Thursday, 23 February 2012

PHL poised to become creditor member of IMF

Business Mirror

THE Philippines looks forward to a more meaningful role as a member of the 180-nation International Monetary Fund, having already made available 163.8 million in special drawing rights or SDRs under a currency exchange mechanism known among members as the Financial Transactions Plan or FTP.

SDRs represent a basket of currencies informally known as the currency of exchange at the IMF, equivalent in this case to $251.5 million.

According to the Bangko Sentral ng Pilipinas (BSP), the country’s continued membership at the FTP will pave the way for its admission to the new arrangements to borrow or NAB facility of the IMF.

The NAB seeks to help distressed countries or institutions with the potential to impair or unhinge the international monetary system.

“The participation in the NAB would be a significant step in strengthening international cooperation. This would also demonstrate the BSP’s strong commitment to global efforts to help address threats to the international monetary system,” BSP Gov. Amando M. Tetangco Jr. said on Tuesday.

According to Tetangco, the FTP to which the Philippines had been a participant since 2010, funds the loans and repayment operations of the IMF by using the foreign exchange resources of its financially strong members to support the needs of members with rather weak external sector finances.

The Philippines holds a creditor or reserve position in the IMF through its participation in the FTP, effectively becoming a net lender rather than net borrower since then.

Members with creditor positions at the IMF use their currency to provide financial assistance to other members and earn interest for their use and without actually relinquishing control over these resources as the monies remain an integral part of their foreign currency reserves or their gross international reserves (GIR).

“By virtue of their participation in the FTP, emerging market economies like the Philippines have joined international cooperation efforts to mitigate the spillover effects of Europe’s sovereign debt crisis by enhancing global financial safety nets,” Tetangco said.

The Philippines, after more or less 45 years of reliance on IMF support since its post-World War II founding, finally “graduated” in 2006 when then President Joseph Estrada was in Malacañang.

This was the year when the BSP paid all its IMF commitments well ahead of schedule and facilitated Manila’s exit from the Fund’s Post-Program Monitoring arrangement.

Tetangco said the Philippines has effectively reversed its boom-and-bust cycle of economic growth so typical of the country in the recent past and has strengthened its external payments position by posting a balance of payments surplus the past seven years.

Apart from its reserve position at the IMF, the Philippines is also a participant to the $120-billion Chiang Mai Initiative Multilateralization or CMIM facility which pools the foreign exchange reserves of members of the Association of South East Asian Nations plus the countries of China, Japan, Korea and Hong Kong.

This initiative promises to provide quick-release liquidity support to any member that suddenly finds itself starved of foreign exchange such as when member countries incur a balance of payments deficit.

The Philippines, Tetangco said, has made available $4.552 billion of its foreign exchange reserves to the CMIM.

P1-B loan will allow Clark airport to expand services

Business Mirror
CLARK FREEPORT-—The P1-billion loan obtained by the Clark International Airport Corp. (CIAC) on Tuesday will give it the leeway needed for the expanded operations of two airlines by March and some 1.7 million passengers this year.  
The CIAC and Land Bank of the Philippines (LBP) signed on Tuesday a P1-billion loan facility for the Phase II expansion of the passenger terminal and other support infrastructure of the Clark International Airport (CIA).

CIAC President and CEO Victor Jose I. Luciano and LBP President and CEO Gilda Pico led the signing of the P1-billion loan in simple ceremonies held at the Land Bank of the Philippines building in Malate, Metro Manila.

In a statement, Luciano said the loan will also be used to improve other support infrastructure facilities such as the navigational equipment vital for the operations of the airport. The remaining funds would be utilized for CIAC’s working capital.

The P1-billion loan will also be used for the expansion of the Phase II of the passenger terminal to meet the demands of passenger growth due to the increase of international and domestic flights this year.

Luciano said that CIAC will start on March 5 the bidding of the Phase II expansion of the P360-million passenger terminal that would further accommodate the growing number of passengers at the airport.

Luciano said the domestic operations of Air Asia Philippines begins on March 28 and AirPhil Express on March 29.

Air Asia will commence Clark-Davao and Clark-Kalibo domestic flights and AirPhil Express will start Clark-Davao, Clark-Kalibo, Clark-Cebu and Clark Puerto Pincesa flights.

“In January alone this year, there have been a 37-percent growth of our international flights at the airport, and we expect this to further grow due to the slated domestic flights,” he said.

Luciano said their projection of P1.76 million passengers this year was “just based” on a 50-percent load factor of airlines operating at Clark. They are led by Cebu Pacific Air which was chiefly responsible for generating 767,109 passengers in 2011.

Luciano expressed confidence that the CIA will have more than 5 million passengers by 2015.

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Are PHL stocks too expensive?

Business Mirror

THE Philippine Stock Exchange Index (Phisix) closed yesterday at 4,934. The Phisix has gained over 11 percent since 2012 began and that 11 percent pales in comparison to the performance of many individual issues. Ayala Corp. is up over 25 percent. Ayala Land has gone up over 35 percent, as has Union Bank. And we have seen price increases of 50 percent and more for several mining stocks.
On Tuesday the question of the day was whether the current stock-market rally was for “real” and I noted that investors would ultimately decide the answer through either buying or selling stock in the near and distant future.  The reason people buy stocks is that they believe the share price will increase and sellers think the opposite. In order for prices to go up, there must be a constant and continuing flow of money into the stock market. The stock market is not a zero-sum game in that there is always fresh cash available for investment. It is my belief that the cash is available and the stock market is one of, if not the most attractive investment right now. At some point investors change their perception about where stock prices will be in the future, and selling overpowers buying, causing prices to fall.

However, in one sense buying a stock is no different from buying a shirt. We look for value. The value of a stock is that its price will be higher in the future. The value of a shirt is the way it looks. A shirt with solid gold buttons would have a higher price but if it did not fit or look good, you probably would not buy it. Even with gold buttons the price might be too expensive in relation to its value as apparel.

Every stock has an underlying corporate value based on the intrinsic value of the company and its profitability. But the stock price is more dependent on what investors think the future value will be rather than the current value.

In July 2011 stock-market icon Mark Mobius said the PSE was “getting expensive.” The Phisix was then 4,300. A few days ago, he said  “The good stocks are very expensive.”

The most common measure of expensive/cheap is the price earnings ratio (PER), stock price divided by earnings per share (EPS). The idea here is that if all the profits were taken out of the company each year and given to shareholders, how long would it take to get your money back.

“The local market is quite pricey relative to our regional counterparts at 17 trailing PER [for the Phisix]. It is also expensive by historical standards as we are trading way average multiples,” said one local stockbroker.

Let’s analyze Ayala Land (ALI). For 2011, ALI’s EPS was P0.55. That is a PER of 38, which is relatively very high. If all of ALI’s profits were paid out, it would take 38 years to get the P21 share price back. Yet ALI just hit a new historic high.  However, PER is a snapshot of price against earnings and not against earnings growth. In ALI’s case, for the last two years profits were up 30 percent annually. Another measure of value is the price/earnings-to-growth ratio (PEG).

PEG is a measure by which you can judge if a stock’s PER and price are reasonable for its growth rate. ALI’s PEG based on 2011 PER is a low 1.3. The lower the PEG ratio, the bigger the bargain you are getting. This is the true test as to whether a stock is expensive or not. By comparison, Jollibee (JFC) has a PEG of 1,040 because of relatively flat profit growth and a PER of 33. MetroBank (MBT) has a PEG of 0.9 because the current PER (20) is lower than ALI.

Current PEG evaluates if the current PER is justified based on past earnings growth. Now we project into the future. If, and it’s a big if, current PER stayed the same into the future and current growth continued the same over the next three years ALI would be P45. MBT would be P158. JFC would be P104.

However, if all the PER of these issues in the future was 20 (like MBT), then ALI would trade at P23, MBT at P149 and JFC at P60.

Therefore, based on past earnings growth relative to current price and future projections, ALI is now fairly valued, MBT is undervalued, and JFC is overvalued.

Are PHL stocks too expensive? The answer is simple and obvious: yes, no, and maybe. That is why you must do your homework and be selective when buying your stocks.

E-mail to and Twitter @mangunonmarkets. PSE stock-market information and technical-analysis tools provided by Inc.

Wednesday, 22 February 2012

Electronics attract $2.477-B investment

Business Mirror
The Philippine electronics industry attracted $2.477 billion in fresh investments in 2011, the highest ever, and the new projects are expected to generate an estimated $5 billion in additional export revenues annually once they go into full commercial operation.

“Our rule of thumb is every $1 of investment generates $2 in additional exports,” Ernie Santiago, president of Semiconductor and Electronics Industries of the Philippines Inc. (Seipi), said.

Read more:

Is the stock-market rally for real?

Business Mirror

IT cannot be said for certain that a crisis brings out the best in people. However, during a time of chaos we do tend to think in very simplistic terms. Everything appears as an “either/or” situation. Fire and ice, right and wrong.

It is easier to lead people by shaping the discussion in those terms because it leaves little room for considering other options. Every action movie usually comes down to the Rambo-like hero saying something like “Either come with me or you are going to die.”

Leaders in the West, particularly in the US, did not present to the public any options for dealing with the three-year-long financial meltdown. It was “Do it our way or the economy will collapse.” “We must spend taxpayers’ money to bail out the banks or the financial system will fail.”

Never in my adult life have I seen the political and economic discourse framed this way with such intensity. And it looks to be nearly universal and global.

During times of crisis, it is natural to look to the authority for proper advice as the doctor when ill or the pilot on the airplane. However, when the extent of our personal analysis is “That sounds right to me” and no further, society is in desperate trouble.

Into popular usage is the term “sheeple” to describe a group or an individual who follows a certain line of thought and opinion without critical examination, research, or analysis.

The first mention of the word “sheeple” in print was in 1950. The Wall Street Journal first reported the word used as a label in 1984 to describe taxpayers who blindly accepted how the government was spending their money.

Left to their own devices, sheep are stupid mammals. Take away the fence of their pen and they just stand there. They are easily led. On ranches, sheep willingly follow the Judas goat to the slaughterhouse. Judas goats are banned on sheep ranches in Europe but not on their political farms.

I fear that too many stock-market investors sometimes have a “sheeple” mentality. Take initial public offerings (IPO), for example.

On stock markets around the world, IPOs have an unpredictable track record, marked by great inconsistencies. Yet, investors keep coming back to IPOs expecting a pot of gold. They listen to and believe the company excitement and do not do any research about it. My advice is to buy them all or buy none. Or do some research to pick the winners.

Splash Corp. came in 2007 at about P9. It now trades at about P1.88. Cebu Pacific had a recent IPO at P130 and it has dropped to P75. Calapan Ventures started at about P2.60 and now at P2.30. Puregold started at about P12 and has risen to P22. Philex Petroleum has gone up from about P7.50 to P10.50.

But, none of the above numbers actually mean anything. The winners could have all been bought within days of their IPO at a premium of 5 percent or 10 percent on the way up. The losers were all lower than the IPO price within two weeks of the first trading day.

A recent IPO in the US, Facebook application provider Zynga has doubled since its December 2011 listing. But you could have bought it at the IPO price a month after the first trading day.

You do not have to be one of the stock market “sheeple.” You, too, can be a real expert.

The big question now for investors: Is the PSE in a bull-market rally or will the recent jump in prices soon come to an end? If you have been in the market since June 2011, then you know enough to make that call. You tell me. These are some of the signs of a bull-market rally.

All industry sectors go higher.

Negative headlines and bad news are ignored. Price breakouts have higher follow-through and when you bought on dips, you made money.

There are so many stocks making price breakouts that you are confused which ones to take advantage of.

Stock prices are rising on increasing volume. The pullbacks are on lower volume.

And, perhaps, the most important way to recognize a bull market is that you ask yourself why this or that stock is up so much today without any news. Sometimes no news is good news. Positive sentiment and investor confidence are powerful forces that can continue longer than you might expect and have a bigger impact than most investors understand.

Is the stock-market rally for real? Your call. If you say, yes will buy and prices will continue to rise. Say no and sell and the rally is over. You will decide the direction of the market.

E-mail to and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by Inc.