Power Crisis, FED may End QE Program, Stock thoughts: 2GO

Power Crisis

News like this stimulates investment ideas:

http://www.interaksyon.com/business/59131/mindanao-power-crisis–cagayan-de-oro-is-regions-bright-spot-but-only-until-this-year

FED may End QE Program

Ending the FED QE program by year end:

http://www.bloomberg.com/news/2013-04-10/fomc-minutes-show-several-members-saw-qe-over-by-year-end.html

“The Federal Open Market Committee members “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end,” according to the record of the March 19-20 FOMC meeting released today in Washington ahead of the regularly scheduled 2 p.m. time.”

I wonder how the US bond market will react should it happen…..

Currently, US prints money and buy assets such as bonds. It is an effort to inject liquidity directly to the economy which is called Quantitative Easing.

In the Philippines, the BSP only adjusts interest rates to stimulate economic activity.

 

2GO

To those who are curious about the Company:

https://fundamentalenthusiast.wordpress.com/2013/04/11/2go-group-inc-pse-2go/

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Investment Grade, If

Investment Grade

A good article from inquirer about investment grade:

http://business.inquirer.net/115075/what-will-investment-grade-status-bring

If

A poem worthy of reflection:

http://www.poetryfoundation.org/poem/175772

The first time I read the poem above in college it made no sense to me but now that I gained experience in life, the poem perfectly describes what a great person should be. 🙂

Making Sense on Inflation Rates

Inflation rate is the annual or year-on-year rate change of the Consumer Price Index (CPI). CPI is a measure of change of the prices of a basket of goods and services commonly purchased by households in a particular area. The beginning prices are based on 1988 prices. Each region has different number of items included in the basket.

CPI1

The items are classified in six major groups and assigned with “weights.” The weight is determined on the percentage of total expenditure that is spent to a specific major group. The statistics were derived from the results of the 1988 Family Income and Expenditures Survey (FIES).

CPI2

Based on the table above, we can deduce that 58% of total expenditures spent go to food, beverage, and tobacco for the whole Philippines.

In order to determine the price level of specific items, sample outlets are selected to get the price quotes. There are about 9,000 outlets selected nationwide based on the following criteria:

  1. Popularity of the establishment along the line of goods to be priced
  2. Permanency of outlet
  3. Consistency or completeness of stock
  4. Accessibility of outlet

The outlets selected are permanent source of price data unless:

  1. Closing of business
  2. Disappearance of item from the stock for more than three consecutive months or permanently

It is replaced with the nearest retail outlet that is within the vicinity of the replaced outlet. The choice of which outlet to choose is left to the discretion of the price canvasser using the criteria for regular outlet selection.

Knowledge of the composition of the CPI will give us more insights about the inflation rate. By simply analyzing which of the six major item groups is likely to go up, we may be able to anticipate the inflation rate and the monetary policies. Being aware of the food prices which account for more than 50% of the CPI will ideally allow us to anticipate whether the inflation rate will go up or down before official data can be released and whether or not the BSP will modify current monetary policies.

 

Macroeconomic basics here:

https://fundamentalenthusiast.wordpress.com/2012/08/08/macroeconomics-basics/

Unemployment, Energy Sector, Ethanol Plant, Stock Thoughts: MER

Unemployment

Social Weather Stations (SWS) estimates unemployment rate at 24.6% .

I don’t get it. If that would be the unemployment rate then should we be at a recession?

National Statistical Coordination Board (NSCB) estimates unemployment rate this January at 7.2%.

http://www.nscb.gov.ph/secstat/d_labor.asp

I prefer to rely on NSCB data.

I am open for any alternative thoughts.

 

Energy Sector

Few take the energy security seriously. In the coming years, assuming the Philippine economy continues to grow; there will be an electricity shortage.

 

How will an individual investor play this opportunity? Invest long-term on stocks that are into electricity trading and electricity generation.

My opinion only.

Ethanol Plant

Gokongwei plans more power and ethanol projects in Negros:

http://business.inquirer.net/108007/gokongwei-plans-more-power-ethanol-projects-in-negros

Gokongwei is planning to do what ROX is already doing. Lol

More on ROX:

https://fundamentalenthusiast.wordpress.com/2013/02/03/roxas-holdings-inc-pse-rox/

MER

MER is seeking for more power?

http://business.inquirer.net/108021/meralco-turns-to-psalm-for-additional-power

Increase in electricity volume sold by MER means an increase in the revenue of MER.

More on MER:

https://fundamentalenthusiast.wordpress.com/2012/11/10/manila-electric-company-pse-mer/

Philippine Economy, Stock Thoughts: PERC

Few thoughts for today. 🙂

 

Philippine Economy

Philippine likely to grow 6.4% in 2013:

http://www.bworldonline.com/content.php?section=Economy&title=Economy-to-grow-6.4%-in-2013:-Nomura&id=65893

Very possible, Philippine Government has plenty of room to tweak the growth of the economy. The government can simply increase its spending on construction and GDP will increase.

See the compositions of the PH economy here:

https://fundamentalenthusiast.wordpress.com/2013/02/13/my-common-sense-approach-in-interpreting-the-gdp/

Basics of Macroeconomics here:

https://fundamentalenthusiast.wordpress.com/2012/08/08/macroeconomics-basics/

 

PERC

PERC won bidding for an oil exploration area in the promising northwest Palawan:

http://www.pse.com.ph/resource/disclosures/2013/pdf/dc2013-1558_PERC.pdf

However, China has existing claims on Area 4.

http://www.interaksyon.com/business/30331/oil-exploration-contract-bidders-unnerved-by-scarborough-shoal-tensions—doe

PERC already has a promising interest on an on-shore oil prospect, SC 51.

More on PERC here:

https://fundamentalenthusiast.wordpress.com/category/stock-ideas/perc/

 

LTG

Going strong price-action wise. 🙂

More on LTG here:

https://fundamentalenthusiast.wordpress.com/2012/10/28/making-sense-on-tdy-consolidation/

Exploring the National Statistical Coordination Board Website

The primary source of Philippine GDP figures is the National Statistical Coordination Board website. Assuming you are to obtain the figures that composes the Industry sector, follow these steps:

1. Go to: http://www.nscb.gov.ph/stattables/

2. Click GDP, GNI

NSCB1

 

 

 

3. Click the title

NSCB2

 

 

4. Click “Industry”

NSCB3

 

To determine the figures that composes the GDP by industry click “by Industrial Origin”

To determine the figures that composes AHFF sector click “Agricultural, Hunting, Forestry & Fishing”

To determine the figures that composes Services sector click “Services”

My Common Sense Approach in Interpreting the GDP

Philippine GDP has three major sectors:

  1. Agriculture, Hunting, Forestry, and Fishing (AHFF)
  2. Industry
  3. Services

AHFF has the following subsectors:

1. AGRICULTURE, HUNTING and FORESTRY
a. AGRICULTURE
Palay
Corn
Coconut including copra
Sugarcane
Banana
Mango
Pineapple
Coffee
Cassava
Rubber
Other crops
Livestock
Poultry
Agricultural activities &  services
b. FORESTRY

2. FISHING

Industry has the following subsectors:

INDUSTRY SECTOR
a. Mining & Quarrying
b. Manufacturing
c. Construction
d. Electricity,Gas and Water Supply

Services has the following subsectors:

SERVICE SECTOR
a. Transportation, Storage and Communication
b. Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods
c. Financial Intermediation
d. Real Estate, Renting & Business Activity
e. Public Administration & Defense; Compulsory Social Security
f. Other Services

After learning what composes the Philippine GDP, analysis of the Philippine economy will be simple and asking the right question will be the key to derive useful insights from the data.

Below is the Philippine GDP pie chart:

IG1

The Philippine economy depends on the service sector? What supports this sector? Remittances from abroad

Below is the pie chart for AFFH Sector:

IG2

AHFF sector has the smallest share in the Philippine GDP, how can the government improve AHFF share? Investment in rice production

Below is the pie chart for Industry Sector:

IG3

The second driver for growth in the Industry sector is construction, what is the future of the construction subsector in the Philippine economy? Private-Public-Partnerships

Below is the pie chart for Services Sector:

IG4

Trade subsector is the largest contributor to the Services sector, what does this imply? Strong domestic consumption

 

What conclusion can you derive from all the data above?

The strong economic performance of the Philippines was attributable to the Country’s Service and Industry Sector. The share of the Service Sector in the GDP stands at more than 50% which means that an economic development that will cause the sector to grow can boost the Philippine economy. However, it would also mean that an unfavorable economic development that can contract the industry can drag the Philippine economy down. Diversification of GDP growth source to other sector such as the Agricultural sector is important. Also, good governance should be continued beyond the current administration to maintain or further improve the attractiveness of the Philippines for investments both local and foreign.

 

Source: http://www.nscb.gov.ph/stattables/