PH bags second investment grade

In another vote of confidence, the Philippines bagged its second investment grade rating on Thursday from global debt watcher Standard and Poor's (S&P).

S&P gave the Philippines a stable outlook and raised its credit rating to BBB- from the previous BB+.

The upgrade came only more than a month after Fitch Ratings gave the country its first investment grade.

An investment grade means the Philippines can borrow funds at a lower cost, allowing the government to save.

Related story: A first in history: PH gets investment grade

"The upgrade on the Philippines reflects a strengthening external profile, moderating inflation and the government's reliance on foreign currency debt," S&P credit analyst Agost Benard said in a statement.

The Philippine economy exceeded expectations last year by accelerating growth to 6.6 percent from 3.9 percent in 2011.

"We expect the country to move into near-balanced external position because of persistent account surpluses, in which large net transfers from Filipinos working abroad more than offset ongoing trade deficits," Benard added.

Also read: PH stock market named one of world's 'hottest'

Malacanang welcomed the upgrade, which it said is the "latest institutional affirmation of the Aquino administration’s good governance initiatives."

"It is further indicative of sustained confidence in the Philippine economy:  of our collective resilience, optimism, and growing potential, amidst global economic uncertainty," presidential spokesperson Edwin Lacierda said.

Finance Secretary Cesar Purisima for his part said the ratings upgrade is "an affirmation of what the markets already recognize—that our economy's underlying soundness is on par with countries rated investment grade or higher."

Related story: More Pinoys remain poor, says NSCB

"For now, we must redouble our efforts to remove the remaining constraints to our growth if we are to reach even greater heights," Purisima said.

This, as he vowed that the government will focus on infrastructure development, ramping up social investments and further opening up the economy.

With the S&P upgrade, only one major debt watcher, Moody's Investors Service, has yet to give the country an investment grade, placing it a notch lower with a Ba1 rating.

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PH stock index rises as S&P gives PH investment-grade credit rating

MANILA, Philippines — Local stocks trekked higher for the fifth straight session on Thursday as investors correctly anticipated that the Philippines would bag an investment grade rating from a second global credit watcher.

After a sluggish opening following an overnight slump in Wall Street, the main-share Philippine Stock Exchange index added 22.43 points or 0.32 percent to close at 7,093.42. The index hit an intraday high of 7,108.28 – close to the all-time peak of 7,120.48 last hit on April 22 – as investors bet on another investment grade rating.

Dealers said the index moved higher close to the end of the session in anticipation that the second investment grading rating would come soon. This offset the “sell in May-go away” syndrome that crept early in the session.

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PH’s fresh credit rating upgrade seen to draw more foreign investments

MANILA, Philippines — The Philippines is on a roll.

After being given bullish growth outlooks from various institutions and getting its first investment grade from Fitch Ratings, another international credit-rating agency placed the country, on Thursday, in the investment status.

Standard & Poor’s announced in a statement that it has raised the country’s credit rating by a notch from BB+ to BBB-, the minimum investment grade, citing the country’s rosy macroeconomic fundamentals in the wake of global economic problems.

S&P assigned a “stable” outlook on the country’s new rating, which means this is likely to remain the same at least over the short term unless unexpected developments that could significantly change the country’s macroeconomic indicators happen.

A credit rating is used by foreign investors in making investment decisions. An investment grade signals to the investors that a country is a place suitable for business, and that its government and private enterprises in general have the ability to service debts to bond and equity investors.

“The upgrade on the Philippines reflects a strengthening external profile, moderating inflation, and the government’s declining reliance on foreign currency debt,” S&P credit analyst Agost Benard said in the statement.

S&P’s move to raise the country’s credit rating came after its decision last month to upgrade its economic-growth projection for the Philippines for 2013 from 5.9 to 6.5 percent.

The improvement in the credit rating and growth estimate for the Philippines come as global economic problems, led by the euro zone crisis, are dampening outlooks on many countries.

For instance, while S&P upgraded its credit assessment for the Philippines, it also announced on Thursday that it lowered its outlook on the BB+ rating of Indonesia from “positive” (which indicates likelihood of an upgrade of the credit rating) to “stable” amid drag caused by unfavorable external environment.  A rating of BB+ is a notch below investment grade.

S&P said the Philippines’ “external profile,” or ability to pay its debts to foreign creditors as these fall due, has strengthened as evidenced by the country’s foreign-exchange reserves. These reserves, which currently stand at about $84 billion, are driven largely by remittances from overseas-based Filipinos, foreign investments in business process outsourcing sector (which includes the call centers), and foreign investments in peso-denominated securities.

The foreign exchange reserves of the Philippines are enough to pay for about one year worth of the country’s import requirements, thus exceeding international standards for adequacy. According to benchmarks, reserves must be worth at least four months of a country’s import requirements to be considered comfortable.

Given the enormous foreign exchange reserves managed by the Bangko Sentral ng Pilipinas and other foreign-exchange liquidity kept in banks in the country,the Philippines is not dependent on the international capital market for its dollar requirements, according to the S & P.

The foreign exchange reserves also exceed the total outstanding, short-term debts of government and private entities in the country. According to the BSP, these short-term debts currently stand at about $60 billion.

S&P likewise cited benign inflation, which is believed to help encourage households to consume more and enterprises to buy more capital goods for investments. A low-inflation environment is thus favorable for businesses, according to economists.

In the first quarter, inflation averaged at 3.2 percent, which was close to the low end of the government’s official inflation target range of 3 to 5 percent.

The credit-rating firm likewise noted the Philippine government’s declining debt burden, which was attributed to efforts for nearly a decade to improve tax collection and the country’s growing economy.

After hitting a peak of 74 percent in 2004, the ratio of the government’s outstanding debt to the country’s gross domestic product (GDP) continually declined to reach about 50 percent by the end of 2012 and is projected by S&P to fall further to 47 percent by the end of 2013.

“The current and previous administrations improved fiscal flexibility through restraining expenditures, reducing the share of foreign currency debt, deepening domestic capital markets, and more recently through modest revenue gains,” S&P said.

The credit-rating agency, nonetheless, cited a major weakness of the Philippine economy—the low per-capita income—which it said the government should focus on addressing.

S&P estimated that the country’s per-capita income (the economy’s total income divided by the population), estimated to settle at $2,850 this year, is below those seen in most countries with the same credit rating as the Philippines.

“The Philippine economy’s low income level remains a key rating constraint. The concentrated nature of the economy, infrastructure shortfalls, and restrictions on foreign ownership, which deter foreign investment, are factors that hamper growth,” S&P said.

The Philippines, together with other developing Asian countries, is often described by economists as suffering from “non-inclusive growth” in that while its economy is growing robustly, this is so far unable to lift poor people above the poverty line.

S&P said the country should generate more investments in order to provide jobs to people in the low-income segment and lift the per-capita income. To generate investments, it said, the country has to liberalize its regulatory environment in a manner that allows easier entry of foreign investors. It also said the country has to invest more in infrastructure, which businesses need for easier transportation of goods.

The credit-rating firm, nonetheless, saw a good chance for the Philippines to increase per-capita income over the medium to long term, especially if the country would address infrastructure and regulatory problems.

“Real GDP per capita growth averaged 3.3% over the past decade — somewhat slow at this stage in the country’s development. Based on ongoing structural changes in the economy, rising private sector investment, and with increased fiscal space allowing greater public spending, we expect real GDP per capita growth to rise to 4.5% in the forecast period to 2016,” it said.

Meantime, BSP Governor Amando Tetangco Jr. said the investment ratings from Fitch and S&P would further lift investor sentiment on the Philippines. He said the favorable sentiment would translate into actual investments over the short to medium term, and make the Philippines catch up with its Southeast Asian neighbors in terms of foreign direct investments.

“With our investment grade rating, we are more confident that these inflows, particularly of more FDIs, will swing towards increasing the country’s productive capacity, thereby generating more employment and higher incomes,” Tetangco said.

Finance Secretary Cesar Purisima said the investment rating from Fitch and S&P reflected economic gains from reform policies of the government. He said the government’s anti-corruption and transparency agenda has made the Philippines win the attention of the international capital markets.

“The investment grade rating is another resounding vote of confidence on the Philippines.  Good governance is bringing structurally sustainable growth for the Philippines,” he said.

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PH stock market named one of world's 'hottest'

The Philippine stock market is one of the "hottest" in the world so far this year, a CNN report said.

The local bourse was ranked as the fifth top-performing stock market globally, with CNN Money noting growth of 20 percent as of April 24.

The Philippine stock market was topped only by the of Kuwait, which grew by 23 percent; Argentina, 27 percent; United Arab Emirates, 28 percent; and Japan, 34 percent.

Related story: A first in history: PH gets investment grade

"Philippine stocks have soared to all-time highs this year, as the Southeast Asian nation earned its first-ever investment grade credit rating," CNN Money said.

Local stocks breached 7,000 level April 22, closing at 7,120.48, its 27th record-high so far this year.

The economy also earned its first investment grade in history from global debt watcher Fitch Ratings late March.

Also read: More Pinoys remain poor, says NSCB

The Philippines' growth amid a global slowdown has been attracting investors, CNN Money quoted Ashraf Laidi, chief global strategist at City Index in London, as saying.

"The economy doesn't depend on exports to China like many other countries in the region," Laid said further. "It's more tied to domestic consumption."

Malacanang has earlier welcomed the stock market's record performance as a "manifestation of continued confidence" in the Philippine economy.

"This is but one among many indicators of a resurgent Philippines," presidential spokesperson Edwin Lacierda said in a statement. 

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Philippines a ‘rising star’

THE PHILIPPINES has been branded as “Asia’s rising star” by Moody’s Analytics, with the country’s growth expected to outstrip much of the world in coming years.

In a report released yesterday, the research arm of credit rater Moody’s Investors Service called the Philippines “among the brightest parts of a generally gloomy global picture.”

While China, the United States and Europe struggled, the Philippine gross domestic product (GDP) grew by a robust 6.6% last year, beating the government’s target of 5-6% and the Moody’s Analytics forecast of 6.5%. This performance is sustainable, it said, with risks low and most sectors solid.

“We expect GDP growth to remain in the 6.5-7% range in 2013 and 2014, making the Philippines one of the world’s fastest-growing economies,” Moody’s Analytics said.

The government’s growth goal for this year and next is 6-7% and 6.5-7.5%, respectively.

Construction should again lead the way, supported by services, especially business process outsourcing, it noted. Government spending should spur demand, although investment and consumption are just as healthy.

This strong growth takes place in an environment of stability. Inflation has dropped well within the central bank’s 3-5% target -- it averaged 3.2% as of March -- allowing interest rates to be kept at record lows of 3.5% and 5.5% for overnight borrowing and lending, respectively.

As a result, the Philippine Stock Exchange index has soared by about 23% to date, closing in on the 33% rise posted in full-year 2012, Moody’s Analytics noted.

“Investors are bullish on the Philippines and so are we.”

Looking ahead, it said, “Some low-hanging policy fruits have already been picked, but if development and reform continue near their current pace, the Philippines’ potential rate for growth will rise towards 8% by 2016.”

The report lauded President Benigno S.C. Aquino III for continuing the work of the Arroyo administration and pushing it further to fight for transparency and accountability.

The commitment to develop infrastructure is also paying dividends, with roads, bridges and public transport extending to distant parts of the archipelago.

However, public investment still accounts for only 2.75% of GDP -- “far too low for a country at this stage of development.” The resulting gap in infrastructure limits growth in manufacturing because of the difficulty of moving physical goods around the country.

Private investment, meanwhile, is a more complicated issue.

The continued inflow of capital from foreign investors fleeing struggling advanced economies is causing money supply in the Philippines to increase sharply.

“Some are fuelling productive activity, but a lot are flowing into asset markets, as suggested by the stability of consumer prices,” Moody’s Analytics said.

A bubble in the stock market would affect relatively few, but one in the real estate market would have a more devastating impact, it warned. “The scant available data on the Philippines’ real estate, alongside anecdotal evidence, suggest that prices and construction may be rising ahead of fundamentals. This bears watching.”

There are also operational risks to private investment, with regulations and taxes “complicated and changeable,” the report read.

“If the government wants to attract more foreign investment, it must ease restrictions on foreign ownership and streamline rules for starting businesses, paying taxes and dealing with workers.”

The Philippines ranked 138th out of 185 countries in the World Bank’s Doing Business survey this year, down two slots from 2012.

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BSP named Asia's best macroeconomic regulator

Regional financial services consultancy firm The Asian Banker has named the Bangko Sentral ng Pilipinas the 2013 Best Macroeconomic Regulator in the Asia Pacific Region.

“The selection process is a rigorous one, completed over several months and involving feedback and interviews with all constituents who are in a position to comment on the candidates. All of these make this a world-class evaluation program, and the insights gained from the program are published in an annual report,” the firm said in a statement.

BSP Assistant Governor Ma. Cyd Tuano-Amador received the award on behalf of the central bank during The Asian Banker Leadership Achievement Awards in Jakarta, Indonesia on Tuesday. — BM, GMA News

Aquino: Record-high stocks show confidence in PHL economy

An indicator of a “resurgent” Philippines.

This was how Malacañang described the 7,120.48 finish posted by the Philippine Stock Exchange on Monday afternoon—the 88th record high reached by the local stock market under the leadership of President Benigno Aquino III.

In a speech in Marawi City, Aquino said these figures show the results of his anti-corruption drive and the international community's interest in the Philippine economy.

“We are now at 7,000, so hindi na ho masyadong malayo ‘yung 8,000, doble na, which is the thermometer or the barometer of business interest in our country. So when we need more resources, I am confident that we can tell you there will be more resources,” Aquino told school officials and students in a speech at the Mindanao State University (MSU).

Aquino was in Marawi City to lead the groundbreaking ceremonies for a new building in MSU. The President also joined the administration slate's sortie and met with local leaders in the area.

On Monday, the Philippine Stock Exchange index (PSEi) closed at 7,120.48 points—its 27th record-high this year—fueled by first quarter corporate earnings and the gains on Wall Street over the weekend.

'Manifestation of continued confidence'

Presidential spokesperso Edwin Lacierda meanwhile said that the Aquino administration considers stocks' record levels a “big leap,” considering that the government initially hoped Philippine shares would breach the 5,000 level. — BM, GMA News