A several times oversubscribed Philippine sovereign issue inaugurated the 2010 Asian season despite a declaration of emergency after mass killings in the South, continued budget overshoots on anti-crisis and storm cleanup spending, and kickoff of the race to succeed President Arroyo which has another family dynasty member in front. Authorities could raise up to $2 billion in foreign currency placements, and CDS quotes have stayed under 200 basis points, as the 2020 benchmark approaches the 110 price. In the last quarter of 2009 a $1 billion dollar bond was successfully offered, and $2.5 billion peso equivalent was sold to retail investors in a market where banks and social security funds represent 85 percent of holdings. The operation preceded the mayhem on Mindanao island which involved dozens of murders in an apparent political feud at the same time a Muslim separatist movement underscored its fight against the government despite regular peace talks.

The ruling party was roundly criticized for its handling of the event resulting in imposition of martial law, and its candidate is far behind in opinion surveys for May’s presidential elections. The leader is legislator “Noynoy” Aquino, son of the former head of state and anti-dictator People’s Power coalition who passed away in 2009. His economic platform is sketchy, but vows to eliminate bureaucracy and corruption while opposing proposed constitutional amendments to increase foreign ownership in key sectors. Wealthy Senator Villar is another favorite despite controversy over his business practices, and former President Estrada retains populist appeal even after being stripped of the office and serving jail time for bribery. The contest occurs against the backdrop of GDP growth set to move from barely positive to 5 percent on remittance-supported consumption, and inflation likely to come in under the 4 percent upper range, keeping the central bank on relative hold.

The fiscal gap however will touch a record $6.5 billion on infrastructure and social outlays and erratic privatization progress. The overreach has rattled equities, which also recoiled early in the year with the sudden resignation of the stock exchange chief who was attempting to enforce broker disclosure and minimum capital rules. His tenure spearheaded an Asean cross-listing and trading initiative which foresees full integration by mid-decade, with additional Asian Development Bank and NYSE/Euronext support. The joint aim is to boost scale and liquidity while retaining home settlement norms that also await in Manila a series of post-election resolutions.