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WRAP-UP: Economy braces for whiplash from AIG troubles

09/17/08

Posted under Investing, So What Chocnut?, economy

Like dominoes, the effects from convulsions in the US financial system will begin unraveling and regulators, investors and market players are hoping there will be more pieces left standing than those that are toppled over.

Late breaking news that the Federal Reserve is now considering providing a bailout package for American International Group is providing a soothing balm to Wall Street, especially after the company was downgraded yesterday by major ratings agencies. We will know more as the day unfolds whether the “unnamed source” in Bloomberg’s report has just given markets an early Christmas gift.

Because Lehman Brothers, Merrill Lynch and AIG are all complex financial companies, the reckoning may take months, not days. AIG’s dilemma, in particular, has had everyone’s knickers in a twist because its demise will hit every big Wall Street name and is expected to have huge ramifications all over the world. Government economic managers are largely expected to talk about this issue during their mid-year economic briefing at the Shangri-la Plaza in Makati at 10 a.m. today.

So far, three local firms, Banco de Oro, Metropolitan Bank and Trust Co. and Sunlife have disclosed Tuesday they have set aside provisions to protect them from their exposure to Lehman. The Bangko Sentral ng Pilipinas, the Philippine central bank, is ready to pump liquidity into any bank with exposure to Lehman, but  does not expect local banks to be significantly hit.

State pension funds Government Service Insurance System and the Social Security System have also been asked to disclose their exposure to the Lehman, Merrill and AIG. Any exposure of the pension funds, especially GSIS, which announced early this year it was going to invest globally, could be potentially alarming for ordinary Filipino workers.

Philamlife, the 100-percent owned local company of AIG, has issued official statements to the media that it is well capitalized and can service any claims from its plan holders—a statement that was echoed by government regulator Insurance Commission.

“While AIG is our parent company, we are separately capitalized, we have the largest and the most stringent capital base in the industry, our investment funds are separate, the funds managed by PAMI are separate and the US operations have absolutely no impact on Philippine operations,” said Joey L. Cuisia, president and chief executive officer of Philamlife in a television interview at ANC.

Based on official financial figures from Philamlife’s website, it’s consolidated assets in 2007 was at P170 billion, it paid out P6.6 billion in benefits during the same year. Its life insurance in force is at P391.8 billion. Its market share as of 2006 is 24.6 percent in terms of premiums, 31.9 percent in terms of assets and 33.6 percent in terms of total investments.

Bandying billions of funds in capitalization, however, still kept investors everywhere, not just in the Philippines, wondering if these funds will be enough under a worst-case scenario. The New York Times and  CNN have informative question and answer articles for plan holders and investors worried about their policies. Unfortunately, the Philippines does not have a PDIC for insurance policies, the way they do in the US. When I get my interview with regulators, I will update you on that.

For now, even ordinary Filipinos without a Philamlife policy or investment are advised to be wise to save more, spend less, err on the side of caution but stay the course and keep a long-term perspective, as the macroeconomic fundamentals domino pieces will get jarred again and again by convulsions in stock, currency and debt markets. The ADB is expecting Asian economies to get badly hit until 2009.

However, you’ve also got the International Monetary Fund (IMF) saying Lehman, Merrill and AIG’s woes are all part of a restructuring in the financial system and once the uncertainty over exposures such as theirs are all worked out, we’ll all see a healthier Wall Street and American economy. I’ve seen other experts being quoted in BBC and Bloomberg, saying these are all positive in the long-run, but no mistake about it, the restructuring will come with much pain. At times like these, when a lot of the shrillness in the market will result in babies being thrown out with the bathwater, some experts say buying opportunities abound.

As agreenspan says: We are all in a serious situation, and there is no place for sugar-coating here. Let us not get crippled by fear, but let’s also not hide under a rock and hope everything will be the same when we emerge.

Meanwhile, the earth is still revolving, and we know that good ol’ Oprah has decided to manage Charice’s US career! Weee! (Humor is good for the soul and no I am not really a fan hehe).

UP NEXT: Your Philam questions answered





2 Feedbacks on "WRAP-UP: Economy braces for whiplash from AIG troubles"



avatar sing

written in 2002 and so relevant tot eh attitude of main stream media to pimp up the stock market.

August 2002

It really is funny when the english media start telling to all and sundry that while it may be that U.S. has some reason to lose shares in the stock market and while the rest of world has lost stock market for so long it is some special god given right of london stock market not to fall or atleast not to fall as others have. Why?thses english propagandist who have been champion of globalization and have told others country that evrything in one country affects other country(though not aparently england even if england produces nothing of sort and her so called service industry is run by constipated looking arse faced low lif salesman and women), ; these people are now saying that england’s accounting system and stock market is different than americas. Till other days they have been telling that their system is best because it is very much like american system.
Whole thing smacks of rats(in this case british) leaving the ship(america) when the rats fear of ship sinking.After it ion the strenght of american power that this thrid rate country called england has had such a boom time while the real industrial giants like japan and Germany have been in recession for years(no globalizatio effect there).In fact poplke should throw their economic book ab=nd theory and examine how a thrid rate country like england has nbeen able to survuive let alone propsper.ofcourse the english were fisrt to glee when they initaited downfall of japanese and far east market-no advice at that time to put money into equity as good value as they talk of in their case now. The english spies in form of jopurnalist put a lot (billion) of false paper money into Soviet russia during may-december 1900 to bankrupt soviets. ofcourse the englsh have been trying to thwart Euro for a long time-only when they are successful then they think of joining eueo-in fact europe should not allow britian to join euro.Also english media and govt. have been indulging in industrial sabotage of european countries thru the anglosaxon network of satellite and net , telephone spying and tapping-even E.U. rightly had complained about it-it was hushed just as it was in case of money laundering by british through their so called tax heaven off shore islands.
In fact for last 20 years and more so in last 15 years the english have shown their true clour-after cold war it is clear that the impotent english have been trying to piggy back pon american strength(americans in majority are not anglosaxons)and thru america england treis to bully other nations-install dictators their and then those dictators without peoples supprt are asked to bring the money to england and buy house in london-that creates housing boom and this nation of plumbers(graduation from pirates to shopkeepers then plumbers now) feels very happy with inflated house prices and low qulaity housing and infrastructrue-the money from abroad comes to london stock exchange and fuels the stock price. The london stock price should be forced to be lowered to one fourth of its present price becasue the rest is all false pumped up price with no real value. wht does england produce that any country would want? the real indutrial nations of the worls -Japan, germany have been in recesssion for last 10years while this england has been booming after gulf war for no reason other than becasue it falsley persuaded other countries and their dicataors to bring money to london and starve the rest of worrld. For God’ sake the english plumber does not even eat healthy food.–atleast not non infected.england -which has preached globalization to evryone-must be forced to import better and healtheir food from other countries and make british farmers go to heaps because they desrve to be finished.After imf has ruined many farmers in the rest of world so what is special about dirty smelly british famers who produce infected smelly industrial food fit for pigs like the british farmers.

the accounting system and evrything in england is reeling with corruption with collusion amongst government, media and business class -inflitrating academia even and polluting every thing in the socail ,ecnomic and political field of this pirate turned shopkeeprs turned plumber country.In fact the corruption is so widespread that the stock market is not worth even ft100index of 1000 let alone 4000. The world must force the london stock market to fall below 1000 and more-first the dictator countries of the world and others must take money out from here and get it in some other country-though england have 98 percent market of off shore tax heaven for corrupt and money lanudered money there is no reason why england can not be forced to obey civilized laws just as the rest of world does and close all money laundery business through tax heavens.



paetechie

nice joke there. i was looking ofr latest news on philamlife since my wife has a new policy there and she’s unaware of the troubles of AIG.

at least Charice can have a very wide audience at the Oprah show



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