RP economic pillars still intact?

I stumbled upon this article in inquirer about RP economy being able to withstand global economic downturn because two of three of the most important income drivers remain intact. It is no secret that our exports, the first pillar, is getting a beating. However, a certain economist is saying that the two remaining pillars of the economy remain relatively robust. These pillars are Remittances and BPO Services.

This made me look for the latest data on remittances. As of End February, remittances grew only by 4.9% year-on-year, and 2.5% growth year-to-date. While scratching my head, I am quite confused. These numbers are far from robust. Our country used to experience remittance growth of around 20%, which is already on the conservative side. This is actually a deceleration. It only highlights that the economy’s milk cow is running out of milk. While I cannot say am certain, but there is a high possibility that remittances will crumble sooner than we think.

Next on the list is the BPO services. The economist is saying that revenues of business process outsourcing firms are still strong. But there are silent horror stories about lay-offs in the sector. Back offices are also laying off people, as mentioned in this blog before. This is not a good sign since most of employment opportunities are on the BPO now.

So, are we free from the effect of global recession? I think we shall be affected, and only time will tell. But saying that these pillars are still intact is refusing to accept the truth.

Petron to issue Php 15B fixed-rate notes

Petron Corporation, the country’s top oil refiner, aims to raise upto P15 billion or $310 million via a private placement of fixed-rate notes starting May, according to Eric Recto, the company’s president. Recto said that proceeds of the notes issue will be used to fund the company’s five-year expansion plan worth $700 million to $1 billion. No word yet on the mechanics of the notes issue, or wheather it will be open to small investors.

The company is now fully private, after the government’s stake was sold to Ashmore. Late last year, San Miguel Corporation entered to an agreement with Ashmore, with some SMC executives now occupying key positions in the management of Petron.

PSE revamps index

The composition of the Philippine Stock Exchange Index (PSEi) shall be revised effective May 4, 2009 as a result of PSE’s regular indices review. Sectoral indices shall also be adjusted accordingly.

To qualify for the main indices (PSEi), companies are required to meet the following during the review period:
1) Free float level of at least 10%
2) Liquidity or average daily trading value of at least P5 million
3) Volume turnover ratio of at least 10%
4) Tradability of at least 95% of the total trading days
5) Free float market capitalization

On the other hand, to qualify for the sector indices, companies are required to meet the following during the review period:
1) Liquidity or average daily trading value of at least P1 million
2) Tradability of at least 75% of the total trading days

The free float level of all listed companies shall also be updated. The adjustments are based from the companies’ latest public ownership reports as of December 31, 2008 submitted to the PSE by April 3, 2009.

As a result, Petron and Union Bank were dropped from the list of blue chip companies. The two listed companies shall be replaced by Aboitiz Power Corp. and GMA Network Inc.

Petron failed to comply with the 10 percent minimum public or free float level while UnionBank will also be replaced in the index after its average daily value turnover went below the P5 million turnover requisite.

For those following the movement of PSEi, consider these changes on your next stock trading strategy.

Aboitiz Power to sell Php3B Bonds Offer

The rates of Aboitiz Power’s 3 billion pesos has been set for its offer of three-year and five-year fixed rate bonds. The three-year bonds would carry an 8.0 percent coupon and the five-year bonds an 8.7 percent coupon, or a premium of slightly over 220 basis points against best bids for comparative local Treasuries. The minimum investment is 50 thousand with increments of 10 thousand for additional invesments.

Aboitiz Power will use the offer proceeds to partly finance its acquisition of the Tiwi-Makban geothermal power plant from state-run National Power Corp.

The company has picked BDO Capital & Investment Corp, BPI Capital Corporation, First Metro Investment Corp and ING Bank Manila branch as joint lead managers.

It is good to see that local companies have been tapping local investors for their bond offerings. After Globe and San Miguel, Aboitiz is the latest addition of blue chip companies who is confident that they can source investment requirements domestically. It is also surprising to see these bonds offer minimum invesment of 50 thousand, where an average office employee can put his savings. These bond offerings are selling like hotcakes, and it only shows there is enough liquidity in the Philippine market despite the global economic turmoil. I think it is time for government to issue retail treasury bonds/bills again to source its pump priming activities.