Is China after the Philippines'oil and gas fields?

Is China after the Philippines’ oil & gas fields?

Filipinos groaning from high power bills might have good reason to be concerned about China’s claims in the West Philippine Sea (South China Sea).

Philippine government officials have expressed apprehension that China may be after the oil and gas-rich areas there, including the Sampaguita gas field recently discovered by an oil exploration firm under contract with the Philippine government.

Philippine officials are concerned because the country’s energy future is at stake.

Department of Energy Undersecretary Jose Layug Jr said in a recent media briefing, which I attended, that “the Malampaya (gas) reservoirs are good until 2024″ or only for the next 12 years.

Malampaya gas now provides 40% of the power requirements of Luzon where most of the country’s economic activities are located.

The gas is currently being piped to three power plants in Batangas which produce a combined 2,700 megawatts.




Philippines’ biggest gas find

Shortly after the DOE’s media briefing last month, a major gas find bigger than Malampaya was announced by Forum Energy Plc in the Sampaguita gas field located in Recto Bank, internationally known as the Reed Bank.

This discovery might not have taken place if the Philippine military, on orders of its Commander-in-Chief President Benigno Aquino, had not secured Forum’s survey ship which Chinese vessels had threatened to ram this March 11, 2012.

The harassment of Forum’s survey ship actually started over a year ago when two Chinese patrol boats visibly stalked the survey ship on March 2, 2011. This prompted the Philippines to lodge a diplomatic protest with China then.
At that time, the president’s spokesman Edwin Lacierda told a news briefing:

The administration has always asserted that it will dismiss out of hand any claim to what are considered integral parts of Philippine territory, such as the Recto Bank (Reed Bank) in western Palawan.

Recto Bank is some 80 nautical miles northwest of Palawan or well within the Philippines’ maritime exclusive economic zone (EEZ) under UNCLOS (United Nations Convention on the Law of the Sea).
Lacierda also said:
Concerning our defense posture, the administration is determined to improve the capabilities of our military and Coast Guard to enable the effective patrol and protection of our national territory and exclusive economic zone.

President Aquino, during his State of the Nation address in July last year (SONA), also emphasized Philippine sovereignty over Recto Bank when he said:
     Malinaw ang pahiwatig natin ngayon sa buong mundo: Ang sa Pilipinas ay sa Pilipinas; kapag tumapak ka sa Recto Bank, para ka na ring tumapak sa Recto Avenue.
[Our statement to the entire world is very clear: What is the Philippines' is the Philippines; when you set foot on Recto Bank , it is as if you have set foot on Recto Avenue (a street in the Philippine capital of Manila) ]

     On September 1 last year, following his SONA, President Aquino flew to Beijing to meet personally with President Hu Jintao. Both then issued a joint statement that, among others, said:
     The two sides will discuss the establishment of a nautical highway that will infuse new energy to bilateral trade and economic activities between the two countries which complement and support the connectivity between ASEAN and China.

     Both leaders exchanged views on the maritime disputes and agreed not to let the maritime disputes affect the broader picture of friendship and cooperation between the two countries. The two leaders reiterated their commitment to addressing the disputes through peaceful dialogue, to maintain continued regional peace, security, stability and an environment conducive to economic progress. Both leaders reaffirmed their commitments to respect and abide by the Declaration on the Conduct of Parties in the South China Sea signed by China and the ASEAN member countries in 2002.
     But a week after Aquino’s five-day visit to China, Budget Secretary Florencio Abad – one of the cabinet ministers closest to the president – said the country would be beefing up its defense over its gas fields.
     Abad announced that the Philippines would spend P4.95 billion for buying helicopters and setting up radar stations in order to strengthen the country’s defense of its oil and gas assets near Palawan. Royalties from the Malampaya gas field would be used for this purpose.

Quietly, the Philippine military also told Philex Petroluem – Forum’s parent firm – to carry on with its survey of the Sampaguita gas field off Palawan. And it promised to secure the ship.

As a result, the survey recently confirmed and for the first time that the Sampaguita gas field – which had been an area of exploration since 1970 or 42 years ago – was indeed commercially viable. Its total reserves were estimated to be as high as 16.6 trillion cubic feet (TCF) of gas and 416 million barrels of oil. It was even bigger than the Malampaya gas field.

The Sampaguita gas field discovery – 90 nautical miles northwest of Palawan – is nowhere near Scarborough Shoal (which is northwest of Zambales in the island of Luzon) where the tense standoff between armed Philippine and Chinese vessels is now taking place.

Earlier, I wrote about the competing claims of the Philippines and China on Scarborough Shoal. See – Why get so riled up over some rocks under the sea?

This piece will be about the competing claims, especially in the Spratlys or what China calls the Nansha Islands. A lot of articles have been written about how many islands each country is claiming.

First, please take a look at the map below which shows the various countries’ claims in the area. China has enclosed all its claims in a “nine-dashed line” – which is shown here as a red line.

The next map, posted by the US Energy Information Administration but which it obtained from the US Central Intelligence Agency, shows the oil wells that each country has in actual operation. Notice that most of these oil wells are actually within China’s nine-dashed line.

Notice that Malaysia and Brunei have many oil wells in actual operation.

In contrast, notice that the Philippines has only ONE oil well in actual operation, plus ONE “new field discovery.”

Please note, too, that the Philippines’ ONE oil well in actual operation – the Malampaya gas field – is right on China’s claimed nine-dashed line.

The Philippines’ maritime area northwest of Palawan is believed to be rich in untapped oil and gas deposits.

However, while the Philippines has been offering for tender the oil exploration blocs in northwest Palawan for decades, it was only in recent years that China became quite adamant about its ownership rights of the area covering these exploration blocs.

In the mid-1990s, the quarrel between China and the Philippines centered more on fishing rights rather than on oil exploration blocs. (NOTE: At the end of this piece, I have added a list of the various military encounters between China and other claimant states. This list shows that the Philippine military has engaged China, Vietnam and Malaysia through the years.)
One senior Philippine government official traced China’s interest in Recto Bank to the joint survey that China and the the Philippines signed in September 2004. The official, who spoke to me on condition of anonymity, said:

The truth is, there’s nothing in the Spratlys (or Nansha islands) but coral and endangered beautiful fish. There are no oil resources there.

The resources are in Recto Bank which China started claiming only after the previous administration (of President Gloria Macapagal-Arroyo) entered into a Joint Marine Seismic Undertaking (JMSU) with China in 2004.

Forum’s recent gas find is on Recto Bank, which is also near the Camago-Malampaya fields now in operation. The US Energy Information Administration (US EIA) noted that:

The Filipino Malampaya and Camago fields are in waters claimed by China. Both fields are estimated to contain a combined amount of 2.3 to 4.4 trillion cubic feet of natural gas reserves. The Philippines has proceeded with development of the fields and linked the gas output to three power plants via a 312-mile pipeline. There have been no objections from China regarding this development. The Malampaya came on stream in October 2001.

Indonesia also came under protest by China after the former found gas-rich fields off Natuna Islands, the US EIA noted:

     Indonesia’s claim was undisputed until China released an official map with unclear maritime boundaries indicating that Chinese-claimed waters in the South China Sea may extend into the waters around the Natuna Islands.
But the US EIA added:
     Indonesia responded in 1996 by holding large military exercises in the Natuna Islands region. Since then, Indonesia has begun major natural gas production in the Natuna area without China voicing any objection. Indonesia has been exporting Natuna gas to Singapore’s Jurong island via a 400-mile undersea pipeline since 2001.

As of 2008, the Natuna fields are estimated to have close to 46 trillion cubic feet of recoverable reserves – dwarfing Forum’s Sampaguita gas field.

As for Malaysia, the US EIA also noted:

     Many Malaysian natural gas fields located offshore Sarawak are also claimed by China, but to date, China has not specifically objected to their development. Discoveries of oil in 2002 and 2004 (by Murphy Oil and Shell Malaysia, respectively) off the coast of Sabah have contributed to the dispute between Malaysia and Brunei over offshore rights. Brunei had asserted a 200-mile exclusive economic zone (EEZ) off its coastline in 2000. Negotiations between the two governments to resolve the issue are ongoing.

China’s objections with Manila intensified last year

     In July 11 last year, the Philippines offered for bidding oil exploration Blocs 3 and 4, northwest of Palawan. China vigorously registered its objections over this.

The two blocs are part of the area where President Gloria Macapagal-Arroyo allowed China and Vietnam to undertake a seismic survey in 2004, DOE Undersecretary Layug confirmed to me in a recent interview.



Next month is the deadline for the submission of the bids.



The JMSU was signed on September 1, 2004 by China National Offshore Oil Corporation and Philippine National Oil Company.



Barry Wain of the Far Eastern Economic Review called the JMSU “Manila’s bungle in the South China Sea.”



Thanks to the JMSU, Wain said:



The Philippines also has made breathtaking concessions in agreeing to the area for study, including parts of its own continental shelf not even claimed by China and Vietnam. Through its actions, Manila has given a certain legitimacy to China’s legally spurious “historic claim” to most of the South China Sea.



Why did the Philippines do this? I’ll be writing about this later on in another article.



___________________________



Military Clashes and Incidents in the South China Sea between 1970 and 2002

[NOTE: I have highlighted in red those which involved the Philippine military.]



1974 – Between China & Vietnam – China seized the Paracels from Vietnam, with 18 of its troops killed in clashes on one of the islands.



1988 – Between China & Vietnam – Chinese and Vietnamese navies clashed at Johnson Reef in the Spratlys. Several Vietnamese boats were sunk and over 70 sailors killed.



1992 – Between Vietnam & China – Vietnam accused China of landing troops on Da Luc Reef. China seized almost 20 Vietnamese cargo ships transporting goods from Hong Kong from June – September.



1994 – Between China & Vietnam – China and Vietnam had naval confrontations within Vietnam’s internationally recognized territorial waters over Vietnam’s Tu Chinh oil exploration blocks 133, 134, and 135. Chinese claim the area as part of their Wan’ Bei-21 (WAB-21) block.



1995 – Between China & the Philippines – China occupied Philippine-claimed Mischief Reef. Philippine military evicted the Chinese in March and destroyed Chinese markers.



1995 – Between Taiwan & Vietnam – Taiwanese artillery fired on a Vietnamese supply ship.



1996 – Between China and the Philippines – In January, Chinese vessels engaged in a 90-minute gun battle with a Philippine navy gunboat near the island of Capone, off the west coast of Luzon, north of Manila.



1997 – Between the Philippines & China – The Philippine navy ordered a Chinese speedboat and two fishing boats to leave Scarborough Shoal in April; the Philippine navy later removed Chinese markers and raised its flag. China sent three warships to survey the Philippine-occupied islands of Panata and Kota.



1998 – Between Vietnam & the Philippines – In January, Vietnamese soldiers fired on a Philippine fishing boat near Tennent (Pigeon) Reef.



1999 – Between the Philippines & China – In May, a Chinese fishing boat was sunk in a collision with Philippine warship. In July, another Chinese fishing boat was sunk in a collision with a Philippine warship.



1999 – Between China & the Philippines – In May, Chinese warships were accused of harassing a Philippine navy vessel after it ran aground near the Spratlys.



1999 – Between Vietnam and the Philippines – In October, Vietnamese troops fired upon a Philippine air force plane on reconnaissance in the Spratlys.



1999 – Between Malaysia & the Philippines – In October, Philippine defense sources reported that 2 Malaysian fighter planes and 2 Philippine air force surveillance planes nearly engaged over a Malaysian-occupied reef in the Spratlys. The Malaysian Defense Ministry stated that it was not a stand-off.



2000 – Between the Philippines & China – In May, Philippine troops opened fire on Chinese fishermen, killing one and arresting seven.



2001 – Between the Philippines & China – During first three months, the Filipino navy boarded 14 Chinese flagged boats, confiscated their catches, and ejected vessels out of contested portions of the Spratlys.



2001 – Between the Philippines & China – In March, the Philippines sent a gunboat to Scarborough Shoal to, “to ward off any attempt by China to erect structures on the rock”.



2002 – Between Vietnam & the Philippines – In August, Vietnamese troops fired warning shots at Filipino military reconnaissance planes circling over the Spratlys.



SOURCE: United States Energy Information Administration

Tithing Accdg. To The Bible

We should not tithe because God wants us to give generously, and tithing is the bare minimum.

Our God is a generous, giving God who so loved the world that He gave that most precious gift, His only begotten Son. “For you know the grace of our Lord Jesus Christ, that though He was rich, yet for your sake He became poor, that you through His poverty might become rich” (2 Cor. 8:9). As God’s people who are to be like Jesus, we are to be generous givers.

The Bible teaches that God, who richly has supplied us with all good things, wants us “to be generous and ready to share” (1 Tim. 6:18). But what does generosity mean? Isn’t giving 10 percent of my income to the Lord’s work being generous? If not 10 percent, how much should I give?

1. Tithing is not the New Testament standard for giving.

Many churches promote a concept called “storehouse” tithing, based on Malachi 3:10, where God tells Israel to “bring the whole tithe into the storehouse.” They teach that the local church is the storehouse, the tithe belongs to God, and His blessing is conditioned upon faithfulness in tithing. One pastor in a church near me in California preached that if his people weren’t giving ten percent to that church, they were in sin and needed to go home and repent!

Before I critique this view, let me point out that there are some commendable points regarding tithing: (1) Those who tithe are often acting in obedience to what they believe God has commanded. (2) Tithing gets some to increase what they give. (3) Tithing helps consistency and discipline in giving. But consider these seven reasons why tithing is not God’s standard for Christians:

A. TITHING WAS A PART OF THE LAW OF MOSES; BELIEVERS ARE NOT UNDER THE LAW.

Romans, Galatians, and other New Testament passages make it clear that Christians are not under the law of Moses. That does not mean that we are lawless, because we are under the law of Christ (1 Cor. 9:20-21; James 1:25; 2:8, 12; Rom. 13:8-10). Those aspects of the Mosaic law that reflect the moral character of God are valid under the New Covenant and are repeated as commands in the New Testament. But the church is never commanded to tithe.

Those who argue for tithing point out that Abraham and Jacob both tithed prior to the Mosaic law (Gen. 14:20; 28:22). Thus tithing supersedes the law, they argue. If the New Testament gave no further guidelines, that might be a valid point. But it does, as I will show. But there are other practices, such as circumcision and sabbath-keeping which pre-date the Law and yet are not binding on us.

If you examine the references to Abraham’s and Jacob’s tithing, you will see that God did not command them to tithe and there is no indication that this was their regular practice. On one occasion after a victory in battle, Abraham tithed the spoils from that battle, but nothing is said regarding his other possessions or his regular income (Gen. 14:20). To follow Jacob’s example would be wrong, because he was making a conditional vow before God, promising that if God would keep him safe and provide for him, then he would give God a tenth (Gen. 28:20-22). That’s hardly a good example to follow in giving! Tithing was required under the Mosaic Law, but believers are not under the Law.

B. TITHING WAS AN INVOLUNTARY TAX TO SUPPORT ISRAEL; BELIEVERS ARE NOT A PART OF THE THEOCRATIC NATION.

In the Old Testament, there was both required and voluntary giving. The tithe was required. It was commanded for every Israelite to fund national worship and help the poor. In actuality, there was not just one tithe, but rather two or three ([1] Lev. 27:30-33, Num. 18:20-21; [2] Deut. 12:17-18; [3] Deut. 14:28-29), so that the total was not 10 percent, but more like 22 percent (see Charles Ryrie, Balancing the Christian Life[Moody Press], p. 86). Thus if we are required to bring the whole tithe into the storehouse today, we had better up the percentage from 10 to 22 percent!

C. TITHING IS NOT MENTIONED IN ANY INSTRUCTIONS TO THE CHURCH, ALTHOUGH MUCH IS SAID ABOUT GIVING.

G. F. Hawthorne writes (New International Dictionary of New Testament Theology [Zondervan], 3:854:

Since the tithe played such an important part in the OT and in Judaism contemporary with early Christianity, it is surprising to discover that never once is tithing mentioned in any instructions given to the church. Jesus mentions scribes and Pharisees who tithe ..., but he never commanded his disciples to tithe. The writer to the Hebrews refers to Abraham paying tithes to Melchizedek and Levi paying his tithe to Melchizedek through Abraham ..., but he never taught his readers to follow their example. Paul writes about sharing material possessions to care for the needs of the poor ... and to sustain the Christian ministry .... He urges and commends generosity ... but never once does he demand, as a command from God, that any specific amount be given.

If tithing is to be practiced by the Christian church, it seems strange that Paul did not mention it when he wrote of giving, especially to the predominately Gentile churches which would not be familiar with the Old Testament.

D. TITHING IS NOT MENTIONED IN ANY WRITINGS OF THE EARLY CHURCH FATHERS.

By itself this is not decisive, but it lends weight to the biblical arguments. If the early church practiced tithing, then the concept should surface somewhere in the writings of the church fathers of the second and third centuries. But it does not, even though giving was an important part of early Christian worship (see Hawthorne, pp. 854-855).

E. TITHING PUTS THE WRONG EMPHASIS UPON GIVING.

Tithing emphasizes your obligation to God; New Testament giving, as we shall see, emphasizes your willing, loving response to God’s grace. Furthermore, tithing limits giving by making a person feel that he has paid his dues (so to speak) and thus nothing more is required, when, in fact, much more could be done. Tithing has a tendency to put a person on a legal basis with God, rather than a love relationship. It’s the wrong emphasis.

F. TITHING LEADS TO A FALSE CONCEPT OF STEWARDSHIP.

It leads to the notion that 10 percent is God’s money and 90 percent is my money. In reality, 100 percent is God’s money, and He may want me to channel 90 percent into His work and live on 10 percent. Tithing can be a bad rut.

G. TITHING IS BURDENSOME FOR SOME AND TOO EASY FOR OTHERS.

If a man with a family of five makes $20,000 a year and tithes, he has $18,000 (apart from taxes) to support five people. If a childless couple makes $100,000 a year and tithes, they have $90,000 (apart from taxes) to support two people. That would be burdensome to the man with five mouths to feed, but ridiculously easy for the couple.

There are seven reasons that argue against tithing. Then what is God’s standard for giving?

2. Generous grace giving is the New Testament standard.

When you say “grace,” a lot of people, unfortunately, connect it with hang-loose, undisciplined living. But that is not grace! Nor is grace the balance point between legalism and licentiousness. Rather grace (as a system) is totally opposed both to legalism and licentiousness, which are two sides of the same coin.

Legalism and licentiousness both operate on the principle of the flesh. Legalism is an attempt to earn standing with God through human effort and leads to pride or condemnation, depending on how well you do. Licentiousness casts off restraint and lives to gratify the flesh.

But God’s grace is His unmerited favor based on Christ’s sacrifice. The motivating power in grace is the indwelling Spirit of God. The person under grace responds out of love and gratitude to God and depends upon the indwelling Holy Spirit to conform his life to what God requires. With that basic understanding of grace, let me spell out some things that grace giving is not, and then some things that grace giving is.

A. GRACE GIVING IS NOT ...

(1) Random and irresponsible. It does not mean that you give every now and then, hit and miss; rather (as we shall see next week), it is planned and systematic (1 Cor. 16:2; 2 Cor. 9:7).

(2) Based on feelings. Being under grace does not mean living by feelings. Living under grace means walking by faith and obedience in response to God’s love. There are many commands under grace.

(3) Usually less than the requirement of the law. God’s grace should motivate us to excel far more than the minimum under the law (1 Cor. 15:10).

(4) Giving God the leftovers. God deserves the best, not just what is convenient. If we love God with all our heart, soul, mind, and strength, then we won’t just give Him what’s left over after the bills are paid. He deserves first place.

Thus grace giving is not sloppy, irresponsible, haphazard giving whenever we feel like it.

B. GRACE GIVING IS BASED ON ...

(1) God’s example in Christ (2 Cor. 8:9). Aren’t you glad that God did not just give a tenth! He gave all. The Lord Jesus Christ was infinitely rich. He dwelled in the unimaginable splendor of heaven, apart from the sin and corruption of this world. But He gave that up, laid aside His privileges, and took on human flesh. He could have chosen to be born as a prince in palatial splendor. But instead He was born and lived in poverty. He ultimately impoverished Himself to the maximum by taking upon Himself the sin of the human race in order that we might become rich (2 Cor. 5:21).

Grace giving looks to the nail-pierced hands of the Lord Jesus, who gave Himself so that we might be rescued from the wrath of God, and says, “Lord, You gave all for me! What can I give back to You?”

(2) The concept of stewardship. “You are not your own, for you have been bought with a price ...” (1 Cor. 6:19-20). All that we are and have belongs to God, not just a tenth. I am merely the manager of His resources. As a good manager, I use the Owner’s resources to further His work (see Acts 2:44-45; 4:32-37; 11:27-30 for some examples).

(3) Inner motivation, not outward compulsion (2 Cor. 8:3-5; 9:7). Motive and attitude are crucial. It is better to give a small amount based on a loving response to God’s grace than it is to give a large amount based on outward pressure or pride. Note the attitude of the Macedonian believers: they had an abundance of joy (2 Cor. 8:2); they gave of their own accord (8:3); they begged with much entreaty for the favor (8:4!); first they gave themselves to the Lord (8:5); they had both the readiness and desire (8:10-12, 9:2); they gave cheerfully, not grudgingly or under compulsion (9:7).

We should not think, “How much do I have to give?” but rather, “How much can I give?” We should not wait for someone to pressure us with a need; we should look for needs that we can meet (8:4). I look for and give to Christian organizations or workers that do not pressure donors with desperate appeals for funds. You almost don’t notice these workers because there are so many pleading for your money so that they “won’t go off the air next week.” May I say, “Let them go off the air!” Christians ought to give based upon inner motivation, not outward pressure. Grace giving is based on ...

(4) A new relationship with the Holy Spirit, not the old dispensation of the Law. Romans 8:14 says, “For all who are being led by the Spirit of God, these are the sons of God.” Galatians 5:18 says, “But if you are led by the Spirit, you are not under the Law.” The context of both passages shows that Paul is talking about the Holy Spirit leading the believer into righteous, godly living. In Galatians, such righteous living is spelled out in the context, in part, as sharing financial resources (6:6, 10).

It’s easier in some ways to follow a set of rules. Just give your 10 percent and that takes care of the matter. But God wants us to be led by the Holy Spirit. That’s kind of scary! The Holy Spirit might want me to give 35 percent or who knows how much! But the point is, I am not living by rules, but in a relationship with the living God.

(5) How much God has prospered you. How much should you give? How much has God prospered you? (Note 1 Cor. 16:2, “as he may prosper”; Acts 11:29, “in the proportion that [they] had means”; 2 Cor. 8:3, 11, 12). Generally, they gave according to their ability, and in some cases beyond their ability. Sometimes you should give sacrificially. (We will look at that next week.) But the general principle is, give as God has prospered you.

When God entrusts you with more money, instead of spending it on more junk that you have to protect from moths, rust, and thieves, you should ask, “Lord, how do you want this money used in Your kingdom?” As God gives you more, you should increase the percentage you give, not just the amount. If you have enough to live comfortably, then invest the rest where God pays guaranteed, eternal dividends.

But here’s the catch: we need to start giving where we’re at, and not put it off until someday when we’re rich. The Macedonians gave in the midst of a great ordeal of affliction, out of deep poverty (2 Cor. 8:2). Jesus commended the poor widow who gave all she had to live on, but He was not impressed with the large gifts of the rich, because they had much left over (Mark 12:41-44).

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Peso hits seven-year low

By: Ben O. de Vera, Doris Dumlao-Abadilla / @inquirerdotnet

Philippine Daily Inquirer / 05:57 PM September 26, 2016

Investor concerns on the Duterte administration’s war on drugs coupled with external developments causing uncertainty globally pulled the peso to a seven-year low on Monday.

The peso closed at 48.25:$1 Monday, the weakest level since the close of 48.335:$1 on Sept. 15, 2009. At the Philippine Dealing System, the domestic currency reached an intraday low of 48.26:$1 after opening at 48.07:$1, weaker than last Friday’s close of 47.99:$1, a nine-month low.

The total volume traded rose to $758.5 million from $590.5 million as the end of last week.

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“The peso movement reflected the continuing uncertainty about the US Fed’s next policy action, just like otter regional currencies,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in a text message to reporters. The US Federal Reserve kept policy rate steady during its meeting last week, such that markets are betting it could eventually push through with a rate hike in December, soon after the presidential elections in November.

Tetangco also attributed the weaker peso to “strong foreign exchange demand for fixing and corporate requirements.”

Finance Secretary Carlos G. Dominguez III told reporters that the peso was not the lone loser among currencies globally. “You know that when Yellen says we might raise the rate, that will affect us,” referring to US Federal Reserve Chair Janet Yellen.

“It’s not only our situation,” Dominguez pointed out.

Joey Cuyegkeng, senior economist at ING Bank Manila, noted that the Philippine peso “continued to underperform other Asian currencies.”

External factors, including economic developments in China, the European Union and Japan, as well as expectations of a lower current account surplus are exacerbating the peso’s weakness, Cuyegkeng said.

“Some analysts think the current account would post a deficit this year or in the coming years—if this materializes, then we would be back to a twin deficit environment that plagued the economy early last decade,” he noted.

But Cuyegkeng said other domestic factors weakening the peso “have to do with market perception  about Philippine valuations (and its outlook relative to other Asian markets) and other concerns, including non-economic concerns.”

“In sum, economic fundamentals remain favorable but there are emerging stresses on the economy and could be exacerbated by non-economic factors. Investors have priced in a lot of positives about the economy and are now on the lookout for risks that could disappoint expectations,” according to Cuyegkeng.

In a research note, Papa Securities said that foreign funds may be almost done selling.

“The pace of the net outflows in the past two months has been faster than other periods historically, averaging above a billion pesos a day. There is still some debate if the cause of which is profit-taking, uncertainty over the Fed hike, or concerns on domestic stability. It’s likely an unknowable mix of all three–though one thing is for certain, this sell-off is certainly not regional,” the local stock brokerage said.

“We suspect that President Duterte’s often-quoted statements merely aggravate foreign selling in a relatively ‘fragile’ market,” the brokerage said.

Since peaking in August, Papa Securities noted that investors had been net sellers to the tune of around 0.75 percent of the total market cap of the PSEi.

“The only other country to experience anywhere near this level of outflows is Vietnam, and theirs is only at -0.35 percent of their peak at the start of the year,” the local stock brokerage said.

On the other hand, Papa Securities said it remained bullish for 2017, sharing the BSP’s assessment that the country’s economic fundamentals were solid and the list of catalysts we expect to emerge starting in the fourth quarter were numerous.

This developed as some analysts have turned critical over how Mr. Duterte was waging a war on drugs alongside some foreign policy jitters.

Global debt watcher S&P Global Ratings last week said Mr. Duterte’s law and order thrust “could undermine respect for the rule of law and human rights, through the direct challenges it presents to the legitimacy of the judiciary, media and other democratic institutions.”

READ: S&P flags ‘rising uncertainties’ in PH amid ‘diminished’ policy stability

S&P had taken note of numerous instances of extrajudicial killings under the new President.

“When combined with the President’s policy pronouncements elsewhere on foreign policy and national security, we believe that the stability and predictability of policymaking has diminished somewhat,” S&P said.

Bank of the Philippine Islands (BPI) economist Emilio Neri Jr. said while most Asian markets have not been spared from market reversals resulting from earlier US Fed jitters, he noted that Philippine markets–including bonds, stocks and currency–had underperformed regional peers.

“Most of the investors who have raised their concerns with us find the uncertainty about Philippine foreign policy and diplomacy to be most unsettling,” Neri said.

But in a statement, Finance Assistant Secretary Paola A. Alvarez noted of “positive developments reflecting the bullish outlook of investors, international institutions and foreign governments on the Philippine economy are telling marks that beyond the political noise, confidence remains high on the capability of the Duterte administration to deliver on its commitment of inclusive growth through its ‘transformative’ 10-point socioeconomic agenda,” citing for instance the sale of P100-billion worth of retail treasury bonds to small investors this month.

“If one were to ignore the political noise generated by certain groups, one could clearly hear the voices of continued optimism over President Duterte’s commitment to bring real change through the implementation of transformative reforms not only in the economy but on the peace and order front as well,” said Alvarez, who is the Department of Finance’s spokesperson.

In a separate research note, BPI associate economist Nicholas Antonio T. Mapa said he expects the BSP leadership to smoothen the forex volatility.

“Tetangco officially began his term with $21 billion worth of gross international reserves (GIR) tucked away to help defend the peso. This represented roughly 4.9 months of import cover, higher than ‘international’ convention for having three-months worth of imports. Over the course of his stewardship, GIR grew at an unprecedented pace, due in large part to the flow of remittances, to hit $85 billion as of August or 10 months of cover.  Of course there are several camps out there estimating the ‘optimal’ level of GIR but what we have noticed is that with increased levels of buffer stock, Tetangco has become more confident to help stem excessive forex pressure on both sides of the pair,” Mapa said.

Beginning November 2010, we’ve seen the peso move within a very tight band as Tetangco attempted to keep the Peso in the comfortable middle. In times of excessive peso appreciation (such as in 2012), Tetangco held the deluge of foreign funds to help defend the 40:$1 handle.  Throughout the last few years we’ve witnessed the same narrative of BSP defending on both the top side and the bottom to build on GIR in good times and to flood the market with forex liquidity to calm depreciation swoons,” Mapa added.

“Now that the peso has strayed, expect Tetangco to be the good shepherd once more and look to stem the stark weakening trend of the peso to help guide it back to his comfortable middle. His virtue of building the defenses early on will pay dividends now that winter is here. Expect Tetangco to resort to heavy forex presence in the next few weeks to keep the peso from straying too far from the proverbial middle of the regional pack,” according to Mapa. JE

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