Saturday, 21 January 2012

GIR At $75.3B, Surpasses Target

Final BSP Tally For 2011
Manila Bulletin

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) yesterday released the final tally for gross international reserves (GIR) for 2011 of $75.3 billion, higher than previous announcement earlier this month of $75.13 billion.

The BSP on schedule reports preliminary GIR data and usually revise same data at the end of every month as additional data are inputted such as foreign exchange balances.

The full-year 2011 projection was $70 billion but because of higher external accounts from capital inflows and stable remittances, GIR exceeded the target once more.

The 2011 final GIR is 20.73 percent higher or $12.93 billion more than end-2010's $62.37 billion. The highest GIR recorded last year was in November when it reached $76.2 billion.

The Philippine foreign exchange reserves have provided an important buffer for the country, especially during the economic and financial crisis. The GIR and the balance of payments surplus of $10.18 billion in 2011 reflected the country’s strong exports, remittances, sovereign bond issuance, and other capital inflows.

Data from the BSP said foreign investments, a major part of GIR, amounted to $65.27 billion as of end-December from 2010’s $53.44 billion. Gold reserves, in the meantime, totaled $8 billion from the previous year’s $7 billion.

The BSP said the current GIR level is adequate enough to cover 11.1 months worth of imports and goods and payments of services and income. It was also equivalent to 10.5 times the country’s short-term external debt based on original maturity and 6.8 times based on residual maturity.

The bulk of the BSP’s reserves, or more than 87 percent of the total GIR are in foreign investments while almost 10 percent are in gold holdings. Other small reserves are the combined holdings of foreign exchange as well as Special Drawing Rights and the BSP’s reserve position in the IMF.

In terms of currency composition, 74 percent of the total reserves are denominated in US dollars, 16 percent in yen, four percent in euro, and the balance are in SDRs and other currencies.

Friday, 20 January 2012

The HSBC report

A large population is a king's glory, but without subjects a prince is ruined. -- Proverbs 14:28

Thursday, 19 January 2012

Rainstorms and sandstorms

Business Mirror

ECONOMIC “experts” like me have never had it any better. It seems like we have waited our whole lives for a situation to happen like the world has experienced in the last few years. It gives us the opportunity to talk and talk and talk.

Understand that for us, it is like watching a chess match, making comments on every move and giving our “expert” opinion of what should have been played and what will happen next. However, we do serve a useful and maybe even important purpose by hopefully getting people to think about what is happening even if their final comment is that we do not know what we are talking about.

The one thing we “experts” do know is that the situation globally is very unique. There have been many other times that there has been major, even global economic turmoil but it has never been like this for two serious reasons.

I know I have spoken of this many, many times before, but the economic world changed when all nations no longer backed their currencies with any hard asset in 1971.

Currency debasement has occurred for thousands of years when governments reduced the gold or silver content of coins. But people easily understood that. If the new coin contained half as much gold as the old coin, the seller simply charged twice as much. That’s currency induced inflation. But by the same token, eventually wages doubled the same way.

The German Weimar Republic printed trillions of pieces of currency to pay their foreign debt causing hyperinflation. Yet they still had gold in the vault. What they were doing was protecting their hard assets.

The second factor now is the overwhelming influence of the global central banks to influence and actually make monetary policy. And much of that policy is based on what the governments see as good politics rather than good economics.

There are two thoughts about where all this bad government policy is leading. One is super high inflation as trillions upon trillions of dollars, euros and other currencies are poured into the system. That on paper will avoid a global recession as this money should create economic output even if it does not create any real wealth. I like to think of that as a rainstorm.

Rainstorms are hard because you have to fight your way through the tempest to get any place. And you get wet, meaning there is damage. It takes longer to drive somewhere. Accidents happen more frequently. You need to buy wiper blades more often. You do not make as much money, your wealth cannot grow because it costs more to do your business.

Prices go much higher but income stays the same or goes down. You just cannot make any real economic headway.

The other idea is that the government policy to allow debt defaults and bank and company failures will create deflation as economic activity greatly slows down. Standards of living are reduced. More unemployment combined with a fall in both production and prices as people simply do not have the money to buy goods and services to create any significant economic growth.

I think of that as a sandstorm. Traveling during a sandstorm is not that difficult. But finding your way can be almost impossible. You think you are going the right way and suddenly you find that you have been going in the opposite direction. And when you get someplace, there is nothing there.

Companies cut costs to make profits and prices to attract customers and yet there are still no buyers. Companies and people reach a point where they have no idea how to cut back any more. It is an economic desert.

The worst case is what happened in the 1970s, a combination of both rain and sand. And what do you get? A mudstorm. High inflation caused by too much money in the system and very little economic activity. Another term is stagflation.

Stagflation is likely as governments swing between more money in the system and trying to deal with rising inflation.

Why do you think you have seen so many recent studies about how great countries like the Philippines are? Global money knows what the prospects are in the West and the new sweetheart economies like China and Brazil.

The Philippines has a large enough domestic economy to support economic activity and is not burdened with large amounts of public and private debt. It’s all sunshine in the Philippines.

On a personal note, I will be holding a one-day seminar on stock market trading in Cebu at the end of February. I will discuss trading techniques, stock selection, and practical technical analysis. E-mail me at and I will keep you informed.


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

Wednesday, 18 January 2012

SEAIR offers promo fares from Clark to 3 regional destinations

Manila Bulletin

MANILA, Philippines — South East Asian Airlines (SEAIR), the Philippines’ premier leisure airline, is offering a special “Buy 2, Take 1” promo on flights from Clark to Bangkok, Singapore, and Hong Kong until January 25, 2012. The free airfare for every third passenger is valid for limited seats in flights booked online via

Promo is valid for travel on May 1 to June 30, 2012 for Hong Kong, February 1 to June 30, 2012 for Singapore, and March 1 to May 31, 2012 for Bangkok.

SEAIR also announced that it will increase its Clark-Bangkok-Clark flights to five times a week starting May 4, 2012. It will add flights on Fridays and Sundays to its current itinerary of Saturday, Monday, and Wednesday flights.

From March to June, the Bangkok summer calendar is filled with traditional celebrations such as the Makha Bucha Buddhist full moon festival on March 7 when worshippers flock the temples for the wian tian candlelight procession, the Songkran or Thai New Year on April 13-15 which is usually celebrated with ‘water-throwing’ to symbolize purification, and Coronation Day on May 5 which honors the king of Thailand. Modern festivities include the Bangkok International Fashion Week slated for mid-Marchand La Fete music festival in June.

SEAIR distributes its international seats at, through its partnership with Tiger Airways. It is the first Tiger Airways Partner Airline in the Asia Pacific. The airline uses the 144-seater Airbus 319 aircraft for all its regional flights.

SEAIR is the Philippines' second oldest airline, and is the first airline basedin Clark. It has the reputation of having pioneered commercial flights to the country's fastest growing tourist destinations including Boracay, Batanes, and northern Palawan. Now on its 16th year of operation, SEAIR is expanding its reach regionally with its jet services to Bangkok, Singapore, Hong Kong, and Macau.

Tuesday, 17 January 2012

Global Growth Slows to 3.9% as O’Neill Sees BRICs Diminished by Population

Aging and shrinking labor pools are also poised to curb expansion across the other so-called BRIC nations that contributed almost half of global growth in the past decade. With fewer youths keeping factories going and more pensioners to support in those markets, the world economy is set to slow, Goldman Sachs Group Inc. (GS) says.

Read more:

How can the PSE be going up?

John Mangun

TERRORIST threats. Impeachment proceedings. Corruption charges. Global-debt meltdown. Slower economic growth.

The PSE Composite Index reaching a historic high close was absolutely predictable, almost inevitable. In fact, on December 14, 2011, I wrote that the market could reach 5,000 in 2012. That is only about 8 percent higher than where we are now. We can advance higher than that based on the domestic internals that are fueling this market rally.

The Phisix index is up 22 percent in the last three-and-a-half months. Has there been any good news in that time?

How can Philippine Stock Exchange share prices be going up?

One word: money—massive amounts of foreign and domestic money looking for investment opportunities.

For many months, I have been saying there will be very large inflows of capital into the Philippines. And yet foreign direct investment, which all the “experts” worry so much about, is down 24.7 percent over 2010. But even that number is false.

In 2011 foreign companies poured money into their Philippine ventures like call centers and other subsidiaries, resulting in a net inflow of $258 million. But this was 47 percent lower than in 2010 when the net inflow was $490 million. When a foreign company sets up a local subsidiary, they loan the money to the locally registered company to get it started. It is a onetime funding placement and the foreign company does not have to loan much more money to sustain the operation if it is successful.

However, massive amounts of portfolio money did come into the country in 2011.

In the first 10 months of 2011, $7.4 billion was invested in PSE listed stocks. Foreign-investor interest in peso-denominated government securities hit $6.3 billion. That $7.4 billion is the equivalent of all the trading volume on the PSE for three months of trading days. But that only accounts through the end of October 2011. A total of $6.3 billion more was placed in government debt, probably short term.

In addition to the net $7.4 billion in stocks already, with the government signaling as much as a 50 basis points or one half-percent drop in interest rates, some of that $6.3 billion has gone into stocks during the last quarter.

On the domestic side, there is a tremendous amount of money flowing through the economy. Money-supply growth accelerated to 7.2 percent in November, which means that there is more physical money in the economy that must go someplace.

Increasing money supply does often show up in higher inflation. But inflation is lower than the money-supply growth so that infusion of cash is not just going to buy things. It is for investment. Philippine inflation eased to an 11-month low last month.

Another source of money in the economy is lending and this is growing very well.

Outstanding loans of commercial banks grew at a faster rate of 21.7 percent over 2010 and increased at double-digit rates almost every month during 2011.

Companies and consumers are borrowing for good reasons. Corporate loans for production purposes, expansion and the like, had a 22.9-percent growth. This was higher than the 10.7 percent in 2010. Growth in consumer loans also increased 17.9 percent.

Not all of the money is going into the PSE, which is also good. Demand deposits at the banks expanded by 12.4 percent.

However, it takes more than large amounts of money to fuel the stock market. It also takes confidence. It is a good thing to have a government that is sometimes inefficient and late to the party. The private sector in the Philippines is doing a very good job. Look at the banks. The banking system’s asset quality improved with the nonperforming loan ratio sustaining its downtrend path, at 3.3 percent as of end-September 2011 from 3.9 percent in 2011.

In spite of all the problems, local investors believe that maybe this year the administration will turn a little more to the economy. Foreign investors are looking to the Philippines as a safe haven, which is what I have been predicting for a long time. That time has finally come.

The PSE is going up and will continue to rise because the Philippines is rapidly becoming one of the best nations on earth to place funds. Of course, for sustainable economic development, it is all up to the government and its policy-makers. But the foundation of short-term confidence has been laid and the PSE performance is evidence of that.

If big local and foreign money is willing to invest short term in the PSE, it will go long term if the government gets economically serious.

Solo Ride to the Heart of the Philippines