by Roderick T. dela Cruz
The Philippines has lent more money to the rest of the world than what it borrowed over the past couple of years, the Bangko Sentral said in a report released Wednesday.
The Bangko Sentral, in its 2010 Flow of Funds Report, said the country’s net lending to the rest of the world amounted to P385.5 billion in 2010, lower than P450.3 billion registered in 2009.
The country became a net lender to the rest of the world after the Bangko Sentral, banks and other local financial institutions invested in securities issued by other countries such as the United States.
“Securities were the dominant instruments for financial transactions with the rest of the world. Aside from the Bangko Sentral, commercial banks and the insurance sector were the main investors in debt issues by non-residents. On the other hand, the national government was the top bond issuer offshore,” the Bangko Sentral said.
The report presents a summary of financial transactions among the four different institutions of the economy, and between these institutions and the rest of the world. These institutions are financial corporations, non-financial corporations, the general government, and the household sector.
Data showed that total savings in the economy improved to P1.71 trillion in 2010 from the previous year’s level of P1.57 trillion, with all sectors in the economy generating savings.
The household sector, for the third consecutive year, maintained its position as lead saver in the economy with total accumulated savings of P841.5 billion, a modest improvement of 6.4 percent from the year-ago level.
Meanwhile, savings in the non-financial corporations sector steadily grew at 14.6 percent to reach P692.9 billion in 2010, underpinned by strong net income that was observed in all industries, notably in food and beverage, real estate, transport and wholesale trade.
Thursday, 29 December 2011
OUTSIDE THE BOX
A “Black Swan” event is something that happens which is completely unexpected and with far-reaching consequences and effects. It is almost impossible to prepare for something like this.
An example might be the 9/11 terrorist attack, unknown beforehand except to the perpetrators. Another example would be the assassination of Ninoy Aquino. No one expected it. No one was prepared for it.
However, Black Swan events can be progressive. The creator of the concept, Nassim Nicholas Taleb, uses the Internet as a perfect Black Swan event.
The Internet was first created as way for university computers to share information in the early 1970s. Who could have imagined or planned that 30 years later, virtually any person on the earth with a cell phone would be connected through the Internet.
If there are unexpected events that cannot be prepared for, there then should be what I will call “White Swan” events that we should be able to see coming and make preparations for.
Even certain unexpected events are thought through and have contingency plans. Every major news organization in the world has an extensive file of obituaries prepared when a celebrity or well-known person dies. Governments have a plan of succession in the event a leader dies, resigns, or otherwise cannot perform his/her duties.
Natural disasters, no matter how severe, are expected to occur. The fact that the contingency plan may not be complete or effective does not change the fact that they are probable.
In truth, it is a bit silly to think and worry about the Black Swans that could happen because the moment we figure out that they might occur, they really are no longer Black Swans. We can prepare and plan for them.
But for the average person, it is the White Swan events that create the most problems. We know they can and will happen. But when they do happen, we do not have a plan. Because we do not maximize the opportunities of events we can anticipate.
The White Swan events that we will encounter in the next 12 months are right in front of us.
The peso/dollar rate is going to fluctuate. This is what we absolutely do know. That seems obvious yet when the peso moves in one direction for a couple of weeks, it becomes a big story. Currencies were very volatile these last few months. However, the Philippine peso was expected to be stronger toward the end of the year when in fact, the peso/dollar rate is almost unchanged from one year ago.
So where is the peso going to be a year from now? I do not have a clue.
But how do you prepare? Most individuals try to take advantage of peso movement the way they drive, switching lanes every time the car next to them moves ahead. It is simply impractical. If your business needs dollars then either purchase forward contracts or buy the physical currency at whatever price it is now and then factor that price into your financial model. The buy/sell spread on the peso at your local bank is so high that it makes no sense to play the movement.
Trying to anticipate currency-price movements over a longer term is only for professional traders.
The stock market is going to go up and then it is going to go down. But millions of Filipinos who could and should be investing do not. They are afraid of the downs. A wise man once said that if you are afraid of losing, you are more afraid of winning. Market fluctuations are a White Swan that can easily and effectively be taken advantage of.
Your house can be instantly destroyed in an earthquake. So why don’t you move to London; no earthquakes there. Because you manage earthquake risk—insurance, sound building practices and proper preparedness for an earthquake are a white swan.
We know that the Philippine economy is going to be difficult this coming year. So what have you done with your personal and business financial model to prepare?
When Ondoy came, only three houses in my little village did not flood badly. I was fortunate. But when the storm cleared, I bought some sandbags. When the next major flooding hits, I am prepared.
Do you have a worst-case scenario plan if GDP growth hits low-end 2012 expectations of 3 percent? Your business model should include a 10-percent revenue decrease. Can you survive that?
Are your personal finances ready for a likely 5-percent inflation and lower income in 2012?
It is not Mayon Volcano blowing its top that’s going to get you. It is the things you know are coming that you have not thought out and planned how to handle.
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Wednesday, 28 December 2011
THE Civil Aeronautics Board (CAB) has allotted flight entitlements to four local carriers to enable these airlines to offer more passenger seats, and embark on direct flights to Vietnam and—for the first time—to Cambodia.
Cebu Pacific was granted five frequencies while ZestAir was allotted two frequencies to the Manila-Cambodia route. One frequency is equivalent to one weekly-flight.
Airphil Express and AirAsia Philippines Inc. each got seven frequencies to mount flights to the Clark-Cambodia route.
The board also awarded six co-efficients (equivalent to about 160 passenger seats) to AirAsia Philippines. CAB lawyer Elena Moro said these entitlements can be used to field flights to Osaka and Nagoya in Japan from Clark.
Cebu Pacific also got 650 weekly-seats to embark on flights to Ho Chi Minh in Vietnam and 1,260 seats per week to Hanoi from Manila.
ZestAir and Airphil Express were each granted 1,045 seats per week. Moro said these seats can be used to service Manila-to-Hanoi or Cebu-to-Hanoi routes.
Earlier, the Philippines inked an air pact with Vietnam, Papua New Guinea, Sri Lanka and Malaysia.
Last week the CAB assigned to Cebu Pacific, Zest Air and Airphil Express the remaining flight entitlements that would service the Manila-Kuala Lumpur (KL) route.
Cebu Pacific was authorized to mount 720 more seats per week from the current 10 weekly flights representing 1,800 seats a week.
Airphil was allotted 1,260-weekly seat entitlements and 540-weekly seats for Zest Air.
The CAB is part of the Philippine air panel which negotiates for traffic rights with other countries. Aside from the CAB, other panel members include the Departments of Transportation and Communications, Foreign Affairs, Tourism, Trade and Industry, and representatives from the airline companies.
THE Philippines will host the permanent secretariat of the Southeast Asian Chemical, Biological, Radiological and Nuclear Center, a European Union global initiative with a total allocation of P59 billion.
The center to be established in Manila beginning 2012 will help the country in mitigating biological risk like pandemics.
The center is part of the EU Global Initiative that seeks to develop at national and regional levels the necessary institutional capacity to fight chemical, biological, radiological and nuclear risks.
The EU Delegation in the Philippines said in a statement that close to €100 million or P59 billion will be allocated within 2009-13 for the initiative.
Read more: http://www.businessmirror.com.ph/home/science/20804-philippines-to-host-regional-eu-cbrn-center
Tuesday, 27 December 2011
OUTSIDE THE BOX
A “Black Swan” event is a term coined by author, statistician and (of course) financial-market trader Nassim Nicholas Taleb. It describes an event of great magnitude that no one expected and that has large magnitude and consequences.
As examples, he gives the rise of the Internet, the personal computer, World War I, and the September 11 attacks as examples of Black Swan events.
Each year, the European Saxo Bank publishes its list of Black Swan forecasts called “Outrageous Predictions.” For 2011, some of its predictions were that: Apple would buy Facebook which did not happen, perhaps in part because of Steven Jobs’s ill health. It forecast that the price of natural gas would surge 50 percent when in fact the price fell like a rock in 2011 as new and cheap discoveries primarily in the US came on line.
However, Saxo did call the price rise in gold going to $1,800 correctly and the fall of US interest rates on the 30-year Treasury debt falling to 3 percent.
So what is Saxo saying about 2012?
First, the world ending in 2012 is not on Saxo’s list, although I suppose this would be the ultimate Black Swan event. What Saxo does call for is for the price of Apple stock to decrease by 50 percent. For US stock-market players, this would be very significant as Apple would probably be forced to go on a corporate-buying binge looking at many tech and Internet companies to prop up its bottom line. Saxo expects Apple to lose market shares as there are now several good competitors in the smartphone market.
Of course, that has nothing to do with us in the Philippines but is interesting, nonetheless.
Another of its predictions does affect PHL. Wheat prices are projected to double in 2012 as the wheat harvest is 2011 was very poor. Prices should reach levels last seen in 2008. My “White Swan” (a likely event) prediction is that the government will tell us that they are doing everything possible to stop the “unexpected” rise in the price of bread and pan de sal. The “pro-poor” groups will say the greedy bakers are to blame.
Here is a prediction that no one expects to happen but if it does, watch out. The European Union will declare an extended bank holiday during 2012 with all banks and stock markets closed for a week or more.
The European Central bank has just pumped $800 billion into its banking system. It is not nearly enough. In February another $800 billion is planned to be loaded into EU economy.
Remember that the US tried the same thing in 2009 and 2010 with virtually no improvement in its economy. However, taken as a whole, Europe is in much worse shape, economic-growth wise, than the US.
If this stimulus does not help and help within one or two quarters, Europe will be in a recession and have many major failing banks. Stock markets everywhere will take a large hit if there is a bank holiday.
The Philippine Stock Exchange is going to reach 4,800 to 5,000. I am 60-percent confident of that. But you cannot put your stock investments on autopilot in these troubled times. You must be constantly updated with the right information.
If this Black Swan swims in during 2012, the US dollar will go through the roof and the PHL peso will fall on a daily basis the way it did back when Cory Aquino was President. I remember 10-percent daily fluctuations back in the late 1980s.
If that happens, oil prices will go up proportionally. Again, this will all be “unexpected” by the government experts, so you personally need to be prepared.
What are some potential Black Swan events for the Philippines?
I asked a few people and the one answer that was the most frightening and least likely was the death of some leading political figure. Some described this as a natural death, others as not-so-natural.
The others mentioned were mostly natural disasters—volcanic eruptions, floods, and the like.
Understand again, these are potential Black Swans that probably will not happen. But you must be prepared for the unexpected. However, more important is to be prepared for what the probable future will be.
What events both good and bad can we expect to happen in the Philippines during 2012 and how do we plan for them? We will talk about some White Swan events on Thursday.