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Current Events - May 2014
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S&P raises PHL credit rating a notch above investment grade
By DANESSA O. RIVERA, GMA NewsMay 8, 2014 8:14pm
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(Updated 7:05 p.m., May 9, 2014) A year after it raised the Philippine sovereign debt rating to investment grade, Standard & Poor's Ratings Services again upgraded the country's foreign currency denominated and peso debts a notch above the coveted credit rating.
This time, the debt watcher gave the Philippines a long-term sovereign credit rating of "BBB" from "BBB-", and upgraded its short-term rating to "A-2" from "A-3".
“The outlook is stable,” the debt-watcher noted, signifying a change in the ratings will not likely happen in the next 12 months.
"We raised the ratings because we now believe the ongoing reforms to address shortcomings in structural, administrative, institutional, and governance areas will endure beyond the current administration," Standard & Poor's credit analyst Agost Benard noted in an e-mailed statement to reporters.
The debt watcher also noted the upgrade "reflects the country's strong external liquidity and international investment position, combined with an effective monetary policy framework relative to the country's income level," while maintaining low inflation and interest rates.
Malacañang on Friday said it was "gratified" by the latest credit rating upgrade from S&P. "And we are hopeful that this will eventually translate into increased investments, and accelerated jobs generation," Presidential Communications Operations Office head Herminio Coloma Jr. said.
The Aquino administration is "committed to strengthen public institutions, and build increased capacity among citizens and communities, and thereby promote the attainment of inclusive growth.
"This is the path that leads to sustained economic development and the raising of the Filipino people’s quality of life," Coloma added.
The upgrade from S&P came a month after Fitch Ratings affirmed the investment grade on the country's foreign currency denominated and peso debts.
S&P gave the Philippines an investment grade rating on May 2, 2013. It was the second upgrade from practically junk status since Fitch Ratings gave the Southeast Asian country its first ever investment grade status in March 2013.
In a statement Friday, Budget Secretary Florencio Abad said S&P basically validated the progress in good governance reforms under the the Aquino administration.
“For one, this credit upgrade recognizes the gains brought about by the public financial management reforms we have instituted," Abad noted
"We are on the right track in terms of continuously improving our public spending efficiency, primarily in ramping up investments for infrastructure projects, among other key priority and substantial programs and projects," he added.
In a separate statement, Finance Secretary Cesar Purisima noted the S&P upgrade was a recognition of the "remarkable economic comeback" the Philippines has so far achieved since President Benigno Aquino III took over the helm of government in 2010.
"This is further proof of President Aquino's belief that good governance is good economics," he said.
"We will continue to institutionalize good governance so our country's economic growth is both sustainable and inclusive. This has been the 19th positive credit rating action since President Aquino took office and the fourth upgrade from S&P," Purisima added.
In raising the ratings, S&P said: "We expect ongoing reforms on a broad range of structural, administrative, institutional, and governance issues to endure beyond the term of the current administration."
A major feat
Bangko Sentral Governor Amando M. Tetangco, Jr. said this is a major feat, as S&P did a straight upgrade without first assigning "... a positive outlook before upgrading the rating.
"This action is further affirmation of the country's strong macroeconornic fundamentals," he said, noting the Philippines has proven it can sustain growth since S&P raised the Philippine credit rating to investment grade last year, the central bank chief said.
The central bank will continue to support growth amid a low-inflation environment, Tetangco said.
"We stand ready to adjust our monetary policy stance and adopt macroprudential measures, as appropriate, to guard against risks that would unsettle inflation expectations and threaten the soundness of our financial system," he said.
"We will also continue to craft external sector policies that will help keep our external liquidity position strong," Tetangco added. – With a report from Kimberly Tan/VS, GMA News
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Inflation edges up to 4.1% in April
By Kathleen A. Martin (The Philippine Star) | Updated May 7, 2014 - 12:00am
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MANILA, Philippines - The country’s inflation rate picked up in April due to higher food and utility prices, the Philippines Statistics Authority reported yesterday.
In a report, the PSA said inflation stood at 4.1 percent last month, faster than the 3.9 percent recorded in March and the 2.6 percent in April 2013.
Without food or oil prices, core inflation accelerated to 2.9 percent in April from 2.8 percent in March.
Inflation in April fell within the Bangko Sentral ng Pilipinas’ forecast of 3.6 percent to 4.5 percent.
BSP Governor Amando M. Tetangco Jr. said the central bank will “not hesitate” to adjust policy settings should there be any risk that the rate will not fall within its target of three percent to five percent for the year.
“We remain watchful for any financial stability risks from the still elevated liquidity growth rate, and continue to monitor the impact of our last action which took effect only mid-last month, as well as developments globally that could affect domestic inflation dynamics,” Tetangco said in a text message to reporters.
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“We will not hesitate to make preemptive adjustments to any of our policy levers in measured pace if the inflation target would be at risk or financial stability pressure heighten,” he continued.
The central bank, mandated to keep prices stable and conducive to robust economic growth, revisits policy settings every six weeks. Its next rate-setting meeting is slated on May 8.
Looking at inflation by region, the rate in the National Capital Region picked up to 3.3 percent in April from 2.9 percent in the previous month. Areas outside the capital, meanwhile, saw the rate accelerate to 4.3 percent from 4.2 percent in March.
According to commodity group, the food and non-alcoholic drinks index rose to 6.2 percent in April from 5.8 percent in March, while the housing, water, electricity, gas, and other fuels index climbed to three percent from 2.7 percent. The transport index also accelerated to 1.3 percent from one percent in the previous month.
The increases in the three indices were offset by a decline in the alcoholic beverages and tobacco index to 4.1 percent from 4.9 percent and a slide in the clothing and footwear index to 3.3 percent from 3.7 percent.
The furnishing and household equipment also decreased to 2.4 percent from 2.8 percent, while the health index tumbled to three percent from 3.3 percent.
Rahul Bajoria, economist at Barclays, said in a research note yesterday that while inflation remains “firmly” within the BSP’s three percent to five percent target this year, the rate is expected to rise near the higher end of the range by the third quarter.
Bajoria said the central bank is forecast to increase the reserve requirement ratio by another two percent in the next two to three months, starting with this week’s meeting.
“This would help underline the central bank’s commitment to maintain price stability, as well as manage liquidity conditions,” Bajoria said.
“In our view, BSP will start raising rates in the June policy meeting, by delivering a 25bp (basis points) increase, as inflationary pressures rise further. We expect another 25bp rate hike in Q3 (third quarter), which would take the policy rate to four percent by the end of 2014,” he continued.
Overnight borrowing and overnight lending rates are currently at 3.5 percent and 5.5 percent, respectively.
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PHL ‘strongest’ among Asean members says Nomura
May 17, 2014/ Written by Genivi Factao/ http://www.businessmirror.com.ph/index.php/en/news/top-news/32300-nomura-phl-strongest-among-asean-members
NOMURA, a leading financial services group, said the Philippines is poised to be the strongest-performing Southeast Asian economy, expecting gross domestic product (GDP) growth to accelerate to 6.8 percent next year, from 6.7 percent this year.
Nomura’s Asia Special Report, titled “Asean on the Move,” says the economies of Malaysia and the Philippines are in the best shape. Thailand and Indonesia are likely to struggle, with Singapore in the middle.
“However, between the Philippines and Malaysia, our preference is for the former, given the lower fiscal drag and, thus, stronger growth prospects,” it said.
Nomura said the Philippines offers a good example of the positive effects of fiscal reforms on growth.
“As we have argued before, a decline in fiscal spending can hurt growth initially but, in the more medium term, fiscal reforms are likely to lead to improvements in the quantity and quality of public expenditures, and the crowding-in of private investment,” Nomura said.
“This has largely played out in the Philippines, with reforms pushing interest rates structurally lower and boosting business sentiment, helped
Foreign portfolio investments pouring into PH
Net inflow of $324M recorded in April, reports BSP
May 18, 2014/ By Paolo G. Montecillo/Philippine Daily Inquirer/ http://business.inquirer.net/170562/foreign-portfolio-investments-pouring-into-ph
MANILA, Philippines—A net inflow of foreign portfolio investments or “hot money” was recorded for the first time this year last April as financial markets stabilized, allowing fund managers to focus on the economic fundamentals of individual countries.
“The net inflow arose from investor optimism about the economy’s growth and strong quarterly corporate results, ignoring the possibility of a further cut in the United States Federal Reserve’s quantitative easing program,” the Bangko Sentral ng Pilipinas said in a statement.
A net inflow of $324 million in foreign portfolio placements was recorded in April, the BSP said.
This was a turnaround from the previous month’s net outflow of $92 million. Portfolio investments, which are also called “hot money” for the speed they can enter and exit a country, refer to investments in publicly-traded shares, and peso denominated debt securities and deposit certificates.
A net inflow measures how much more money entered the country than went out.
However, BSP data released on Thursday showed that despite the improvement, the country was still way behind last year’s strong showing.
Last year, hot money inflow reached a record high of $4.22 billion.
This year, the BSP expects this figure to be cut in half.
The BSP said while registered investments of $1.9 billion were lower by 12.1 percent compared to the previous month’s $2.1 billion, outflows declined to $1.5 billion from $2.2 billion in March 2014.
About 76.7 percent of the investments went to PSE-listed securities (holding firms; property companies; banks; telecommunication companies; and utilities firms) and 23.3 percent to government securities.
The United States, Singapore, United Kingdom, Malaysia, and Luxembourg were the top five investor countries for the month with combined share to total of 78.8 percent, while the United States continued to be the main destination of outflows, receiving 80 percent of total.
Hitachi eyes expansion in Phl
By Iris C. Gonzales (The Philippine Star) | Updated May 18, 2014 - 12:00am/ http://www.philstar.com/business/2014/05/18/1324334/hitachi-eyes-expansion-phl
MANILA, Philippines - Japanese multinational engineering and electronics company, Hitachi Ltd., is eyeing to expand its presence in the Philippines in various aspects of business.
These include social infrastructure and urban development such as transportation, elevators and escalators and home appliances comprising of mainly high-end products, the company said in a report.
Furthermore, the company intends to continue to utilize the Philippines, which has many English speakers, for the human resource needs of its business in the region.
In a report, Hitachi said it is forward-looking regarding the future of the company as its announced the progress of its 2015 Midterm Management Plan which focuses on achieving growth and corporate transformation driven by the further promotion of Hitachi’s Social Innovation Business.
The Japanese conglomerate said its global strategy would focus on amplifying its business in North America and China, and increasing the overall profit in Asia.
Part of Hitachi’s plan is to evolve the Hitachi Smart Transformation Project to develop cash-generating capabilities. The project is expected to generate an estimated amount of ¥400 billion by 2015 from the ¥75 billion in 2012.
“Hitachi is continuing initiatives to deliver revenues and profits by expanding the products and services businesses as well as expanding the Social Innovation Business globally,” the company said in its report.
Through the Social Innovation Business, Hitachi hopes to provide total solutions for sustainable, urban development worldwide and to address critical global issues such as the need for creating and improving the transportation infrastructure in urban areas, improving access to clean water and developing technologies that promote a smooth and efficient transition.
Hitachi has already began its Social Innovation Business in many parts of the Association of Southeast Asian Nations (ASEAN) and implemented some of its projects in the region.
For instance, the company is supplying equipment for an ultra-super critical coal-fired thermal power plant in Malaysia. In order to achieve world-class efficient power generation, Hitachi focuses on its sophisticated technological capabilities.
Moreover, Hitachi aims to boost their sales through their competitive products such as data storage, medical systems, construction machinery, wind power generation, inverters, pumps and motors. Part of the company’s plan is to develop new products that would meet the needs of the society and the consumers and to further enhance competitiveness with overseas expansion of operations and management.
The Tokyo-based company is confident that the steady and continuous implementation of the 2015 Midterm Management Plan would achieve further growth until 2015 and beyond. – With reports from Louise Maureen Simeon
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