Biz Buzz: Is Tetangco up for a 3rd term?

With the global economic environment in a flux and with local developments also causing some investors to worry, a steady hand is needed more than ever at the helm of the country’s monetary policy ship.

We’re talking about the Bangko Sentral ng Pilipinas, of course, whose governor heads the seven-member Monetary Board. This group of presidential appointees—including Finance Secretary Carlos Dominguez III who represents the government in an ex officio capacity—sets interest rates for the local financial system that, in turn, determines the value of the peso that all Filipinos have in their wallets and bank accounts.

The good news is that the administration of President Duterte recognizes the value that BSP Governor Amando Tetangco Jr. brings to the table, just as two previous presidents had before (President Arroyo appointed him in 2005 and President Aquino reappointed him in 2011).

We say that the Duterte administration values him because word on the street is that Tetangco has, in fact, received inquiries from administration lawmakers if he was willing to serve a third term in office (that would be from 2017 to 2023, if ever).

Now, let’s be clear that the law prohibits a third term for the central bank governor. The central bank law specifically states that any member of the Monetary Board can serve only for a maximum of two terms. And the governor is a member of that board. He’s the chair, in fact.

But hey, why should a small restriction like that bother the administration if it wants to reappoint one of the world’s best central bankers (given an “A” grade by Global Finance magazine eight times over his two terms) to serve for another tour of duty, right?

For an administration that commands an overwhelming majority in both chambers of Congress, amending the law to remove a minor obstacle like that will be easy. The question now is … will the 63-year-old Tetangco accept? Abangan! Daxim L. Lucas

Treasury fires back

AFTER word got out about some banks’ dissatisfaction over the conduct of last week’s P100-billion retail treasury bond issue, National Treasurer Roberto Tan pointed out to the deal’s critics that the rules of bond auctions—specifically the rounding down of the yields to the next lowest 1/8th of a percent tier—was a “well established” practice.

At the same time, Tan (who was in Beijing to represent the Philippines in the meeting of the China-led Asian Infrastructure and Investment Bank) said the secondary market trading for bonds similar to the RTB stood at 3.425 percent, thus buyers of the 3.5-percent bond should be happy with the “reasonable” premium.

As far as looking after the interests of retail investors, Tan also pointed out that “selling agents and arrangers are obliged to disclose market risks to their retail clients” and that the Treasury had “clearly presented these” to the investing public.

Tan also noted that raising P100 billion from retail creditors during this uncertain time was nothing to scoff at and was actually “quite impressive considering market conditions especially later during the offer period when volatility set in.”

Of course, the banks who are unhappy about the deal—though they may have expectedly quieted down by now—maintained that the deal could have been executed better.

They point to the fact that the Treasury accepted banks’ bids all the way up to 3.624 percent and that it would have been more fair to round this up by by mere 0.001 percent to 3.625 percent instead of down to 3.5 percent.

“We’re not questioning how the risk was presented during the roadshow,” said one banker. “What we want to know is whether retail clients were told that they could earn higher by investing in a security with a shorter tenor,” pointing to the 9-year bonds available on the secondary market that yielded 3.6 percent.”

“Were the interests of the retail clients put ahead of the sellers?” another banker added.

In any case, Tan fired a shot across the bow of banks who were questioning the Treasury’s methods. “I’m wondering which ignorant dealers are questioning and therefore should not be GSEDs,” Tan said, referring to the small and exclusive group of government securities eligible dealers who are allowed to deal with the Treasury. Daxim L. Lucas

Clinton vs Trump

IF HE were to pick the next US president, Budget Secretary Benjamin Diokno will go for the Democrats’ Hillary Clinton over the Republicans’ Donald Trump.

“I think there’s too much uncertainty with Trump. I’ll go with the safer choice,” Diokno said Tuesday at the Philippines Investment Conference 2016 organized by the CFA Society Philippines. The conference coincided with the widely anticipated US presidential debates ahead of the November elections.

Mark Matthews, head of research at global private Swiss Bank Julius Baer, said in the same CFA forum that Clinton had a higher probability of winning the US presidential elections than Trump. However, he said there was a strong likelihood that the Republicans would get control of both the House and the Senate.

But in the case of a Trump victory, Baer said it would actually be better for investors. “Apart from the crazy stuff that he says, actually his economic policies are great and it will be much better for the economy, for equities.” Trump, whose battlecry is to “make America great again,” plans a significant reduction in individual income taxes and corporate taxes and eliminate the estate tax.

Meanwhile, Diokno has this to say to investors who are getting jittery over the escalating political noise in the Philippines given the oftentimes perplexing rhetoric of his boss, President Duterte, alongside the rising scrutiny on extrajudicial killings: “Look at the forest, instead of the trees. Don’t be distracted by the noise.” Doris Dumlao-Abadilla

Foregone revenue

DESPITE having shelled out some P20 billion to build the Naia Expressway—including a jaw-dropping P11-billion bid premium that topped the P305-million offer of its bid rival, Metro Pacific Investments Corp.—San Miguel Corp. kept a relatively low profile during last week’s long awaited opening of the 14-kilometer elevated toll road.

Instead, the star of the show which began at exactly one minute past midnight of Thursday was Public Works Secretary Mark Villar who made it a point to be behind the wheel of the first vehicle to drive on the completed phase 2A of the project (extending from the vicinity of Naia 1 and Naia 2 all the way to Macapagal Ave. in Pagcor Entertainment City.

And since Sec. Villar was to be the first driver on the new expressway, he had to cross the toll gates at exactly 12:01 a.m. No, the exact time had nothing to do with any feng shui beliefs, but more to stress a point that the toll road would open on the very first minute of the day on which government said it would open.

That’s a welcome change for traffic-weary motorists, of course, who were initially looking forward to the expressway being finished in October of last year (in time for the November Asia Pacific Economic Cooperation summit), but had to bear traffic hardship for almost a year more, no thanks to the previous administration’s inability to deliver on its right of way commitments on time.

Biz Buzz understands that the first phase of the project will soon be augmented by the rest of the expressway connectors—especially the one meant to ease vehicular traffic in front of Naia 3 from the Skyway—before yearend.

As is often the case with new toll roads, its builder and concession operator will offer use of the facilities to motorists for free for a limited time to get them to develop a habit of driving on it and become regular paying customers later on.

In the case of Naia Expressway, it will be open toll-free until October 22. And how much in revenues does San Miguel expect to forego during this period? Biz Buzz hears it’s in the vicinity of P55 million for the entire 30 days.

Well, what’s a few million pesos to a conglomerate when it has already spent P20 billion on a key traffic easing project, right? Daxim L. Lucas

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