WITH the Philippine Stock Exchange (PSE) lowering the boom on erring listed firms, Globalport 900 Inc., a company largely owned by the family of Reghis Romero, may find its shares untradable by tomorrow (September 3), with the threat of delisting looming over the horizon unless it submits the required structured financial reports to the exchange.
That threat, signed by the PSE’s head of Disclosure Department, Janet Encarnacion, is seen to be met with much concern from Globalport 900, not just because of delisting, but the possibility that the company, set to raise $200 million for its planned expansion and diversification plan, may have to resort to borrowing from banks and other financial institutions, a bitter alternative because of the higher costs of borrowing, i.e., higher interest charges, as opposed to the no-interest equity offering.
“Pursuant to Section 17.8 for Non-Compliance with Certain Structured Reportorial Requirements of the Revised Disclosure Rules, failure by [Globalport] to comply with the requirements of the Exchange will result in the automatic suspension of the trading of PORT (the company’s listed symbol) shares starting on September 3, 2012, up to a maximum period of two months. After the lapse of the suspension period and PORT still fails to comply with the reportorial requirements, the Exchange shall initiate delisting procedures,” Encarnacion said.
The threat comes at a time when the listed firm is set to buy port operations in Visayas and Mindanao and in three other foreign countries, with the investment to come from the proceeds of an equity offering via a secondary placement of its shares.
Bangko Sentral SDA placements now equal to RP budget
THE uncertainty in the foreign financial markets such as in the PIG countries of the euro zone—Portugal, Ireland and Greece—has seen the surge in the placements of excess money in the Bangko Sentral ng Pilipinas (BSP) vault, such that it rose by more than P200 million in just two months to now equal the country’s entire budget for this year of P1.8 trillion.
These extra funds, coming at a time when the BSP restricted those who could place their funds in the special-deposit account (SDA) to the locals, meant a big increase, with experts weighing in their punditry that the added funds could have been due to the projected addition of the S country, or Spain, to the PIG states that are now just waking up from their catatonic state of sleep, refusing to believe that one cannot go on spending beyond your means. Which is what has actually happened in the euro zone.
Only the alert eyes of Bangko Sentral Governor Amando Tetangco Jr. to the financials of the banks resulted in the restriction of the SDA investors to the locals. Asked by the BusinessMirror how the BSP learned of the use of bank proxies by nervous investors of the euro zone, he said the audit of the “due from” accounts of the banks led to the startling discovery that foreign funds were rerouting their money to the Philippine banking system to partake of the higher interest-rate offerings of the Philippine central bank.
Now, will the BSP also lower the boom on the local banking institutions that allowed themselves to be used in the placement of foreign funds in its vaults, defeating in the process the very reason the Monetary Board created the SDAs: to manage inflation. When that happens, expect the BSP’s accounts to balloon due to the monetary penalties that would be imposed on the local banks for allowing themselves to be used. Which is just fit and proper, as the BSP’s rule on banking officials’ prequalifications are so written.
Asian electricity rates subsidized
GOVERNMENT subsidies on the electricity rates in Asian countries are the main reason their rates are much lower than in the Philippines, according to a study done by Dr. John Morris of the International Energy Consultants. As per the study, the electricity rates in Manila Electric Co.’s (Meralco) franchise areas rank ninth among 44 countries surveyed.
It showed that Asian countries with lower power rates are enjoying government subsidies that account for 75 percent of the differential between Meralco’s tariffs and their own tariffs. If subsidies are then added back to the tariffs in these countries, the total costs of supply in their markets are actually comparable with or even higher than Meralco’s in some cases.
The study pointed to the high intrinsic cost of supply as one factor that drives the differences between Meralco’s tariffs and those in the other countries. This is the result of high dependence on fossil-fuel prices at international market prices, a relatively small grid size and dependence on hydro resources, which requires a higher reserve margin, geographic challenges of transmission and higher cost of capital.
Peso’s surge due to foreign funds
IN just a short while, the Bangko Sentral has arrested the surge in the peso’s value vis-a-vis the dollar due to the so-called carry trade, a euphemism for foreign funds borrowing dollars and then dumping them on the BSP’s SDA funds. The reason for this is that these foreign funds, which move in the blink of an eye to where they could earn more, have used as their go-between the local banks to torpedo the government’s currency management and inflation targeting.
Foreign funds borrow at just a little over 1 percent for their dollar funds and then use these to place their funds in SDA that pay up to 5 percent. What better rate can they think of next? But if President Aquino, with the economics background that he has, wises up to it, then expect the local banks to get straightened out.
Now, which of the local banks will get it? Abangan.