Third time’s the charm

The PSEi (7,716.06, +1.35%) tested the 7,700 psychological level for the third time and finally managed to close above it, rising to a new intraday high of 7,738.12 before succumbing to a little profit taking near the end of the session. This also marks the local bourse’s eighth time to break its record close this year. All the sub-indices flashed green today, led by the service sector (2,185.42, +1.97%) which was lifted mainly by telecommunication giant TEL (3,086.00, +3.56%). The mining and oil index (16,202.91, +1.66%) was not too far behind, buoyed by gains from SCC (156.90, +4.60%) which closed at a new 52-week high. BDO (114.00, +2.24%), MBT (94.70, +1.50%), PNB (87.00, +2.35%), and BPI (98.20, +0.26%) sustained the upward momentum of the financial index (1,784.46, +0.96%), while the property sector (2,987.73, +0.98%) took its cue from ALI (36.00, +1.69%), which captured the highest amount of total trades for the day. The industrial sector (12,674.34, +0.92%) made a rebound due to JFC (229.40, +1.96%), EDC (8.56, +1.42%), URC (206.00, +0.49%), AP (44.95, +1.24%), MER (274.00, +1.71%), and FGEN (30.45, +1.33%), while the holding companies index (6,832.91, +0.89%) got its strength from LTG (15.36, +9.71%), AC (730.00, +2.10%), DMC (15.80, +2.86%), AEV (58.00, +0.78%), GTCAP (1,210.00, +0.83%), and SM (905.00, +0.17%).

source Techistock.net

US economy grew 2.5% in Q2

RAPPLER: BY AGENCE FRANCE-PRESSE

24

WASHINGTON, USA – The US economy grew at an annual rate of 2.5% in the second quarter, the Commerce Department said Thursday, September 26, leaving its prior estimate unchanged.

Analysts had expected that second-quarter gross domestic product (GDP) expanded at a slightly stronger 2.6% pace.

The world’s largest economy grew 1.1% in the first quarter.

“With the third estimate for the second quarter, the general picture of economic growth remains largely the same,” the Commerce Department said.

Revisions offset each other in the data, leaving last month’s estimate unchanged.

Inventory investment was lower than previously estimated, amid weaker spending by food and beverage stores and information industries.

Exports of goods and services also were revised lower.

But state and local government spending was revised upward, particularly in investment in structures.

Overall, the pace of economic growth in the April-June period was lackluster and well below the momentum needed to boost job growth.

Analysts expect that growth slowed sharply in the current third quarter that ends Monday.

Macroeconomic Advisers puts the third-quarter pace at 1.7%, while Moody’s Analytics revised down its tracking estimate to 1.4% Wednesday after weaker-than-expected durable goods orders and new-home sales.

The Federal Reserve last week cut its growth forecast for this year to 2% to 2.3% as it unexpectedly announced it would keep an open throttle on its easy-money policy.

Fed Chairman Ben Bernanke said that the central bank could still begin reducing its $85 billion a month bond purchases, known as quantitative easing (QE) in the next 3 months, but only if the outlook for the economy strengthened.

READ: Fed leaves stimulus unchanged at $85-B, no taper

“If the data confirm our basic outlook, if we gain more confidence in that outlook… then we could move later this year,” he said after a two-day Federal Open Market Committee policy meeting.

READ: Fed cuts 2013-2014 US economic growth forecast

The Fed’s preferred measure of inflation — the personal consumption expenditures (PCE) price index for goods and services — fell 0.1% in the second quarter, according to the Commerce Department data.

“Worryingly, it looks like even this relatively modest growth is only being achieved by firms cutting prices,” said Chris Williamson, chief economist at Markit.

“That was the first time these prices have fallen since the dark days of early 2009 and points to a general lack of demand growth.” – Rappler.com

US banks surrender profit for capital relief

 
NEW YORK — US banks are increasingly giving up the right to sell tens of billions of securities in their investment portfolios, a shift that helps them avoid the pain of weaker bond markets but will cut into future profits as interest rates rise.
 
Lenders ranging from large banks like US Bancorp to smaller banks like Cullen/Frost Bankers Inc. have been changing the way they account for investment securities, adopting a treatment that essentially forces them to hold onto bonds through thick and thin, instead of being able to sell them when markets tank. The accounting switch gives them near-term relief that helps them meet new capital and liquidity rules. 

The accounting shift is known as moving assets from “available-for-sale” treatment to “held-to-maturity,” a change that has been underway for several years.

US commercial banks’ held-to-maturity books increased 62% to $347.4 billion in the second quarter from $215 billion in the fourth quarter of 2010, according to SNL Financial. 

As bond markets weakened in the second quarter, the switch accelerated, with held-to-maturity accounts rising 8.7% from the first quarter. It was the biggest increase in nearly two years. 

One of the first big banks to make the shift was US Bancorp of Minneapolis, Minnesota, the sixth-largest US bank, with $353.4 billion in assets. The bank is a favorite of Warren Buffett, whose Berkshire Hathaway Inc. is one of its biggest shareholders. 

US Bancorp’s held-to-maturity securities book ballooned to $34.7 billion in the second quarter, or 46% of its investment portfolio, from just $1.5 billion at the end of 2010, with most of the change coming in 2011. 

But the bank is now saddled with tens of billions of dollars in low-yielding assets. The weighted average yield on US Bancorp’s held-to-maturity portfolio was 1.89% in the second quarter of 2013, compared with 2.72% for the available-for-sale portfolio.

As rates start to rise, the bank could earn less on some assets than it has to pay to fund itself, cutting into its income. 

To be sure, banks have some ways to mitigate that pain. For example, they can borrow against the held-to-maturity assets and invest the proceeds. And many bank loans carry floating rates, so rising rates will boost interest income.

But banks that go too far with a held-to-maturity strategy will not be able to free up as much of their balance sheet to make new loans if the economy improve in the coming months, said Johannes Palsson, managing director at Angel Oak Advisory, a risk management consulting firm. 

Those banks are “kind of stuck. There’s not much you can do” to take advantage of future loan growth, Mr. Palsson said. 

For available-for-sale assets, banks must record paper losses each quarter when the securities’ values fall. The paper losses do not hit earnings but reduce net worth, as measured by the book value of assets minus liabilities.

That happened to banks in the second quarter, when bond markets weakened amid talk of the US Federal Reserve cutting back on its bond buying program.

The $38 billion of unrealized investment gains they had reported at the start of the year swung to $13.1 billion of paper losses by the end of August, according to Fed data.

For a long time, regulators ignored changes in the value of available-for-sale books when assessing a bank’s capital strength.

But under the international framework known as Basel III, losses from available-for-sale assets will hit regulatory capital, and a bond market selloff could force US banks to boost their capital levels. 

Paper losses on held-to-maturity securities, however, would not subtract from banks’ capital levels.

This, along with new liquidity rules that pressured banks to increase their securities holdings, encouraged banks to park assets in their held-to-maturity bucket of their investment portfolios. — Reuters

Country imports less oil in first half

THE COUNTRY’S oil import bill decreased in the first half of the year on the back of less crude oil shipments during the period, data from the Energy department showed.

Net imports — the difference between the country’s oil imports and exports — fell 8.01% to $6.096 billion in the January-June period from $6.627 billion in the same six months last year. This is equivalent to a volume of 53.590 million barrels of oil, down 2.88% from 55.182 million barrels.

Total imports dropped by 8.15% to $6.603 billion in the first half this year from $7.189 billion in the same period last year due to less shipments — which slid by 2.93% to 58.289 million barrels from 60.050 million barrels.

Specifically, crude oil imports decreased by 22.32% to $2.837 billion from $3.652 billion, outpacing the increased imports of finished petroleum products, which inched up by 6.47% to $3.766 billion from $3.537 billion.

In terms of volume, the country imported a total 25.821 million barrels of crude oil in the first semester, 17.46% less than the 31.283 million barrels in the same period last year.

The volume of imported finished products, on the other hand, rose by 12.87% to 32.468 million barrels from 28.766 million barrels.

Meanwhile, the country’s petroleum exports dipped by 9.73% to $507.2 million in the first six months of the year from $561.9 million in the same period last year, mainly because of decreased exports of refined petroleum products.

Earnings from the export of finished products fell 17.87% to $431.6 million from $525.5 million. Earnings from the export of crude oil, on the other hand, doubled to $75.6 million from $36.4 million.

In terms of volume, the country exported a total 4.698 million barrels of oil, down by 3.49% from 4.868 million barrels. Crude oil accounted for 706,000 barrels (from 326,000 barrels), while finished products made for 3.992 million barrels (from 4.542 million barrels). — Claire-Ann Marie C. Feliciano

China fire rattles world chip supply chain

BY AMANDA WANG, AGENCE FRANCE-PRESSE
RAPPLER

SKOREA-ELECTRONICS-HYNIX-COMPANY-EARNINGS

UP IN SMOKE. A fire hits a factory of S. Korean firm SK Hynix in China, potentially disrupting the global electronics supply chain. Photo by AFP

SHANGHAI, China – A fire at a giant Chinese factory making almost one-sixth of the world’s supply of a key high-tech component shows how vulnerable global manufacturing chains can be to an unexpected event, analysts say.

The vast SK Hynix facility in Wuxi city produces dynamic random access memory (DRAM) chips, used to store data in personal computers and mobile devices such as smartphones and tablets.

The South Korean firm is the world’s second-largest manufacturer of DRAM chips, and says it has a 30% market share, with the factory in eastern China accounting for half its output.

Foreign firms have flocked to China, the workshop of the world, to take advantage of cheap labor, good infrastructure and accommodative local governments.

Economies of scale gained through massive factory complexes help lower costs, but also bring with them risks should a company rely on a limited number of plants.

The scale of production now means that a fire or strike taking one factory out of action can reverberate around the world.

Hynix – whose customers include smartphone giants such as Samsung and Apple, which has just introduced two new iPhones – has only one other facility producing DRAM chips, in South Korea.

Partial production in Wuxi resumed three days after the September 4 blaze, which was reportedly caused by a gas leak, but a spokesman at the company’s headquarters told AFP: “It’s still too early to give the estimate of the damage and to predict when full operations may resume.”

Analysts say such supply chain shocks can push up prices and potentially delay shipments for finished products.

“As global smartphone shipments are at a high level…supplies (of memory chips) are sought-after,” said Wang Jun, of consultancy Analysys International.

“Hynix is in a relatively advanced position in the global memory chip market, so even a single incident at one plant will have a domino effect.”

Chip values spiked after the fire and are expected to remain buoyant, according to analysts.

“Memory chip prices surged mainly because of expectations” of short supply, said Kevin Wang, director of China services at market research firm IHS iSuppli. “Prices will likely remain on an upward trend towards year-end.”

A huge shortage of memory chips was unlikely in the next two months because of high inventories, he added, but the longer-term impact would depend on how soon Hynix could resume full production, which could take up to four to six months.

In July Hynix posted record second quarter profits on the back of robust chip demand and strong semiconductor prices.

Its operating profit for April-June jumped to 1.1 trillion won ($1.0 billion), a sharp increase from 5 billion won a year earlier.

No smartphone producers are known to have announced delays yet due to the fire, but analysts said it would inevitably have some impact.

“Mobile phone producers related to Hynix will surely be affected, but shipments will gradually stabilise as other suppliers in the global supply chain will come in and fill the gap,” said Wang Jun.

Global shipments of smartphones jumped 52.3% annually to 237.9 million units in the second quarter this year, the strongest growth in more than a year, according to market intelligence firm International Data Corporation (IDC).

IDC has forecast 40% annual growth in worldwide smartphone shipments to over one billion units this year.

But such explosive growth assumes other suppliers can meet demand for DRAM chips to fill the gap left by the Hynix fire, analysts said. – Rappler.com

 

 

US stocks rally as Q2 growth estimate hiked

BY AGENCE FRANCE-PRESSE
POSTED ON 08/30/2013 10:31 AM

STOCKS UP. The Dow Jones rises following an upgrade to the 2nd-quarter GDP growth of the US. Photo by AFP

STOCKS UP. The Dow Jones rises following an upgrade to the 2nd-quarter GDP growth of the US. Photo by AFP

NEW YORK CITY, United States – US stocks Thursday (Friday, August 30 in Manila) closed higher following an upgrade to US 2nd-quarter economic growth and a shift in expectations away from an immediate military strike on Syria.

The Dow Jones Industrial Average rose 16.44 (0.11%) to 14,840.95.

The broad-based S&P 500 added 3.21 (0.2%) at 1,638.17, while the tech-rich Nasdaq Composite Index increased 26.95 (0.75%) to 3,620.30.

US economic growth in the second quarter came in at an annual rate of 2.5%, faster than the original estimate of 1.7%, the Commerce Department said.

Stronger consumer spending and exports underpinned the pickup from the first quarter’s sluggish 1.1% pace, while imports grew more slowly than originally estimated, the department said.

In addition, market watchers have been calmed by an apparent shift from the US and other western powers in the timing of any military strike against Syria in response to its alleged chemical warfare attack on its people.

“There just seems to be less urgency about an attack any time soon,” said Alec Young, global equity strategist for S&P Capital IQ. “The stress level has come down a little.”

Dow component Verizon rose 2.7% after British telecommunications giant Vodafone said it is in talks regarding a possible sale of its stake in Verizon. The stake is said to be worth more than $100 billion. Vodafone’s US-traded shares rose 8.1%.

Oil giants Exxon Mobil and Chevron, both components of the Dow, fell 1.8% and 1.2% as oil prices retreated on diminished Syria anxiety.

Microsoft, another Dow component, gained 1.6% on reports that the tech giant is considering a strategic investment in Foursquare, which provides recommendations on restaurants and other services by geographic area.

Fashion house Guess surged 12.9% after forecasting full-year earnings in the range of $1.78-$1.92 a share, whereas analysts currently project earnings of $1.80. Results in North America were strong, but Southern Europe remains “challenging” and the company is “beginning to see a slowdown in China,” it said.

Bond prices rose. The yield on the 10-year Treasury bond fell to 2.75% from 2.78% late Wednesday, while the 30-year dropped to 3.7% from 3.75%. Prices and yields move inversely. – Rappler.com