Nose bleed alert!

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As of 8.24.2009

1. Philippine rates kept steady

• As expected the Philippine central bank kept overnight rates unchanged at its policy meeting Thursday.
• COMMENT: This halts the easing cycle that has caused a 200 basis points cut since December.
• The CB is expected to keep a wait and see attitude regarding Philippine economic growth, due to come out this Thursday.
• The anticipated change in policy however does not deter any significant shift to fixed income investments.
• Rates remain low (SDA rates below 3%) enough to keep risk appetite high for equity investments.

2. Philippine GDP bottomed out in 2Q09; data due this Thursday

• According to NEDA, the Philippine economy continued to remain weak in the 2Q09.
• NEDA sees gross domestic product in the second quarter to have shrunk as much as 0.1% or expanded up to 0.9% from a year earlier.
• The economy expanded 0.4% in the first quarter from a year earlier.
• The government is set to release second-quarter GDP data on Aug. 27.
• Officials estimate that services sector is expected to have grown between 1.7% and 2.2% in the second quarter.
• Agriculture likely expanded between 0.4% and 1.4%.
• Industry however is projected to have contracted between 1.3% and 2.9%.
• However, the NEDA expects the economy to have bottomed out in the second  quarter of 2009
• Economy will be driven by campaign spending ahead of the elections in May 2010.
• In 2007, election spending contributed around  0.34 percentage point to GDP growth.