Wednesday, October 20, 2004
Foreign banks worried over delay in tax bills' approval
Exports exceed imports in August
Oil prices expected to rise anew
Napocor to raise prices despite lower debts
Palace works on electronics firms' concerns
US electronics firm to invest $300M for new products
Reenacted budget to result in lower-than-expected deficit
Inflation rate seen to breach 7% mark this month
Distillers, importers clash on tax rates for liquor, spirits
Virgin coco oil exports seen to grow twofold soon
DaimlerChrysler to buy abaca fiber from RP
Four-year bonds at 11.875%
Debt servicing reduces central bank's net worth
Bank of America's local unit exits debt dealing
Market integrity board chief seeks brokers' cooperation
Meralco seeks OK to refinance debt
Globe to spend $350M for expansion plans in 2005
Phisix down on oil, Jollibee results

Tuesday, October 19, 2004
Investment priorities include fashion, health
Peso can recover to below PhP50:$1 by '05
Monetary officials seen to keep rates steady
Gov't to fix Channel 4 for PhP550M
Asian property sector rally stutters in September
Malacaņang downplays destabilization talk
Envoy to UN hits labeling of Arroyo as 'weak leader'
House pressed on budget approval
Finance dep't cuts proposed 'sin' tax rate
Credit ratings team in town
Singapore bank sees RP growth at 5.4%
Securities dealers to ask for review of auction rules
Asian spreads steady; eyes on $2B in new issues
Peso barely budges vs dollar; range-trading seen today
Nenaco president resigns
As shipping company files petition to delist from PSE
National Steel rehab cost so far at PhP900M, says Global
Jollibee 3Q net hurt by high oil prices
Cuervo bidding for Transco contract to appraise assets
Meralco projecting savings through power producers
Stocks inch up in brisk trading

October 15- 16
October 13- 14
October 11- 12
October 7 - 8
October 5 - 6




Foreign banks worried over delay in tax bills' approval

By KAREN L. LEMA, Reporter

Foreign banks that finance many of the country's development projects are worried lawmakers are hindering the debt-ridden government from better managing its finances. And their worries, in turn, can adversely affect future funding for programs relying on grants or loans from groups like the World Bank, Asian Development Bank, and the International Fund for Agriculture Development, a ranking government official said. "They [banks] have queries whether Congress will be cooperative in terms of passing the set of legislative measures being proposed by the Executive. That has always been the question: whether there is that momentum in Congress," said the official, who requested anonymity. The official said the banks -- all multilateral institutions or co-owned and co-funded by many countries -- aired their concerns during recent discussions on possible financing for the government's medium-term development plan. The plan details the government's fiscal and other economic targets for 2004 to 2010.

World Bank, Asian Development Bank, and the International Fund for Agriculture Development are working on new Country Assistance Strategies for the country for 2005 to 2008. These strategies will detail the banks' social and development programs for the Philippines, including their financing. The official said the banks urged the government to also look into how "the academe and the civil society can help convince the legislature" to support several bills:

  • on a PhP2 per liter increase in the excise tax on oil products;
  • on raising excise taxes on cigarettes and alcohol products based on their price increases;
  • on raising the value-added tax rate;
  • on shifting to gross income from net income taxation;
  • on a new amnesty for delinquent taxpayers;
  • on an attrition system that will encourage government agencies to hit revenue targets;
  • on a franchise tax on telecommunication companies; and
  • on removing some tax exemptions given to investors as incentives.

The banks, in turn, were assured that the "Executive is exerting all efforts to push the bills in Congress, and convince [lawmakers] to support their passage." Socioeconomic Planning Secretary Romulo Neri said previously that the government's economic tragets could be achieved by improving, among others, the government's management of its finances. But crucial to this is the approval of revenue-enhancing bills pending in Congress, which are projected to earn for the government an additional PhP100 billion yearly. The government's budget has been in deficit for many years now. Officials aim to again balance the budget by 2009, and drastically cut public debts.

At the Palace, President Gloria Macapagal Arroyo asked Congress to approve by yearend four of the eight "revenue" bills it had proposed, to assure investors and lenders that the government was fixing its finances. "The passage of half of the eight tax measures we have proposed will generate enough momentum towards putting our fiscal house in order, and generate the level of confidence to carry our economy forward," the President told reporters. Lawmakers insist the government should first fix collection problems before asking for new taxes. International credit ratings agencies earlier warned of a poor score for country's debt ratings should Congress fail to approve any of the revenue bills. A lower debt rating prompts creditors to ask for a higher premium, and thus raise the cost of government borrowings abroad. The House of Representatives has pledged to approve four out of eight bills before yearend: on tax amnesty, on the attrition system, on higher taxes on cigarettes and alcohol products; and on limiting tax perks for business. House Speaker Jose C. de Venecia Jr. yesterday appealed to lawmakers to approve these bills this year. But the Senate has so far vowed to approve only the higher taxes on cigarettes and liquor. Mr. de Venecia said this was also his priority. "This is our litmus test, otherwise, we will come out looking irresponsible and irresolute about addressing the fiscal crisis before the international creditor community," he said in a radio interview.

Tarlac Rep. Jesli A. Lapus, House of Representatives ways and means committee chairman, has set a November 15 deadline for the tax's approval. His committee has approved the amnesty and attrition bills, and would again discuss fiscal incentives next week. He said the franchise tax on telecommunications companies would follow. The bill that will require submission by taxpayers of statements of assets, liabilities and net worth is expected to be approved by the House before yearend, he added. The President, meanwhile, tried to assuage concerns in both chambers of Congress that the Palace was trying to take the easy way out of a looming fiscal crisis by seeking new tax measures aimed at tapping a proven -- but already burdened -- tax base, without plugging tax leaks. "The fate of our economy truly lies in a strong executive-legislative partnership," she said. "The executive will continue to do its part in cleaning up the system and plug revenue leaks, enforcing political stability and the rule of law."



Exports exceed imports in August

The country in August reversed five consecutive months of trade deficits as its earnings from the sale of goods abroad exceeded its spending on foreign goods like oil. This was despite higher oil prices that month, which substantially raised the country's dollar spending. A small trade surplus of $36 million was reported for August by the government statistics office yesterday as the annualized growth rate of export receipts for the month also outpaced that of import spending. But for the eight months to August, the trade deficit was still $1.479 billion, slightly down from $1.671 billion in the same period last year. Exports in August grew by 8.5% year on year to $25.3 billion, while imports rose by 7.2% to $26.7 billion.

An economist said the country made more money on exports in August as it benefitted from the growth of the economies of its trading partners. "Practically, our export market is improving," said economist Bienvenido S. Oplas, Jr. of Think Tank, Inc. "It should be expected that the bills of all oil-importing countries have gone up because of the petroleum price hike factor. On the exports side, there are a lot of economic recovery happening, be it in America, Japan and many other emerging economies," he added. August import spending grew by 8.9% year on year to $3.379 billion while export earnings grew by 13.7% to $3.415 billion. In August, spending on imported mineral fuels, lubricants, and related materials grew the most at 33.82% year on year, to $428.97 million from $320.56 million. The benchmark Dubai crude traded at an average $38.54 per barrel in August, from only $27.60 last year.

Another principal driver of import growth was consumer goods, with spending rising by almost 15% year on year to $277.74 million from $242.31 million. Durable consumer goods were at the forefront of the upswing as payments for imported cars and motorcycles grew by 36.63% year on year to $39.89 million, and on home appliances by 61.69% to $19.94 million. Spending on imported food and live animals, also chiefly for food, rose by 20.96% to $163.25 million. "Probably this indicates an anticipated increase in the buying power of not all but a big portion of the population. I believe most will be coming from [overseas Filipino workers]," given large remittances during the Christmas season, he said. "It is a function of [workers'] money coming in and seeking plenty of goods to buy. Some of these goods are not produced locally, so we have to import them," he added. The August import bill for raw materials and intermediate goods, which represent about 38% of total, also went up by 6.63% year on year to $1.240 billion. These include unprocessed and semi-processed raw materials like wheat, corn, unmilled cereals, inedible crude materials, unmanufactured tobacco, feeding stuffs for animals, and chemical and chemical compounds, etc.

Spending on imported capital goods (also 38% of all imports) -- such as power generating machines, telecommunications equipment, land transportation equipment except passenger cars and motorcycles, and aircraft, ships and boats -- even declined in August by 1.28% year on year to $1.241 billion from $1.257 billion. Electronics and components, which accounted for 43% of the total import bill, were the top import items in August. Nonetheless, spending on them actually fell by 2.89% year on year to $1.437 billion from $1.480 billion. Electronics were followed by mineral fuels and lubricants, industrial machinery and equipment, cereals and cereal preparations, and transport equipment.

Other top imports were iron and steel; textile yarn, fabrics, made-up articles and related products; plastic in primary and non-primary forms; telecommunication equipment and electrical machinery; and organic and inorganic chemicals. In August, Japan was the country's biggest source of imported products with 18.36%, or $621 million, of the total import bill. Its total trade with the Philippines hit $1.289 billion. The Philippines also enjoyed a $288-million trade surplus with the United States, with total trade at $1.408 billion. Its trade surplus with Singapore totaled $8 million, with total trade at $512 million. Total trade with the People's Republic of China, Taiwan, and Hong Kong was $441 million, $430 million, and $397 million, respectively.


F.O.B. Value in Million U.S. Dollars
Electronics Products 1,436.93 1,479.62
Mineral Fuels, Lubricants 428.97 320.56
Industrial Machinery & Eqpmt 130.78 139.52
Cereals and Cereals preparation 98.63 56.56
Transport Equipment 95.04 100.31
Iron and Steel 85.72 72.31
Textile yarn,fabrics made-up Articles & related products 78.55 64.71
Plastics & Non-primary forms 73.48 64.30
Telecom. Eqpmt/Electr. Machine 66.84 75.72
Organic and Inorganic Chemical 66.00 53.13

Source: National Statistical Office

In a memorandum for President Gloria Macapagal-Arroyo, National Economic and Development Authority (NEDA) chief Romulo L. Neri said the August import growth indicated rising consumer demand. He particularly noted the double-digit increases in import spending for telecommunication products, medical and industrial instrumentations, and automotive electronic products.

"This is an indication of the robust growth in call/contact and business process outsourcing services, and the medical and health industry," Mr. Neri said in a statement.

University of the Philippines economist Ernesto Pernia said rising imports may signal well for exports for September. "Our export growth for September will be okay, but exports for October to December may slow down due to expected slowdown in global demand," he said.

As for the $36-million trade surplus for August, he said this was due largely to the pick-up in world demand for electronics in July and August.

Mr. Pernia also noted the country's oil bill these past few months was lower than those in the May-June period, as the country got a reprieve from sharp increases in global oil prices. -- Rizzarene S. Manrique with Jennifer A. Ng



Oil prices expected to rise anew

Oils and fuels are forecast to become more expensive this week, with production uncertainties in oil-exporting countries seen continuing to push up world oil prices. But small oil retailers belonging to the Independent Philippine Petroleum Companies Association, which account for about 15% of the local market, said diesel prices were likely to rise first. Total Philippines Corporation had already raised its diesel and kerosene prices by 35 centavos per liter last night. Other oil companies had yet to announce price increases as of press time. Energy Secretary Vincent S. Perez Jr. asked oil companies to limit any price hike, even as he warned of even higher fuel prices in coming months. "Prices have continued their relentless march higher and are expected to be in the upward trend until the end of the year with the coming of winter season in the Northern Hemisphere. We have to brace ourselves," he said in a statement released yesterday. Tight supply of diesel, which is used as heating fuel in the United States and Europe, has kept its price on steady uptrend, Mr. Perez said. There were also disruptions in production because of an oil workers' strike and threats of rebel attacks in Nigeria, production losses in the Gulf of Mexico due to several hurricanes, continuing violence in Iraq, and the ongoing legal and financial problems of Yukos, Russia's largest oil company.

For his part, businessman Raul T. Concepcion said he would discuss with oil companies the possibility of weekly oil price increases. He also said the Consumer and Oil Price Watch, which he heads, would not object to higher diesel prices by Total and Caltex Philippines Inc., given their need to recover about PhP1.71 per liter for September. But Mr. Concepcion appealed to Petron Corp. and Pilipinas Shell not to raise their prices this week. He said oil refiners companies favored a shift to current month average (September) from previous month end average (August) to determine price changes (for October) given the volatility of world market prices. Energy department data showed Dubai crude climbed to $37.69 per barrel in October from $35.55 in September, while Singapore-traded unleaded gasoline imported by retailers rose to $54.88 from $49.04. Singapore-traded diesel rose to $57.60 from $54.29, while the contract price for cooking gas (liquefied petroleum gas or LPG) rose to $401.50 per metric ton from $383.00.

Meanwhile, Independent Philippine Petroleum Companies Association chairman Fernando L. Martinez said going back to a regulated oil industry would further push up oil prices. "In a deregulated industry, competition is the stimulus for oil companies to excel or make better, and the consumers have the power of choice," he said. Also yesterdday, the National Price Coordinating Council, a multisectoral body tasked by law to monitor prices, has joined calls for an oil price rollback initiated by Consumer and Oil Price Watch's Mr. Concepcion. In a statement, the Department of Trade and Industry said it has asked Mr. Concepcion to brief the council meeting today on his basis for a price cut. Adrian S. Cristobal, Jr., Trade undersecretary for consumer welfare, said the council would study claims that oil companies have accumulated "over-recoveries" while continuing to increase pump prices. "A rollback is a definite respite for producers and traders who rely heavily on fuel for production and in distribution of basic goods; a decrease in fuel prices will help keep prices stable and control inflation," Mr. Cristobal said. He urged oil companies to "reflect the correct prices in their retail stations."

Noting that the price council's role was to keep prices of basic necessities and prime commodities stable, Mr. Cristobal said "deregulation does not mean the government has no role to play; it must ensure responsible and fair behavior." After computing the price difference of Dubai crude, Singapore-traded diesel, and Singapore-traded gasoline as of October 8 vis-a-vis September, Mr. Concepcion claimed Pilipinas Shell Petroleum Corp. has an "over-recovery" of 53 centavos per liter for gasoline and 34 centavos per liter for diesel. Petron Corp. has an "over-recovery" of 18 centavos for gasoline and 24 centavos for diesel. Smaller oil firms have a 35-centavo "over-recovery" for gasoline, but a PhP1.71 "under-recovery" for diesel, he added. -- Felipe F. Salvosa II and Bernardette S. Sto. Domingo



Napocor to raise prices despite lower debts

State-run National Power Corporation (Napocor) will still need a PhP1.0775 per kilowatthour rate increase next year, even if the government assumes about PhP200 billion of its debts this year, Senator Ralph G. Recto claimed yesterday. Citing documents submitted by Napocor to the Senate, he said, "the absorption will only lessen, but will not take away all the pain of its customers." He noted the PhP200 billion would just cut debts incurred by Napocor for its expansion. But the rate hike will pay for operating and interest expenses, he said. The PhP1.0775-per-kilowatthour increase next year, if approved by the Energy Regulatory Commission, will raise electricity cost to PhP4.5461 per kilowatthour. Another rate increase of 33.37 centavos per kilowatthour in 2006 will put power cost at PhP4.8834. "The result is that the cost of power as early as 15 months from now can be 83% higher than the pre-September 2004 rate of PhP2.48 per kilowatt hour. The people, as power consumers, will foot the bill of PhP170.8 billion in just two years for bringing Napocor out of the intensive care unit," Mr. Recto said.

President Gloria Macapagal Arroyo last October 12 ordered the government to directly assume PhP200 billion of Napocor's debts. Senator Manuel A. Roxas II had noted this PhP200 billion was only 34% of Napocor's PhP600-billion debt, and 17% of its PhP1.2-trillion combined debt and non-debt liabilities, including payables to electricity suppliers. But the Power Sector Assets and Liabilities Management Corp. (PSALM) claimed the debt transfer would help hasten the sale of Napocor plants to private investors and prevent an increase in electricity rates. PSALM is the residual company that will assume Napocor liabilities once the power company is sold. It said that if the government would not shoulder all of Napocor's debts, their payment would be passed on to consumers in the form of higher prices. This, in turn, will adversely affected the competitiveness of the economy, particularly local industries. "The PhP200-billion debt absorption is also a necessary step to complete the sale of Napocor's assets," said pSALM President Raphael Perpetuo M. Lotilla.

Under the power reform law, "the national government shall directly assume a portion of the financial obligations of [Napocor] in an amount not to exceed" PhP200 billion. PSALM has successfully auctioned four Napocor hydroelectric power plants but has yet to transfer them to the winning bidders because of lack of creditors' consent. Mr. Lotilla said Napocor's official creditors, particularly the World Bank, the Asian Development Bank, and the Japan Bank for International Cooperation, have made debt transfer a precondition for consent to the sale and transfer of Napocor assets. The government aims to raise $4 billion to $5 billion from the sale of Napocor and its network of transmission lines. It has so far sold three mini-hydropower plants. It will also auction the Loboc hydroelectric plant in Bohol on October 27, and Masinloc coal-fired power plant on November 24.

Meanwhile, a government official said the Asian Development Bank was considering a new program for the country that could hasten the sale of state-owned National Power Corp. to private investors, so as to avert another power crisis soon. One option is for the bank to give a partial credit guarantee to buyers. The government has found it hard to sell its power company, which is heavily in debt, and the company's transmission lines. -- Carina I. Roncesvalles and Bernardette S. Sto. Domingo with inputs from K. L. Lema



Palace works on electronics firms' concerns

President Gloria Macapagal Arroyo has vowed to provide labor flexibility and lower power costs to electronics and semiconductor companies in a bid to keep the sector, which accounts for almost 70% of Philippine exports, globally competitive. Arthur J. Young, Jr., president of the Semiconductor and Electronics Industries of the Philippines, Inc., (SEIPI), said the Malacaņan presidential palace adopted two key industry proposals in a joint meeting of the Export Development Council and the Cabinet last October 12. Ms. Arroyo has directed the Labor department to spearhead the implementation of a compressed workweek scheme, under which 12 hours a day for four days would be considered in compliance with the 48-hour workweek required by the Labor Code. "This is the first step to changing the law," Mr. Young told the 6th SEIPI CEO Forum at the Makati Shangri-La Hotel yesterday.

Calling the Labor Code "antiquated" and "inflexible," the PSi Technologies, Inc. chief said the Philippines is perhaps the only country in the world that requires a six-day workweek, with overtime pay for work in excess of eight hours a day. The President has also directed the acceleration of SEIPI's proposal for the industry to directly connect to electric power producers, Mr. Young said. SEIPI is set to meet the Energy and Trade departments, and power generation and transmission companies. Without going into specifics, the SEIPI president said direct connection would result in "significant savings" and make power costs "fairly competitive with China."

Last October 4, the Energy Regulatory Commission removed cross subsidies under which large firms partly pay for power consumed by residential customers. Mr. Young noted that growth in electronics and semiconductor exports continued to be below par at 9.3% year-to-date, as against world growth of 35%, which he attributed to lack of investments. Electronics and semiconductor investments have in fact declined for the last three years from $1 billion in 2001. Latest data placed investments in the sector at PhP15.3 billion year-to-date. "The industry spends today for growth tomorrow. The key challenge is to bring in more investments," he said. At the same forum, investment bank Bear Stearns gave a positive economic outlook for the region and the Philippines. Dr. John R. Stuermer, managing director, cited high foreign exchange reserves and large current account surpluses among Asian countries. And despite pronouncements of a "fiscal crisis," the Philippines is actually no different from its neighbors in terms of budget deficits and inflation, he said. -- Felipe F. Salvosa II



US electronics firm to invest $300M for new products

Semiconductor company Texas Instruments, one of the biggest electronics companies in the world, is investing $300 million (around PhP16.8 billion) in two to three years for new product lines to be manufactured in the country. Norberto A. Viera, president of Texas Instruments Philippines, Inc., said the capacity of the firm's facility in Baguio in northern Luzon would be increased by 50%. New products to be manufactured there include stack dies used in third generation or 3G phones. These are currently manufactured in Japan and Korea, but Texas Instruments has decided to also produce them in the Philippines starting next year. Texas Instruments will also start producing here its trademark OMAP processors and "performance" ball grid arrays used for networking and DSL applications. Of the $300 million, $50 million will be spent for a new building. The rest will be for capital expenditures, equipment, and a number of requirements for the new products, Mr. Viera said.

Texas Instruments Philippines currently produces 100% of the digital signal processors or DSPs for Nokia mobile phones, and 80% for Siemens and Ericsson. Headquartered in Dallas, Texas, it is the world's leading designer and supplier of digital signal processing solutions, the engines driving the digitization of electronics. Major businesses also include calculators, productivity products, sensors and controls, and technologies for digital light products. Texas Instruments has manufacturing and sales operations in more than 25 countries. Mr. Viera said his company's sales forecast for 2004 was $3 billion, up by 10% from 2003 on account of the "normal" growth in the digital cellular sector. Next year, the company expects to sell 5% to 6% more with the electronics sector forecasted to grow by 10% to 11%, he said. The $300-million expansion project is being timed for the expected stronger growth in 2006, Mr. Viera added. -- F. F. Salvosa II



Reenacted budget to result in lower-than-expected deficit

By KAREN L. LEMA, Reporter

While the Department of Budget and Management (DBM) wants Congress to pass the 2005 national budget, it sees at least one positive side to reenacting the 2003 budget anew. Reenacting the PhP861-billion budget will result in a budget deficit below the PhP184-billion ceiling set for next year, Budget undersecretary Mario Relampagos said in a telephone interview. This is because expenditures will be kept at 2003 levels, while revenues are seen to increase more than what had been projected two years ago when the 2003 budget was being crafted, he explained. "There are no legal impediments on using a lower budget for 2005. If that will be the case, we will have a more favorable deficit. Although it would be better if we have a new budget because there are incremental programs for 2005; so that means that the incremental amount needed for these programs may not be allocated," Mr. Relampagos said. But since there are projects and programs under the PhP861-billion budget in 2003 that have already been completed, allocations for these projects can be declared by the President as "savings" and she is allowed under the law to reallocate these resources to fund her priority programs such as infrastructure, Mr. Relampagos said.

The Malacaņang presidential palace has appealed to Congress to approve the PhP907.6-billion proposed budget for next year, as well as the needed revenue measures promptly, saying lawmakers should be aware of the repercussions in the face of a debt crisis looming in two to three years. Senate President Franklin Drilon on Monday warned that Congress might end up reenacting the 2003 national budget due to the shift to line-item budgeting. Line-item budgeting specifies actual projects and their funding and is expected to be more tedious than the previous system of lump sum budgeting.

Finance undersecretary Eric O. Recto, however, said he could not see why the reenactment of the budget should delay the passage of eight Palace-backed revenue proposals. "The revenue measures, if passed in the form we have proposed, will get us out of the rut," Mr. Recto told reporters. He remains optimistic that the Executive branch could convince Congress to act on the four revenue measures that the Department of Finance wants enacted before the end of the year. These are the proposed tax amnesty, the long-awaited indexation to inflation of "sin" taxes on tobacco and alcohol, a law improving accountability among corrupt tax collectors and the rationalization of fiscal incentives. But the legislature, now on a month-long break, is running short of time with another week-long recess due next month and an adjournment for Christmas on December 20.



Inflation rate seen to breach 7% mark this month

The Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) expects prices of basic goods and commodities to have risen faster in the year through October because of skyrocketing oil and food prices. Inflation -- the upward movement in the general price level -- likely breached the 7% mark in October due to the surge in oil prices, officials said. "It is higher than the September figure," BSP Deputy Governor Amando M. Tetangco, Jr. said in a statement yesterday. The BSP is still finalizing its inflation forecast for October. Inflation in September rose 6.9%, its highest level in more than five years. Rising world oil prices, which affect the local prices of goods and commodities as well as transport costs, have led to upward adjustments on inflation expectations.

An official from the National Economic and Development Authority earlier said inflation October inflation may hit a range of 7%-7.5%. The official said this is due largely to the recent round of oil prices and expectations that costs of crude will continue to increase in the coming weeks. A BSP official said that while inflationary pressures coming from food prices have somehow eased in the past months, oil prices would continue to put pressure on inflation. "Food prices eased in October but the surge in oil prices continues," the central bank official said. Oil prices have been shooting up amid uncertainties in oil-rich countries such as those in the Middle East and Nigeria. Crude prices rallied to a new high of $55 per barrel in Asian trade on Monday and $54 per barrel at the New York Mercantile Exchange last week. The 6.9% September inflation has brought the year-to-date inflation to 4.8%, just a few notches shy of the BSP's inflation target of 4%-5%. -- Iris Cecilia C. Gonzales



Distillers, importers clash on tax rates for liquor, spirits

The local alcohol industry favors retaining the present tax rate structure on distilled spirits and fermented liquor, while importers of premium alcohol brands favor a tax rate based on alcohol content. In their individual presentations on Monday to the House of Representatives ways and means committee, representatives of the Consolidated Distillers of the Far East, Tanduay Distillers, Distileria Limtuaco and San Miguel Corp. said they favor the retention of the tax rate structure on distilled spirits and fermented liquor and an increase in the tax rates. They added that they recognize the government's need to raise additional revenues.

The Tax Code defines distilled spirits as including whisky, brandy, rum, gin, vodka and other similar products, and fermented liquor as including beer, lager beer, ale and porter, but excluding tuba, basi and tapuy. Only the Lucio Tan company, Asia Brewery, Inc., said raising the tax rates is not necessary. ABI chief financial officer Jose Gabriel Olives pointed out that right after the shift to specific tax from ad valorem tax in 1997 and after the 12% adjustment in the tax rates in 2000, tax collection increased in the initial year but went down afterwards. He added that the tax adjustments in 1997 and 2000 led to negative volume growth for beer. "It is not necessary to increase the tax rates to increase collections," he said. "Let us maintain the current tax rates. Only higher volumes will mean higher tax collections."

San Miguel Corp. manager Cynthia de Castro stated that her company supports the retention of the tax rate structure and increase in the tax rates. Consolidated Distillers of the Far East general manager Ferdinand Masi, Tanduay Distillers president and chief operating officer Wilson Young, as well as Distileria Limtuaco executive vice-president Olivia Limpe-An echoed Ms. de Castro's position, and asked that government continue to protect local producers like them against imported distilled spirits by retaining the tax rate structure. -- Judy T. Gulane



Virgin coco oil exports seen to grow twofold soon

Exports of virgin coconut oil (CNO) could double or even triple once local product standards, which conform to food safety standards of the Food and Agriculture Organization-recognized Codex Alimentarius, are released before the end of the year. Around 200,000 liters of virgin CNO so far have been exported mainly to the United States and in limited markets in Europe, Japan and Korea at prices ranging from $3 to $8 per liter. Philippine virgin CNO producers have the capacity to produce around 200 metric tons (MT) to 250 MT monthly. Public consultations are nearing conclusion, with a third round to be held October 27 in Ormoc City in Eastern Visayas. These are expected to resolve minor issues like terminologies that should be included and removed in the final wordings of the Philippine National Standards for virgin CNO, Paulo P. Mamangun, Jr., president of the Virgin Coconut Oil Producers and Traders Association said. "Foreign buyers would now have an assurance of specific quality standards for locally produced [virgin] CNO, which would entice them to source more from us," he told BusinessWorld.

Thailand and Singapore have also set standards for virgin CNO, although theirs are bundled with other coconut oil unlike the Philippines that eventually would have a specific set for itself. Virgin CNO is used a health supplement and as an ingredient in beauty products. The Philippine standards will eventually classify the process for manufacturing virgin CNO whether cold process, heat process, or centrifugal process. Under the draft standards, virgin CNO is defined as coming from fresh, mature kernel of coconut by mechanical or natural means, with or without the use of heat, without undergoing chemical refining, bleaching, deodorizing and does not lead to alteration of the nature of oil. "The issue of whether cold or hot process [type of manufacturing] still crops up, but largely it has been resolved. The issue before on moisture content has been settled to 0.2% as well as of the fatty acids [content] with the standard now at 0.2% from 0.5% previously," Mr. Mamangun said. He noted that as long as new technical data come out that may warrant a change in the parameters of the standards, the private-public sector group would consider this information before the final national standard is issued. -- R. M. Balaba



DaimlerChrysler to buy abaca fiber from RP

German carmaker DaimlerChrysler will finally source local abaca fiber as raw material for composite parts used in its global car manufacturing operations after years of research with Leyte abaca experts and growers. The company still has to determine how much abaca fiber it would purchase from local growers and at what price, Dr. Werner Muhlbauer of the Institute of Agricultural Engineering for Tropics and Subtropics in the University of Hohenheim in Stuttgart, Germany said in a forum yesterday. "But definitely we would buy [from the Philippines]," Mr. Muhlbauer said. He was a key resource speaker at the United Nations Development Programme-sponsored seminar, entitled: "Abaca: Improvement of Fiber Extraction and Identification of High-Yielding Varieties." DaimlerChrysler earlier commissioned Mr. Muhlbauer to study the industrial application of natural fibers such as abaca since these can replace synthetic fibers in composites, which recently has become of interest to the automotive industry because of its economic and ecological advantages.

DaimlerChrysler was the pioneer in this area and has used composites in more than 30 components in some of its cars. "The fiber of abaca or Manila hemp offers great potential for different industrial applications due to its extremely high mechanical strength as well as fiber length which could reach two to three meters," Mr. Muhlbauer said in a study. A public-private partnership project was earlier set up with the German Investment and Development Foundation (DEG), Euronature, the University of Hohenheim and Leyte State University to achieve sustainable production of consistently high-quality abaca fibers that could be processed into composite materials for technical applications. Exports of abaca fiber as of July were valued at $40.945 million or about 17.8% lower from $49.806 million last year, mostly shipped to the United States and Japan. -- Rommer M. Balaba



Four-year bonds at 11.875%

Liquidity among banks prevented premium risk rates from further moving up. In yesterday's auction, the four-year Treasury bonds fetched a coupon rate of 11.875%. The Bureau of the Treasury sold the reissued instrument carrying a coupon rate of 11.75% only last September 21. It posted then an 11.892% yield-to-maturity rate. The market is expecting bonds worth PhP10 billion to PhP11 billion to mature this Friday, and an estimated PhP6 billion on October 25. "We just need a rollover of funds. Previous auctions show that the market has enough money to buy government securities like the funds supposedly earmarked for corporate loans," a trader at a local bank said. Tenders reached as high as PhP8.595 billion against a public offering of PhP4 billion. The auction committee awarded all bids. "What we [saw was] a slightly upward bias. The strong demand was already expected. There are many reasons for the [slight increase] but the main factor should be inflation," said Finance Undersecretary Eric O. Recto, who took over the chairmanship of the auction committee from National Treasurer Mina C. Figueroa, who resigned effective October 16.

The government's inflation target for the year is 5.4%. For September alone, inflation hit 6.9% -- the highest in three years. Mr. Recto said, however, that a "slew of good news coming" could temper the rise in debt yields. Besides market liquidity, he also said the government was on the right track in generating revenues as the Bureau of Internal Revenue exceeded its September collection target. The bureau reported that it surpassed the month's target by 1.05% with revenues of PhP33.746 billion. Year-to-date collection was placed at PhP343.848 billion, which was 98.44% of the 2004 goal. "I hope [the good news] continues so that we would be able to borrow reasonably, not cheap because that is not our objective. To borrow cheaply is relative," Mr. Recto added.

Meanwhile, a trader at a foreign bank said the bond rate at present was not an indication of how interest rates will move. "There is no push in interest rates either way," the trader said. Another trader said, however, that comparing yesterday's rate to that of August 24 indicated concerns over the country's fiscal situation. "We still have rising crude oil prices as well as other local issues," the trader said. Oil prices rose to $55 a barrel on Monday. "However, the rates are already good, that's why bids were oversubscribed. The four-year paper is already near 12% which is already comparable to the five-year paper," he added.


Meanwhile, the Philippine peso yesterday extended its rally against the US dollar as it appreciated by almost six centavos despite a cautious tack from the market. "We figured that there was this foreign bank which was selling heavily. It's not everyday that you see a foreign bank do that. Usually, the net sellers are the local banks. I guess there was a big chunk of their inflows and that they needed to sell," a trader said. The trader added that around $20 million was infused by the bank. Total volume of transacted dollars dropped to $115.5 million from $122 million previously, indicating a below-average level. "This should mean that banks are not really 100% convinced to move in a firm direction. There are those keeping on to their dollars," the trader added. At the Philippine Dealing System, the country's electronic currencies exchange, the peso averaged stronger by more than three centavos to PhP56.376 from PhP56.407 the other day. It capped its intraday low at its opening value of PhP56.40 against the dollar. The peso finished at its intraday high of PhP56.355. The local unit is expected to move from PhP56.30 to PhP56.40 today. -- Ira P. Pedrasa



Debt servicing reduces central bank's net worth

The multi-million dollar debt service requirements of the Arroyo administration reduced the resources of the Bangko Sentral ng Pilipinas in the second quarter, central bank officials said. They said, however, that the decline in net worth and net income was no cause for alarm as the monetary authority's priority is to keep prices stable and not to make profits.

In its latest balance sheet, the central bank reported that its total resources -- comprised of foreign reserves -- fell by PhP6.6 billion in the second quarter of 2004 compared with the level in the previous quarter. This resulted in a PhP9.8-billion or 4.7% decline in net worth. As of the period, the monetary authority placed its net worth at PhP197.7 billion, down from the previous quarter's PhP207.5 billion, as the country's international reserves fell by $156 million. It said $881-million government debts matured in the second quarter or roughly PhP49 billion at the current rate of exchange.



Bank of America's local unit exits debt dealing

The local branch of Bank of America was recently delisted by the Bureau of the Treasury in its roster of government securities eligible dealers. The Treasury said the bank had ceased to be a dealer effective as early as September 3. Its delisting means that it can no longer participate in the auction of government securities. Officials of the bank were unavailable for comment as of presstime. "They requested for it as they have reduced their government securities business," ex-National Treasurer Mina C. Figueroa said. The bank's move came ahead of Circular No. 2-2004 issued by the Treasury which limits the participation of some dealers in debt auctions. The Treasury told banks as early as September of its intention to classify them as either primary or ordinary dealers as well as plans to increase the volume of competitive bids in each auction.



Market integrity board chief seeks brokers' cooperation


Members of the newly created Market Integrity Board of the Philippine Stock Exchange (PSE) buckled down to work yesterday after meeting with brokers in a bid to strengthen its relationship with trading participants. Its chairman, retired Supreme Court Justice Jose Vitug, said last Monday the board will be open to the broker community, as he urged members to let the board know what their concerns are to ensure a relaxed relationship. "It would be good if brokers will inform the [integrity board] of their problems so we can work on those. [But] I hope they would not expect results to come by at the earliest time they want to be because we need to organize ourselves and come up with internal rules as we coordinate with various groups. These are all preparatory," Mr. Vitug said. He said the board will ensure that all parties are given a fair chance to explain themselves when complaints are filed against them before the board metes out a penalty or makes a recommendation.


"It is not nice to act without giving others the opportunity to express themselves first," added Mr. Vitug, noting that he, like others, used to perceive the stock market as having something of a bad reputation. The former justice argued that this case should not be limited to the Philippines because such perception exists in almost every stock market in the world. "We [the PSE] have had not a very good perception but this is true in every place. It is about time that we think good of the country and its people," Mr. Vitug said. He assured that they would work on rules to strengthen the cord of integrity at the exchange. "One of these days, we may come up with some good rules and the right way to implement them." He said the integrity board must be aware of what it can do by coming up with a written agreement. "There could be a way by which, somehow, we could work without necessarily taking on the power that is not ours," he added.

The board seeks to go further than policing activities of market participants, or catching them in wrongdoing or meting out penalties. "The [board] is tasked with the mission of nurturing a culture of compliance among market participants," said Mr. Vitug, stressing that they will not work in secret because promoting transparency and fairness is part of their mission. PSE Chairman Alicia Arroyo said the integrity board is a welcome development, adding that it was Mr. Vitug's "request to reach out to trading participants before they start out [by] soliciting their reactions." "Let me assure you that the [integrity board] shall also take a more proactive approach to improve and safeguard the integrity of the stock market through formulation of compliance-friendly and business-friendly policies," Ms. Arroyo said in her opening remarks.

PSE President Francis Lim assured that although the board is still under the PSE, it is only so in as far as administrative supervision is concerned because the PSE is a private corporation. "It is administrative supervision not regulatory," Mr. Lim clarified. He added that certain mechanisms were put in place to ensure the independence of the board. These include the provision the board will no longer be under a committee of the board of directors of the PSE, that it is composed of respected leaders and a fool-proof decision-making process. "[The foremost issue to be tackled by the board] will be the updating of rules to make them more responsive to the needs of the clients, especially with the new Securities and Regulations Code," Mr. Lim said. The creation of the board, which replaced the governance committee, is part of the PSE's effort to strengthen its audit, compliance and surveillance capacity. The board shall oversee the regulatory functions of the market regulations office, formerly the compliance and surveillance group. Both entities have full autonomy over their regulatory functions and are independent from the PSE.



Meralco seeks OK to refinance debt

The Manila Electric Co. (Meralco), the country's largest power distribution firm, plans to seek the approval of its creditors to refinance $240 million in loans maturing between now and in 2005, officials yesterday said. Jesus Francisco, president, said Meralco would also meet its creditors within the month to seek approval to extend the maturity of Meralco's debts by five to seven years. "Our target is to get creditors' approval to refinance $240 million worth of loans before the end of the year," he told reporters. "If we can't refinance, then we might have a problem next year." Mr. Francisco did not say how Meralco planned to refinance its maturing debts. The Meralco official said creditors need to approve its proposal so the company could service the last phase of its refund process amounting to PhP18 billion ($319.15 million).

Meralco, 25% owned by the government and 23% by Spanish utility Union Fenosa, is in the final phase of a PhP30-billion refund to consumers for years of overbilling, which was ordered by the Supreme Court in 2002. Phase 4 of the refund process involves commercial and industrial customers with a monthly consumption of at least 1,600 kilowatt-hours (kWh) of electricity. Meralco proposed that the refund for commercial and industrial customers be divided into two phases. State-agency Energy Regulatory Commission has yet to approve this. Phase 3 of the refund, amounting to PhP4.9 billion, covers 850,000 residential customers consuming more than 300 kWh a month. This phase is expected to be completed by the end of the year. The first two phases of the refund program have been completed. Meralco has about four million customers in Manila and neighboring provinces. Shares of Meralco A, limited to Filipinos, fell 3.08%, or 50 centavos, to PhP15.75 on Tuesday, while Meralco B, open to foreigners, lost 3.06%, or 75 centavos, to PhP23.75. Manila's main stock index fell 0.62% to 1,778.85 points. -- Reuters



Globe to spend $350M for expansion plans in 2005

Second largest telco Globe Telecom, Inc. is spending about $350 million for its continuing expansion in 2005. The Ayala-led company said the outlay will finance its network rollout next year. Chief Financial Officer Delfin C. Gonzalez said part of the needed funds will come from foreign financing, while the balance will come from the mobile phone giant's internal funds. "We are still trying to finalize the numbers, but most likely we would have to source about $100 million to $150 million from external funding. The rest would come from internally generated cash plus we still have the proceeds of the $100 million which we did in July," Mr. Gonzalez said.

In July, Globe raised an additional $100 million worth of eight-year bonds in the international financial markets bringing its total outstanding bonds to $300 million. The issuance of the notes was used to bankroll Globe's capital expenditure program for 2004. It had allocated about PhP19.7 billion for 2004 for the expansion of its wireless business. By the first half of the year, Globe has added about 350 cellsites in line with its Phase 10 expansion program. From its existing 3,600 cellsites, the cellular firm plans to roll out about 1,000 more. Globe's expansion program is primarily focused to increase its presence in the mass market through the creation of more cellsites and the building of distribution infrastructures such as "over-the-air" reloading schemes to have a wider reach of the target market.

President and Chief Executive Gerardo C. Ablaza said Globe is optimistic about reaching targets for mass market expansion by the end of 2004. "Indicators from second and third quarter show that we are achieving well in the mass market because we have significantly increased our coverage in terms of the percentage or mix of people and the kind of subscribers we have gained," he said. Mr. Ablaza said Globe's provincial subscribers are now moving beyond the 50% mark. This, he said, is an important indicator since most subscribers from the rural areas are from the mass market. He said Globe sees more opportunity to expand in the provincial market given the low penetration rate. -- Beverly T. Natividad



Phisix down on oil, Jollibee results


The Philippine stock market yesterday succumbed to profit-taking yesterday after a mild recovery, driving share prices to close lower. The main index lost more than what it gained last Monday. The benchmark Philippine Stock Exchange composite index (Phisix) dropped by 11.13 to 1,778.85. It opened at 1,790.74, rose to an intra-day high of 1,791.65 and slipped to its lowest level for the day at 1,777.32. Astro del Castillo, managing director of First Grade Holdings, Inc., said the market continued to consolidate. "[The stock market] is still in a consolidation mode due to the continued upsurge in oil prices at the world market, the possible pressure for domestic rates to go up and the weaker peso," said Mr. del Castillo.


But these were not the only factors that dampened investors' sentiment. Apparently, investors were not pleased with the third-quarter report of Jollibee Foods Corp. whose share price declined to PhP27.50. The country's leading fastfood chain said its net income for the period rose by 6% to PhP317 million. Although it ended the quarter positively, the growth rate was a sharp decline from a 36.8% increase in the second quarter. The market did not expect Jollibee to post slim gains. Before it released its report, expectations were high that it will report double-digit growth. Jollibee said its net earnings slowed sharply, particularly in August and September, due to high oil prices that pushed up costs.

Ysmael V. Baysa, Jollibee's chief financial officer, said the firm made slight price adjustments on products and continued pursuing operation cost improvement but these were not enough to immediately offset the impact of cost increases. "Jollibee did well but its admission of the effects of the increases in oil prices to the costs of its raw materials was [taken as] a warning signal that the growth for the second half could be slower," said Mr. del Castillo.

The all-shares index collected gains of 3.77 at 1,113.99. Except for the property counter, all the other indices were down. Mining lost 43.86 at 2,096.69. The commercial-industrial index dropped 20.04 to 2,809.53. Banks and financial services slowed down by 6.80 at 492.83. Oil shed 0.04 at 1.76. On the other hand, property went up 4.13 to 652.41. There were 114 issues traded with more stocks sticking to their previous price level. Decliners outpaced advancers at 41-26. A total of 894.3 million shares exchanged hands for PhP850.6 million. Over three billion shares amounting to PhP305.3 million were transacted as odd lots. Main board cross transactions for 44.9 million shares were valued at PhP480.4 million. Net foreign buying was PhP110.52 million.


Philippine Long Distance Telephone Co. (PLDT), a subsidiary of Hong Kong's First Pacific Co., closed lower at PhP1,405 but it remained the most active stock. The Bank of the Philippine Islands (BPI) and Ayala Corp. ranked second and third most active stocks. BPI was down at PhP46.50 while Ayala Corp. kept to its previous level of PhP6.30.

SM Prime Holdings, Inc. (SMPH) of retail magnate Henry Sy, Sr. was unchanged at PhP7.10. The firm operates 18 shopping malls across the Philippines, said it will open SM City Batangas in Batangas City next month. This newest addition to the SM malls will have a gross floor area of 70,820 square meters.

Last week, the mall developer declared a special cash dividend amounting to almost PhP5 billion. In a statement, the country's largest shopping mall developer and operator said a special cash dividend of PhP4.9 billion, equivalent to 50% of the par value or PhP0.50 per share, will be paid on or before Dec. 1 to stockholders on record as of Nov. 12. The special cash dividend, approved by the board last Oct. 13, brings SMPH's total dividend payout to PhP6.4 billion with payout ratio of 154% against the 2003 net income.

Most of the active stocks were down, including Digital Telecommunications Philippines, Inc., International Container Terminal Services, Inc., Manila Electric Co. B, DMCI Holdings, Inc., Metropolitan Bank & Trust Co., and Union Cement Corp. Only four recorded gains. These include Metro Pacific Corp., another subsidiary of First Pacific Corp., Petron Corp., Ayala Land, Inc., and sister company Globe Telecom, Inc. Seven issues were unchanged. Together with Ayala Corp. and SMPH, Aboitiz Equity Ventures, Inc., the Lopezes' ABS-CBN Holdings Corp., Philippine Deposit Receipts and First Philippine Holdings Corp., as well as Filinvest Land, Inc. and Equitable PCI Bank, Inc. all did not budge. Mostly mining stocks completed the list of gainers. Basic Consolidated, Inc., a holdings company that has interest in mining, gained 10.34% at PhP0.16. The firm signed a memorandum of agreement last week with S.F. Pass International Co., Ltd. of Thailand for opportunities to develop and explore areas of investment in the Philippines, Thailand and Asia.



Investment priorities include fashion, health

The government plans to give priority to 10 economic areas, including fashion and healthcare, and encourage more investments in these sectors through tax perks. That is, if Congress will approve its proposal to overhaul the prevailing system for the grant of fiscal incentives. If the Arroyo administration were to have its way with perks, investment areas under its Investment Priorities Plan will be limited to information technology and IT-enabled services, automotive, electronics, mining, healthcare, tourism, shipbuilding, fashion, garments, jewelry, and agribusiness. This list, as proposed by the Malacaņan presidential palace, will also be reviewed every three years by an interagency body composed of representatives from the Department of Finance, Department of Trade and Industry, and the National Economic and Development Authority. The Investment Priorities Plan is an annual listing of priority industries and service areas that are encouraged through the grant of fiscal and non-fiscal incentives, including four to six years of income tax holidays.

The government's Medium Term Philippine Development Plan (MTPDP), its economic master plan, justifies the inclusion of agriculture among priority investment areas. It noted that agriculture "has exceeded productions targets[and yet] remains uncompetitive due to high cost of inputs, large post-harvest losses, and the disruption of extension services due to devolution." "Employment and incomes are also low due to the low degree of farming intensity and diversification, and the lack of technological and enterprise skills of the farmers," the MTPDP added.

In the Investment Priorities Plan for 2004 are economic activities divided into a national list, a regional list, and a list for the Autonomous Region of Muslim Mindanao (ARMM). Under the national list are export projects, mandatory inclusions, and areas that are supportive of special government programs such as but not limited to infrastructure upgrading; mass housing; modernization programs for the agricultural, fishery and the pharmaceutical sectors; biotechnology; and tourism. The regional list covers activities for implementation in specific regions and 80 industry clusters composed of linked industries that take advantage of the natural advantages of specific locations.

The ARMM list, meanwhile, was prepared by the ARMM Regional Board of Investments. Also part of the government's fiscal rationalization bill is the repeal of provisions in at least 25 laws that grant tax perks and exemptions to businesses and investors. Finance department data showed the government gave away PhP229.4 billion in tax perks, equivalent to 5.33% of gross domestic product or total economic output, in 2003 alone. Finance officials are also pushing for the lifting of tax exemptions granted under the value added tax system, including those being enjoyed by lawyers and doctors, as part of a package of eight bills being pushed by Malacaņang. Approval of these measures, which include a number of tax bills, is needed if the country is to avoid a fiscal crisis, the Palace claims. -- Karen L. Lema



Peso can recover to below PhP50:$1 by '05

The peso can recover to below PhP50 to the US dollar next year, from around PhP56 currently, but only if the country can raise enough taxes to pay for its operations and drastically cut its budget deficit, Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) Governor Rafael B. Buenaventura said yesterday. He said the peso, battered by fiscal concerns for several weeks now, remained undervalued as investors awaited progress on the government's fiscal reform measures. "Next year, the peso can fall below PhP50 if investors see that we are well on our way to overcoming our fiscal crisis through the passage of all the reform measures," he told reporters. The peso's recovery will depend largely on the success of administrative and legislative revenue-enhancement measures committed by the Arroyo administration, said the central bank governor, an appointee of former president Joseph Estrada.

Investors and fund managers, he said, are closely watching the government's attempt to fix its fragile fiscal position. The Arroyo administration must deliver on new taxes measures that will help boost state coffers and balance the budget by 2010, he added. Eight revenue-enhancement measures that are estimated to raise at least PhP83 billion yearly are awaiting congressional approval. Administrative measures include raising various fees of government agencies, and the use of benchmarks for income-generating agencies such as the Philippine Amusement Gaming Corporation. Aside from reform measures, Mr. Buenaventura said the peso's recovery would also hinge on the successful recovery of the power or electricity sector. He said investors would have to see that the power sector problem would be "resolved satisfactorily," through a price increase as well as the sale of state-owned National Power Corporation to private investors.

The Energy Regulatory Commission has already approved a 98 centavos rate increase for the power firm, which wants a PhP1.87 per kilowatthour increase to recover its losses. Mr. Buenaventura said investors also await the approval and implementation of financial sector reforms pushed by the private sector and the central bank. These reforms include the establishment of a fixed-income exchange for securities and debt papers, and the creation of a credit information bureau that will function as a database of corporate and individual borrowers. Other measures proposed include the corporate recovery act, which would help rehabilitate troubled companies. Mr. Buenaventura said the peso could start recovering by this quarter, noting that remittances from overseas Filipino workers have started coming in and that corporate demand for dollars has been satisfied. If the government fails to fix its finances, the peso can fall to PhP57 to the US dollar starting next year and stay at this level until the government gets the economy back on track, the central bank said. In a briefing paper given to Congress, it said the peso could weaken on the back of modest capital inflows, but could easily recover if the government could get a grip on its fragile fiscal position. Sought for comment, traders agreed that the peso's recovery would depend largely on new taxes. "Investors will be wary if no new measures are passed. They will put their dollars elsewhere," one trader at a foreign bank said. Another trader said that it could take a while for the peso to recover because "fundamentals are the problem." "It's not like there's a political situation such as the Oakwood mutiny or an impeachment trial, so there has to be a permanent solution," the trader said. "But definitely, it will strengthen once reforms are in place." -- Iris Cecilia C. Gonzales



Monetary officials seen to keep rates steady

Monetary authorities are still inclined to keep key interest rates steady, and thus stabilize borrowing costs of consumers and businesses, despite rising consumer prices or inflation. They have noted that price increases could be traced more to shortages in goods, rather than the increase in money in circulation. Inflation hit 6.9% in the year through September, its highest in five years, because of rising oil and food prices. Regulators usually increase interest rates to siphon excess money in the economy that can push up inflation and cut the purchasing power of the peso. Debates on whether to touch interest rates have been spirited among members of the policy-making Monetary Board, which will again meet on rates on Thursday. "There were debates, but the votes were still unanimous [against raising interest rates]," one central bank source said of the Monetary Board's last two policy-rate setting meetings.

Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) Governor Rafael B. Buenaventura, also a member of the board, said yesterday that any monetary tightening now, through higher rates, would be ineffective. He noted that even if key rates were already at a 12-year low, businesses and consumers have not been inclined to take out loans, since consumer spending has been weak. "Increasing interest rates will not help the economy," he told reporters. Early yesterday, the Bangko Sentral's advisory committee met to discuss its recommendations to the Monetary Board meeting on Thursday. Mr. Buenaventura declined to disclose the committee's recommendation, but said that there were no indications that rising oil and food prices would further aggravate inflation. He stressed, however, that nothing was final yet as far as rates were concerned. "As of now, we can still hold off [a rate increase], assuming there will be no further [price] increases. The situation can always change," he said.

The Monetary Board has kept policy rates unchanged at a 12-year low of 6.75% for overnight borrowing and 9% for overnight lending, despite rising consumer prices and a recent increase in US Fed rates. The United States Federal Reserve System has adjusted US rates for the third straight time last September 21 to 1.75%. The Monetary Board usually matches a move by the US Fed to prevent capital flight, when investors shift funds to economies that offer higher interest rates. ING Bank chief economist Jose L. Cuyegkeng earlier said that the board could raise its key policy rates by 25 basis points by yearend if inflationary pressures would continue to mount. Mr. Buenaventura, however, said the market has already adjusted benchmark rates. "Any increase now may just exacerbate the situation," he added. He also said the Monetary Board need not match the US Fed rate increase. "We don't have to move with the Fed, [unless] there are second-round effects of inflationary pressures," he said. The US market expects the Fed to increase rates by another 25 basis points by yearend, which will widen the interest rate differential between peso- and dollar-denominated bonds. A narrow differential gives investors incentives to shift to dollar from peso bonds. Bangko Sentral contends that, for now, the interest rate differential is still at a comfortable 400 basis points. -- Iris Cecilia C. Gonzales



Gov't to fix Channel 4 for PhP550M

Government economic planners approved recently the rehabilitation of the National Broadcasting Network (NBN Channel 4) at a cost of PhP550 million. In a statement, the Investment Coordination Committee of the National Economic and Development Authority (NEDA) said the project is designed to improve NBN's coverage and boost its signal. NEDA official Librado F. Quitoriano said the government would refurbish and upgrade NBN's present transmitting system, acquire modern digital equipment, as well as upgrade the facilities of key provincial stations in Baguio, Cebu, and Davao.

The PhP550 million will be spent on the supply, installation and commissioning of new television transmitting systems for Channel 4 Isabela, Channel 6 Mindanao, Channel 7 Jolo, Channel 11 Pagadian, and Channel 13 Tuguegarao. The project also involves the purchase of broadcasting and production equipment (in-studio and off-studio) to rehabilitate the existing broadcast facilities of NBN. "The spare parts and equipment will be distributed to various stations in the National Capital Region [Metro Manila], the Cordillera Autonomous Region [in northern Luzon], and Regions VII [Central Visayas] and XI [Davao Region in southern Mindanao]," Mr. Quitoriano said in a statement. He said the project would also involve the purchase of the "iNEWS Room Computer System," which would replace the now obsolete computer system that NBN was using for daily operations. "This software will enable the reporters, editors and managers to browse, update, share, and archive news items instantly and more efficiently," Mr. Quitoriano said.

Currently, NBN has only three stations with studio facilities -- at the Broadcast Complex in Quezon City, and at its Cebu and Dumaguete stations. NEDA said the studio facility at the Broadcast Complex was installed in 1991 and has become obsolete. "Most of NBN's equipment are still analog, whereas Philippine industry standards are already digital. This has a big effect on the clarity and quality of video and audio transmissions," Mr. Quitoriano said. NEDA's said that of the PhP550 million or $10 million for NBN's rehabilitation, 85% or PhP467.5 would come from the US Export-Import Bank. The remaining 15% or PhP82.50 million is being proposed to be shouldered by either state-run Development Bank of the Philippines or other Export Credit Agencies. The Poeple's Television Network, Inc. will serve as implementing agency for the project, which will last six months or until March next year. The new broadcast equipment are expected to be operational by April next year.



Asian property sector rally stutters in September

SINGAPORE -- This year's surge in Asian property investments stuttered in September, but analysts still see some sector bargains among the regions' developing countries. Netherlands based Global Property Research said Asian property securities, including stocks and trusts, slipped 0.7% last month, but still stood 20.3% ahead in the year so far on hopes Hong Kong and Singapore property values are emerging from a six-year slump. The book has left some property stocks looking fully valued.

Singapore's City Developments, for example, is trading at a 4% premium to net asset value (NAV) against a long-term average discount of 9%. Hong Kong's Sung Hung Kai Properties is at a 6% premium to NAV, while its long-term average discount of 13%. Analysts say better value, albeit with higher risk, can be found in Chinese, Malaysian and Phillippine property developers benefitting from surging demand for housing because of rapid economic growth, population growth and urbanization. "Valuations in emerging markets are quite compelling now, especially in China," said Douglas Sung, head of Asia property research at JP Morgan in Hong Kong. "Many people are concerned about the short-term macro outlook -- whether there'll be a soft or hard landing or an interest rate rise," he said. "But the physical market is quite stable, prices are quite stable and demand appears to be still pretty strong."

JP Morgan has an "overweight" recommendation on home builder Shanghai Real Estate Ltd., which is trading at a 64% discount to NAV compared to an average 31% discount for Chinese developers. The firm is priced at eight times 2004 earnings forecast, against 15-18 times for most Hong Kong property firms. Some Malaysian firms are also cheap despite surging demand for houses -- some developers say there is a shortfall of 400,000 homes in the Kuala Lumpur area. The main risk is that strong demand for steel in China is causing a shortage for construction in Malaysia, where steel prices are government controlled, but analysts see comfortable gains in prospect at last until the end of next year, albeit with growth focused on geographical hotspots. "The smart money says 06-07 is the cycle peak," said an analyst at a foreign broker in Kuala Lumpur. "The Klang valley and Johor Bahru will see a lot of growth because that's where the concentration of spending power is." Sunway City is trading at a 52% discount to NAV and E&O Property Development is at a 39% discount, compared to an average 22% for Malaysian developers.

Philippine developers are also revelling in brisk house sales, thanks largely to increasing remittances from overseas workers, but investors fret a three-year peak in inflation is putting upward pressure on interest rates. Filinvest Land is trading at a 51% discount to NAV, but JP Morgan's Sung was not keen on the firm because of concerns about refinancing a P2 billion debt due in November. Megaworld Corp. was a better bet, he said, trading at a 43% discount, against a sectoral average of 25%. "A lot of these stocks are in early expansion phase -- small companies that could see rapid growth in the next few years," Sung said. Returns from property in Asia have easily outstripped the 7.4% returns from equities in Morgan Stanley Capital International's Pacific index. European property securities are also on a high, gaining 1.9% last month and 22.4% this year. North American property stocks slipped 0.2% in September and are up 14.9% in 2004. Global bonds tracked by JP Morgan were 3.2% higher in the first nine months of this year, while MSCI's global equities index is up 3.3%. -- Reuters



Malacaņang downplays destabilization talk

Malacaņang yesterday again downplayed rumors of destabilization attempts against President Gloria Macapagal-Arroyo, saying corruption allegations against the military would not affect the administration's stability. Press Sec. Ignacio R. Bunye expressed confidence that the entire Armed Forces of the Philippines (AFP) would rally behind the President, despite threats of her ouster due to the alleged high-level corruption in the military. "We have heard of rumors before, but we believe no amount of destabilization effort would succeed against this government, and we believe that the AFP is solidly behind the chain of the command," Mr. Bunye said in a briefing. "The rumors being perpetrated against military top brass cannot be used to overturn this present government, which is very sincere in pushing through with reforms in the armed forces," he added.

The Arroyo government is under fire due to alleged corruption charges against Maj. Gen. Carlos Garcia. A former AFP comptroller, Mr. Garcia is undergoing investigation by the Office of the Ombudsman and two congressional committees on the issue of his alleged unexplained wealth. The President earlier ordered the AFP to place the general under court martial, exercising her powers as the military's commander-in-chief. However, some camps are launching a signature campaign for the President's ouster, claiming the President has allegedly failed to address the widespread corruption in the government. The President last week already dismissed the destabilization rumors, saying it would only fail since the government has been working in addressing the concerns and grievances of the soldiers. "The military command is firmly pushing the investigations forward, backed up by the determination to pursue systemic reforms, many of which are already in place in the procurement and logistics train," Mr. Bunye said. "These are solid morale boosters for the soldiery that has now become fully aware of the government's resolve to respond effectively to their vital needs and grievances," he added.

Meanwhile, Malacaņang expressed support to the congressional investigation into Mr. Garcia's unexplained wealth and alleged military corruption. The Palace was lukewarm, however, to the proposal of some lawmakers that Mr. Garcia be considered a state witness for him to divulge who else might be involved in the alleged corruption activities within the AFP. Justice Sec. Raul M. Gonzalez last week already dismissed the proposal, saying considering Mr. Garcia as a state witness was still "premature" since has not yet given his testimony. -- Jeffrey O. Valisno



Envoy to UN hits labeling of Arroyo as 'weak leader'

The country's envoy to the United Nations yesterday criticized a Washington-based think tank that claimed President Gloria Macapagal-Arroyo was a "weak leader." Philippine Permanent Representative to the United Nations Lauro L. Baja, Jr. slammed the Heritage Foundation for its "unfounded" criticisms against Mrs. Arroyo, saying the think tank failed to recognize the efforts of the President to stabilize the country's economy. "This is without foundation and out of reality. Obviously, the Heritage Foundation does not see the big picture," Mr. Baja said in a statement.

The Heritage Foundation recently issued an assessment that painted a negative picture of Mrs. Arroyo's leadership by using the looming fiscal crisis to boost its case. It also noted the Philippines' "overdependence" on the US for its anti-terrorism campaign. Mr. Baja, however, argued that the Philippines has been able to assert itself in the international arena with Mrs. Arroyo as the commander in chief. "The Philippines has been cited for its efforts against terrorism in the national, regional and global aspects. You cannot have a strong representation in multilateral diplomacy unless you represent and have the support of a strong leader and a strong government," Mr. Baja added. The Filipino envoy to the world body stressed that the rest of the international community have remained supportive of the Arroyo government and that the US-based think tank was an isolated voice. "When your views are sought and when bilaterals with you are requested, that means you count and you are making a difference," Mr. Baja said. -- Ma. Eloisa I. Calderon



House pressed on budget approval

The Malacaņan presidential palace remains hopeful Congress will be able to approve the proposed 2005 national budget and needed revenue measures on time, saying lawmakers are aware of the repercussions. Senators called on their counterparts in the House of Representatives to speed up deliberations on the proposed PhP907.6-billion General Appropriations Act (GAA) for 2005, but a congressman said the government will not collapse if the budget ends up delayed. Senate Majority Leader Francis N. Pangilinan proposed the conduct of budget deliberations during the December 18 to January 9 recess to assure the GAA's passage. House appropriations committee chairman Rep. Rolando G. Andaya, Jr. of Camarines Sur (southern Luzon), meanwhile, said budgets have been delayed in the past but admitted government projects will be threatened the longer it takes Congress to pass the budget bill.

In Malacaņang, Press Secretary Ignacio R. Bunye said in a statement that "We hope that our legislators will find time to iron out any hitches on these pieces of legislation...The world waits upon our nation to proceed decisively in the business of economic self-repair and recovery." Senate President Franklin M. Drilon on Monday warned that Congress might end up reenacting the 2003 national budget for the second straight year due to the shift to line-item budgeting. Line item budgeting specifies actual projects and their funding and is expected to be more tedious than the previous system of lump sum budgeting. The reenactment of the budget may also delay the passage of eight Palace-backed revenue proposals. Delays on the approval of these bills, in turn, may lead to a downgrade in the country's credit standing. "The proposed national budget for next year and the tax measures pending before the Congress are key elements in the President's overall reform agenda to stabilize the economy and to put our fiscal house in order," Mr. Bunye said.

Mr. Bunye yesterday expressed confidence that Congress will likely approve the proposed increase in the excise taxes of cigarette, alcohol and other "sin" products by yearend. "Indexation of sin taxes would be very important. If this would be approved, we will be sending a very clear signal that we are serious in putting our financial house in order," he said. Malacaņang, however, declined to take a more active role in convincing lawmakers to immediately act on the GAA and the revenue bills, citing the independence of Congress from the Executive. "The Executive department proposes, the Congress disposes. We leave it to the sound judgment of the Congress to determine which is beneficial," Mr. Bunye said. Mr. Pangilinan, meanwhile, told a briefing "I'm proposing to amend the legislative calendar to spend more time for budget deliberations. We will see if other Senators are willing to meet beyond December 18 which is the start of the Christmas break."

The PhP907.6-billion GAA for next year is being deliberated in the House of Representatives. Only after the House has approved the measure will the Senate conduct its own deliberations. "We need to work overtime. Everything depends on how the Lower House can pass budget proposal," Mr. Pangilinan said. He said that when the Lower House passes the GAA, the Senate will need five to 10 days to approve it, including the bicameral conference meeting. He said the constitution does not prevent a second reenactment of the budget but stressed that a repeat will not be good for Congress. Senate finance committee chairman Manuel B. Villar Jr. also said a second reenactment means Congress will have failed to do its constitutional duty. Mr. Drilon said the 2005 budget will likely be passed by February, giving two months use of the 2004 reenacted budget. "It is expected that we will not approve the budget by the end of 2004. However, we assure that the budget will be approved on or before February," he told a separate news conference.

Mr. Andaya, meanwhile said that three times since 1987, the GAA was approved two months into the fiscal year it was supposed to take effect. These were in 1997, 1998 and 2000. "One was even signed as late as June 1991," he said, "while the 2003 budget was signed into law in April of that year." In contrast, the GAA was approved only six times since 1987 before December 31 of the prior year. Congress has no deadline as to when it should finish deliberating on the national budget -- prepared and transmitted to Congress by the Department of Budget and Management -- but it is ideal that a new budget be operational by January of the new fiscal year. "The government will not collapse, public offices will not shut down, government services will not grind to a halt if no budget law is approved on the first day of next year," Mr. Andaya pointed out. Mr. Andaya, however, told BusinessWorld that failure to approve the GAA will have negative consequences on government's programs for 2005. Foremost among these programs is the hiring of 10,000 new teachers by the Department of Education (DepEd), to address the acute shortage of teachers in public schools, and infrastructure projects.

Based on the PhP907.8-billion proposed national budget for next year, DepEd gets the biggest budgetary allocation of PhP112 billion. It is followed by the Department of Public Works and Highways with PhP49 billion, Department of National Defense with PhP46 billion and the Department of Interior and Local Government with PhP44 billion. The Department Tourism is allocated a total of PhP1.13 billion, which is a substantial increase over this year's budget, reflecting the government's prioritization of this sector. The Autonomous Region in Muslim Mindanao is allocated PhP7 billion, which represents a 29% increase over this year's allocation, reflecting the government's intent to address the region's 57% poverty incidence. The committee on appropriations, Mr. Andaya said, is working hard to approve the proposed national budget by the end of November, and as it is, has been conducting whole-day hearings, four times a week, since October 11 when Congress should have been on recess. Mr. Andaya regarded Mr. Drilon's statements as "traditional" application of pressure tactics for the House to work faster.

After the department-by-department hearings, which are expected to conclude by the end of October, he said, the proposed budgets of the offices and agencies under each department will next be subjected to the scrutiny of the subcommittees of the committee on appropriations. The latter process is expected to end in November, and floor debates will start after this. The House will send the approved budget to the Senate by December, and the bicameral conference committee can be convened by January. President Gloria Macapagal-Arroyo can sign the GAA into law in February, he said. "The Senate can argue that it will be getting the budget bill late from the House this year," Mr. Andaya said. "The House got it from Malacaņang a month after the State of the Nation Address, a buzzer-beater, but we ain't complaining." -- reports from Jeffrey O. Valisno, Carina I. Roncesvalles and Judy T. Gulane



Finance dep't cuts proposed 'sin' tax rate

The Department of Finance (DoF) has lowered its proposed rate by which the excise tax on alcohol, cigarette and tobacco products will be increased next year. Instead of the 30.1% previously sought, the DoF now wants a 20% increase and the indexation of the tax rates every two years thereafter, using the cumulative inflation of the two immediately preceding years. It also proposed to maintain the existing tax rate structures for cigars, cigarettes and fermented liquor, and one tax structure for distilled spirits. The decision, Finance Secretary Juanita D. Amatong told the House of Representatives committee on ways and means, was arrived at after consultation with other economic advisers and after taking into consideration stakeholders' positions.

A 20% increase on existing tax rates will increase the tax on cigars to PhP1.34 per cigar from PhP1.12, and cigarettes packed by hand to PhP0.48 per pack from PhP0.40. For cigarettes packed by machine, if the net retail price (NRP) is more than PhP10, the tax will increase to PhP16.12 per pack from PhP13.44. If the NRP is between PhP6.50 to PhP10, the tax will increase to PhP10.75 per pack from PhP8.96; to PhP6.72 per pack from PhP5.60 if the NRP is between PhP5 to PhP6.50; and to PhP1.34 per pack from PhP1.12 if the NRP is less than PhP5. Estimated revenues from the 20% increase on cigarettes -- whether packed by hand and whether high-priced, medium priced or low-priced -- is PhP24.4 billion in 2005, based on total 2003 tax collections of PhP19.7 billion.

For fermented liquor, the tax rates will increase to PhP8.27 from PhP6.89 for brands with an NRP of less than PhP14.50 per liter; to PhP12.30 from PhP10.25 for those belonging to the PhP14.50-to-PhP22.50 bracket; and to PhP16.33 from PhP13.61 for those belonging to the PhP22 and above bracket. Estimated revenues from fermented liquor will be PhP13.9 billion in 2005, based on total 2003 tax collections of PhP11.4 billion. House of Representatives ways and means committee chairman Rep. Jesli A. Lapus of Tarlac (Central Luzon) noted, however, that the DoF's revenue estimates were low because they were based on 2003 collections. Ms. Amatong told Mr. Lapus that the DoF will be presenting new estimates. For distilled spirits, the DoF proposed to remove distinctions between brands derived from nipa, coconut, cassava, camote, buri palm and sugar cane, and those produced using other raw materials.

Under the present tax structure, brands derived from nipa, cocounut, cassava, camote, buri palm and sugar cane are taxed PhP8.96 per proof liter, while those using other raw materials are taxed according to this schedule: PhP84 if they cost less than PhP250, PhP168 if they cost between PhP250 to PhP675, and PhP336 if they cost more than PhP675. The DoF proposed to institute just one tax structure for distilled spirits. If the NRP per 750 milliliters is less than PhP60, the tax will be PhP50.40; PhP100.80 if the NRP is between PhP60 and PhP250; PhP201.60 if the NRP is between PhP250 to PhP675; and PhP403.20 if the NRP is more than PhP675. The DoF did not present revenue estimates from the change in the tax structure of distilled spirits. For sparkling wines with NRP of PhP500 or less, the DoF proposed to increase the tax to PhP134.40 from the present PhP112, and to PhP403.22 from the present PhP336 for sparkling wines with NRP of more than PhP500. The tax on still wines with 14% alcohol or less will be increased from PhP13.44 to PhP16.13, while tax on still wines with more than 14% alcohol will be increased to PhP32.26 from PhP26.88. -- Judy T. Gulane



Credit ratings team in town

... verdict known this week

A FitchRatings team led by senior sovereign analyst for the Philippines Brian Coulton is in the country to look into the progress of key revenue measures seen necessary to addressing the country's fiscal problems. Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) Governor Rafael B. Buenaventura said the country cannot afford a downgrade by the credit ratings firm since it would further shoot up government's borrowing costs. Before meeting with FitchRatings yesterday, Mr. Buenaventura said that he would tell officials of the agency to wait for lawmakers fulfill their commitment to pass at least four tax measures by yearend. "The lawmakers have said that it's as good as done. So I will tell them to wait and see and give lawmakers a chance to pass [the measures]," he told reporters.

Lawmakers said they may approve four of eight proposed revenue measures this year: the rationalization of fiscal incentives, indexation of excise taxes on sin products, grant of a tax amnesty, and a lateral attrition system. Fitch maintains a 'BB' grade with a stable outlook on the Philippines but stressed in July the need to show progress in key reforms by end-2005. The Fitch team was unavailable for comment as of press time yesterday. Philippine Investor Relations Office executive director Corazon P. Guidote said results of the review will be presented this week. Moody's Investors Services will also arrive next month to review the progress of the government's reform program that includes a package of key tax measures.

A credit downgrade makes it more expensive for the Philippines to borrow, as it reflects the country's ability to pay its debts. It also increases the costs of doing business in the country. Ms. Guidote said credit rating agencies need to see enough improvement in the government's efforts to raise new revenues before upgrading the country's credit rating. The Macapagal-Arroyo administration is asking Congress to pass eight revenue measures that are expected to raise PhP83 billion annually. Moody's downgraded the Philippines' credit rating last January to 'Ba2' from 'Ba1', with a negative outlook. A Ba or speculative grade means that the borrower has substantial credit risk, particularly as a result of adverse economic change over time. Standard & Poor's Ratings Services has already warned the Philippines of a downgrade, citing the lack of progress on key revenue measures. The credit rating agency noted two weeks ago that President Gloria Macapagal-Arroyo's new term, which began July 1, is already approaching its six-month mark and yet it has not been able to push for new measures. In July, S&P downgraded its credit rating on the Philippines' long-term local currency to 'BBB-', which is the lowest investment grade, from 'BBB', citing the government's fiscal woes. It kept the foreign currency rating at 'BB' or speculative, which means that there are substantial credit risks for borrowers. -- Iris Cecilia C. Gonzales



Singapore bank sees RP growth at 5.4%

Philippine growth this year could come slightly below the government's revised forecast of 5.9% to 6.1% this year, Singapore's United Overseas Bank (UOB) Group said. In its fourth quarter report, UOB said it expects Philippine economic growth -- as measured by gross domestic product (GDP) or the value of goods and services produced within the country -- at a lower 5.4% for 2004. Rising headline and core inflation, meanwhile, may pressure the Bangko Sentral ng Pilipinas (Central Bank of the Philippines, or BSP) to increase its overnight rates by at least 25 basis points this year.

The headline inflation rate, or the year-on-year change in the consumer price index, is expected to rise to 5.2%. "Monetary tightening is unlikely to derail the positive economic outlook," UOB said. The peso, meanwhile, will "likely to remain on the defensive" due to debt and fiscal gap concerns. "We expect US dollar/Philippine peso to continue trading in the upper half of the PhP55-to-PhP57 range in the fourth quarter with rise capped by overseas workers' remittances ahead of the festive season and an expected 25 basis points BSP tightening before yearend," the bank, Singapore's third largest lender, said. Testing of higher levels is likely as the "weak market undertone can be easily exaggerated by the slightest signs of fiscal slippage", although UOB said the central bank will likely prevent the currency pair from "stretching too far." Taking into account that falling foreign reserves will limit central bank's ability to prop up the peso and slow down in exports growth, UOB said sentiment on the local currency should remain weak going forward.

With Arroyo administration's commitment to trimming the budget deficit, UOB said meeting the current year target should be peso positive. "Unless the government trims the ballooning deficits rapidly, this supporting factor is only transitory in nature. Philippines is clearly caught in a debt trap. Total outstanding debt has risen to PhP3.5 trillion [74% of GDP] by end June 2004, up 5.4% since end-2003," the report read. The fiscal gap, which indicates government spending in excess of its revenues -- is closely watched by many investors due to its impact on borrowing and interest rates. UOB said there is a good chance the central bank may take a "slightly more agressive" stance to rein in inflationary pressures. Last year's PhP199.9-billion deficit narrowly beat the PhP202-billion ceiling. The government aims to reduce this year's budget deficit to PhP197.8 billion. -- R. A. M. Rubio



Securities dealers to ask for review of auction rules

By IRA P. PEDRASA, Reporter

Bond market players are set to ask the Bureau of the Treasury for a review of newly issued requirements that limit the participation of some government securities eligible dealers or GSEDs in debt auctions. But there are some traders have welcomed the circular, viewing it as "a professionalization of the market." Those who oppose it see it as a hindrance for small banks to participate in the capital market.

Last October 11, the bureau came out with Treasury Memorandum Circular No. 2-2004 that lists the requirements and obligations of primary and ordinary dealers -- who were previously classified either as GSEDs or non-GSEDs. According to the circular, primary dealers are GSEDs accredited by the Treasury to bid competitively in the primary market auction of government securities while ordinary dealers are GSEDs accredited to participate in the auction by submitting noncompetitive bids. Competitive bids in regular auctions allow GSEDs to put in money and ask for rates. Noncompetitive bidders can only put in a certain value. The circular also prescribes that a primary dealer should have total awards of at least 2% of the total amount of Treasury bills or bonds awarded within a particular quarter; otherwise, they pay a corresponding penalty. Also, the circular increases the volume of competitive bids to 75% of the total tender from 60% while reducing noncompetitive bids to 25% from 40%.

In a quarter, the Treasury auctions around PhP120 billion in government debt, with GSEDs -- mostly banks -- submitting their bids, which are either partially or fully rejected by the auction committee, effectively trimming the awarded volume. The circular requires primary dealers to corner at least 2% of that pared volume. Those who fail to meet the minimum have until the first month of the following quarter within which to satisfy the 2% mandatory requirement for the four-month period. Primary dealers who fail to do so will be dropped from the Treasury's roster and will be classified as an ordinary dealer for a minimum of 12 months. "That is quite a big volume for primary dealers. It might not be sustainable for small banks to comply. Say, PhP9 billion of the total awards within a quarter should be coughed out by each primary dealer? We do not even understand if the 2% requirement will be against the full total awards or the 75% competitive bids," a trader at a local bank said. "At the minimum, the circular does not answer small details. But when you look at it, eventually, this will hamper the competitiveness of small banks," the trader added.

Earlier, former National Treasurer Mina C. Figueroa said banks have to prop up the volume of bids or otherwise be delisted as a main GSED. This came after interest rates have steadily moved up despite undersubscribed bids against an offering size. In past auctions, she said there were around 40 GSEDs participating in auctions with only around seven active players. Ms. Figueroa said the Treasury was giving banks the option to be classified in either of the two "so as not to be accused of unilaterally deciding what they should be." A trader said the circular could result in primary dealers concentrating solely on auctions. "What will happen to the secondary market? We will get burned from marked-to-market losses," another trader added. However, a trader at a foreign bank said "being a GSED is not a free ride, we have big obligations. We have to be in the auction all the time. Sometimes, others become lax. Others just give throwaway bids. Others simply do not participate. At least with the circular, others can maintain their dignity because they can only be categorized as a primary or ordinary dealer... If they will complain, they might be guilty."

As primary dealers, banks have the following privileges besides the eligibility to participate in the competitive bidding of regular issues.

  • Eligibility to participate in the issuance of special issues such as retail T-bonds, promissory notes, dollar-linked peso notes, zeroes;
  • Eligibility to act as underwriter, arranger and financial advisor of securities issued by the national government;
  • Eligibility to access the tap facility window;
  • Eligibility to purchase from/sell to the bond sinking fund; and
  • Other incentives and privileges provided by the Treasury.

"What if small banks can't make it as primary dealers? Wanting to go into government securities still, such banks may crowd the noncompetitive bids. And it's just 25%?" the trader said. While traders said they understand the government's need to cover budget holes through the help of the circular, they said the 2% requirement should be reduced. The circular will take effect on the first business day of December, and banks' performance will be evaluated starting from the first quarter of 2005.



Asian spreads steady; eyes on $2B in new issues

HONG KONG -- Asian dollar bond spreads held steady yesterday with more than $2 billion in fresh debt set to hit the market this week already factored in, traders said. October issuance is expected to drop sharply compared with more than $5 billon in September, leaving traders looking for trading cues. "The market has been range-trading for a while. I think there is a lack of a catalyst in the market. Supply wise, there is not a whole lot in the near term," said Lloyd Ong, regional credit analyst at BNP Paribas. "The market on the whole is actually quite stable and grinding slightly tighter. I think going into the year end, we will see the market continue to be well supported," he said. China is to market a dual-tranche sovereign bond worth the equivalent of $1.7 billion to Europe this week after presenting the issue to investors in Hong Kong on Friday. The deal, comprising a 1 billion euro, 10-year tranche and a $500 million, 5-year tranche, is set to be priced later this week. It will be Beijing's second global bond issue in as many years, and analysts said the deal would provide a yield benchmark that Chinese companies could use when they tap offshore debt markets. The offering has a larger portion in euros compared with previous issues, which could attract more European-based customers and expand China's traditional profile of investors.

China last sold US$1 billion in 10-year and 400 million euros in 5-year bonds in October 2003. China's sovereign dollar bonds due in 2013 were stable at 73/65 basis points (bps) over comparable US Treasuries. South Korea's Chohung Bank will begin marketing a $400 million, 10-year subordinated bond in Hong Kong on Wednesday, a market source said. Investor presentations will move to Singapore on Thursday, London on Friday and New York on Oct. 25. Pricing of the deal, which includes a call option after five years, is expected shortly after the roadshow. Chohung is a unit of Shinhan Financial Group, South Korea's second-biggest financial services group. South Korean sovereign dollar bonds due in 2014 were steady at 83/78 bps over comparable Treasuries.

Philippine sovereign dollar bonds due in 2014 were unchanged at 474 bps over Treasuries. "The market is looking for more signs as to where [Philippine sovereign] bonds are going to trade. No one wants to take any aggressive positions," a Manila-based trader said. -- Reuters



Peso barely budges vs dollar; range-trading seen today

Moving within a range of PhP56.40 to PhP56.42, the Philippine peso yesterday closed a shade stronger against the greenback in lackluster trading. "The market awaits fresh leads to push a new range projection," a trader said. The trader attributed the "lack of inflows and outflows" yesterday to the balance between a weak dollar and domestic concerns that have pressured the local unit to match its all-time low last week. World market analysts said the dollar could further fall if the country would not be able to finance its gaping trade deficits. The peso fell to new lows against major currencies because of a weaker-than-expected industrial output as well as diminished consumer confidence. Outputs only went up by 0.1% in September. The Japanese yen was at the 109.25 level at the last count compared with 109.33 during Friday's late trading.

At the local front, traders said corporate dollar users seem quiet. "But the banks would still be always onhe lookout for surprises," a trader at a local bank said. Total volume of transacted dollars dropped to $122 million from $140.5 million last Friday. Fitch Ratings Services officials are expected to arrive this week and check on the country's progress in pushing revenue measures. A credit downgrade from ratings agencies last week affected the peso, which weakened to its record low of PhP56.45.

Officials of the Bangko Sentral ng Pilipinas will meet on Thursday to decide on the direction of key rates. The trader said while the central bank has reiterated that it will hold off a hike in overnight rates this year, "the market will always wait [for any changes]." At the Philippine Dealing System, the country's electronic currencies exchange, the peso averaged stronger by five centavos to PhP56.407 from PhP56.412 previously. The local unit capped its intraday high at its opening value of PhP56.40. It eventually settled at PhP56.41 against the greenback from PhP56.425 previously. "Expect the peso to remain range-trading today at the PhP56.40 to PhP56.45 levels," the trader said. -- Ira P. Pedrasa



Nenaco president resigns

In compliance with court order


Negros Navigation Co. (Nenaco) President and Chief Executive Sulficio O. Tagud, Jr. stepped down from his post last Friday in compliance with a Manila court order for the approval of the shipping firm's rehabilitation plan. On Oct. 7, Manila Trial Court Judge Artemio S. Tipon directed the company, a subsidiary of listed Metro Pacific Corp., to replace Mr. Tagud if it wants to continue its corporate rehabilitation. "In choosing the directors to be replaced, priority must be given to Sulficio Tagud, Jr.," Mr. Tipon said. Mr. Tipon also ordered the company to elect three creditor-representatives to its board to look after the interests of both secured and unsecured creditors.

Mr. Tagud, formerly Nenaco's rehabilitation receiver, has been under fire for not revealing to the court that he once served as director of Bonifacio Land Corp., which was owned by a consortium that included Metro Pacific, when he was appointed as rehabilitation receiver. According to the court, this posed a conflict of interest on Mr. Tagud's part. Mr. Tipon expressed dismay at Mr. Jacob's appointment as president in August, noting the firm's move was "duplicitous." The judge said Mr. Tagud has been groomed as president all along even when he was the receiver.

In his order released yesterday, Mr. Tipon said the company "complied substantially" with the conditions, after the court was informed officially of Mr. Tagud's resignation yesterday. Mr. Tipon said he was pleased with the election of Renato A. Castillo, Wellington Q. Aldemita, and Arlyn C. Soresca to the Nenaco board, after the firm held a special meeting on Oct. 11. Mr. Castillo, senior vice-president of the Development Bank of the Philippines, was the bank's nominee, while Mr. Aldemita was the nominee of Pilipinas Shell Petroleum Corp. Both represent secured creditors. Ms. Soresca, representing the unsecured creditors, is a lawyer and a nominee of Unique Machine Shop. In an interview with BusinessWorld, David Nugent, Metro Pacific's senior vice-president for communication, clarified that no one stepped down from the board to make way for the three new members, as there were vacancies in the first place. Nenaco's board has 13 members, he said. Nenaco, the country's second largest shipping firm, filed for corporate rehabilitation on March 29. The court approved the company's 10-year corporate rehabilitation plan on Oct. 5. The shipping firm's debts had hit PhP2.5 billion and the firm said its financial woes could be traced to a decrease in passenger volume and to the 1997 Asian financial crisis, which increased interest rates and operating costs.



As shipping company files petition to delist from PSE


Negros Navigation Co., Inc. (Nenaco) yesterday filed a petition to have its shares delisted from the official registry of the Philippine Stock Exchange (PSE). "As a private company, Nenaco will be able to effect the many changes it intends in order to rebuild our business, stabilize our financial foundation and reposition the company for future growth," Willard G. Mosquito, corporate information officer, told the exchange. He also asked the exchange to consider the delisting of Nenaco in view of its 10-year rehabilitation plan approved on Oct. 4 by the Manila Regional Trial Court. "We also ask [the PSE Listings] committee to consider the unique circumstances of our rehabilitation program and ask your assistance in achieving approval of this delisting in as expedient a manner as possible," wrote Mr. Mosquito, adding that they "do not discount the possibility of returning to the market at some point in the future." The petition was in line with a tender offer by parent Metro Pacific Corp. to buy back the 85 million remaining shares equivalent to 2.81% of the outstanding capital stock for PhP0.16 each at PhP13.6 million.

The tender offer will start tomorrow and end on Nov. 17. Every Nenaco shareholder on record as of Oct. 15 is entitled to tender all or a portion of their shares for acceptance and purchase by Metro Pacific. Metro Pacific, which currently owns 97.19% or 2.9 billion shares of Nenaco, will pay through ATR-Kim Eng Securities, Inc. the tendered and accepted shares on Dec. 3 -- the 12th business day after the close of the tender offer. He said the tender offer will help Nenaco to implement its rehabilitation plan. "We understand that Metro Pacific has decided to effect this tender to Nenaco's remaining shareholders in an effort to assist us in implementing our rehabilitation program. We believe that the tender offered by Metro Pacific is a fair and clear exit mechanism for their investments, which have depreciated in value over the past several years," Mr. Mosquito said. Nenaco's shares began trading in 2002, reaching the highest price of PhP1.70 each on the first quarter and the lowest of PhP0.07 in the same period. Nenaco's stock price hovered at the range of PhP0.33-PhP0.55 per share in 2003 before the PSE suspended trading last March.



National Steel rehab cost so far at PhP900M, says Global


With the acquisition of National Steel Corp. completed, Indian-owned Global Steelworks International, Inc. yesterday vowed to turn the Iligan-based steel plant into a "world-class" facility and a major contributor to the national economy. In a statement, Global Steelworks said it has so far spent PhP900 million ($16 million) for the rehabilitation of the steel plant and equipment. Work on the 40-hectare complex began last Feb. 1 and is nearly completed. Global Steelworks said the investment went to expenses on spares, maintenance work, consumables, and labor. The amount is on top of the total PhP13.25 billion Global Steelworks will pay for the acquisition.

Creditors of National Steel and Global Steelworks closed the deal last Friday with two remaining hitches finally resolved: a certificate of eligibility for incentives under the Special Purpose Vehicle Law from the Bangko Sentral ng Pilipinas (Central Bank of the Philippines), and an assurance from the National Power Corp. that it won't run after Global Steelworks for National Steel's obligations. Iligan city officials have also struck a deal with the creditors to collect only the principal amount of back taxes owed by the steel firm. "The Iligan City government and the National Power Corp. have confirmed that [Global Steelworks] has no obligation for the payments [National Steel] owes them, as they are matters to be settled among the [National Steel] liquidator, the creditor banks and the claimants," Global Steelworks said. The asset purchase deal was signed last Sept. 10, after which Global Steelworks delivered as promised a PhP1-billion down payment. Installments will me made over an eight-year period. "With all these formalities now out of the way, operations of the Iligan plant can move forward at full steam," Global Steelworks President Sushant C. Das said. The company cited a trial order shipment of 5,600 metric tons of cold rolled coils worth more than $3.9 million to China last month "as a token of the economic benefits the rehabilitation of the mothballed plant could bring to the national economy." Meanwhile, the BSP said the sale of National Steel to the Global Group is a legitimate special purpose vehicle transaction.


This is contrary to claims by a law firm that it was illegal for the BSP to certify the sale of National Steel as eligible under the Special Purpose Vehicle or SPV Law. The transaction is covered by the SPV law, which grants tax exemptions to SPVs that acquire or invest in non-performing assets. National Steel shut down its Iligan plant in 1999 after it failed to settle loans to creditors. The Roque, Butuyan Law Office, however, maintained that National Steel is not a qualified financial institution under the SPV law. Only the BSP, banks, financing companies, investment houses, government financial institutions, government corporations and quasi-banking institutions are qualified to avail of SPV perks and exemption privileges.

The BSP, however, said in a letter to the law firm that based on its legal review, the sale is in accordance with the SPV law. "We wish to clarify that the transactions in issue involve the sale of non-performing loans of secured financial creditors of National Steel to two SPVs," said BSP Assistant Governor and General Counsel Juan de Zuniga. He added the transactions fall under the implementing rules of the SPV law. "Moreover, the selling financial institutions including banks, will sell absolutely and unconditionally, their NPLs [non-performing loans] to the SPVs. The absolute and unconditional sale of the NPLs does not include any buyback arrangement by which said NPLs would revert back to the creditors," Mr. de Zuniga said. As such, he said the transaction is a "true sale," contrary to the claims of the law firm. The two SPVs are Global Ispat Holdings, Inc. and Global Steelworks International, Inc. The Global group said the transaction already met all the necessary approvals including those of the BSP, the Securities and Exchange Commission, the National Power Corp., and the local government of Iligan.



Jollibee 3Q net hurt by high oil prices

Fastfood firm Jollibee Foods Corp. said on Monday its net earnings growth slowed sharply in the third quarter as high oil prices pushed up costs. The company said in a statement that preliminary figures showed its quarterly net profit reached PhP317 million ($5.6 million), up 6% from PhP298 million in the year ago period. That marked a sharp slowdown from profit growth of 36.8% in the second quarter. "That's bad for the stock," said Jose Vistan, an analyst at AB Capital Securities. "The expectations were at least double-digit growth for the quarter. "The earnings are disappointing but we still like the company's financial standing, especially with high levels of retained earnings," he said.

The company, which vastly outsells McDonalds and KFC locally, said net income for the January-September period reached PhP1.17 billion, up 28% from a year ago. The firm will disclose its final third-quarter net income figures on or before a Nov. 15 deadline. "The cost of packaging materials, utilities, and certain raw materials rose rapidly in August and September, driven mainly by the increase in the price of petroleum," Chief Finance Officer Ysmael Baysa said in the statement. "We made slight price adjustments on our products and continued pursuing cost improvement on our operations, but they were not sufficient to immediately offset the impact of cost increases," he said.

Jollibee, which started as an ice cream house but shifted to hamburgers and chicken, has raised prices four times so far this year, with each increase averaging about 2% or less. The company, which has expanded into pizza, pasta, cafe-bakery and Chinese food, said group-wide sales climbed 24.5% to PhP8.6 billion from a year ago in the third quarter. The firm said sales growth was higher in the central Visayas region and the southern island of Mindanao, "most likely on account of strong output and prices of farm produce." Jollibee said its Yonghe King fastfood chain in China posted 35.9% sales growth in the third quarter from a year earlier. As of end-September, the group had 1,008 stores locally and 120 stores abroad. Jollibee shares climbed 8.3% in the third quarter against the 11.5% rise in the main index. The stock added 1.79% yesterday compared to the 0.48% climb in the index. -- Reuters



Cuervo bidding for Transco contract to appraise assets


Leading appraisal company Cuervo Appraisers, Inc. is bidding for the contract to appraise the value of state-owned transmission company National Transmission Corp. (Transco). At the same time, the company is looking at offering its valuation services in China and other countries in Southeast Asia. In an interview, Federico C. F. Cuervo, president, said the company has submitted its bid for the Transco contract. The contract involves appraising Transco's transmission assets. This is to assess how much the company's assets are worth in preparation for privatization. "We are bidding for the [appraisal of the] Transco transmission assets. We can do it. We are ready to get the job," he said. Mr. Cuervo said local appraisers are more qualified than foreign appraisers for the job because they know the Philippine setting. He said foreign appraisers will just hire local appraisers to do the valuation for them if they get the job. He added that besides Cuervo Appraisers, Asian Appraisers is also bidding for the contract.

The government is set to privatize the operations of Transco, the spin-off company which handles the transmission functions of the National Power Corp. As provided for under the Electric Power Industry Reform Act, Transco's operations will be given to the private sector. However, ownership of the company and its transmission assets will remain with the government. However, the valuation of Transco has not yet been finalized.


Meanwhile, Cuervo Appraisers is eyeing appraisal contracts in other parts of Southeast Asia. "We want to compete. We can compete with our expertise and also at cost. If they are using Australia and American appraisers, those entail higher costs," he said. "There's a big market for this. I've been going around the region promoting the appraisal business," he said. He said that by next year, Cuervo Appraisers will be going full scale on the expansion. "There will be an appraisal Congress and it will be an opportunity to promote the Philippines," he said. The 14th ASEAN Appraisers Pre-Congress will be held in the Philippines in April next year. Simultaneously, the first Philippine Appraisers Congress will also be held, Mr. Cuervo said. The two events will be a venue to discuss the role of ASEAN appraisers in attracting foreign direct investments, he added.



Meralco projecting savings through power producers

The Manila Electric Co. (Meralco) is seen to generate savings of PhP1.37 per kilowatt-hour once power plants of its independent power producer First Gas Power Corp. are allowed to run over and beyond their contracted capacity of 83%. This, in turn, is expected to translate to savings of at least 20-30 centavos per kWh for Meralco customers. Meralco contracts 20% of its power requirements from First Gas. "Once plants are allowed to increase dispatch beyond 83%, this can translate to savings of PhP1.37 per kWh between Meralco and First Gas," First Gas Chief Executive Peter D. Garrucho, Jr. told reporters. Meralco customers may avail of the savings up to 2011.

Meralco gets bulk of its power supply from state-owned National Power Corp. (Napocor), while the remaining supply is being secured from its contracted IPPs such as First Gas Power, Quezon Power Philippines Ltd. Co. and Duracom Power. Mr. Garrucho said if the Sta. Rita natural gas-powered plant and 500-megawatt San Lorenzo natural gas-powered plant in Batangas would be dispatched beyond their minimum energy quantity of about 83% of their installed capacities, more savings could be generated. The minimum energy quantity dispatch of the IPPs has been a significant part of the amendments set in the power supply deal between Napocor and Meralco which is now pending approval by the Energy Regulatory Commission (ERC). The limited dispatch of the natural gas facilities was partly due to the congestion in the transmission line of Napocor but is now being addressed by spinoff firm National Transmission Corp. Transco is currently pursuing its long-delayed Batangas Transmission Reinforcement Project and the uprating of the Biņan-Dasmariņnas line to solve congestion in key transmission lines where the output of the gas plants would be transmitted.


The savings could be generated from an improved dispatch from the current 60%-70% to about 92% and once the ERC approves amendments to the purchased power agreement with Meralco. Upon amendment to the deal which Meralco filed with the ERC, the shortfall capacity can be recovered until 2011. Acceptance short fall is the portion of the fixed charges that has already been paid for by Meralco but is yet to be utilized. If only 70% of the contracted output of 83% would be used, a remaining 13% which was already paid for can be tapped by the consumers, Mr. Garrucho said. -- Bernardette P. Sto. Domingo



Stocks inch up in brisk trading


Trading was brisk yesterday as the equities market moved forward with some gains from early positioning by investors who expected good corporate earnings data. Reversing its earlier losses, the Philippine Stock Exchange composite index (Phisix) went up 8.57 or 0.48% to 1,789.98, a far cry from Friday's decline of 15.89 to 1,781.41. As third-quarter earnings reports began to trickle in, investors seemed to have found an anchor for their expectations which could rev up trading in the market in the coming days. Jose Vistan, Jr., research director of AB Capital Securities, Inc., said the market was basically in another consolidation mode. "The local equities market inched up in another day of consolidation," said Mr. Vistan.


The gains may not have been spectacular as projected by most analysts but it put back enthusiasm among investors. The surge in optimism was obvious in the list of top 20 active stocks where majority went up, only two ended lower, and five were unchanged. The Philippine Long Distance Telephone Co., which remained the widely traded stock, was unchanged at PhP1,425 but it accounted for a market share of 34.63% on 170,000 shares traded for PhP243.3 million. Ayala Land, Inc. followed, finishing stronger at PhP6.90 on 15.4 million shares valued at PhP106.3 million. But its market share was only 15.13%. DMCI Holdings, Inc. was next in line, closing higher at PhP2.70.

Metro Pacific Corp. slid to the fourth slot but it finished on the positive side at PhP0.44 with 94.5 million shares trading for PhP43.4 million. The holdings firm of Hong Kong-based First Pacific Co. in the Philippines has tendered an offer to buy back shares of its debt-saddled shipping subsidiary, Negros Navigation, Inc. (Nenaco). The offer was necessary for the delisting of Nenaco from the exchange's official registry. Nenaco yesterday filed a petition for the delisting of its shares which stopped trading last March. It said while it does not discount the possibility of listing in the future when it regains its financial health, it would be to the best interest of stockholders to have a fair and clear exit mechanism for their investments whose values have been depreciating over the years.

Bank of the Philippine Islands, the oldest banking institution in the country, was the fifth actively traded stock. Its price was unchanged at PhP47. The exclusive list of the market's best performers showed a sprinkling of stable stocks that hold promise based on their strong fundamentals. These include the Gokongweis' Digital Telecommunications, Inc., the Lopezes' ABS-CBN Holdings Corp., Philippine Deposit Receipts, Ayala Corp. and its telecommunications arm Globe Telecom, Inc., and Jollibee Foods Corp., the country's leading fastfood chain.

Jollibee yesterday released its third-quarter report with results expected to encourage investors even more. The food company -- which was incorporated in 1978 and whose primary interests are in developing, operating and franchising fastfood stores under the trade name "Jollibee" -- reported a 24.5% increase in sales for the third quarter. It said it maintained the strong growth in the first two quarters as third-quarter sales rose to PhP8.6 billion. However, its net income was up by a modest 6% to PhP317 million due to high costs in August and September. Sales of Jollibee's Yonghe King business in China grew rapidly by 35.9% for the same period. Jollibee operates the country's largest food service chain, with 1,008 stores as of Sept. 30. These include 478 Jollibee stores, 276 Chowking branches, 226 Greenwich and 28 Delifrance outlets. It has 120 stores abroad -- 89 for Yonghe King, 23 for Jollibee, and eight for Chowking.


The gainers, led by DMCI Holdings, Inc., were composed mostly of stocks of holdings firms with some from the mining, real estate and construction, and food and beverage sectors. Interest in mining continues despite a temporary drop with investors looking at the stocks as a possible hedge against inflation and increasing oil prices. At the stock market, advancers were ahead of decliners at 33-25 but the unchanged issues gained the upper hand at 51. All 109 issues saw some action in 2,636 trades. Around 1.8 billion shares exchanged hands for PhP702.5 million. Only the commercial-industrial and the property counters reflected positive sentiment. Property blazed the way with gains of 13.35 at 648.28. The commercial-industrial was equally upbeat as it rose 8.78 to 2,829.57. Mining swerved to the negative territory, overwhelmed by a volley of optimistic projections. It slipped 64.26 to 2,140.55. Banks and financial services dropped 0.19 to 499.63. Oil was down 0.05 to 1.80. The all-shares index weakened by 8.42 to 1,110.22.

There was still net foreign buying at the stock market. Total foreign buying was at PhP408.7 million with foreign selling reached PhP384.8 million. The market may likely try to snap up some gains through the week, although prospects of some low sessions are not discounted. "The market will continue to consolidate amidst the uncertainties of oil and optimism of third-quarter earnings," said Mr. Vistan. Investors, he added, are expected to continue to position in select stocks ahead of the release of corporate results later this month. He warned that with the uptrend in oil prices, investors may take profits quickly.