October 15, 2007

Be thankful. Cultivate an "attitude of gratitude." Thankfulness is much more
dependent on attitude than circumstance. When you feel the lack of
what you don't have, thank God for what you do have! At any time,
there is more going right in the life of a committed Christian
than there is going wrong. It's just that the "wrong" makes a lot more noise than the "right."

-Jim Stephens, GraceNotes

Appellate court reinstates estafa case vs executives of UrbanBank. The Court of Appeals has ordered a Makati regional trial court to revive a P4.5-billion estafa case against the officers of the closed Urban Bank. In a 16-page decision penned by Associate Justice Remedios A. Salazar-Fernando, the seventh division of the appellate court said the former bank officers should not be allowed to get away without explaining the allegedly anomalous transactions. "The bank is under obligation to treat the accounts of its depositors with utmost care, always having in mind the fiduciary nature of their relationship," the court said. "[The officers of Urban Bank] should not be allowed to go scot-free without shedding light on the anomalous transactions involving billions of pesos that led to [the bank’s] closure and even to the alleged suicide of accused [Teodoro C. Borlongan]," it added. Mr. Borlongan, who died in 2005, was the former president of the bank and was named one of the respondents in the case. The others were Arsenio Bartolome III, Corazon M. Bejasa, Nida S. Santos, Milagros Santiago, Rowena Punsalan, Chulla Formanes, Loida O. Payonga and Amalia Ordas. Bworld pS2/1 (related stories in Bmirror pA6, Malaya pA2, Mstandard pA1, Mbulletin p8)

BSP eyes tweaking mandatory deposit reserve. The BSP would not hesitate to make adjustments to the mandatory deposit reserve of 25 percent should liquidity prove intractable, official said on Friday. It is one policy instrument that the 7-man Monetary Board would rather not use unless its hard is forced. BMirror pA1

BSP considers reserves hike amid high liquidity. The Bangko Sentral ng Pilipinas (BSP) hinted at resorting to an increase in required deposit reserve currently at 25 percent of a bank’s total if liquidity level continues to rise. "The banks’ deposit reserve requirement is a blunt instrument but that’s an option," a member of the policy-making Monetary Board (MB) said. The BSP last made changes to the reserve requirement more than two years ago. The option was again raised over market observations that the BSP’s moves to mop up excess liquidity may not be able to hold in the face of a continuous rise in liquidity. The required deposit reserves were last raised from 21 percent to 25 percent in July 2005, which meant that banks can use only 75 centavos of every peso deposit for lending and other commercial purposes while the portion reserved is kept in the BSP. Tribune p8

Tetangco named one of world’s top 7 central bankers. Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. has been named one of the world’s top seven central bankers, receiving the top score in the annual survey of central bank chiefs worldwide. According to the Global Finance magazine in its annual Central Banker Report Card for 2007, Tetangco was one of seven top central bankers in the world, wielding monetary tools to contain inflation and able to resist intense political pressure for short-term economic relief. The survey covered a total of 31 heads of central banks worldwide. It is the second year that Tetangco had joined the list although this year, his overall rating went up to A from last year’s A-minus. Pstar pB2, Bmirror pA1, Inquirer pB7, Mstandard pB1, Mbulletin pB1, Tribune p8, Malaya pB9, Mtimes pB1

Trust assets held by investment houses, banks up 23% to P1T. Assets managed by trust institutions in the country hit P1 trillion in the first semester as investors shifted to alternative instruments due to the low interest rates on deposits. Philippine central bank data showed the total trust assets held by banks and investment houses surged by 23 percent to P1.07 trillion in the first six months of the year from P872 billion in end 2006. Trust assets are considered off-balance sheet items in banks' and quasi-banks' books. This is because clients assume all the risks that go with these assets, as opposed to traditional deposits whose interest rates are guaranteed. Traditional trusts and other fiduciary accounts accounted for P546 billion or 51 percent of the industry's resources. This group of services includes businesses generated from the appointment of retirement, pension and provident funds and pre-need trusts as trustees of living and other personal and corporate trusts, as well as trustees of mortgage and collateral trusts and as facility. Inquirer pB6

LBP taps Citi, Deutsche Bank for Tier 1 issue. Deutsche Bank and Citibank have been hired by Land Bank of the Philippines to lead manage and arrange  its $100-million worth of hybrid tier 1 capital notes slated sometime next month. Industry sources disclosed the bank's board has selected the two foreign institutions among the 14 that have responded to the request for proposal in September. Mbulletin pB7

BSP says no to forex inflow restrictions. The Bangko Sentral ng Pilipinas (BSP) said it would not impose restrictions on foreign inflows to reduce the adverse impact on domestic liquidity. BSP Governor Amando M. Tetangco Jr. said over the weekend that rather than imposing restrictions, the BSP would instead implement further liberalization to ease both inflow and outflow of foreign exchange. The dramatic increase in foreign exchange inflows in the form of investments and remittances have led to a surge in domestic liquidity and the rapid appreciation of the peso against the dollar. But Tetangco said the negative impact of inflows would not be helped by imposing restrictions which would only create distortions in the financial market. Pstar pB1 (related story in Malaya pB9)

Rate cut signalled a stable economy — BSP. The Philippine Economy remains in good shape and monetary authorities are not surprised by still strong capital inflows following a policy rate cut earlier this month. The Bangko Sentral ng Pilipinas (BSP) pared its key policy rate by a quarter-percentage point to 5.75% last October 4, which some analysts have said was aimed at slowing capital inflows that have been buoying the peso. "Capital inflows will not necessarily go down when you cut the interest rates," BSP Deputy Governor Diwa C. Guinigundo said. "The signal the rate cut sent to the market was that the central bank is so confident of its inflation outlook that it’s able to bring down its rate," he added. "So, the signal to investors is that the economy will remain stable and there’s scope for making money in the Philippines." Bworld pS1/1

Central bank intervention won’t stem peso rise-IMF. The International Monetary Fund (IMF) said central bank intervention in foreign-exchange markets is ineffective if capital inflows are persistent. The warning comes at a time when the Bangko Sentral ng Pilipinas (BSP) is incurring record losses due to its dollar-buying, aimed at stemming the rapid rise of the peso. "Intervention may help initially to contain exchange rate pressures from capital flows, but intervention is not effective when these inflows are persistent," Simon Johnson, economic counselor and director of the IMF’s Research Department, said in the lender’s World Economic Outlook (WEO). Mtimes pB1

Investors bullish on growth. The BSP said the recent cut in the key overnight rates has not dampened investors’ sentiment but made them more bullish on Philippine growth prospects. Malaya pB9

Shortfall to stay. The Bureau of Internal Revenue (BIR) is projecting a P38.6-billion yearend shortfall, admitting that revenue-raising efforts will only allow it to hit its second semester target and not recover from a disastrous first half. This comes in the wake of reports that the bureau again failed to meet its goal in September. The BIR was supposed to collect P55.3 billion last month to enable it to hit a P193.6-billion third-quarter target. The Customs bureau, on the other hand, has said it exceeded its P19-billion September goal. The government’s September fiscal situationer is expected to be issued this week. In a recent report to the Finance department, the BIR indicated that it expects to end the year short by P38.6 billion, the same shortfall it notched at the end of the first semester. Bworld pS1/1

Low rate environment to pull down 10-year T-bond. The ratev of the 10-year Treasury bond is expected to decline at tomorrow’s auction given the country’s low interest environment. The debt instrument is expected to yield between 6.875% and 7%, 75.6 to 88.1 basis points (bps) lower than 7.756% it fetched at the auction on Aug. 21. "We expect the rate to ease. We had the peak of the US subprime mortgage crisis back then, and we have the low interest rate scenario right now," a government securities dealer said. Bworld pS2/2

Share prices may hit new peak this week. Share prices will likely touch a fresh record this week on the back of positive economic data and strong corporate earnings. Good news appears to be out-weighing the bad, adding to the market’s overall positive sentiment in recent trading, dealers said. For the week to Oct. 11, the composite index gained 1.28% or 48.29 points to 3,824.20 points. Markets were closed on Friday for a religious holiday. Average daily turnover fell to 4.6 billion shares worth P4.625 billion from 6.94 billion shares worth P6.7 billion in the previous week. Bworld pS2/4 (related story in Pstar pB4)

3 stocks in regulators’ watchlist. The Securities and Exchange Commission and the Philippine Stock Exchange have placed three stocks in their closely-watched market for their unexpected trading trend. In their letters to regulators, Pacifica Inc., Dizon Copper-Silver Mines Inc. and Information Capital Tech Ventures Inc. said company insiders, apparently referring to senior officers, members of the board and iother executives know nothing about the unusual price change in their traded shares. BMirror pB2

Cost of siphoning off excess money surged in Q2. The Bangko Sentral ng Pilipinas' (the Philippine central bank) aggressive use of high-yielding special deposit accounts (SDAs) since May has nearly tripled the cost of mopping up excess money in the system in the second quarter of the year. BSP statistics showed that interest expenses on these SDAs surged to P2.66 billion in the second quarter from only P957 million in the first quarter. The second quarter cost even exceeded the P2.21 billion in interests paid by the BSP on these instruments for the whole of 2006. This can be attributed to the surge in the volume of placements in SDAs following the relaxation of the rules governing placements in these instruments. Inquirer pB7

Sequestered asset sales to raise P23B. A government agency tasked with recovering the Marcoses’ ill-gotten wealth is planning to sell some P23 billion worth of recovered assets over the next three years. "We have to generate income for the government under terms advantageous for us, subject to the final approval of the Privatization Council," said Alfredo dela Paz, director of the Presidential Commission on Good Government’s (PCGG) asset management department director. PCGG documents show over half the assets (63.55%) as real property worth P14.91 billion, a little under a fourth (22.72%) comprising shares of stock worth P5.33 billion, and the rest involving broadcast assets worth P3.08 billion. Another P137.5 million is expected to be raised from the sale of jewelry. Bworld pS1/1

Income tax perk to cost gov’t P1B. Revenue losses amounting to roughly P1 billion will result from income tax exemptions for minimum wage earners, the Finance department has estimated, but the losses were said to be negligible in the aim of providing financial relief to the sector. In various correspondence with Congress, where measures seeking to exempt minimum wage earners from the income tax have been filed, the department said annual losses would amount to P950.72 million based on Labor and Budget department data. It said some 365,000 minimum wage earners in the private sector and some 84,000 government workers belonging to salary grades 1 to 4 would benefit. Bworld pS1/1

Peso seen breaching P44/$1. The peso is expected to break down the P44 barrier today, supported by large dollar inflows from overseas Filipino workers (OFWs) that mounted due to the long weekend. A foreign bank treasurer, also, believed the appreciation of the peso will continue this week. Mbulletin pB1

BSP monetary tools adequate. The Bangko Sentral ng Pilipinas (BSP) has enough capital or reserves to continue implementing tools to mop up excess money in the system and bring down liquidity growth to lessen the risks to inflation. The BSP has been siphoning off excess money supply via its special deposit accounts (SDAs) to take out of circulation. Mbulletin pB1

SDAs raise BSP's interest expese to P2.65 billion. The Bangko Sentral ng Pilipinas (BSP) interest expenses on its special deposit account (SDA) amounted to P2.656 billion in the second quarter of the year. The increase was mainly contributed by the cost of the SDAs, which expanded 1,699 percent from only P956 million in the first quarter. Mbulletin pB2

OFWs now more investment savvy. Filipino workers abroad are now paying more attention to investment opportunities in the home country than the fulfillment of their family obligations, a new Bangko Sentral ng Pilipinas study suggested. The BSP study revealed that domestic economic prospects and the peso-dollar movement now influence overseas Filipino workers' decision to send money to their families back home. Inquirer pB12

UOB Group revises Philippine growth forecast. Singapore's United Overseas Bank (UOB) Group expects the Philippine economy to continue expanding this year but has raised concerns over the implications of poor tax revenues. It also said the current strength of the economy should provide the Bangko Sentral ng Pilipinas the option of "comfortably" keeping its present monetary policy stance. Bworld pS1/1

Peso at 38 by 2008. (PHILEQUITY CORNER By Valentino Sy, Pstar) Going forward, we expect the strong peso drivers in the first half to continue through the year’s end and towards 2008. Other catalysts include the successful privatization of other government assets (remaining PNOC-EDC stake, NPC power plants, transmission assets, San Miguel Corp. and Meralco shares, etc.) and the long-awaited credit upgrade. Already, the BSP is at the losing end trying to slow the peso’s rise while foreign reserves have risen to almost $31 billion as a result of the intervention. While this strategy may work in the short-run, this is very costly to the BSP which has reported losses of over $713 million for the 1st half of 2007. In the long-term, however, we believe that the virtuous cycle of debt reduction, accelerating economic growth, plus strong OFW remittances, FDI and portfolio inflows will maintain upward pressure on the peso. Thus, we are now looking at an end-2007 exchange rate target of P43/US$1 and end-2008 target of P38/US$1. Pstar pB4

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