MAY 7, 2006
 (STAR) By Des Ferriols - The country’s gross international reserves (GIR) continued to post new record highs in March, reaching $20.844 billion due mainly to the government’s heavy foreign borrowing early in the year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The March GIR level was up by 1.2 percent from the end-February level of $20.586 billion.

The GIR represents all the foreign exchange that enter the country, mostly US dollars. The higher the reserves, the more comfortable monetary officials are that the country had enough foreign exchange to pay for importation as well as maturing foreign obligations.

Since the Asian crisis, the country has recovered by leaps and bounds from its balance of payments problems as a result of strong inflows from overseas Filipino workers (OFWs).

Over the last two years, foreign borrowing to refinance existing foreign loans have also been contributing significantly to the GIR as the government is able to access cheaper borrowing rates from foreign fund sources.

The current GIR level, according to the BSP, was adequate to cover about 4.3 months of imports of goods and payments of services and income.

At this level, the BSP said the country also had enough reserves equivalent to 3.3 times the country’s short-term debt based on original maturity and 1.8 times based on residual maturity.

Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.

The higher GIR level was attributed mainly to the deposit by the National Government (NG) of the proceeds from its bond sale, as well as the BSP’s foreign exchange operations and income from investments abroad.

The March GIR, according to the BSP, still contained the proceeds of the Arroyo administration’s $1.5-billion global bond and $500-million Euro-denominated bond floats in January.

The Arroyo administration had programmed a total of $3.1 billion worth of commercial borrowing for 2006 and the January float filled up the bulk of this requirement as the government took advantage of positive investor sentiments.

Net international reserves (NIR), on the other hand, including revaluation of reserve assets and reserve-related liabilities, increased to $20.221 billion, higher by 1.4 percent from the end-February 2006 level of $19.938 billion. NIR is computed as the difference between BSP’s GIR and the total of its short-term liabilities and use of Fund credits.

The BSP is projecting the end-2006 GIR to reach $18 to $18.6 billion and as a result, the balance of payments is expected to reach a surplus of at least $1 billion or higher, mainly due to record-high remittances from overseas workers.

Remittances from overseas Filipino workers, according to BSP Governor Amando M. Tetangco Jr. is expected to reach $11 billion and could possibly go up to as high as $12 billion including the inflows not captured by the banking system.

Despite its initial success, however, the Department of Finance (DOF) said the government did not have plans of borrowing more than it has to from the foreign market, saying that the Arroyo administration planned to stay with its approved borrowing mix for 2006.

For the whole of 2006, the Arroyo administration would have to finance part of its operations and all of its debt service costs through borrowing since it is not generating enough revenues to be self-sufficient.

For the year, finance officials calculated that the government needed to amortize P119.07 billion worth of principal foreign obligations while servicing P215.5 billion worth of interest payments on domestic debt and P124.4 billion of interest payments on foreign debt.

Stocks soar in biggest single-day gain in 5 yrs The Philippine Star 05/06/2006

Share prices posted their strongest one-day gain in more than five years yesterday, as foreign funds helped extend a rally to a fourth straight day on the country’s positive economic and fiscal outlook, traders said.

The benchmark 30-company Philippine Stock Exchange (PSE) index surged 99.95 points, or 4.2 percent, to close at 2,470.24, its best close since July 22, 1999, when it ended at 2,488.62.

Yesterday’s gain represents the biggest single-session rise for the main index since Jan. 22, 2001 when it rose 255.13 points following the ouster of former President Joseph Estrada.

On Thursday, the market was up 1.3 percent. Friday’s advance brings the total index gain to 8.8 percent since the start of May.

"The market’s rally is the result of a combination of good fundamentals and technical factors. It’s hard to stop a trainload of money," said First Grade Holdings managing director Astro del Castillo.

"Banks and property companies are most likely to do well this year,’’ said John Padilla, who helps manage $2.8 billion at Metropolitan Bank and Trust Co. "When interest rates are low demand for financing usually goes up."

More funds are expected to pour into stocks, said Junie Banaag, who helps manage over P1.1 billion in equities at First Metro Investment Corp.

"Some investors are shifting their fixed-income funds to equities, betting these sharp gains will run some more," the fund manager said. "Investors who missed the boat are chasing it now."

Francis Lim, president and chief executive officer of the Philippine Stock Exchange, said the dramatic rise in stock prices, especially during the last four trading days, reaffirms investors’ confidence on the Philippine economy.

"The economic reforms that the government is putting in place, along with reforms that we at the PSE are implementing, have started to bear fruit," Lim declared.

Lim believes favorable developments in the political front, like the peaceful holding of Labor Day celebrations, have convinced investors of political maturity and sobriety.

"Our show of political maturity, combined with sound economic fundamentals, strong corporate performance and more transparent stock market operations, will definitely fuel a further surge in stock prices," he added. "I believe we have the beginnings here of a bull run, provided, of course, that we maintain all these factors conducive to business." ‘Manageable’ inflation The National Statistics Office (NSO) yesterday reported that inflation slowed to 7.1 percent in April, from 7.6 percent the previous month, as higher farm output helped make food cheaper.

That’s the lowest rate since November and less than the 7.6-percent forecast by economists.

On Thursday, the Bangko Sentral ng Pilipinas (BSP) kept its key interest rate unchanged at 7.5 percent for a seventh straight month, saying inflation is "manageable" and doesn’t warrant higher borrowing costs.

Ayala Land, the country’s largest property developer, rose P1.5, or 11 percent, to P14.75, the highest since Aug. 7, 1997. Bank of the Philippine Islands, the country’s largest lender by market value, added P4, or 6.2 percent, to P68.50.

Ayala Corp., which controls Ayala Land, Bank of the Philippine Islands and also the nation’s second-biggest mobile-phone company, rose P27.50, or 6.8 percent, to P430. Better harvests Stocks also rose after Economic Planning Secretary Romulo Neri said that better-than-expected farm output probably drove first-quarter economic growth above 5.5 percent, the lower end of the government’s forecast for 2006.

Jollibee Foods Corp., the largest fast-food company, added P1, or 2.8 percent, to P36.50. SM Investments Corp., owner of the nation’s shopping mall operator, grocer and department store chain, climbed P9, or 3.9 percent, to P239.

Philippine Long Distance Telephone Co. (PLDT), the country’s largest company by market value, surged P65, or 3.2 percent, to P2,125, a record close.

International Container Terminal Services Inc., whose chairman is buying out his partner’s 23 percent stake in the port operator, gained P1.25, or 9.6 percent, to P14.25, also an all-time high.

"We are probably seeing some irrational exuberance in the market,’’ Erick Tan, who helps manage about $4.7 billion at BPI Asset Management Inc. "This is a very sharp gain and a good time to lighten up on positions."

Lepanto Consolidated Mining Corp.’s Class A shares, equity reserved for Filipinos in the nation’s second-largest metal producer, fell one centavo, or 2.5 percent, to P39, eroding last month’s 72 percent gain. Its Class B shares, which have no ownership restrictions, lost one centavo, or 2.3 percent, to P43.

Banco de Oro, a lender that is acquiring bigger rival Equitable PCI Bank, slid 50 centavos, or 1.4 percent, to P36, after climbing yesterday to its highest in almost a month.

Shares worth P4.39 billion were traded, almost triple the six-month daily average. Gainers edged losers, 59 to 42, with 50 unchanged. – AP

Chief News Editor: Sol Jose Vanzi

All rights reserved