Wednesday, April 24, 2013

Moody’s: PH a rising star



Set to be ‘one of world’s fastest growth rates’

By 

The Philippines has grabbed the spotlight amid a lackluster global economy, with a think tank describing it as a “rising star” poised to record one of the fastest growth rates in the world and a credit-rating firm raising its growth forecast for the country.
Moody’s Analytics said in a report released Wednesday that the Philippines is likely to grow between 6.5 and 7 percent this year and within the same range next year, outperforming not only the anemic advanced economies but also many robustly growing emerging markets.
It also said that if favorable economic trends continue, the growth rate for the Philippines could be close to 8 percent by 2016.
“The Philippines has been among the brightest parts of a generally gloomy global picture,” Moody’s Analytics said in the report, titled “Philippines Outlook: Asia’s Rising Star” and authored by its senior economist Glenn Levine.
It said the story of the Philippines was noteworthy, noting that the country swung from being a “perennial underachiever” in Asia until the last few years.
Moody’s Analytics, a sister company of credit rating watchdog Moody’s Investor Service, said the country’s 6.6-percent growth in 2012 was achieved despite weak growth in the United States, a crisis in the eurozone and a slowdown in China.
It said the problems of the United States, the eurozone and China—
key export markets—significantly dampened the performance of other economies last year.

Sustainable growth

The Philippines, however, managed to temper the drag of a weak external environment because of a strong household consumption, a nascent rise in private investments and a spike in government spending.

S&P’s rosy forecast

“This impressive rate of GDP [gross domestic product] growth [last year] looks sustainable, as risks are low and most sectors of the economy are growing solidly. We expect GDP growth to remain in the 6.5 to 7-percent range in 2013 and 2014, making the Philippines one of the world’s fastest-growing economies,” Moody’s Analytics said.
Echoing a similar tune, international credit-rating firm Standard & Poor’s has raised its growth forecast for the Philippines for this year from 5.9 to 6.5 percent. At the same time, it said the economy was expected to post another robust growth of 6.3 percent in 2014.
S&P’s updated growth projections for the Philippines were cited in its latest report on Asia, which it said would grow by a decent pace this year and next year as a region. But, it said, the impact of external factors on individual countries would vary.

Domestic demand strong

The credit rating agency said the advantage of the Philippines—together with a few neighbors namely China, Indonesia, Malaysia, Thailand and Vietnam—was that domestic demand was strong and so any adverse impact of weak global demand on the country’s exports would not significantly harm its overall growth.
“China and the Asean 5—Indonesia, Malaysia, Philippines, Thailand and Vietnam—are more domestically driven and, therefore, continue to enjoy relatively high and stable growth rates. This is not the case elsewhere,” S&P said in the report, titled “Emerging Asia Will Grow but Won’t Be Firing on All Cylinders.”
S&P also said that unlike other countries, the Philippines and the rest of the Asean 5 were not expected to suffer from the weakening yen, a trend that has alarmed advanced economies and some Asian economies.

Weakening yen

This was because the Philippines and the four other Southeast Asian economies were net importers of goods from Japan. A weakening yen, therefore, would actually be beneficial as this would make Japanese imports cheaper.

Anticorruption agenda

Moody’s Analytics, meanwhile, highlighted the benefits of the anticorruption agenda of the Aquino administration.
It said the reform programs of the current administration had significantly improved business sentiment in the Philippines.
“The government’s 2011-2016 development plan provides a five-year blueprint for growth and development, providing transparency, predictability and accountability. The crackdown on corruption and encouragement of local and foreign investments, in particular, have worked well,” it said.

Monday, April 22, 2013

PSEi breaks 7,000-mark



By 

 8 246 136
A general shot of the Philippine Stock Exchange in Makati. INQUIRER FILE PHOTO
MANILA, Philippines – The local stock market raced to new record highs on Monday, allowing the main index to breach the 7,000-mark for the first time, on optimism over first quarter local corporate earnings reporting season.
The Philippine Stock Exchange index rallied by 75.86 points, or 1.09 percent, in the morning trade to 7,032.96.
“The PSEi breached the 7,000 level and continues to be one of the ‘it’ markets of 2013. Bullish sentiment has taken over as first quarter earnings releases go into full swing,” said Mark Angeles, head of research at First Metro Securities.
Some dealers said expectations that a second global credit rating firm may issue an investment grade rating on the Philippine sovereign as early as May also excited investors.
The upcoming monetary setting of the Bangko Sentral ng Pilipinas on Thursday, whereby another hefty cut in the rates on special deposit accounts is widely expected, is also seen driving some yield-seeking investors to equities.
SM and Ayala stocks traded higher in heavy volume in early session. SMIC (+2.22 percent) and BDO (+2.71 percent) were boosted by BDO’s record-high P20.4-billion profit guidance for 2013, of which P10 billion had been achieved in the first quarter.
Ayala Corp. (+3.95 percent), Ayala Land (+0.95 percent) and BPI (+1.83 percent) also rose on upbeat outlook and fresh expansion plans.

Sunday, April 7, 2013

NEWS AND FUND UPDATES


Good news to our investors! An excerpt from article


A first: Investment grade rating for PH

 RAPPLER.COM
POSTED ON 03/27/2013 2:45 PM  | UPDATED 03/27/2013 7:39 PM
4K
2
Pinterest
4K
Share
MANILA, Philippines (4th UPDATE) - The Philippines won its first ever investment grade debt rating from global credit rating firm Fitch.
By upgrading the Philippines' sovereign credit rating to BBB- from BB+, Fitch gives the country a vote of confidence, and marks the first time the Philippines, once a basket case in Asia, joins the A-lister countries considered safe to invest in.
The Philippines follows in the footsteps of Indonesia, which secured investment-grade status in January 2012 with upgrades by Fitch Ratings and Moody’s Investor Service.
In a statement on Wednesday, March 27, Fitch added a stable outlook and cited a robust economy and improved fiscal management.
"The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn," Fitch said.
Fitch was the first among the other international credit rating firms -- Standard & Poor's (S&P) and Moody's Investors Service -- that granted the Philippines a long-awaited investment grade. S&P and Moody's still rate the country one notch below investment grade. S&P currently rates the Philippines a BB+ market, while Moody's gave it a Ba1.
"This is an institutional affirmation of our sound good governance agenda," President Benigno Aquino III said in a statement. He also called this "a national pride." (READ: Aquino admin downplays Arroyo role in investment grade)
"The task now is to ensure that the investments will be used to empower the economy." he added.
Finance Secretary Cesar Purisima, who has been leading the efforts toward a credit rating upgrade, called Fitch's decision "a landmark achievement."
"This is the clearest and most definite affirmation that good governance is indeed good economics," he said in a statment.
What a credit rating means
An investment grade is a seal of good housekeeping. It tells investors it is safe to do business in the country, and encourages them to put huge capital here.
An investment grade means the Philippines, as a borrowing country, has a strong ability to pay its debt. This lowers its borrowing costs, generating savings, which may be spent for social services. For Filipinos, it means better education and health care, and affordable loans for major purchases.
What led to the upgrade?
In summary, these are the reasons Fitch granted the Philippines an upgrade:
  • RESILIENT REMITTANCES. Remittances, which account for 8% of the Philippine economy in 2012, stayed resilient despite the global financial crisis. The inflows from overseas Filipino workers (OFWs), which grew 6.4% to US$23.8 billion in 2012, supported a strong net external creditor position, which accounted for 12% of GDP in 2012. This means there are more dollars flowing into the country than those being paid out (like payment for imports).
  • PRUDENT MONETARY STRATEGY. Fitch has cited the Bangko Sentral ng Pilipinas' (BSP) inflation management track record and proactive use of monetary tolls to support the economic growth.
  • GOOD GOVERNANCE. Fitch noted that governance reforms, which have been a centrepiece of the Aquino administration's policy efforts, must remain a priority of the Aquino government and institutionalize these beyond 2016. Fitch also said that the Philippines' good governance scores based on standards of international groups like the World Bank "remain weaker than 'BBB' range norms but are not inconsistent with a 'BBB-' rating as a number of sovereigns in this rating category fare worse than the Philippines."

More upgrades coming?
BDO Capital chief market strategist Jonathan Ravelas told Rappler that upgrades from Moody's and S&P's are key to sealing this vote of confidence.
"We need another credit rating agency to give us an investment grade to really be considered of the upgrade."
Economist Victor Abola echoed this. "I will not be surprised that the other two (Moody's & S&P) will give their own upgrades this semester," he told Rappler.
"The credit rating upgrade of Fitch is an indication of the reflection of what the market is already doing," he added.
On Wednesday, the Philippine Stock Exchange main index rallied to a new high, closing at 6,847.47 points, up 182.35 points or 2.74%. This marks the 24th time this 2013 that the PSEi hit a record high.
"It’s primarily considered a gold standard in the financial community and...would unleash and allow some funds that only invest in stock and countries to invest in Philippines stocks," John Forbes, president of the American Chamber of Commerce of the Philippines, told Rappler.
PROPERTY BOOST. Analysts say the investment grade is "great news" for the property market. Photo by Rappler/John JavellanaPROPERTY BOOST. Analysts say the investment grade is "great news" for the property market. Photo by Rappler/John Javellana
Industry boost, peso impact
Aside from the capital markets, other industries expected to get a boost from the investment rating upgrade include the property market.
“This is a great news particularly for the property market and especially since there have been a lot of foreign investors looking into the market. This tells foreign investors it's about time to invest in the Philippines," Karlo Pobre, research analyst at Colliers International, told Rappler. (READ: 'Hot' PH attracts multinationals)
"There is more opportunity in the commercial or industrial sector since the residential sector is already slightly competitive. There should be increased expansion from BPO’s (business process outsourcing) and there may be more financial insitutions coming in to set up office,” he added.
Lylah Fronda, associate director market of property consultant Jones Lang Lasalle, echoed this: "The upgrade will encourage more businesses to expand and relocate to the Philippines. If last year's total office space take up was around 400,000sqm, we are expecting a better performance this year -- probably 20% more."
"With a lot of job opportunities that will come available and possibly significant growth in expat community we see more demand in luxury destinations and leisure properties. Manila will continue to be a favorite among real estate investors and developers as a good alternative market in Asia," she added.
The upgrade, however, may further result in a stronger peso, which does not bode well for dollar earners, including overseas Filipino workers to send money home, as well as exporters and BPO firms.
“It's good in a sense that it gives confidence of the investors to come. However the effect of that is the peso appreciation, which affect the cost efficiency of the third party and ones who are outsource. The BPO industries are already suffering from that.” Fronda noted.
Trickle effect?
Making the rest of the Filipinos, especially those who consider themselves poor, benefit from these investments remain a challenge.
"[The investment grade] has relatively little to do with the specifics of actual investment in direct job investing activities such as agro business, mining, or manufacturing. Those investors are concerned with the actual cost of investment, quality of infrastructure and labor issues,” Forbes noted.
"Prudent measures to attract investment, improve the business climate and diversify the economy have paved the way for growth. Now it's up to the authorities to make that growth more inclusive by creating more and better jobs," Norio Usui, Country Economist at the Asian Development Bank (ADB), said in a statement.
"This rating is unprecedented in the Philippines and can trigger the kind of investment that will help carry the country into its next phase of development," he added. (READ: PH needs 'judo economics' to further grow)
BSP governor Amando Tetangco echoed this: "The upgrade to investment grade status should inspire the entire government bureaucracy and the Filipino people to capitalize on the opportunities that will arise from this positive credit rating action."
"We should continue to work together not only to achieve higher credit ratings but also to ensure that the gains from these benefit most of our people," he stressed. - with reports from Lala Rimando, Cai Ordinario, Lean Santos and Aya Lowe/Rappler.com