By the TechnoGraph
Saturday, 5 November 2011
International reserves bounce back to $75.8b
by Roderick T. dela Cruz
The country’s foreign exchange reserves rebounded with a growth of $600 million to hit $75.814 billion as of end-October 2011, after a slight drop in the previous month, Bangko Sentral reported Friday.
Bangko Sentral Governor Amando Tetangco Jr. said the October gross international reserves rose from just $75.174 billion in September. The figure remained below the record peak of $75.94 billion recorded in August.
Over a 12-month period, the GIR surged $18.7 billion or 32.6 percent from $57.154 billion recorded year-on-year.
“The appreciable buildup in the reserves level at end-October 2011 resulted mainly from the foreign exchange operations and income from investments abroad of the Bangko Sentral as well as revaluation gains on BSP’s gold holdings,” said Tetangco.
The flows were partially offset by payments by the national government on maturing foreign exchange obligations.
At $75.8 billion, the reserves could easily cover the country’s total foreign debt of $61.4 billion as of June 2011, making the Philippines a net capital lender.
Bangko Sentral Deputy Governor Diwa Guinigundo said despite the external challenges emanating from the United States, Europe and the Middle East, the Philippines continues to attract foreign exchange flows including remittances, foreign portfolio investments and business process outsourcing revenues.
He said remittances were expected to contribute more than $20 billion this year while BPO revenues would reach more than $10 billion.
The October GIR is enough to cover 11.2 months worth of imports of goods and payments of services and income. It was also equivalent to 10.6 times the country’s short-term external debt based on original maturity and 6.4 times based on residual maturity.
Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium and long-term loans falling within the next 12 months.
Data showed that Bangko Sentral’s foreign investments jumped to $65.9 billion as of October from $65.7 billion in September and $48.6 billion in October 2010. Gold holdings also went up to $7.9 billion in October from $7.45 billion in the previous month and $6.8 billion a year ago.
Thursday, 3 November 2011
OUTSIDE THE BOX
IF you have experienced an earthquake, then you know exactly what it feels like when the shaking starts. If you have felt more than one earthquake, perhaps a big one, then you also know that for the first few seconds they all begin the same. The vibrations grow larger and larger and you can only hope that they will stop and not carry on to something great causing large damage.
The financial earthquake has started and we can only wait to see whether it will grow larger.
You probably never heard of MF Global (MFG) before this week. MFG is one of the largest global clearinghouses for commodity and foreign-exchange trading and perhaps the largest in Asia. A clearing broker has a critical function in the financial markets, standing between the buyer and the seller and guaranteeing that the transaction will go through and both sides will get paid.
The same system works on the stock exchange since we buy through a stockbroker and transact our purchase through another stockbroker who handles the selling side. In the Philippines, the Securities Clearing Corp. of the Philippines (SCCP), owned by the Philippine Stock Exchange, guarantees that money and stock properly change hands.
However, in the financial markets that are global and cross borders, the exchanges designate sort of “super brokers” to guarantee the settlement of the trades. MFG was one of those. The impact of the failure of MFG is important enough that the Australian Stock Exchange has suspended trading “until further notice” on its commodity exchanges because MFG handles most of the settlements.
MFG is out of business because it bought $6.3 billion of European debt believing that there was not any chance that the countries would default. They bought this debt because the interest rates were very high and they would have made a fortune. Note that this were corporate funds, not client money. But then came along Greece again not being able to pay its bills. MFG was looking at losing a large portion of the money that it loaned out. The company was not large enough or liquid enough to be able to afford this kind of loss.
So what’s the big deal?
Assume in MFG’s case that there was no fraud and nothing illegal about its activities (We will wait and see on this one). We had a similar situation in the Philippines a few years ago with Uniwide Holdings (UW). UW had a great chain of low-cost grocery/department stores. It decided to become like Shoemart so it built a financial disaster called Coastal Mall, using corporate money. UW went bankrupt, leaving millions in unpaid bills to its store suppliers. Everything was fine until it all exploded.
A few months ago, MF sold its debt to the public and was given an investment-grade rating. MFG’s books were examined and everything seemed just fine until it all exploded. Now the question that the markets are very worried about is how many other financial firms seem just fine and yet may be ready to explode?
In Europe, everything seemed just fine with the debt deal that was being worked out with the Greek government. Except, that deal just exploded. Greek Prime Minister Papandreou decided to allow the Greek people to vote on whether to take the bailout money. It was a brilliant political move. If they vote yes, he does not take any heat for the massive austerity measures. If they vote no and Greece fully defaults, it is not his problem.
It is very unlikely that the Greek people will vote yes and Greece will default. If that happens, European governments will be forced, no long discussions this time, to bail out their banks.
And Greece will leave the euro, effectively exploding the euro zone. Greece will then print a much-devalued currency, the drachma. Bondholders will be left holding an empty bag and we may see another even bigger (maybe more than one) MFG hit the headlines.
But of course, you do not do business with MFG. You do not own any Greek bonds and it is unlikely that your bank does either. It is also unlikely you have part of your wealth in euro currency.
However, the financial shaking is going to rumble your world, too.
During and after an earthquake you need to stay close to home and that means holding pesos. This is not the time to be speculating if the peso is going higher or lower. The stock markets are going to be very volatile also. For the short term, any opportunities to take profits or cut losses should be done quickly. And fasten your seat belt.
E-mail to firstname.lastname@example.org and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by CitisecOnline.com Inc.
CAI U. ORDINARIO
DESPITE the country’s problems with high maternal mortality ratio, the World Economic Forum (WEF) cited women’s health and education as the major contributors to the exemplary performance of the Philippines in the 2011 Global Gender Gap Index, where it ranked No. 8 out of 135 economies worldwide.
The WEF said the Philippines remained the highest-ranking Asian country because of its success in health and education. This is also the reason the country improved its performance to an overall score to 0.7685 in the 2011 Gender Gap Index from its No. 9 rank and a score of 0.7654 in 2010.
“Gender gaps close when countries recognize the economic and social imperatives. With the right policies, change can happen very quickly,” Laura Tyson, one of the co-authors of the report, said. Tyson is the Angela Chan Professor of Global Management at the Haas School of Business of the University of California at Berkeley.
The Philippines ranked first out of 135 countries in the categories of literacy rate, enrollment in primary education, enrollment in secondary education and enrollment in tertiary education. It also bested all countries in terms of sex ratio at birth and healthy life expectancy.
It also ranked first in other categories like legislators, senior officials and managers, as well as in professional and technical workers, which are under the “economic participation and opportunity” subindex.
However, this subindex also saw the country’s performance plummeting in the category of women’s labor-force participation rate, where the country was ranked 94th overall.
The Philippines also ranked poorly in the categories of women in ministerial positions, where it was No. 71; estimated earned income, No. 60; women in parliament, No. 43; and wage equality for similar work, No. 23.
In terms of sub-indices, the country was ranked No. 15 for “economic participation and opportunity”and No. 16 for “political empowerment.”
The WEF noted in a statement that the international scores for health and education are encouraging with 96 percent of the health gaps and 93 percent of the education gaps already closed. Around the world, economic and political participation continues to show the largest gaps.
“Female healthy life expectancy and literacy levels remain alarmingly low across many parts of Africa and Asia. In Latin America, women have more schooling than men but marriage and motherhood are still not compatible with a fuller economic and political participation of women. We’ve come a long way but there is still a long road ahead of us,” report co-author Ricardo Hausmann said. Hausmann is the director of the Center for International Development at Harvard University.
The Global Gender Gap Report’s index assesses 135 countries, representing more than 93 percent of the world’s population, on how well resources and opportunities are divided among male and female populations.
The sixth annual World Economic Forum Global Gender Gap Report 2011 shows a slight decline over the last year in gender equality rankings for New Zealand, South Africa, Spain, Sri Lanka and the United Kingdom this year, while gains are made in Brazil, Ethiopia, Qatar, Tanzania and Turkey.
Nordic countries such as Finland, Iceland, Norway and Sweden continue to hold on to the top spots, having closed over 80 percent of their gender gaps, while countries at the bottom of the rankings still need to close as much as 50 percent.
The index scores can be interpreted as the percentage of the gap that has been closed between women and men. Of these, 114 have been covered since the first edition of the report. Thirteen of the 14 variables used to create the index are from publicly available hard-data indicators from international organizations such as the International Labor Organization, the United Nations Development Program and the World Health Organization.
Mariae Francesca C. Ramos
Read full article: http://www.bworldonline.com/Research/economicindicators.php?id=0513
ELECTRICITY CONSUMPTION rose faster in 2010 than in the previous year, fueling worries that the country’s power generating capacity might not be able to meet the growing demand.
Total power consumption increased by 9.4% to 67,743 gigawatt hours (GWh) last year from 61,934 GWh in 2009, when the annual growth rate was only at 1.8%, data from the Department of Energy (DoE) showed.
Overall consumption has been rising since 2000, when it was pegged at only 45,290 GWh. Cid L. Terosa, senior economist at the University of Asia and the Pacific, said this is an indication of a healthy economy. “The higher the power consumption, the higher the economic activity, the higher the economic growth,” he said.
Power consumption went up across all sectors in 2010 — by 7.6% to 18,833 GWh for residential, by 10.2% to 16,261 GWh for commercial, by 8.7% to 18,576 GWh for industrial, and by 4.8% to 1,596 GWh for other sectors. The power utilities themselves accounted for the rest of the electricity consumed last year.
Meanwhile, the country’s installed generating capacity grew by just 4.8% to 16,359 megawatts in 2010 from 15,610 MW the previous year.
Wednesday, 2 November 2011
by Roderick T. dela Cruz
Metrobank, Security Bank and Union Bank among the strongest 100 banks in Asia, says poll
Six Philippine banks were listed as among the strongest 100 banks in the Asia-Pacific region while 10 others were included in the top 500 (AB500) rankings by the financial publication, The Asian Banker.
The Asian Banker, in its special edition released in October, evaluated the top 500 banks in the Asia-Pacific region for the financial year 2010 with a March 2011 cutoff. It actually ranked 700 banks throughout the region, in terms of assets, loans, deposits and net profit.
Metropolitan Bank & Trust Co. was ranked the 20th strongest based on capital and performance, although the bank with assets of $20.2 billion was listed only the 197th largest bank in the region.
Banco de Oro Unibank, which was listed as the largest bank in the Philippines with total assets of $22.8 billion and good for a 186th spot in terms of assets in the region, however, was 161st in terms of strength.
Bank of the Philippine Islands, with $20 billion in assets and no. 200 in the list of the region’s largest, ranked higher in terms of strength at 27th place.
Security Bank was the 28th strongest bank, although it was only 398th in terms of assets, while Union Bank ranked 40th in terms of strength, despite being 343rd in the list of largest banks.
Security Bank actually topped all Asian banks with the highest return on assets placed at 4.6 percent.
Philippine Savings Bank, despite being just the thrift banking unit of Metrobank, was the 57th strongest bank in the region, with a ranking of 452nd in terms of assets. China Bank ranked 74th in terms of strength and 338th in terms of assets.
“It is my privilege to inform you that the Asian Banker’s AB500 magazine, 2011-2012 edition, has ranked PSBank as the 5th strongest bank in the Philippines. Likewise, PSBank was also ranked 57th among the 500 strongest banks in the Asia-Pacific region. This is the first time that PSBank was included among the top 10 banks in the Philippines,” said PSBank president Pascual Garcia III.
Garcia said the top ranking of PSBank shows “how a Philippine savings bank can build a foundation of strength and profitability vis-a-vis larger commercial banks, not only in the Philippines, but in the Asia-Pacific region as well.
Other Philippine banks in the list were Philippine National Bank which was ranked 130th strongest and 324th largest; Rizal Commercial Banking Corp., 139th and 317th; Land Bank of the Philippines, 143rd and 264th; United Coconut Planters Bank, 168th and 387th; Allied Banking Corp., 192nd and 384th; East West Banking Corp., 196th and 466th; Bank of Commerce, 207th and 449th; RCBC Savings Bank, 211th and 497th; and BPI Family Savings Bank, 250th and 415th.
Kathleen A. Martin
THE NUMBER of passengers on international flights is expected to increase more than 10% in 2011 over last year’s level amid a competitive aviation industry and strong tourism, the Civil Aeronautics Board (CAB) said.
CAB data showed that the number of international air passengers increased 12% to 14.01 million in 2010 from 12.46 million in 2009.
Already, the country is seen to be on track with the expected full-year growth, CAB executive director Carmelo L. Arcilla told BusinessWorld in a phone interview on Friday.
“Our projection is a more than 10% growth, and so far, we’re on track,” Mr. Arcilla said.
Latest data from the CAB showed the number of passengers on international flights increased by 11% to 8.04 million in the first half of the year from 7.24 million in the same period last year.
“Our aviation industry has been continuously growing and competition has given rise to reasonable ticket prices and consistent airline expansion,” Mr. Arcilla said.
The competitive aviation industry has also encouraged air travel, boosting the tourism industry, Mr. Arcilla said.
“The [more than 10%] growth will also be on the back of a strong tourism industry,” Mr. Arcilla said.
In 2010, outgoing passengers totaled 7.08 million, up by 12% from 6.33 million in 2009.
Meanwhile, incoming passengers increased by 13% to 6.93 million from 6.13 million in the same comparative periods.
“I think we can sustain the growth from last year,” Mr. Arcilla said.
The bulk of the passengers on international flights last year was carried by flag carrier Philippine Airlines (PAL).
When asked if PAL’s continuing labor row will affect the expected increase in passengers on international flights, Mr. Arcilla said it would not influence the projected growth.
“The labor row started during the lean season for airlines. Moreover, when that happened, other airlines were able to absorb affected passengers,” Mr. Arcilla said.
PAL’s ground labor union protested the airline’s outsourcing plans which laid off some 2,500 ground workers.
From Sept. 28 until mid-October, the airline had to cancel international and domestic flights amid the continuing labor row.
During the first half of the year, PAL carried 2.04 million passengers on international flights, a 5% growth from the 1.95 million passengers it carried in the same period last year.
Budget carrier Cebu Pacific, on the other hand, carried 1.3 million passengers in the first half, up by 30% from 1 million passengers in the same period last year.
Hong Kong airline Cathay Pacific Airways, meanwhile, carried 712,117 passengers on international flights to and from the country in the first half, a decline of 2% from carrying 725,374 passengers in the same period last year.
Singapore Airlines recorded an 8% decline to 339,116 passengers in the first half from 368,723 passengers, according to the same data.
Korean Air Lines Co., Ltd. posted a flat growth of international passengers to 291,255 from 290,641.
United Arab Emirates’ flag carrier Emirates also recorded a flat growth to 286,085 passengers from 284,980 passengers.
OUTSIDE THE BOX
GROWING up in California, the old-timers would talk about a condition called “earthquake weather,” the belief that you could tell if an earthquake was coming by the weather. Actually this myth has been around since the 4th century before Christ. Both Aristotle and Herodotus wrote that the weather would be hot and the air calm before an earthquake.
There is no such thing as “earthquake weather.” Statistically, there is approximately an equal distribution of earthquakes in cold weather, hot weather, rainy weather, etc.
However, probably all of us have had a “feeling” when something important was going to happen. We sometimes use the word “intuition” to describe those times that we know something, have a perception, outside of our normal rational thought process.
So I am going to go with some “financial-earthquake weather” predictions for the coming months.
The events of the last weeks regarding the European debt problem have made fairly clear how deeply serious the problems are and what the so-called solutions are going to be.
We need to start by understanding how governments, central banks and the global banking industry operate. This might be best summed up by a statement from the US Federal Reserve Board Vice Chairman Alan Blinder on the financial news program Nightly Business Report in 1994: “The last duty of a central banker is to tell the public the truth.”
Based on that statement, the financial condition of the European and US banking system is much, much worse than generally realized. And if the problem is greater than the public is being told it is, then logically, the solutions being offered are not as wonderful and effective as we are told.
That is like the doctor not telling you your disease can be fatal and then not telling you that the treatment usually does not work well. A double whammy.
In a story that is still developing at this time, one of the largest global financial brokers, MF Global, is going under. MF Global was spun off from MAN financial in 2007 and did the third largest initial public offering in New York Stock Exchange history at $30 per share. Its share price fell more than 60 percent last week on a debt rating cut to junk status to about $1. The company also reported its largest quarterly loss in history. MFG is a huge clearing broker (responsible for guaranteeing transactions) in the commodity and foreign-exchange trade. Tens of thousands of smaller brokers pass their client’s business through MFG. This is a big deal.
Why is MFG going under? The major reason is that they are overleveraged just like Lehman and Bear Sterns were in few years ago. The stock market value of MFG is about $200 million; the company owns $6.3 billion of Italian, Spanish, Belgian, Portuguese and Irish debt.
That $6.3 billion illustrates the problem. What about the solution?
The solution is that the debt holders are going to take a 50-percent loss on the bonds that they purchased in good faith. The issuing countries will borrow “new money.” Problem is, private creditors are going to want a much, much higher interest rate, and these countries cannot afford it. How bad is Greece for example?
Greece’s debt to gross domestic product is forecast at 170 next year and the “solutions” will bring it down to 120 percent by 2020. A goal of 120 percent by 2020 just guarantees further defaults. Already there is increasing hunger among the Greek population and a shortage of medicines. This is ridiculous. They cannot pay the debt. No country really could. What is needed is for the banks to lose 80-90 percent. That pretty much destroys the banking system.
Therefore, the central banks will ride to rescue by printing money and buying the debt just like in the US. Estimates are about $2 trillion for Europe. The negative effect on Western currencies is already occurring. Japanese yen hit another all-time high against the US dollar forcing the Bank of Japan to spend billions to sell yen after they announced a $725-billion stimulus plan.
Earthquakes occur suddenly without warning as seismic pressure builds up slowly over a long period of time and then goes bang in a few seconds.
Failing banks and failing nations being saved by printing more worthless money. What possibly could go wrong?
When the earthquake starts, expect a 15-percent to 20- percent move on the Philippine Stock Exchange. Expect as large as a 10-percent move in the peso.
This will not happen instantly, of course. This scenario will take several weeks to play out. However, the first rumblings will happen before the end of 2012.
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