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Robinsons Bank looking to tap peso fixed-rate bonds to raise fresh funds

ROBINSONS BANK Corp. said it is considering offering fixed-rate peso bonds following the central bank’s relaxed regulations on lenders’ fund raising.
Robinsons Bank President Elfren Antonio S. Sarte said the Gokongwei-led lender is “considering” to raise fresh funds through peso-denominated bonds.
However, he said the capital-raising activity is “not approved yet.”
“No decision yet on size and term for the peso bond,” Mr. Sarte said in a text message.
Circular No. 1010 issued by the Bangko Sentral ng Pilipinas (BSP) in August simplifies the process for universal and commercial banks looking to raise funds via bonds, allowing lenders to issue fixed-rate bonds without having to secure central bank approval.
The reform forms part of streamlined rules designed to deepen capital markets.
UnionBank of the Philippines, Bank of the Philippine Islands as well as Metropolitan Bank & Trust Co. recently raised P11 billion, P25 billion and P10 billion, respectively through fixed-rate securities.
Meanwhile, BDO Unibank, Inc. and Security Bank Corp. also announced their intention to raise more capital by establishing local currency bond programs worth P100 billion and P50 billion, respectively.
In October, Robinsons Bank said it is set to raise P3.5 billion via long-term certificates of deposit (LTNCD) to fund the expected growth of its lending business.
The papers, which will be offered in the first half of the year, will constitute the second tranche of the lender’s P5-billion LTNCD program approved by the central bank.
The Gokongwei-led bank booked a P292.4-million net income in the nine months ended September, 32% higher than the P222.2 million recorded in the same period last year.
Robinsons Bank is licensed as a commercial lender and is the 19th biggest in the industry in asset terms as of June. — Karl Angelo N. Vidal

Fight masterpiece fatigue with 2019’s thrilling new art exhibits


FOR CULTURE vultures, 2019 will hold a dazzling array of museum exhibitions. From London to Los Angeles and Brooklyn to Basel, there are thoughtful, sweeping, and often provocative shows to look forward to.
Here, in chronological order, are some of the most exciting.
• Tintoretto: Artist of Renaissance Venice at the National Gallery of Art
March 10 — July 7
Jacopo Tintoretto was born 500 years ago, but until now the master painter has never had a retrospective in North America. Better late than never, particularly when the final product involves a series of spectacular loans that have never been seen before in the US. The exhibition first appeared at the Palazzo Ducale in Venice as part of a citywide celebration of the artist’s birth. For its US debut at the National Gallery the exhibition will be altered and expanded, with close to 50 paintings plus a dozen drawings. It will be further boosted by two component shows on view at the same time — one of Venetian prints and another of Venetian drawings.
National Gallery of Art, Washington, D.C.
• Oscar Rejlander: Artist Photographer at the Getty Center
March 12 — June 9
When photography was in its infancy the camera operator was considered just that: someone who managed a machine and nothing more. A few early proponents, including the Swedish born, UK-based Oscar Rejlander (1813- 1875), made a concerted effort to change that perception. In a comprehensive new show that originated at the National Gallery of Canada, viewers can see the results of Mr. Rejlander’s efforts. This exhibition of 150 works includes his undisputed masterpiece, The Expression of the Emotions in Man and Animals (1872), which he created by exposing 30 negatives then collaging them together to print a single picture.
J. Paul Getty Museum, Getty Center, Los Angeles, CA
• Early Rubens at the Legion of Honor Museum
April 6 — Sept. 8
Peter Paul Rubens was a superstar almost from the beginning of his career. By the time he was in his early 30s he’d already found patronage from the aristocracy of Europe, and in arguably the most fertile period of his career, from 1609 through 1621, Mr. Rubens created a body of work that would solidify his place in the canon. The Legion of Honor Museum in San Francisco has organized a show with more than 30 paintings and 20 works on paper from that period, including some of his notable large-scale, life-size paintings, which have been loaned from institutions across Europe and the US.
The Legion of Honor, San Francisco, CA
• Lincoln Kirstein’s Modern at the Museum of Modern Art
March 17 — June 30
If Lincoln Kirstein is remembered at all, it’s for co-founding the New York City Ballet. But Mr. Kirstein, who was born into a prosperous Boston family in 1907, was also a curator, collector, and writer. This exhibition will include more than 200 works from MoMA’s permanent collection. (He was also, for those less interested in New York’s avant-garde, one of the “monuments men” who went into Europe to save Nazi-confiscated art.) There will be works from Mr. Kirstein’s close friend, Walker Evans, paintings by intimates such as Pavel Tchelitchew, costume designs by Paul Cadmus for ballets he commissioned, and Latin American art that Mr. Kirstein acquired for MoMA including works by Antonio Berni and Raquel Forner.
The Museum of Modern Art, New York, NY
• Garry Winogrand: Color at the Brooklyn Museum
May 3 — Aug. 18
Mr. Winogrand (1928–1984) is famous for his black and white snapshots of midcentury New York. His lush color photography of the same subjects — commuters, teens, high society, and everything in-between — is more obscure, in large part because it hasn’t been exhibited significantly since 1967. (That year he included 80 color images in MoMA’s New Documents exhibition, which were displayed in a slide projector. However, the projector broke and wasn’t replaced, meaning few if any visitors saw the color photographs even then.) Now the Brooklyn Museum is putting on the first ever dedicated exhibition of Mr. Winogrand’s color photography, with more than 450 images displayed as slide projections.
Brooklyn Museum, Brooklyn, N.Y.
• The Venice Biennale’s 58th International Art Exhibition
May 11 — Nov. 24
Every two years much of the art world congregates in Venice for what should, in theory, be a relic from another age: Dozens of countries fill their pavilions in the city’s formal gardens with contemporary art that establishes some approximation of national prestige. The show is augmented by a colossal exhibition in the Arsenale, a warehouse nearby, which this year will be curated by the director of London’s Hayward Gallery, Ralph Rugoff. The whole thing should feel antiquated — a sort of “World’s Fair” style get-together for the culturally minded — but as geopolitics threaten to devolve into a midcentury freeze, the biennial has suddenly taken on a genuine urgency. Culture, in a turn that’s surprised more than a few people, is back on the global forefront for the first time since the 1950s.’
The Venice Biennial, Venice, Italy
• Manet and Modern Beauty at the Art Institute of Chicago
May 26 — Sept. 8
In a crowded field, Edouard Manet is probably the greatest portraitist of the 19th century. His proto-modernist depictions of friends, models, and strangers have an otherworldly quality, particularly in his paintings of women. Olympia, probably his masterpiece, has been dissected by thousands of critics for the past 150 years, but his smaller, less monumental portraits are equally enchanting. For the first time in 50 years, the Art Institute is putting on a show of these works, with 54 paintings and 90 works in total, drawn in part from its excellent permanent collection. The art will be supplemented with letters Mr. Manet sent to friends, which he illustrated with pictures of fruit and flowers.
The Art Institute of Chicago, Chicago, IL
• Women Artists in the Nationalgalerie Before 1918 at the Alte Nationalgalerie
Oct. 11 — Jan. 26
It’s almost absurd to complain about too many famous masterpieces, but anyone who’s been to a blockbuster exhibition is familiar with the fatigue that sets in — it’s hard, if not impossible, to bask in recognizable painting after painting after painting without losing your focus. That’s why exhibitions like this survey of women artists in the permanent collection of Berlin’s Alte Nationalgalerie will be such a treat — there’s depth and variation, in style, content, and talent. There are star artists such as Käthe Kollwitz, along with a host of obscure albeit compelling work; in its totality, it’s as much an historical snapshot as it is an art exhibition.
Alte Nationalgalerie, Berlin, Germany
• Nam June Paik: The Future is Now at the Tate Modern
Oct. 17 — Feb. 9, 2020
An exhibition devoted to video art might not have the popular appeal of, say, a Michelangelo blockbuster, but Nam June Paik, the so-called father of the medium, knew how to put on a show. His art isn’t just videos on screens. It’s often sculptures — weird, confusing, occasionally very large sculptures, including a room-sized installation — in which videos and televisions feature heavily. Much of Mr. Paik’s art is half a century old, but visitors will discover that almost all of it feels surprisingly current.
The Tate Modern, London, UK
• Sofonisba Anguissola and Lavinia Fontana: Two Models of the Female Artist at the Prado
Oct. 22 — Feb. 2, 2020
It’s always nice when a startling reappraisal of gender, politics, and power intersects with very good art. Happily, the Prado is set to put on just such a show. Sofonisba Anguissola (1535- 1625) and Lavinia Fontana (1552-1614) were both genuinely famous female artists who found royal patronage across Europe. Ms. Anguissola, an aristocratic Italian, rose to fame at the Spanish court in Madrid. Ms. Fontana, also Italian, though markedly lower-born, found fame in Rome. Both are relatively obscure today, but the Prado’s exhibition, which includes more than 60 works, should rectify that quite quickly.
Museo del Prado, Madrid, Spain
— Bloomberg

PSEi’s highs and lows in 2018

PSEi’s highs and lows in 2018

Gov’t debt yields end flat

YIELDS ON government securities (GS) traded on the secondary market continued to move sideways as traders awaited the release of government’s planned borrowing program for the first quarter.
On average, GS yields inched up by 1.48 basis points (bp) week on week, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Dec. 28 published on the Philippine Dealing System’s website.
“The yields were flat last week as market participants were not expecting any market moving news/catalyst,” the First Metro Asset Management, Inc. (FAMI) said.
Traders also remained on the sidelines ahead of the release of the Bureau of the Treasury’s (BTr) borrowing program for the first quarter of 2019.
“So instead of placing/investing the money before the year ends, we expect the market participants to wait for this planned borrowing. There’s even a P70B bonds that will mature in February 2019 so expect more borrowings to refinance it,” said FAMI.
The government wants to shore up funds amounting to P360 billion during the first three months of 2019 — P240 billion via Treasury bills (T-bills) and P120 billion from the sale of Treasury bonds (T-bonds). For the whole year, the state plans to borrow a total of P1.89 trillion to fund its spending program.
“There were trades in the three-, five- and the 10-year papers but not that much to move the yields lower, as the market still expect two more rate hikes for the first half of 2019,” FAMI said.
At the secondary market, yields on the 91-day and 182-day T-bills fell 3.4 bps and 2.2 bps to end at 5.78% and 6.51%, respectively. Meanwhile, the 364-day paper’s rate rose 0.60 bp to 6.78%.
Bonds at the belly of the curve climbed except for the seven-year papers, which saw its yield drop 0.20 bp to 7.06%. The two-year and three-year T-bonds yielded 6.89% and 6.98%, up 4.80 bps and 3.6 bps, respectively. The four-year and five-year papers were quoted at 7.02% and 7.04%, respectively, also 2.1 bps and 0.80 bp higher than week-ago levels.
Longer-termed notes rose, with the 10-year and 20-year bonds ending at 7.07% and 7.49%, up 0.60 bp and 4.3 bps, respectively.
For this week’s trading, Jonathan L. Ravelas, chief market strategist at the BDO Unibank, Inc. said: “The prospect of steady to lower inflation should provide some potential to push yields down.”
He said with the trend in inflation tied up with the Monetary Board’s (MB) decision to keep rates unchanged, “probably next auction [yields will move] sideways to down.”
At its last meeting for 2018, the MB decided to halt its streak of rate hikes as it saw inflation moderating. Key policy rates were kept at a range of 4.25-5.25% as inflation eased to 6% in November from a nine-year high of 6.7% recorded in September and October. — Carmina Angelica V. Olano

How PSEi member stocks performed — December 28, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, December 28, 2018.

 
Philippine Stock Exchange’s most active stocks by value turnover — December 21-28, 2018

Another new year

By Tony Samson
ECONOMISTS refer to the optimism that a new year brings as the “January Effect,” specifically relevant to the stock market which is traditionally given a boost in price and volumes on the first month of the new year. It is considered temporary and more behavioral than rational in its bullish mood.
There was already the profit taking or value enhancing necessary for the accountants’ closing of the books for the just ended calendar year aimed to make the numbers look better (or at least not much worse) than the previous period. Then are declared the new year’s challenges to meet, the fresh fields to plow, and new trends to test. Most of them are seen as opportunities for growth. The cash from profit taking on the last trading day is again ready to be redeployed in January 2019. (There, you have to get used to writing that new number.)
Even if January is not really a new beginning but just a continuation of time, the artificial divide of using a new calendar seems to be more than symbolic. In the digital format of your phone, it’s just another new day.
Many issues that have been deferred in the last month now need to be taken up and resolved — after the holiday break. So the feeling of a new start is fleeting and more psychological than real. Old problems linger and the new month does not really start from zero but some other big number, sometimes negative, that has been staring a CEO in the face. The new year is not a new document that offers the blank page, waiting to be written on with a fresh start.
It is not just markets that are affected by the January Effect. Social relationships too offer the illusion that the new year is a fresh starting line, even when unresolved issues of fiscal irresponsibility, thoughtlessness, forgotten birthdays, and unnecessary debates continue. That’s why couples sometimes make joint New Year’s resolutions — I will show my appreciation for your culinary skills with yelps of unmitigated pleasure, like a scene from the movie When Harry Met Sally. (I’ll have what she’s eating.)
Since there is no quarterly review of these yearly promises like the budget process in a corporation, commitments are sometimes forgotten — the pasta is a bit soggy and the carbonara sauce again too salty. There is no variance analysis acceptable to justify why something has fallen short of expectations.
The January Effect provides a sense of rebooting life. It provides a surge of energy, perhaps even a feeling of hopefulness that maybe this new year, contrary to the historical evidence of other years, will somehow be an improvement on the past. The fireworks on New Year’s Eve are probably meant to build a noisy firewall between one year and the next, exorcising the negatives of the past year.
You now seldom see the old cliche representation of the old man exiting the scene wearing the sash of the old year (how did he get so ancient-looking in 365 days?) and the baby, of course, with a horn to toot, walking forth bravely as the personification of optimism of the new year. Maybe, this metaphor of the old and the new so ubiquitous in the old giveaway wall calendars beloved by bakeries and department stores has been rendered obsolete. Even the desk diaries of insurance companies and banks that replaced them are themselves being phased out by golf umbrellas or simple greetings sent by email. Appointments are now all recorded on the phone.
January is named after the Roman deity Janus with his two faces joined back-to-back, one looking backwards and the other one forward. This original symbol of the first month alludes to its significance as a time to reflect on the past as well as plan for the future. Still, there persists the illusion of a fresh beginning, especially in taking care, when writing out checks to pay for all that shopping and exuberant celebrating the month before, to jot down the correct year.
The new year is truly a continuation of life with new twists and turns, much like a teleserye, with happy endings only for some characters, as new ones are added and removed. In real life, however, there are no commercial breaks, and not that much drama.
 
A.R. Samson is chairman and CEO, TOUCH xda.
ar.samson@yahoo.com

The joys of Christmas and New Year in the Philippines

If you are thinking of retirement and are wondering where to spend the remaining years of your life, try spending Christmas and New Year in the Philippines. That should help you make up your mind.
After 32 years, my wife and I spent Christmas in Manila, and as I write this, we are looking forward to greeting the New Year in Iloilo City.
We have a large clan and every Dec. 24 was when the entire brood — brothers, sisters, nephews, nieces and grandkids — would gather at our home in Parañaque. Christmas Day was an elder brother’s turn to host the family reunion at his home in Quezon City. New Year would be greeted at a sister’s house in Sampaloc. And another elder brother in Quezon City would host the commemoration of the Feast of the Three Kings to complete the annual round of family gatherings.
But then, in 1986, we sent our four children to study in the US and my wife had to join them to take care of them. I could not pull up my roots from Manila because of my job with an ad agency. However, it became mandatory for me to spend Christmas and New Year with them.
We spent our first Christmas away from the Philippines in Cambridge, a small town on Maryland’s eastern shore. The plaintive lyrics “Oh, little town of Bethlehem, how still we see thee lie,” must have been written with Cambridge in mind. My family and I were huddled in a snow-bound chalet, wondering if we could survive the cold or burn down the house with the flames dancing in the fireplace.
Mercifully, an elder sister living nearby offered the warmth of her family and the joys of her festive table. But we sorely missed the loud laughter of soused relatives, the shrieks of children, and the cacophony of young carolers wailing their version of “Jingle Bells,” “Singko lang po, singko lang po, singko lang po ang ibigay niyo… ayos na ang buto-buto.”
If Christmas was rather laid back, our first New Year’s Eve in America might well have inspired the lyrics, “Silent night, holy night…” There were no fireworks, no empty cans being dragged by cars across neighborhood streets, no noise-makers wielded by noisier revelers and, worst of all, no children around to shout the old year out. They were all partying with friends.
As my wife and I sat in front of the TV, watching the ball in New York’s Times Square plunge down, we asked ourselves what we were doing in a strange land away from family and friends on the most festive night of the year.
I eventually had to give up my ad agency job to join my wife and kids in the US and we relocated to the San Francisco Bay Area. That move mitigated the absence of relatives during the Christmas season, as new friends filled our lives.
California accounts for half of the over 4 million Filipinos in America, so one won’t miss the Tagalog chatter wherever you turn, and the Pinoy supermarkets, like the Seafood City chain, provide a balm for homesickness, somewhat.
Over the years, as my family grew and as we got used to the way things are done in the US, we learned to enjoy Christmas and the New Year the way Americans do — in fact, it came to a point where we no longer missed Pasko and Bagong Taon in the Philippines.
But this year found my wife and I joining some of our children and grandchildren for Christmas in Manila and for the first time in 32 years, we hosted the traditional clan reunion at our home in Parañaque.
We also found ourselves flying to Iloilo City at the invitation of the siblings of a daughter-in-law, which is why we will greet the New Year in Ilonggo country.
We look forward to a great time in Iloilo. Our hosts are excellent singers who have the Ilonggo talent for hospitality. For the past three days, we have been gorging ourselves on oysters and assorted seafood — and the cost has not been much more than a nice meal in the US. But our Iloilo meals have been much, much more than nice. The meals have been overwhelmingly delicious. And that’s not even counting the lechon de leche on New Year’s Eve!
My brothers and sisters who used to host the annual Christmas and New Year reunions in their homes in Manila have all passed on, but their absence was more than made up for by their children, grandchildren, and great-grandchildren who crowded into our home in Parañaque and on Christmas Day in Quezon City. The loud laughter of beer-drenched nephews, the shrieks of children tugging at our hands to kiss them, the struggle for the karaoke microphone as old standards and holiday songs were mutilated by lovably out-of-tune singers — and the food, THE FOOD, and the drinks, THE DRINKS that never seemed to run out, and the warmth and the love that filled the air — these were the things we lost in 32 years overseas, and which we, eventually, got used to being without.
Now, we will begin to miss all of that again.
At a few months short of 80 years old, my wife and I are seriously considering spending the remaining years of our lives in the Philippines. Of course, our children and grandchildren will continue to keep us attached to America. Besides, the US has been good to all of us. But the lure of the Motherland is too strong to resist.
This lure is especially strong for those who face the prospect of being consigned to an old folks’ home or being trapped on a couch, with only a TV set for company because one’s driver’s license can’t be renewed and the rest of the household are at work or in school.
Without a doubt, the Philippines is unmatched as a place to spend your final years in. Senior citizens are spoiled to the point of embarrassment (everyone offers to help you up a flight of stairs or across a ditch). You enjoy a 20% discount at restaurants when you flash your senior citizen card. Your meager US social security pension can cover the cost of a driver, a nurse, and even a personal alalay. And the pretty young ladies (of which the Philippines has a surplus) still like to flash their flirtatious smiles at you (while calling you Lolo or Tatang).
Indeed, for those like us who wonder whether we should call the Philippines home once again, there’s nothing like being a senior citizen. And if you really want to conclude your sojourn on this earth with a smile, try spending Pasko and Bagong Taon in the land of your birth.
A few years ago, during the tenure of Imelda Nicolas as chairman of the Commission on Filipinos Overseas, I was asked to write a piece on behalf of overseas Pinoys answering the call of the Motherland. The last lines of that piece still echo in my mind:
“And in the winter of our lives, when mournful bells will ring,
The Philippines will always be our summer and our spring.”
 
Greg B. Macabenta is an advertising and communications man shuttling between San Francisco and Manila and providing unique insights on issues from both perspectives.
gregmacabenta@hotmail.com

Provinces and New Year wishes for them

Last month, I traveled to several provinces. Below are my observations and my wishes for them.
1. Palawan. I went there with former dormmates from Narra dorm in the University of the Philippines Diliman in the 1980s upon the invitation of fellow Narrehan Peter “Pidro” Sing, founder of Palaweno Savers Club. Puerto Princesa has a new and bigger airport but no passengers tube to the planes. Big malls and hotels are sprouting. Roads are improving and widening but some are still bumpy. The main attraction is still the Puerto-Princesa Subterranean River National Park, which attracts an average of 1,000 people a day. When school is out, the park attracts up to 1,600 visitors a day. Local oil prices are about P7/liter more expensive than Manila prices, bad for the locals.
2. Oriental Mindoro. I drove again from Makati to Iloilo during the holidays via roll-on, roll-off (RoRo) vessels. Calapan Port has somehow expanded but the road from the port to the city proper — and bypass road — remains narrow with so many vehicles passing. The road from Calapan to Roxas is good, as is the road to Bulalacao. Road widening continues but one cannot sustain fast driving as there are too many tricycles and motorcycles. The Port of Roxas is wide and good but it becomes very congested and “small” during the holidays with so many vehicles and people going to Caticlan Port and Panay island.
3. Aklan. Caticlan Port is good and wide but like the Calapan and Roxas Ports, it becomes congested during the season. It is the gateway to Boracay, that’s why. The provincial road network is generally good and smooth. I did not notice even a single road cut.
4. Capiz. The first time I took the RoRo bus from Cubao to Iloilo was about two decades ago. The roads in Capiz were notable because they were ugly and bumpy. Now the roads have improved and widened but several parts remain ugly and bumpy. I wonder what is wrong with the provincial Department of Public Works and Highways (DPWH) and provincial government — this seems to be a forever problem.
5. Iloilo. Roads improve upon reaching this province except for a few short road repairs. Iloilo City is booming especially the old airport area that has been developed into a modern central business district (CBD) by Megaworld and other big Manila-based developers. Buildings and hotels there are new and modern. My wife’s parents live in the city — that’s why my family visits Iloilo yearly.
6. Guimaras. Famous for many white beach resorts and sweet mangoes, Guimaras is enjoying a very visible economic and business expansion. A boat leaves from Jordan port every five minutes carrying, I think, 40-50 passengers. The fare is only P15 per head for a 15-minute trip. The provincial road network is generally good. Many portions are now four lanes, preparing for the onslaught of more cars and motorcycles.
7. Negros Occidental. My province: I was born in Cadiz City, attended public elementary and high school there. The new, bigger provincial airport is now in Silay City while the old airport in Bacolod City remains undeveloped. There is a new, bigger seaport terminal for fast crafts coming from Iloilo and Manila. Many big malls, BPO centers are now in Bacolod. The provincial road network is regularly maintained and road widening continues.
Provinces
COMMON ISSUES IN SEVEN (AND MANY OTHER) PROVINCES AND MY NEW YEAR WISHES (NYW) FOR THEM:
1. Insufficient power supply while electricity demand keeps rising, resulting in occasional brownouts.
My NYW: That new power plants from cheaper and stable sources (coal, gas, big hydro) be constructed soon in these islands.
2. Many tricycles and motorcycles in highways leading to slower travel.
My NYW: That new tollways be constructed, especially from Calapan to Roxas where vehicle traffic is rapidly rising due to the large numbers of people driving from Manila to Panay (sometimes even up to Negros Occidental and Oriental).
3. RoRo ports that become very congested during holidays and long weekends.
My NYW: That more road reclamation and port expansion be done, and newer and bigger boats be dispatched.
4. Although many of these provinces are big, they are not developing fast enough as our decentralization scheme is not effectively working. Meanwhile, the proposed shift to federalism will, in my opinion, only expand bureaucracies.
My NYW: That someday, the big islands and provinces can become new, separate countries.
(Also, an aside regarding stories of “worsening plastic pollution” in seas — whether worldwide or nationwide — I saw the seaports of Batangas, Calapan, Roxas, Bulalacao, Caticlan, Iloilo, Guimaras, and Bacolod: I saw some of the beaches in Palawan, Guimaras, Iloilo, and Negros Occidental. To me, these stories are alarmist and fake news as I did not see a big volume of plastics in the sea even in big cities like Iloilo and Bacolod.)
 
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.
minimalgovernment@gmail.com

Beijing dithers as the economy declines

By Christopher Balding
Bloomberg
CHINA’s annual economic policy summit has come and gone, leaving a wet lump of coal in place of stimulus hopes. Beijing will have to do better if it wants to steer the country to another year of robust growth.
The economy started slowing in September, and has only worsened since then. Consumption tax revenue was up 16.3% year to date as of that month. In the following two months, it collapsed, recording declines of 62% and 71% from a year earlier. Value-added tax revenue has also turned negative in the past three months. All this is a good sign that the economy’s deterioration is more rapid and pronounced than the government has acknowledged.
Against this backdrop, the Central Economic Work Conference convened earlier this month. Beijing made news by not making any news at all. No new stimulus packages were announced. Monetary policy will be kept stable and prudent, Xinhua reported after the meeting ended. Confusion surrounds real-estate policies after officials announced some cities would be allowed to ease sales restrictions, only to backtrack a day later, emphasizing Beijing’s intention to control prices.
So what are the challenges facing China in 2019 and how do authorities plan on meeting them?
Beijing has done an admirable job of starting the long-promised deleveraging process. The economic slowdown reflects a sharp tightening of credit that began in November 2017, the month after President Xi Jinping’s reappointment for a second term as leader. It took a six-to-nine-month pass-through period for that squeeze to be felt.
However, 2019 will be where the reality of economic pain meets calls for more credit. Beijing is trying to negotiate an end to the US-China trade war as internal opposition to the conflict gains momentum. The dispute has sapped confidence within China and is pushing the government to consider painful market-opening concessions.
The trade negotiations have probably delayed Beijing’s response to the economic downturn, as officials wait to see what concessions they may have to make (the US and other countries are pushing for verifiable changes to Chinese protectionism and overseas investment). With reports of a weak job market and falling asset prices, their indecision becomes more problematic each day.
Unfortunately, authorities have far fewer tools at their disposal this time. The government wants to avoid being seen as flooding the market with credit to prop up growth as it did in 2009-2011 and 2016-2017. However, monetary easing also raises problems as yields are already near parity with those in the US, raising outflow pressures on the yuan. Furthermore, there is evidence potential tax and interest rate cuts will be less stimulative than in the past as more of the increased income is saved.
Finally, Chinese banks are under enormous pressure. Bank of China Ltd. has announced plans to sell as much as 40 billion yuan ($5.8 billion) of perpetual bonds; other banks are considering raising 100 billion yuan each. Only in November, the central bank’s financial stability report declared Chinese bank capital “abundant.” With new loans outpacing new deposits by 13% in 2018, how the government recapitalizes a strained banking sector will be a major theme in the coming year. This matters because authorities will struggle to carry out fiscal stimulus as long as banks are capital-constrained.
Stimulus would provide some short-term relief, though at the cost of setting back a deleveraging process that’s essential to the Chinese economy’s long-term health.
Every year the challenges for Beijing get bigger, yet the responses only delay the reckoning rather than addressing the problem. Never underestimate China’s ability to sustain growth, but don’t expect solutions. Increasingly expensive palliatives look the more likely route in 2019.
 
Christopher Balding is a former associate professor of business and economics at the HSBC Business School in Shenzhen and author of Sovereign Wealth Funds: The New Intersection of Money and Power.

Stocks may climb ahead of inflation, GDP data

LOCAL EQUITIES are seen to firm up in the first trading day of 2019 as investors await the release of data on December inflation as well as the country’s economic growth.
The bellwether Philippine Stock Exchange index (PSEi) closed the previous year on a negative note, losing 0.22% to 7,466.02, for a total weekly loss of 0.18%. The market was down by 12.8% from its finish of 8,558.42 in 2017.
“We go into 2019 with a lot of optimism as investors are eager to see the market’s recovery become a reality… The next few weeks are going to be crucial for the PSE and although the main index has been trading sideways since the beginning of December, we may see a huge move soon based on the technical,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a weekly market note.
“Several economic numbers like December inflation and 4Q GDP (gross domestic product) are going to be announced in the following weeks which may help fuel the rally.”
The Philippine Statistics Authority will be releasing December inflation data on Friday, Jan. 4. Projections from the Bangko Sentral ng Pilipinas Department of Economic Research placed the figure within a range of 5.2-6%, which could be the country’s slowest since July.
Meanwhile, the government will also release fourth-quarter GDP growth data on Jan. 7, alongside the balance of trade report for November. Analysts from First Metro Investment Corp. and the University of Asia and the Pacific expect the economy to have grown by 6.6% in the fourth quarter.
“Economic fundamentals remain intact, even inflation has started to taper off with the continuous drop in oil prices. We may see more and more investors gain confidence and get back into this market. It may as well bring back foreign money which will be a big factor to the market’s rally,” Eagle Equities’ Mr. Mangun said.
In contrast to Mr. Mangun’s more optimistic view for the first week of January, online brokerage 2TradeAsia.com sees the market experiencing some volatility.
“Volatile sessions might greet the initial week of 2019, with attention set on the macro economic picture that would help stimulate growth. While there are challenges to hurdle, 2019’s financial resolution will revolve on return optimization by taking on calculated risks,” 2TradeAsia.com said in a weekly market note.
The online brokerage also added that the trade war between the United States and China remain in the minds of the investing public, as well as the implementation of the second round of excise taxes on fuel, petroleum, and their effects on electricity rates and water tariffs.
“Participants will also guard how legislators will progress in the sequel to the tax reform package (specifically balancing reduction in trade incentives vs. cut in corporate income tax).”
2TradeAsia.com placed the PSEi’s immediate support at 7,400, while resistance could be from 7,500 to 7,550. — Arra B. Francia

Peso may weaken further versus dollar this year as imports surge

peso bills
THE PESO may continue to decline this year as imports are likely to surge.

By Karl Angelo N. Vidal, Reporter
THE PESO is seen to weaken further against the dollar this year as the surge of capital goods to support the infrastructure push of the government is expected to widen the trade deficit.
In a text message, UnionBank of the Philippines chief economist Ruben Carlo O. Asuncion said the local unit could end 2019 at the P54.50-per-dollar level, as the country’s external trade gap continues to widen.
“I expect imports to robustly grow and exports continue to slowly recover,” Mr. Asuncion said.
According to latest data, the country’s trade deficit — or the gap between its imports and exports — hit a record high of $4.212 billion in October, wider than the $2.585 billion booked in the same period last year.
In that month, the country’s imports climbed 21.4% year on year, outpacing a 0.3% growth in exports.
Mr. Asuncion added that the country’s import bill will continue to grow “due to continued domestic expansion” through the Build Build Build infrastructure program of the Duterte administration.
The government is embarking on an P8-trillion infrastructure spending program until 2022 in an effort to boost economic growth to 7-8% until then.
Despite recording record highs recently, Rizal Commercial Banking Corp. economist Michael L. Ricafort said the country’s trade deficit can narrow as global oil prices dropped, affecting the strength of the local unit.
“There is some possibility that the peso could partly recover in 2019…after global crude oil prices sharply declined by about 40% from the four-year highs posted on Oct. 4, 2018 and lingered among the lowest levels in 15-16 months,” Mr. Ricafort said in a separate text message.
“This could reduce the country’s import bill and help narrow the trade deficit from record levels.”
Meanwhile, Mr. Asuncion added that the peso could strengthen towards the latter half of the year “like the way it has these past two years” as remittance flows will drive the year-end strengthening.
The peso ended 2018 at P52.58 versus the dollar, declining sharply from its 2017 close of P49.93 against the dollar. However, the currency’s yearend finish was still better than the P54.325-per-dollar finish recorded last Oct. 4, which was the peso’s weakest in nearly 13 years.
The peso has since recovered from being the worst-performing currency in the region and is now the third-worst next to the Indian rupee and the Indonesian ringgit.
On Monday, most Asian currencies were set to end a bumpy year on a positive note, with the Indonesian rupiah leading gains as investors took heart from signs of progress in Sino-US trade talks.

Risk-averse banks continue to shun agri lending

By Melissa Luz T. Lopez
Senior Reporter
BANKS REMAIN reluctant to extend credit to the agriculture sector in the third quarter of 2018, the central bank said, lending out a little over half the legal minimum and preferring to incur penalties rather than take on the risk of lending to farmers.
The Bangko Sentral ng Pilipinas (BSP) said total credit extended to the agriculture sector amounted to P644.64 billion during the quarter, against the P1.173 trillion they were required to lend under a 2010 law.
The total was, however, up 30% from a year earlier.
Republic Act 10000 or the Agri-Agra Law, requires banks to set aside at least 25% of their loan portfolio to the sector, with 10% going to agrarian reform beneficiaries and 15% to farmers and fisherfolk.
Compliance for the “agra” component of the law remains dismal with the banking industry extending just P46.372 billion, barely 1% of the industry’s loanable funds, compared with the P469.15 billion which banks should have lent out. This, total, however, was substantially higher than the year-earlier P28.486 billion.
Big banks set aside only 0.79% of their portfolios for agrarian reform, while thrift lenders allocated 1.2%. Only rural and cooperative banks met the standard with 11.79% of their loanable funds going to the agra segments.
Loans to farmers and fisherfolk rose 28% to P598.266 billion but accounted for just 12.75% of banks’ total loan portfolios.
Big banks raised the share of farm loans to 12.95% or P563.687 billion during the quarter, but were still not compliant with the 15% minimum required by law. Thrift banks lent 6.19% or P16.141 billion.
Small banks continued to lend about a quarter of their portfolios to the farming sector, extending P18.439 billion during the quarter or 24.19%.
The first nine months of 2018 saw interest rates rise following a series of tightening moves from the BSP, which were meant to rein in price expectations at a time of rising inflation. This also pushed market borrowing rates higher.
Banks have several options to meet the Agri-Agra lending quotas. Direct compliance involves extending credit lines to qualified borrowers and the purchase of eligible loans from other financial firms.
Meanwhile, alternative methods include investing in duly-declared eligible debt instruments, investing in the special deposit accounts of BSP-accredited rural lenders, wholesale lending to rural banks, granting rediscount loans to other banks covering farm loan credits, and the extension of loans for public infrastructure for the benefit of the farming sector.

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