Final Rules for ETFs Approved

IN THE NEWS from PhilStar.com

The SEC has approved the final set of rules that would guide the offering of exchange traded funds or ETFs.

ETFs are similar to other kinds of investment funds, but unlike mutual funds and UITFs whose value are computed and posted daily by the issuer, the price of an ETF is determined by how much investors are willing to pay for (and sellers willing to receive for) its shares, just like stocks and other assets that are traded in exchanges.

ETFs are a good alternative to currently available investment funds because they are more liquid (easier to convert to cash) and ideally have lower costs.

According to the article, at least three firms, First Metro Investment Corp., BDO Unibank Inc., and Bank of the Philippine Islands have expressed their plan to offer ETFs.

A copy of the rules may be found here.

Many thanks to reader haezel for the heads up.

"Effects of PH Investment Grade to Trickle Down to Poor"

IN THE NEWS from ABS-CBN News Channel

Perfect timing. The punchline is in the title.

You'll find a shorter version of the video here.

Asian Stocks Drop the Most in Eight Months Amid Cyprus Bailout

IN THE NEWS from Bloomberg

From Bloomberg Businessweek

This may be big news for some, and not so big for others

The MSCI Asia Pacific Index dropped by 1.89% today, the most in eight months, just after the announcement of an EU bailout of the island-nation of Cyprus. The bailout was granted under the condition of a one-off tax on bank deposits: 6.75% for deposits of less than 100,000 euros and 9.9% for deposits of more than 100,000 euros.

The PSEi was down 1.78% for the day.

News of the bailout, perhaps not surprisingly, was met with outrage and some degree of panic among the Cypriot public. Numerous accounts of people queuing in front of ATMs to take their money out raise the possibility of a widespread bank run in the coming days.

Be sure to keep your eyes peeled for the latest news about the bailout and its effect on the global economy in the coming days.

"Kasambahay Bill' Finally Signed Into Law

IN THE NEWS from Interaksyon

Participants and facilitators of CARD HK and Project Be's Financial Literacy Workshop for OFWs (Batch 9) 

President Benigno Aquino III has signed into law the "Kasambahay Bill," formally Republic Act No. 10361 or “An Act Instituting Policies for the Protection and Welfare of Domestic Workers.” The law defines the labor rights of domestic household workers, increases their minimum wage, and provides regular employment benefits for them.

The new law sets the minimum wage of domestic workers to a minimum of P2,500 a month in the National Capital Region; P2,000 a month in chartered cities and first class municipalities; and P1,500 a month for those employed in other municipalities. A year after the law takes effect, the Regional Tripartite Wages and Productivity Boards are mandated to review and adjust the wages for domestic workers as needed.

Besides standardized pay, domestic workers will be entitled to other social benefits provided under existing laws and to be enrolled in the Social Security System, PhilHealth, and Pag-Ibig Fund, with premium payments shouldered by employers if the helpers receive a monthly salary below P5,000.

You can download a pdf copy of the law here.

A brief commentary

Based on the 2,500 minimum wage defined by the law, SSS, PhilHealth, and Pag-Ibig contributions amount to 260, 100, and 100 pesos, respectively. This means that an employer would have to pay at least 2,960 pesos per month for one kasambahay. If you or your family employs a kasambahay, how much do you pay her? Because as far as I can remember, the informal, "socially acceptable" wage for domestic workers in the NCR has always been 3,000 pesos.

What I would have loved to see is for the law to define a mechanism by which the minimum wage can be periodically adjusted for changes in cost of living or inflation. But hey, beggars can't be choosers.

Feeding the Frenzy: HSBC Analyst Talks about the Philippine Economy in 2013

IN THE NEWS

In this video from Bloomberg, Rishaad Salamat and HSBC's Trinh Nguyen discuss the outlook for economic growth in the Philippines for 2013.

Some highlights:

• Indonesia is already investment grade and the Philippines is only expected to achieve investment grade at the second half of the year. Despite this, right now bond yields in Indonesia are higher than in the Philippines, implying that the credit rating upgrade is already "priced in" Philippine bonds and bond yields and prices won't be affected any further ("upgrade doesn't matter anymore"). The analyst, however, offers that the impending credit rating upgrade will affect the Philippine economy positively in other ways (e.g., lower borrowing costs for the Philippine government).
• The Philippines' Consumption-driven economy and booming demographics will allow it to have another strong year. Remittances at 20 billion USD will continue to drive local consumption. Other important sectors such as the BPO sector will continue to support the economy.
• HSBC predicts a 5% GDP growth in 2013. They also expect the Philippine peso to appreciate to 39.5 (to 1 USD) by the end of 2013.

Many of the factors that lead to the growth of the economy in the past year or so will continue to hold. So can the Philippines sustain growth in 2013? According to HSBC, YES.

Manuel Amalilio, Aman Futures Group Updates

IN THE NEWS from Interaksyon

Photo of Manuel Amalilio taken at Kota Kinabalu airport on January 25, 2013,
taken while he was in the custody of Philippine officials. From Interaksyon

Ten weeks ago, we were greeted by bad news that some of our kababayans down south fell victim to an investment scam allegedly perpetrated by a Mr. Manuel Amalilio and his Aman Futures Group investment company. In this follow-up post, we'll take a look at recent developments about the case.

According to the latest reports, Amalilio is now confined in a hospital in Malaysia where he also faces criminal charges. This comes after news that NBI agents were able to arrest Amalilio in Malaysia and were about to bring him to the Philippines, only to be prevented from boarding a plane at the last minute by Malaysian police. One very interesting detail is that evidently, a group of Amalilio's investor-victims were able to track and confront him in Kota Kinabalu, which led to his arrest by NBI agents.

Overall, I find these updates to be highly encouraging that the victims of the scam will at least get justice, if not part of their investment. Let's all remain vigilant and hope that authorities will not screw this up.

"Behest"

IN THE NEWS from Interaksyon

I remember first encountering the word in college when I was doing research for my paper about the Marcos dictatorship, and even then it was used in the same phrase/context: "behest loans." Around three decades after the word was first used in that sense (presumably), a return to democracy, two (three?) "revolutions," and five presidents later, we hear it again.

What is a behest loan anyway?

Do a Google (web, not news) search, and you'll see that all the relevant results come from the Philippines (I stopped clicking next at Page 5). To me, this is evidence enough that the term, if not the concept, is genuinely and exclusively Filipino.

I'm not familiar with the history and official etymology of the phrase, so all I can offer is a layman's understanding based purely on context:

A loan granted to an undeserving borrower, upon the endorsement (i.e., behest = order or command) of a person (or persons) in power and/or of high authority.

Technically, a loan is considered a behest loan if it satisfies any two of the following criteria:

• loan is undercollateralized
• borrower is undercapitalized
• direct/indirect endorsement by high government officials
• cronies own or control the borrowers
• loan was used to other purposes
• use of corporate layering
• funded project is not feasible
• extraordinary speed in loan release

According to Ombudsman Conchita Carpio Morales, the 660 million peso loan that the Development Bank of the Philippines (DBP) has extended to former Marcos Trade Minister Roberto Ongpin in 2009 has met "some" of these criteria, and is thus behest. As a consequence, the Ombudsman imposed harsh civil-administrative penalties on several high ranking executives of the bank. Good job, Ms. Ombudsman, keep it up.

The next step, of course, should be to pursue criminal cases against those who have broken the law.

And behest loan? The more important question is: at the behest of whom?

Manuel Amalilio, Aman Futures Group, and the Great Pyramiding Heist of 2012

IN THE NEWS

If it seems too good to be true, then it must be.

This lesson was painfully and expensively realized by 15,000 Filipinos who unwittingly participated in a "pyramiding" investment scheme scam perpetrated by this guy:

Take a long, hard look at the face of Mr. Manuel Amalilio, Filipino Malaysian and CEO of Aman Futures Group Phils. Inc. According to reports, Amalilio is now out of the country, presumably with the 12 billion pesos that he allegedly bilked from his investors.

Online and traditional media are now rife with stories of how Aman's victims are now coping with the loss of a not-inconsiderable sum of money, in many instances from life savings, in some from high-interest loans from middling financial institutions. Reading these accounts and seeing the reports can be more than a little depressing. Situations like this are always very unfortunate, but much more so when many of the victims are the not-so-well-off.

While it's clear that blame and the plea for justice should be laid on the feet of Mr. Amalilio and his still unknown (or maybe just still unproven?) cohorts, we should all remember that we are not completely powerless to avoid falling into such a trap. Awareness, knowledge, and understanding of matters of money and finance--causes that are central to this blog--are key in weeding out scams like this from decisions and alternatives that truly provide additional value to people's lives.

And I think it's best if we make the most out of this atrocious situation and learn from the misfortune of others, however callous that may seem.

ETF Updates

IN THE NEWS from Inquirer.net

It seems that we are now closer to finally having the first exchange-traded funds (ETFs) in the country, with the PSE eyeing a launch before before the end of the year. Perhaps not surprisingly, financial heavyweights BPI and BDO are eyeing to be among the first to offer this mutual fund and UITF alternative.

If you want to learn more about ETFs in the Philippines, you might want to check out this draft of rules and regulations that cover the funds. Of particular interest are the requirements to ensure the transparency of the funds (under Section 22); how I wish we had the same transparency rules for mutual funds and UITFs.

Many thanks to readers Anonymous and Daniel for the heads up.

A Tale of Two Markets

IN THE NEWS

I arrived in Hong Kong exactly two years and one week ago. I decided then to take most of my capital with me and invest it and all future earnings in Hong Kong. Let's see how that decision turned out after two years...

Hong Kong Recession Risk May Increase On Exports, Tsang Says (Sep 3, 2012)

Hong Kong’s risk of a “technical recession” may increase after declines in exports and a slowdown in retail sales, Financial Secretary John Tsang said.

Hong Kong’s economy shrank 0.1 percent in the second quarter from the previous three months as the sovereign debt crisis in Europe capped export demand. China’s slowdown is dragging on trade, weighing on confidence and encouraging the million of mainlanders who visit each month to spend less on luxury goods.

The benchmark Hang Seng Index (HSI), down about 10 percent from this year’s high in February, was little changed as of 10:19 a.m. local time. Hong Kong’s retail sales grew in July at the slowest pace since the global financial crisis. The city’s exports fell 3.5 percent from a year earlier.

Performance of the Hang Seng Index in the past two years: -6.90%

Philippine Bourse Stock Sales Poised To Pick Up (Sep 3, 2012)

Philippine Stock Exchange Inc. (PSE) Chief Executive Officer Hans Sicat said share sales are poised to surpass the bourse’s full-year target as transactions accelerate toward the end of 2012.

Sicat sees three more initial public offerings being completed this year, he said in an interview last week, declining to name the companies. That would take the annual total to six, compared with five listings in 2011. There are enough funds in the stock market to absorb new IPOs or share sales by listed companies, he said.

Overseas investors have bought a net $2.15 billion of Philippine equities this year to Aug. 30, compared with $1.33 billion of purchases for all of 2011, amid optimism about the nation’s economic growth prospects. Philippine stock trading has averaged 6 billion pesos a day this year, compared with the 2011 average of 4.82 billion pesos, data compiled by Bloomberg show.

The Bangko Sentral ng Pilipinas cut its benchmark interest rate to a record-low 3.75 percent this year to spur spending and counter faltering global demand. The $225 billion economy grew 5.9 percent in the second quarter, faster than the 5.5 percent median prediction in a Bloomberg economist survey. Standard & Poor’s raised the Philippines’ debt rating in July to BB+, one step below investment grade and the highest level since 2003.

Performance of the PSEi in the past two years: +44.48%

It was not as bad as it seems, though. In the past two years, I bought in and out of the Hong Kong stock market a couple of times and was able to break even in that period. It's a bit disheartening to miss the incredible performance of the Philippine stock market in the past two years, but I'm definitely happy for those of you have benefited from the run. I don't regret my decision, not one bit; after all (and I'm sure someone already said this somewhere sometime), regret is for the weak.

SMC Preferred Shares Offer

DEAR INVESTOR JUAN
IN THE NEWS

Dear Investor Juan,

I'm a frequent reader of your blog. Have you seen these articles?

http://www.interaksyon.com/business/40049/sec-approves-san-miguels-preferred-share-sale

http://business.inquirer.net/76027/sec-approves-san-miguel-preferred-share-offering

It will offer 7.5% to 8% on preferred shares at P75 a par value.

Correct me if I am wrong but this preferred share issue feels more like a bond issue (fixed dividends, has a fixed period etc. etc.) than a stock issue.

I'm doing my own research on these terms cumulative, non-voting, non-participating and non-convertible.

But from what I know preferred shares have priority over common stock if a company goes belly up and they have no voting rights except for situations covered in the penultimate paragraph of section 6 of the corporation code.

Can an ordinary person like me get into this? I'm into UITFs right now and given that this offers a guaranted return I'm tempted to sell my low-yield low-risk UITFs to buy this.

What do you think? Assuming this is available to the public is it a sensible investment?

I hope you can feature this in your blog. San Miguel is one of the most stable blue chips in the country and with a fixed rate of 8% for 10 years this issue beats government 10 year bonds by a pretty sweet margin. I also hope you can help me find out how I can get in on this. As a newbie investor I'm just looking for better yield on my savings just like anybody else.

Thank you.

Randy


Dear Randy,

Details of the issue may be found here.

Thanks for sharing the news with us. You're right, preferred shares are very similar to bonds in that investors receive a fixed and guaranteed (to a degree) periodic income, unlike common stock where dividends are uncertain. The cumulative feature means that any unpaid dividends accumulate and must first be paid by the issuer, in this case San Miguel Corporation (SMC), before it can issue any common stock dividend.

Also, you're right, preferred shareholders have a higher priority claim than common stockholders over the assets of the firm if it goes through bankruptcy proceedings, but lower priority than creditors. Therefore, a direct comparison with corporate bonds isn't exactly appropriate, but for a large and stable firm like SMC it may be practical. So yes, the 7.5% to 8% dividend rate (gross of 10% withholding tax for individuals) seems attractive compared to current corporate bond yields, especially since all taxes and duties applied to dividend payments shall be borne by SMC, according to the offer prospectus above (page 32 under "Taxation"). (EDIT: Dividends paid to individuals (who are Philippine citizens) are subject to 10% withholding tax. Domestic corporations will however receive dividends tax free. Thanks Henry.)

For your other concerns, yes it is available to the public, and yes, I do think it is a sensible investment. You can apply for an allotment through any PSE stock broker like Citisec Online (which has provided me with some valuable information regarding this issue). The minimum investment amount is 37,500 pesos, with additional amounts in multiples of 7,500 pesos. Take note, though, that while the stated last day of the offered period is September 14, 2012, you can only submit your application through Citisec Online until August 22, 2012, 3:30pm.

I hope I was able to sufficiently answer your questions. Good luck!

More Reasons to be Optimistic about the Philippine Economy (?)

IN THE NEWS from PhilStar Online

It's not often that one comes across this much good news about the Philippines in one day. Just posting these excerpts in case you missed them.

Stock market rises to unprecedented heights

The Philippine stock market is making its mark as one of the hottest emerging markets in the world, having outperformed many of its regional rivals this year on the back of rosier macroeconomic fundamentals, a resilient corporate sector as well as government’s resolve in stamping out corruption. An improved fiscal situation, a growing middle class, stabilizing political situation and vast natural resources have likewise brought the Philippines back on the radar of foreign investors.

In the first half of the year, the Philippine Stock Exchange index (PSEi) vaulted to new all-time highs 19 times, rising 20 percent to close at 5,246.41 by the end of June. Last July 5, the PSEi shot to a new record high of 5,369.98. The PSEi has gained around 25 percent this year, making it the top performing market in Asia, outpacing bourses in Singapore, Indonesia, Malaysia, Thailand, Vietnam, Hong Kong, India and China, among others. After a sharp rally, local stocks have gotten costly compared to other Asian stocks, making some investors reluctant to stick around. The PSEi, trading at nearly 16 times projected annual earnings or nearly double South Korea’s 8.3 times, is now showing signs of topping out. It is now down by more than four percent from a record reached earlier this month as the euro zone’s debt crisis has worsened. (Emphasis is mine - IJ)

Phl on its way to achieving investment grade rating

The Philippines is on its way to achieving an investment grade rating from international rating agencies amid the reforms undertaken by the administration of President Aquino who is in the first half of his six-year term. Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said rating agencies led by Standard and Poor’s (S&P), Moody’s Investor Service, and Fitch Ratings have recognized the efforts undertaken by the Philippines. This came after S&P upgraded the country’s credit rating to one notch below investment grade on a stable outlook, putting the agency’s assessment on the country at par with that of Fitch that also rates the Philippines a notch below investment grade. Moody’s, on the other hand, rates the country’s sovereign debt at two notches below investment grade but recently upgraded the country’s outlook to positive from stable, paving the way for a favorable action within the next 12 months to 18 months. If the Philippines is granted investment status, this would translate to lower borrowing costs and further attract more investments into the country.

The Philippines has obtained eight positive credit rating actions from S&P, Moody’s, and Fitch since President Aquino assumed office in June 2010. This enabled the Philippines to attain its highest credit rating in 13 years at one notch below investment grade.

Investor confidence in Phl rises: P-Noy's good governance pays off

The Philippines has seen renewed investor confidence over the past few months largely due to the Aquino administration’s good governance thrust. While greater investor confidence in the country is a reason to celebrate, this also means the government must continue to work hard to implement reforms to sustain the momentum.

When There's Smoke, There's Fire: MVP Purchase of GMA 7 "Just a Matter of Time"

IN THE NEWS from Philstar Online

It now turns out that there's more than a little bit of truth to the rumored sale of GMA 7 to MVP, which we first heard about seven months ago. The actual offer price may not be as exorbitant as what was first reported (25 times GMA's market cap), but the premium of almost 100% (from an offer of up to 60 billion pesos against a market cap of 34 billion) must be making GMA majority shareholders salivate. Retail investors of the network giant should also have reason to be excited since they stand to gain still-handsome, if not as astronomical, returns.

At least now we have a more concrete answer to one of the questions we posted when the rumor first broke out in late December. In the next few months, we'll just have to wait and see how the remaining two issues will unfold:

• If ABS-CBN would go the same way as Globe with the PLDT-Digitel merger and try to block the deal
• How the stock prices of affected players (e.g., PLDT, GMA, ABS-CBN) would be affected

As of this writing, here's how the stock prices of the three firms mentioned above have behaved since the rumor broke out. 

PLDT (TEL): Up by 10% since December 26, 2011

GMA (GMA7): Up by a whopping 73% since December 26, 2011

ABS-CBN (ABS): Up by 23% since December 26, 2011

Finally, with this imminent deal we see how aggressively MVP has been pursuing monopoly profits in the industries that he enters, especially since the lack of an anti-trust law in the Philippines allows him to do so. In the next post, I'll discuss the different kinds of industry structure in more detail and why business persons like MVP find monopolies irresistible.

SEC Seeks Comments on ETF Rules

IN THE NEWS from Business World Online

As draft rules that allow the listing of exchange-traded funds or ETFs on the Philippine Stock Exchange have been completed, the Securities and Exchange Commission (SEC) now solicits comments from market participants before finalizing the measure. The draft includes provisions that classify ETFs as a new investment product, thus allowing issuers to hurdle old rules that only recognized more traditional financial instruments, the SEC said.

This latest development moves us closer to having a more inexpensive and more liquid alternative to traditional UITFs and mutual funds. Learn more about the advantages of ETFs over comparable investment vehicles in this post.

Thanks to reader Neil for the heads up.

A Closer Look at SMIC's 15 Billion Peso Bond Issue

DEAR INVESTOR JUAN
IN THE NEWS
PERSONAL FINANCE 101

Dear Investor Juan,

I am Manny, an OFW from Qatar, one of your new readers and I admire your willingness to share your knowledge. I'm also new to investments and I would like to request for your opinion and analysis and explanation of an article I read in Philippine Daily Inquirer about SMIC's bond issue found here. I like to know what phrases like "scripless form at 100 percent of face value," "indicative interest rate will be a maximum of 6.2115 percent a year for the seven-year bonds," and others mean.

I hope you can find time to explain these, not just to me, but also to all your readers.

Thank You.

Regards, 
Manny


Dear Manny,

Thanks! I'm glad that you find the website helpful and interesting. And thank you for sharing this information with us.

I've already discussed bonds to some degree of detail in prior posts (i.e., "The Ins and Outs of Bonds" and "Pricing Bonds"), but this issue presents a good opportunity for me to discuss some things that I haven't talked about yet and emphasize those that I already have. So let's go through these details one by one.

1. "It will be SMIC’s first time to offer retail bonds since 2009 when it issued P10 billion worth of bonds."

Corporate bonds are typically available in denominations that are beyond the reach of individual investors, running in the neighborhood of hundreds of thousands of pesos. Retail bonds, on the other hand, are more affordable since they are available in denominations of 10,000 pesos or so.

2. Based on documents from the SEC, SMIC’s bonds will have a term of seven and 10 years with a base offering size of P10 billion and an option to increase by P5 billion in case of oversubscription.

Term (or tenor) of a bond is the number of years from the issue until the issuer (or borrower)--in this case SMIC--has to pay back the face value or the borrowed amount (from the point of view of the investor, the invested amount) to the investor/lender.

3. The proposed bonds due 2019 and 2022 will be issued in scripless form at 100 percent of face value. 

For several years now, publicly-traded securities like bonds and stocks have been issued in "scripless" form, which means that investors are not issued paper certificates of ownership anymore; instead, ownership is just recorded (electronically) on the "books" of the broker.

4. Prior to final redemption, SMIC will have a one-time option but will not be obligated to redeem the bonds in whole. The redemption option is open on the 10th interest payment of the seven-year bonds and on the 14th interest payment for the 10-year bonds.

Just like this East West Bank issue I discussed two years ago, these SMIC retail bonds are "callable," or include a "call option." This option gives the issuer (SMIC) the right but not the obligation to buy back the bonds at a certain price (face value + a certain premium) for a specified period of time (from the 10th interest payment for the seven year bonds and from the 14th interest payment for the 10-year bonds). The issuer would benefit from exercising this right if and when interest rates fall within the specified period, since it will then be able to buy back the bonds at a price lower than the prevailing market price.

5. Indicative interest rate will be a maximum of 6.2115 percent a year for the seven-year bonds based on PDST-F benchmark as of May 21 and 6.975 percent a year for the 10-year bonds. 

The indicative interest rate is the return you will most likely earn per year, before taxes, if you invest in the bonds and hold them to maturity. You will know the actual interest rate when you actually buy the bonds.

There you go. I hope you find my answers helpful. To help you decide whether to buy these bonds or not, you might want to take a look at my past posts about other investment alternatives and risk and return. Good luck!

Putting the Philippines' Recent Economic Gains Into Perspective

IN THE NEWS

Bloomberg released a very interesting graphic today: how does the Philippines stack up against its ASEAN neighbors in terms of poverty alleviation, especially given the significant economic gains that the country and region has recently been experiencing? The answer, it seems, is "not to well"?

The above graph shows the GDP growth and poverty reduction rates of three ASEAN nations--the Philippines, Malaysia, and Thailand--since 1988. We see that while the Philippines has been able to keep up with the general pace of economic growth in the region, it has been a consistent laggard when it comes to poverty reduction (where lower or more negative means less poverty, so is better). 

On the surface, these statistics make us think: if the country as a whole is getting richer and the poor remain poor, where is the money going to? What the graphic makes clear is that the income inequality issue does not only apply to the US or China, where discussions have been most lively and publicized, but also to emerging markets like the Philippines. The problem is that a lot of us, Filipinos--or at least those who have Internet access--seem to have been deluded into complacency by the outperforming stock market and recent pats-on-the-back from ratings agencies and investment analysts. Income inequality in the Philippines has been a persistent problem--perhaps now more than ever--that we need to continue (or start?) talking about to at least have a chance to solve. Unfortunately, we are all too pleased with how well we've been doing to even care.

By the way, Bloomberg, if you're reading this--what's up with that x-axis?

Legacy Scam Primary Suspect Celso de los Angeles Dead

IN THE NEWS via Interaksyon

Celso de los Angeles, the principal suspect in a scam that used a network of rural banks to bilk thousands of depositors of billions of pesos died Tuesday morning of cancer.

De los Angeles’ lawyer, Noel Malaya, and Philip Piccio of the PEP Coalition, which had been helping victims of the so-called Legacy scam, said he died at the St. Luke’s Medical Center in Quezon City, where he had been under hospital arrest for several cases of syndicated estafa (fraud).

In light of this development, PEP is studying the possibility of filing charges against De los Angeles’ wife and son instead.

De los Angeles founded the Legacy Group, which operated rural banks, a pre-need firm and financing companies that offered high interest rates to lure in clients, many of them small merchants, wage earners, tricycle drivers and pensioners.

When the network collapsed, it reportedly owed as much as 30 billion pesos to some 130,000 depositors.

MVP's Philippine "Silicon Valley"

IN THE NEWS from PhilStar.com

Manuel V. Pangilinan yesterday launched a multimillion-dollar program that seeks to emulate the Silicon Valley technological entrepreneurship incubator model. IdeaSpace Foundation Inc. is a non-profit foundation established exclusively to implement the program. The foundation is supported by the following companies: First Pacific, Metro Pacific Investments Corp., (MPIC), MPIC hospital group, Philippine Long Distance Telephone Co. (PLDT), Meralco, Smart Communications, Digitel, Sun Cellular, SPI Global, ePLDT, Indofood, Philex Mining, Maynilad, MediaQuest, and TV5.

IdeaSpace will act as an incubator and accelerator program to support technology entrepreneurs in the Philippines and for the global market through partnerships between the MVP Group of Companies and global IT companies. The seed fund being invested will be augmented with parallel activities for mentorship, resources and support. The program goes beyond “angel investing” and provides incubation and acceleration with access to a wide group of companies to share and learn experiences, fast access to be defined market runway and opportunities to be connected to potential investors.

This is another laudable initiative of MVP that is aligned with national development efforts. What strikes me as odd, though, is that there is no mention of any partnership with the academe in the press release. The role of the universities in the technology-based business incubator model is crucial as they supply the researchers, engineers, and scientists that are necessary in making the model work. We see this role exemplified by the relationship between Stanford and Silicon Valley, between Harvard and MIT and business accelerators in the Massachusetts area, and locally between the University of the Philippines and the Ayala Technopark. I would have expected the program to involve Ateneo de Manila University, at least, given MVP's close ties with the institution, but as far as I know no such involvement exists.

Reasons To Be Optimistic About the Foreseeable Future

IN THE NEWS from Asia Times

The Philippines' sound economic fundamentals, financial conservatism, and the Aquino government's efforts to shake up the bureaucracy seem to have finally caught the attention of the global investing community.

Recent upgrades from credit ratings agencies (and further upgrades expected in the near future) and positive outcomes of studies by respected multinational financial institutions have stoked investor interest and confidence  in an economy that has been a consistent underperformer in the region. One study now places the Philippines as one of the most important investment destinations in the world, trailing only China and Indonesia.

The points made in the article seem to validate some observations that were made in the ADB seminar about Emerging East Asia in December of last year about the resilience of the Philippine economy amid threats of another global financial crisis. All in all, these findings suggest that economic advances in the previous year will continue well into this year and that further investments in the Philippine stock market now might be a good idea. In 2011, the PSEi had been up 3.7% for the year even as other markets around the world floundered in the midst of economic uncertainties in the US and Europe.

PLDT-Digitel Deal Finally Gets NTC Approval

IN THE NEWS from Business World Online

After seven months and three postponements, the much talked about PLDT-Digitel deal, which first broke out on Investor Juan, finally gets the approval of the National Telecommunications Commission. The deal provides the PLDT-Digitel union with a dominant 70% share of the market and leaves Globe at farther second, eliciting criticisms from various sectors who fear that the industry might revert to a monopoly.

The approval comes with the following conditions:

1. That PLDT-Digitel offer Sun Cellular's unlimited text and call services permanently.
2. That PLDT and Digitel "continue providing high quality service to their respective subscribers."
3. That PLDT divest 10 megahertz of 3G frequencies held by Smart. Said frequencies will be auctioned off and PLDT will not be allowed to bid.

All three parties involved--PLDT, Digitel, and Globe--have reportedly expressed their acceptance of the conditions laid out by the NTC.

If we take a closer look at these conditions, it seems that the only one that matters to Globe would be the last one, that the most important (or perhaps, only) reason why it tried to block the deal was that it wanted those valuable 3G frequencies as a form of concession. I mean, who is the NTC kidding? The first two conditions are clearly inutile. First, I don't think NTC is in any position to dictate what any player should sell, much less sell permanently. And even if by the slightest chance NTC does have that power, it does not say anywhere that PLDT-Digitel cannot increase the price of these unlimited services. Second, what does "high quality service" even mean? Would Sun Cellular's services pre-merger qualify as being "high quality"? This one has so many holes, a blind man would have trouble not seeing through it.

Anyway, perhaps what's important is that everyone seems to have gotten what everyone wanted. That is, everyone except investors and consumers; what happens to them remains to be seen. Would investors finally be able to see their bet from seven months ago pay off with NTC's approval. Maybe. Would the deal really benefit consumers in the long run, as what the major players and some observers argue? We'll see.