JGS prices bonds at 8.25%

HONG KONG, Jan. 9 (Reuters) — Philippine conglomerate JG Summit Holdings Inc. has set an indicative yield of about 8.25 percent for a 0 million, seven-year bond, a market source said on Monday. Pricing was expected shortly after JG Summit completed its investor presentations on Wednesday. The proceeds would be used to refinance debt and for general corporate purposes. Credit Suisse First Boston is the sole bookrunner for the deal, which will have a put option after five years.

RP sovereign bonds rise

HONG KONG, Jan. 9 (Reuters) — Philippine sovereign dollar bonds rose on Monday in line with strong performances in emerging markets elsewhere and a firmer regional market. "The (Philippine) market is firmer on buying from both local and offshore accounts on the back of emerging market strength," a Manila-based trader said. The benchmark Brazilian Global bond due in 2040 rose 0.312 point on Friday, back to its record bid price of 130.125, with a yield of 6.694 percent. Philippine sovereign paper gained fraction of a point. Bids on Philippine 2016 bonds were quoted at 105.25, while long-dated 2030 bonds were bid at 118.625 and newly issue 2031 bonds were bid at par. JPMorgan said Philippine bonds were the best performers in 2005 in its Asia Credit Index (JACI) , generating returns of 19.50 percent compared with 6.21 percent on the overall index. Taking advantage of its bonds’ strong performances and ample regional liquidity, Manila completed Asia ex-Japan’s first offshore debt issue for 2006 last week, raising more than billion in a dual-tranche offering. Five-year Philippine credit default swaps — insurance-like contracts that offer protection against debt default or restructuring — tightened by 10 to 15 basis points (bps) to 229/236 bps. Philippine conglomerate JG Summit Holdings Inc. has set an indicative yield of about 8.25 percent for a 0-million bond, a market source said.

Stable peso crucial to investors

A stable peso-dollar exchange rate, meaning fluctuations within a narrow band, is one of several factors would encourage business expansion but a wild fluctuation, wider band, would scare investors away. Trade and Industry Undersecretary Elmer C. Hernandez, who is also managing head of the Board of Investments (BoI), stressed that a stable local currency is crucial in making investment decision. As of last Friday, the peso continued to strengthen against the greenback finishing another all-time high of P52.52. The Bangko Sentral ng Pilipinas already said that the local currency band in 2005 is the best performing band among Asian currencies. "Why should a businessman invest in a country with an unstable currency although a stable currency is only one of a host of factors in making investment decision," Hernandez said. For a manufacturing firm that is export-oriented, a stable currency is necessary to make his production cost competitive. "Thus, a stable currency meaning moving within a narrow band is important," Hernandez said. Hernandez, however, noted that the problem lies the higher cost of production other than cost of raw materials. For instance, the country’s cost of power is one of the highest in the region. Salary cost is also inching up. In addition, Hernandez further said that the strengthening of the peso must be market driven. The strengthening of the peso is attributed to the continued inflow of the remittances from the overseas Filipino workers and inflow of foreign investments because of the improvement of the local economy following the implementation of revenue enhancement measures.

BSP sets 2006 inflation range

Bangko Sentral ng Pilipinas governor Amando Tetangco said inflation will now likely be 7.5 percent to 8.2 percent this year, slightly less than the bank’s previous forecast of 7.6 percent to 8.3 percent. Consumer prices rose by an average of 7.6 percent last year. "Inflation is expected to be higher in 2006, but the recent strengthening of the peso and easing of world oil prices from their peak in 2005 will help counterbalance the effect of the value-added tax," Tetangco said. He said inflation will likely slow in the second half of this year as the impact of the new value-added tax (VAT) law diminishes. The new law, which removed the VAT exemption enjoyed by the oil, electricity and transport sectors and raised the corporate income tax rate to 35 percent from 32 percent, took effect in November. On Feb 1, the VAT rate will be increased to 12 percent from 10 percent.