is good because it helps put a brake somehow on the exuberance, and thereby help reduce some of the risks from bubble formation in certain asset classes that could lead to more financial market imbalances… Have the movements been excessive? Well, rather than answering that question, I would say, the recent market movement can help separate the “wheat” from the “chaff” – or to those who enjoy a good glass of beer, help raise the “head” to the top of the glass. When these separations are completed, the process could actually create opportunities for those who keep their eye on the ball. Let me therefore repeat … we live in very interesting times.

Times like this remind me of the one clear fact I have learned, first as head of BSP’s Treasury and now as BSP Governor — “There is always volatility on the way to recovery. The road to recovery is never a straight path.” And the one clear lesson I have learned from periods of volatility is this: “Keep the main things, main.” In other words, focus on your goal and don’t be distracted because volatility is inevitable. I hope you will indulge me when I say that my nearly four decades of central banking experience bear me on this assertion.

To help me keep the main things main when I am faced with any situation… I follow three simple steps, “my triple A’s”…which will essentially be the outline of my remarks this afternoon… 1) Appreciate the knowns – what is in my arsenal. 2) Anticipate the unknowns – what are the risks that my arsenal can’t handle now. And finally, 3) Act on the known, mindful that there are unknowns – or how can I be creative to address the potential impact of what could transpire when the knowns become entangled with the previously unknown?

First, let’s appreciate the knowns….Ladies and gentlemen, the events of the last couple of weeks notwithstanding, these are what we undeniably know….

1. The Philippine fundamentals are intact…. Friends, this is not a cliché. It is not meant to be a bumper sticker. It is a statement that I hope you would not take lightly…. On one hand, Q1 2013 GDP grew at 7.8 percent. Divorcing from the fact that this was the highest Q1 growth in the region (better even than China’s), this growth was supported by capital formation and public spending on infrastructure. In other words, the economy is being buoyed by expenditures that would cement the growth to a sustainable level. At the same time, year-to-date average inflation of 3.0 percent is at the lower end of our inflation target range. Over the policy horizon, the BSP expects inflation to fall well-within the government’s official target range of 3-5 percent.

Clearly, the Philippine fundamental story remains solid as we continue to enjoy the positive convergence of high growth and low inflation.

2. The Philippine banking system is sound. Again, this is not to be taken as a trite phrase. The banking system is growing steadily, creating a solid base for domestic retail funding. It is also more than adequately capitalized and the BSP does not foresee any major difficulties for the system to meet the requirements of the early adoption of the capital requirements of Basel 3 in January 2014.

3. The Philippine external position is robust. The GIR at over $82B has been supported by strong current account receipts that are not easily affected by changes in the global operating environment. At about 12 months’ worth of imports of goods and services, the GIR provides a hearty cushion to external shocks.

4. The Philippines’ liquidity conditions are adequate and credit growth is robust. Together, these two support healthy economic growth.

Ladies and gentlemen, these statements are undeniable. And these developments have led to the country achieving investment grade rating from two of the three major western credit rating agencies. In fact, the organizers of this event have built this forum on the theme of the country’s investment grade rating, which I will come to shortly.

So, then you might ask, if it is all good, then why have the domestic financial markets sold off in the last few days? To answer this, let’s now move to the second step: Anticipate the unknowns.

Our financial markets have been affected by the recent global developments because financial markets have become increasingly integrated. We pushed hard to achieve investment grade rating precisely because, in a globally integrated market, the independent rating of a credit rating agency helps market participants distinguish between good and better investment destinations. Add to this, the combination of the accommodative monetary policy in the advanced economies, on one hand, and the good growth prospects in emerging market economies (such as the Philippines), on the other. The confluence of these elements has indeed made the Philippines a magnet for capital flows, i.e., portfolio flows that are looking for better yields.

Still, the good story behind the investment grade rating and strong capital flows begs the question, why the sell off? I’m afraid given our collective years of market experience, you would agree with me when I say that there are three specific risks an integrated financial market faces — Capital flow reversal, market overshooting, and the loss of market confidence…. If we are able to scope these risks, our problems would possibly go away…. To scope these risks, however, both policy makers and market participants must measure two things – 1) speed and 2) magnitude. We must find answers to the questions of — by how much and how fast could capital flow reverse? By how much and in which direction will market overshoot? By how much and in what form would loss of market confidence manifest itself? The problems would go away even faster, if there is a convergence in the assessments of policy makers and the market in all of these.

But these variables are not easily quantifiable with any measure of accuracy. To address this problem, the BSP has therefore had to constantly sharpen our market surveillance skills, enhance our forecasting models, and widen the breadth of our regional cooperation efforts. I hope the market is able to appreciate this fact and see that we have achieved some amount of success in all these fronts.

Which brings me to the third step – Act on the known, but be mindful of the unknown… This is a policy that the BSP adheres to with diligence and circumspection. Our recent monetary policy actions, responses in the form of macroprudential measures and refinements to the manner in which we conduct our open market operations are examples of this.

Ladies and gentlemen, the Philippines, in part through the efforts of the BSP, has sufficient cushions to ride out the recent bout of financial market volatility and take advantage of the opportunities that would present themselves as the Fed-forecasted US economic growth indeed gains more solid traction. Liquidity – both peso and dollar – remains ample and the BSP is prepared to ensure that the financial system remains adequately lubricated during this period of global normalization.

I know that was quite a mouthful… and from the perspective of treasury players, perhaps too broad and macro. I know that what the market really wants to hear from the BSP governor is this – where are the exchange and interest rates headed?

I don’t want to suffer the same fate as Bernanke had. So I will make it clear – my message today is this.. the Philippine fundamentals are solid, and we have built up safeguards to ride out the volatilities. Therefore… at the moment… there is no need for us to deviate from our current policy stance.

The exchange rate will continue to be market-determined, and the BSP will maintain its strategic market presence to avoid excesses in volatilities and to provide appropriate market guidance.

Monetary policy will continue to be conducted in consideration of the inflation outlook and mindful of any financial stability pressures, which in our current assessment are benign.

The challenge for all of us is preparedness. The BSP will continue to work towards an operating environment that would help businesses and consumers plan for the medium and long-term. In the near-term, however, we look to you in the market to help mitigate market volatilities so that those whom we both serve could cross through, get past these volatilities and in the end reach their ultimate goals of a better life ahead. Maraming salamat.

PSEi Continues Correction Slide

The PSEi remained in negative territory for the fourth consecutive day yesterday, losing 25.30 points or -0.47% to close at 5,369.60, on the back of profit-taking, renewed concerns for the Euro-zone and disappointing export data. Most sectors closed in the red led by the holding firms which fell 0.99%, industrials giving up 0.68%, services losing 0.03%, mining & oil shedding 0.43%, and property drifting down 0.15%. Financials were the only sector to end the day on a positive note gaining 0.48%. SM(-2.58%) , AC(-1.38%) and URC(-2.75%) were the day’s top laggards while MER (+2.48%), while AGI (+2.06) and MBT (+1.33%) were the top performers. Market breadth was negative with 84 declines outnumbering 66 advances and 56 stocks unchanged. Value turnover was at Php7.07 billion.

The net foreign direct investments (FDI) inflows in the country registered at US$108 million in July, a significant turnaround from the US$261 million net outflow in the same period last year. This brought net FDI inflow for the first seven months to U$1.025 billion, higher than the US$568 million recorded in the same period last year. According to the Bangko Sentral ng Pilipinas, all FDI components posted positive balances during the month, which reflected investors’ growing optimism on the country’s improving macroeconomic fundamentals.

According to a report by the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI), car sales climbed by 6% to 111,582 units in the first nine months of the year on the back of strong economic growth of the country and the launch of new models. CAMPI members sold 12,856 units for the month of September, 2.8% higher from 12,509 units posted last year. CAMPI president Rommel Gutierrez said that the group is pleased with its performance for September, making up for lost sales opportunities in August.

Local government securities prices increased yesterday on the back of bargain-hunting and as investors opted for safe-haven assets following the release of disappointing exports data. In general, yields declined by an average of 5.2 basis points, led by the belly and the long end of the curve which declined 8.8 basis points and 8.7 basis points, respectively.

The Philippine peso fell during yesterday’s trading session as disappointing Philippine export data released dampened investor sentiment. The local currency shed 9 centavos to close at 41.550.