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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
Mitsubishi to invest P10B in PH
Japan manufacturer wants to put up 3rd Asian hub here
May 19, 2014/ By Amy R. Remo/Philippine Daily Inquirer/http://business.inquirer.net/170783/mitsubishi-to-invest-p10b-in-ph
MANILA, Philippines—Mitsubishi Motors Corp. (MMC) is eyeing an initial investment of P10 billion in its Philippine operations to establish its third Southeast Asian manufacturing hub in the country, a statement from the Department of Trade and Industry’s foreign trade office in Japan showed.
The proposed capital infusion would be used to increase the current production of Mitsubishi Motors Philippines Corp. (MMPC) to as many as 100,000 units annually, from the current 15,000.
MMC officials, led by their chair Osamu Masuko, made the disclosure before President Aquino in a visit to Malacañang in March this year.
The plan to increase production volumes was also confirmed by MMPC officials in an interview with reporters last Friday.
MMPC president and CEO Hikosaburo Shibata said the company’s acquisition of the factory site in Sta. Rosa, Laguna, from Ford Motor Co. Philippines would allow the company to further increase its capacity, and even add a new model to be produced in the country.
“We have a strong intention to add a new model (in our lineup) as we’d like to continuously work here. Manufacturing cars is very important because we cannot rely only on imported cars. But Cainta is becoming largely a residential area, so further expansion is very difficult. This is why we transferred to the Sta. Rosa industrial area,” Shibata explained.
MMPC’s existing facility in Cainta, Rizal, can produce the Lancer EX, Adventure, and L300 at a rate of 30,000 units a year. The current utilization rate, however, is only half at 15,000 units in 2013.
But the Sta. Rosa facility can already produce some 50,000 units, which may be doubled to 100,000 units by 2020. At this rate, not only can MMPC serve domestic demand, it can also export locally produced motor vehicles to neighboring countries, Shibata said.
According to the MMPC chief, they have yet to decide on which new model to produce here, but one of the candidates being considered is the Mirage, which the company currently imports from Thailand.
“We are on the decision-making stage and we have not yet decided” which model to produce, Shibata said.
The company is now discussing its proposal with the DTI and Board of Investments, as it hopes to secure support from the Philippine government, he said.
“We’d like to stay here in the country and produce a new model, but the reality is, compared to Thailand and Indonesia, production cost in the Philippines is higher.”
MMPC will start to relocate its operations from the Cainta facility to the Sta. Rosa factory by September or October this year. By January, it expects the Sta. Rosa plant to be fully operational. It is now building up its inventory to prepare for a two-month lull in production when the relocation will be in full swing.
MMPC is highly bullish of its prospects in the Philippines, which it considers a growing market. While its production and sales volumes may be higher in other countries, MMPC enjoys a healthy chunk of the Philippine automotive market with over 20-percent share.
“Everybody in the world is watching the Philippines. Your GDP per capita is now at the $2,700 level and demand is rapidly increasing. The Philippines … shows big potential. So now is the right time to have a new model here for the Filipino people,” Shibata said.
That is great news! A more stable credit rating means more opportunities for economic growth. It has a domino effect and will eventually benefit a lot of sectors including the real estate industry.
"Why expats are buying luxury condos in PH"
MANILA, Philippines - Asian real estate investors and expatriates in the country are fueling the demand for luxury residential condominiums, according to CBRE Philippines.
CBRE Philippines senior director for research and consultancy Jan Custodio said expats in the country are now buying condo units, instead of just renting.
"We see a shift from expats from renting to buying units. They're availing of the 60-40 ruling on ownership of condo units... It's a win-win situation for the expatriates. They do their business here, they buy their units and by the time they have to leave, they sell their units and make a tidy profit as well," he said in a press briefing in Makati City on Tuesday.
While foreigners are not allowed to own land in the Philippines, they can own condominium units but subject to conditions of the Condominium Act.
Expatriates are keen on luxury condos, which are generally located within the business districts of Makati, Rockwell and Bonifacio Global City. If they rent the units, rents range from P230,000 to P250,000 a month.
However, if they buy the unit, they stand to benefit since the value of these luxury developments have been soaring.
"Case in point are units in One Roxas and Pacific Plaza. In 2007, the units were selling for P35 million for a 300-square meter, 3-bedroom unit. Right now, we've had reports from our residential group that some units have been selling for as much as P50 million," Custodio said.
Asian real estate investors are also becoming keen on the Philippines, as Hong Kong and Singapore have implemented tax measures to make it difficult for investors and speculators to buy properties in the two cities.
"We're now seeing Singaporean, Hong Kong, mainland Chinese, Korean buyers coming in. It's the start of more overseas investment capital coming into the Philippines, especially on the residential side where you can buy condo units... We are seeing a lot more foreign investors coming in due to the tax and cooling measures in HK and Singapore. From overseas perspective, PH looks very cheap and cost-effective, from an investment standpoint, at a per square meter basis," CBRE chairman Rick Santos said.
Some hotel developers are now taking advantage of this demand by launching luxury residential projects. Development of three luxury projects -- Shangri-la in Bonifacio Global City; Grand Hyatt Hotel and Discovery Privea in Makati -- are ongoing.
"Now with the increased demand in the (luxury) segment, we see three ongoing projects, I guess that proves the point that the luxury segment is one of the segments to watch out for in the coming years," Custodio said.
BPO growth seen for next 10 years
At the same time, the Philippines' business process outsourcing industry (BPO) is seen to continue growing for at least the next 10 years.
"The Philippines is where India was in 2002. We're looking at 10 to 12 years of record growth...India in 2002 was at the beginning of a 10-year growth cycle. And that's where we are now... But our macroeconomic fundamentals and leadership are stronger, more confidence here," Santos said.
The Philippines remains one of the most cost-effective destinations for BPOs in the world. He noted that US expense pressures are leading to more BPO expansion in the country.
"If you are a US, European company looking to reduce cost, outsource and improve earning - the Philippines is the place for call centers and Business process outsourcing," Santos said.
Demand from BPOs and multinational companies are seen to drive growth in the office property market. "The resilient office market is expected to continue its strong performance for the rest of the year, and increasing office space demand from multinational and BPO companies shall sustain growth in the sector," Santos said.
CBRE said the Philippines remains one of the Asian countries with increasing rents and occupancy rates. As of the second quarter, the Philippines still has the lowest prime rent across Asia with Makati rates at $26 per square foot a year. Bangkok is second lowest with $32, followed by Bangalore with $36, New Delhi $41 and Kuala Lumpur with $46.
Vacancy rates, especially in Makati central business district and Bonifacio,have continued to drop this year as demand for office spaces picked up. As of end June, overall occupancy rating in the business districts of Metro Manila is at 97.49%.