The country may now be officially classified as investment grade and foreign funds are flooding local financial markets, but things at the Bangko Sentral ng Pilipinas are as busy as ever.
For BSP Governor Amando Tetangco Jr., the next four years of his second term promises to be the busiest yet. And the outcome may be nothing short of dramatic.
According to our sources, the central bank chief will unveil over the next few weeks his work program from now until his term ends in mid-2017. This includes a renewed push to have Congress pass the revisions to the BSP charter. At the center of this will be a new framework that will allow regulators to head off bank failures with US-style powers (“close a bank on a Friday and open it on Monday under new owners with fresh capital”).
In addition, the BSP needs to be able to issue bonds—a power taken away from the central bank in 1992—as an added weapon against inflation (much like what the US Federal Reserve is doing now with its Quantitative Easing program, only in reverse).
The central bank also wants Congress to shield its officials from lawsuits in the performance of their duties so that they can be more effective regulators. (Whether progress can be made on this front depends a lot on who will chair the banking and finance committees in the Senate and the House of Representatives.)
Lastly, the BSP has quietly been bracing itself to handle the massive disruption in liquidity flows that will come to a head toward the end of this year (and extend into the coming years) once P1.9 trillion in funds is forced out from its effective but costly special deposit accounts (SDAs).
So even while the economy is growing, there’s no coasting along for the BSP chief, it seems.—Daxim L. Lucas
Clean sweep
With the Philippine Stock Exchange poised to take over the fixed-income trading platform under Philippine Dealing and Exchange Corp. (PDEx), what is more intriguing is the announcement of what sounds like a “clean sweep” of Capital Markets Integrity Corp. (CMIC) a year after its spin-off. The PSE said it plans to create a “new independent Capital Market Surveillance Group within the Exchange structure” that would absorb the functions of the CMIC and prepare for surveillance of products beyond equity securities.
As part of the overhaul, the PSE has sounded off plans to replace all five directors on the board of CMIC, which is set to hold its annual stockholders’ meeting this week. The PSE has yet to come up with a new list of nominees but it seems that whether or not this PDEx transaction pushes through, there is an intention to collapse the CMIC.
Does this mean going back to the old structure wherein there is a market regulation department (MRD) under the PSE doing all this stuff? Could this move be masking the tension between the CMIC and some trading participants who see the former as being overly strict in the implementation of market regulation rules that have preceded the CMIC’s existence? How independent should the independent market regulation unit be and is it better off returning to the folds of PSE?—Doris C. Dumlao
Speaking of mergers…
Union Bank of the Philippines president Victor Valdepeñas finds it a bit amusing when people refer to PSE-PDEx engagement as a prospective merger of two exchanges. While the PSE is a real exchange, he points out that PDEx is only a trading platform wherein data on bilateral transactions traded over the counter (OTC) are gathered by PDEx. What the PSE is acquiring, he says, is not another exchange but a trading platform. A real exchange like the PSE, he explains, is where buyers and sellers are matched without them not necessarily knowing who had bought or sold. That’s not the case in PDEx where you know exactly who had bought what you sold and vice versa, he says. The transaction details are then reported and aggregated.
Now, whether the PSE can and will transform such fixed-income trading platform into a real working exchange is another story, he points out. But having said that, Valdepeñas—a long-time staunch critic of PDEx—says there is a reason why the United States, the biggest and deepest debt market in the world, trades fixed-income instruments via OTC rather than creating a formal exchange. For fixed-income instruments, this treasury veteran believes that OTC is still the most efficient and cost-effective for investors.—Doris C. Dumlao
Neighborly call
Spotted checking out competition at Solaire last week were Macau’s casino tycoons Lawrence Ho and James Packer, who flew into town via their private jets for another brief visit to the country where they will operate their next gaming facility. The men behind gaming play Melco Crown Philippines were seen having lunch on Thursday with SM group’s Henry Sy Jr. aka “Big Boy” and Belle Corp. vice chair Willy Ocier at Solaire’s Italian fine-dining resto Finestra.
After lunch, the visiting billionaires took time to visit “The Chairman’s Villa” at the resort overlooking Manila Bay—an 850-square-meter villa on the southwest corner of the facility, said to be the biggest and the best appointed among the four bayside villas. Resort owner Ricky Razon was said to be in the building at the time of the visit of the SM-Melco entourage, but it was unclear if they actually met. (Razon flew out of the country that night.) The local gaming licensees are working together to address a potentially game-changing tax issue.
Belle Grande, a partnership between Melco and the SM group, is the next gaming and entertainment estate to open its doors in Pagcor City. Can the Melco-SM guys top what they have seen in Solaire? We’ll see next year.—Doris C. Dumlao
No Taiwanese, no problem
Taiwan dollars may be drying up in popular vacation hotspots like Boracay as diplomatic tensions between Taipei and Manila keep Taiwanese visitors away, but resort operators like Zest-O juice founder Alfredo Yao are betting that the current situation will be short-lived.
Yao says his own hotel, the 55-room Sol Marina Resort near the famed Shangri-La Boracay Resort and Spa, has been hit by cancellations from Taiwanese guests but he told the Inquirer an aggressive expansion program to add 300 rooms remains in full swing.
“I think the government is on the right track in trying to resolve this. It is just a misunderstanding,” Yao says, referring to ongoing tensions after a Philippine coast guard shot and killed a Taiwanese fisherman.
He says new rooms in Sol Marina, where rates start at about $150 a night, will be ready by the latter part of this year. Yao, described as a rags-to-riches businessman who also owns Philippine Business Bank and recently sold a stake in Zest Airways to Malaysia’s Air Asia Bhd., said he will not stop at Boracay.
The Sol Marina brand is already being expanded to Yao’s private island near Coron, Palawan, where the businessman is building a 200-room resort, which he hopes will be open to the public sometime next year.
He says Coron is a natural choice given its rich marine life and white-sand beaches. This part of Palawan also draws relatively fewer visitors compared to other parts of the province. Coron’s Busuanga airport, for instance, handled 140,660 visitors in 2010, a fifth of the volume seen at the much more developed Puerto Princesa, data from the Civil Aviation Authority of the Philippines showed.
Competition is also less intense with property giant Ayala Land Inc. laying claim to another, although equally beautiful, slice of Palawan in El Nido.
“Tourism is the way to go now as we have God-given assets. It is just picking up,” Yao says.—Miguel R. Camus
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