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Oil drops on inventories gain with Trump trade war back in focus

Oil extended losses below $69 a barrel after a surprise gain in American crude inventories spooked investors who are already contending with the rising trade dispute between the US and China.
Futures in New York fell as much as 0.8 percent after a 2% decline Tuesday. The American Petroleum Institute was said to report US stockpiles rose 5.59 million barrels last week. Most analysts surveyed by Bloomberg forecast government data due Wednesday will show an inventory loss. Meanwhile, the US will propose more than doubling its planned tariffs on $200 billion in Chinese imports, according to three people familiar with the internal deliberations.
Oil slumped more than 7% in July, the biggest monthly loss in two years, on concern that trade tensions between the world’s two largest economies will imperil growth and sap global energy demand. Still, uncertainties remain whether the latest threats from U.S. President Donald Trump will ratchet up pressure on Beijing to return to the negotiating table or further increase conflict that could lead to a full-blown trade war.
“The API data is moving oil prices as we don’t have a lot of other major news” that would directly impact crude markets, Mikiko Tate, a senior analyst at Sumitomo Corporation Global Research Co., said by phone from Tokyo. Meanwhile, “the escalation of a trade war between the U.S. and China would reduce crude demand in the long term” and that concern could weigh on oil prices, Tate said.
West Texas Intermediate crude for September delivery fell as much as 54 cents to $68.22 a barrel on the New York Mercantile Exchange, and traded at $68.40 at 12:46 p.m. in Tokyo. The contract dropped $1.37 to $68.76 on Tuesday. Total volume traded was about 47 percent below the 100-day average.
Brent for October settlement fell as much as 48 cents, or 0.7%, to $73.73 a barrel on the London-based ICE Futures Europe exchange. The September contract declined 72 cents to expire at $74.25 on Tuesday. The global benchmark traded at a $6.59 premium to October WTI.
Futures for September delivery lost 1.9% to 503.6 yuan a barrel on the Shanghai International Energy Exchange. The contract rose 0.7% on Tuesday.
The US imposed 25% tariffs on $34 billion of Chinese products in early July, and the review period on another $16 billion of imports ends Wednesday. Trump had threatened an additional $200 billion with levies of 10 percent, a level the administration may raise to 25% in a Federal Register notice in coming days, one of the people said.
At the same time, representatives of US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are having private conversations as they look for ways to re-engage in negotiations in a bid to avert a full-fledged trade war, two people familiar with the effort said. Talks to resolve the dispute had been stalled for weeks, with both sides refusing to budge.
American crude stockpiles probably declined by 3 million barrels last week, according to the median estimate of analysts surveyed by Bloomberg, with all but one expecting a drop. If confirmed by the Energy Information Administration’s data later in the day, it would be the third decline in four weeks. — Bloomberg

Infrastructure spending, capital outlays top target in first half

Government spending on infrastructure and other capital outlays breached its first-semester target due to roadworks, the Budget department said.
Budget Secretary Benjamin E. Diokno presented the government’s disbursement performance in the first half of the year in a media briefing on Tuesday, August 1, with infrastructure and other capital outlays reaching P352.7 billion, 41.6% higher than the P249.1 billion recorded in the same period in 2017.
It was 4.3% above the P338.3-billion target set for that period.
“This is attributed to infrastructure projects of various agencies, especially the road infrastructure projects of the of the Department of Public Works and Highways (DPWH),” Mr. Diokno said.
In June alone, infrastructure and other capital outlays surged 23.8% to P71.9 billion from P51.9 billion in June 2017.
It also grew 23.8% from May’s P58.1 billion.
“Specific to June 2018, these projects include the construction, widening, upgrading and preventive maintenance of road networks under the DPWH, the repair and rehabilitation of classrooms and school facilities under the Department of Education and State Universities and Colleges, acquisition of hospital and medical equipment of the Department of Health, and rail transport projects and purchase of airport security equipment of the Department of Transportation,” said the Budget chief. — Elijah Joseph C. Tubayan

Iceland wants foreigners to stop buying its land

A little over a century ago, a young woman named Sigridur Tomasdottir threatened to throw herself into the icy gorge of Iceland’s iconic Gullfoss waterfall in a bid to stop English businessmen from turning it into a hydroelectric dam.
In the end, the proto eco-warrior was able to hold on to her life — the leasing contract was canceled, allegedly because the money failed to turn up on time — and the Golden Falls are today one of the country’s biggest tourist attractions.
Iceland’s first environmentalist prime minister, Katrin Jakobsdottir, has now picked up Tomasdottir’s baton by railing against foreign investors who have been purchasing vast swathes of the north Atlantic island’s pristine wilderness.
The 42-year-old prime minister, who heads the Left-Green Movement, wants “further restrictions” on land ownership, but says she will first wait for studies currently being carried out at four different ministries. Their conclusions are expected by the end of the summer.
“First and foremost I want to defend the nation’s sovereignty,” Jakobsdottir said in a telephone interview in Reykjavik. “It matters to us that we can decide how the land is developed and utilized.”
As a member of the European Economic Area (a free trade zone linked with the European Union), the government has limited space for maneuver. Jakobsdottir says she’s seeking “restrictions based on the size and number” of plots owned. Iceland can already bloc purchases by non-Europeans, as it did in 2012, when it prevented Chinese billionaire Huang Nubo from snapping up a 300-square kilometer piece of land in the north.
Foreign Interest
Her government is responding to growing complaints from farmers, many of whom resent the superior purchasing power of foreigner buyers and also question their motives. Iceland only achieved full independence from Denmark in 1944, and patriotic feelings continue to run high. Jakobsdottir’s ruling coalition is reliant on the support of the conservative Independence Party and the Progressives, the party of choice for farmers.
British billionaire Sir Jim Ratcliffe and his associates own a total of 39 plots rich in fishing rivers, according to Icelandic newspaper Morgunbladid, while Sweden’s John Harald Orneberg and Switzerland’s Rudolf Lamprecht are two other fishing enthusiasts with deep pockets who have bought land on the north Atlantic island, according to local media reports.
Ratcliffe has said his main interest is in the local salmon population and that any tightening of the rules may prompt him to reconsider his future plans. “No one wants to be operating against the will of the authorities in a country,” said his spokesman in Iceland, Gisli Asgeirsson.
One of Ratcliffe’s Icelandic neighbors, a farmer named Aevar Rafn Marinosson, remains unconvinced.
“They say they want to protect the salmon, but that’s not a very believable explanation,” he said. “You don‘t need to own land to protect the salmon.”
Though much of it is inhabitable, Iceland’s land is still cheap (prices range from around $500,000 to $5 million, depending on their size and the kind of resources they offer, and can get way higher if the plot hosts a famous tourist attraction). Aevar Dungal, a real estate agent based in the East Fjords, says that while 70 percent of his clients are Icelandic, foreign investors are snapping up the biggest and most expensive plots.
Jakobsdottir insists this is not about “banning foreigners,” but rather about “the concentration of ownership” (in Scotland, for example, less than 500 people reportedly own half of all private land) and about ensuring the land is put to its best use.
“I think general regulations that apply to both foreigners and Icelanders are likely to be more successful and more viable,” she said.
Sigurjon Sighvatsson, an Icelandic Hollywood producer who has been buying land for the past 20 years, says he doesn’t want to see rules that discriminate against non-residents.
“I’m not afraid of foreigners, I’m more afraid of Icelanders,” he said. “Many foreigners who’ve come here were ahead of their time when it comes to protecting the land.” — Bloomberg

Huawei passes Apple in smartphone market share for the first time

Huawei Technologies Co. pulled ahead of Apple Inc. to claim the No. 2 position in global smartphone shipments in the second quarter just behind Samsung Electronics Co., solidifying the rise of Chinese competitors.
Huawei shipped 54.2 million phones in the quarter, 41% more than a year earlier, to jump ahead of the iPhone maker for the first time, according to market research firm IDC. The telecoms giant accounted for 16% of the market, compared with 21% for South Korea’s Samsung and 12% for Apple. Xiaomi Corp. and Oppo, both based in China, rounded out the top five.
Chinese smartphone makers have been gaining influence as their domestic market grows and they expand abroad. Huawei has pushed into Europe and Africa, though it’s failed to crack the massive U.S. market. Apple tends to sell iPhones at higher prices than its rivals and profits from services like iTunes, which helped it top earnings estimates for the quarter.
Globally, the smartphone market continued its slowdown with shipments slipping 1.8 percent for the quarter to 342 million units. The number of smartphones shipped in 2017 fell 0.3%, according to IDC, the first decline after years of strong growth. — Bloomberg

Philippines’ July manufacturing growth slowest in five months

Manufacturing activity in the Philippines decelerated further in July, reaching the lowest reading in five months, as demand softens, according to an IHS Markit survey conducted for Nikkei.
The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) slid for the second consecutive month to 50.9 in July, from 52.9 logged in June, which indicated a “marginal improvement in the health of the sector.”
The country moved up to the second rank among select Association of Southeast Asian Nations (ASEAN) last month, behind Vietnam’s 54.9, from placing third in June–but still above the ASEAN average of 50.4.
“The Philippines manufacturing economy expanded further at the start of the second half of 2018, but at a weaker pace. Growth in both output and new orders slowed noticeably in July accompanied by a milder accumulation in input stocks,” the report read.
The report noted that new business intakes grew at the weakest pace in survey history despite export growth reaching a 19-month high, as it pointed to supposed input shortages amid high prices of raw materials.
“Slower sales led firms to scale back their production volumes. Output growth reached a six-month low. That said, there was anecdotal evidence that input shortages disrupted production activity,” it said.
“Inflationary pressures in the sector remained marked. Higher prices for raw materials, such as diesel, plastics and rice, a weaker peso and effects of the TRAIN regulations all contributed to input cost inflation, which remained well above that seen in recent years,” it added, referring to the Tax Reform for Acceleration and Inclusion law.
“Greater cost burdens led firms to raise selling prices further in July.”
The sustained inflationary pressure in July led business expectations to fall to its lowest level to date.
The Bangko Sentral ng Pilipinas made a 5.1-5.8% inflation forecast for July, which would come from a 5.2% print in the previous month. — Elijah Joseph C. Tubayan

Max’s merges two units

Max’s Group, Inc. (MGI) is merging two of its subsidiaries in line with its goal to maximize operational synergies across its businesses.
In a disclosure to the stock exchange on Wednesday, August 1, MGI said the Securities and Exchange Commission (SEC) has approved the merger of its wholly-owned units, The Real American Doughnut Company, Inc and Fresh Healthy Juice Boosters, Inc., with the former as the surviving entity.
“The resulting transaction is aligned with on-going reorganization initiatives to maximize operational synergies across the business and does not adversely impact existing shareholders,” the company said. — Arra B. Francia

Century Pacific’s second-quarter profit up by 9%

Century Pacific Food, Inc. (CNPF) delivered a nine percent increase in earnings for the second quarter of 2018, driven by the double-digit growth in branded revenues amid higher costs of raw materials.
In a regulatory filing, the listed canned goods manufacturer said net profit reached P838.9 million in the April to June period of 2018, higher than the P767.5 million it posted in the same period a year ago. Revenues for the quarter went up by 19% to P10.2 billion
This pushed the company’s topline performance 20% higher in the first six months of 2018 to P19.3 billion. Net income accordingly rose seven percent to P1.57 billion.
“We saw branded sales surge during the first half, as we hit records in terms of volumes sold and distribution outlets reached. We believe local macroeconomic factors have favored demand for our products, which have wide appeal and reach a broad consumer base,” CNPF Chief Finance Officer Oscar Pobre said in a statement. — Arra B. Francia

Labor turnover rate grows nearly 2% in first quarter

Employment among firms grew by 1.94% in the first quarter of 2018, results of the Philippine Statistics Authority’s first nationwide Labor Turnover Survey showed.
This means that for every 1,000 persons employed, 19 people were added to the workforce on a net basis during the quarter.
The labor turnover rate is the difference between the rate of accession or hiring and the rate of separation or job termination or resignation.

AEV earnings slip 2% in first half

Aboitiz Equity Ventures, Inc. (AEV) reported a 2% drop in earnings for the first six months of 2018, dragged by net forex losses coming from ts dollar-denominated debt.
In a statement issued Wednesday, August 1, the listed conglomerate said net income fell to P10.1 billion in the first semester, lower than the P10.3 billion it generated in the same period a year ago. AEV wrote off non-recurring losses worth P467 million, against P495 million in losses a year ago. This represents “net foreign exchange losses recognized on the restatement of dollar-denominated net debt.”
“Our first half results reflect challenges that continue to test the resilience of our diversified portfolio,” AEV President and Chief Executive Officer Erramon I. Aboitiz was quoted as saying in a statement.
AEV’s power business remained to be the largest contributor to net income at 68%, followed by the banking and financial services unit at 22%, food at six percent, land at three percent, and the remaining one percent from infrastructure.
Aboitiz Power Corp.’s net income dropped six percent to P9.1 billion during the first half. In terms of its contribution to the parent, the power unit provided P7.5 billion to AEV, also lower by six percent year-on-year. — Arra B. Francia

BSP sees July inflation still past 5%

grocery imported goods
PRICES of widely used goods likely sustained their overall increase past an official full-year target in July, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.
The BSP Department of Economic Research said headline inflation likely picked up within a range of 5.1-5.8% last month, coming from a nine-year peak of 5.2% actually clocked in June.
The range compares to the 4.3-5.1% estimate given for last month, surpassing the central bank’s 2-4% target for the fourth straight month.
Inflation clocked in at 2.4% in July 2017. As of end-June, prices have increased by an average of 4.3%, versus the BSP’s 4.5% projection for the entire 2018.
The BSP unit attributed the elevated inflation expectation to a sustained increase in prices across most commodities.
“The increases in electricity rates in Meralco-serviced areas, water rate adjustments in Maynilad- and Manila Water-serviced areas, domestic gasoline and LPG prices, jeepney fares, scheduled increase of the tobacco excise tax, and prices of rice and other agricultural commodities could lead to upward price pressures during the month,” the central bank said in a statement published yesterday.
Manila Electric Co., the country’s biggest power distributor, said bills rose by P0.316 per kilowatt-hour in July due to a higher generation charge, reversing from two straight months of a rate reduction.
The Metropolitan Waterworks and Sewerage System also approved an increase in rates for water concessionaires at P0.99 per cubic meter (/cu.m.) for Manila Water Co., Inc. and P0.06/cu.m. for Maynilad Water Services, Inc., reflecting foreign currency movements.
July also saw fuel pump prices go up overall to mirror movements in world crude oil prices as well as the peso’s continuing general weakness against the dollar. Still, a rollback in domestic diesel prices may have partly offset upward pressures, the BSP said.
The government also approved last month a P1 provisional increase in jeepney fares to help drivers cope with rising fuel costs.
Another P2.50 increase in excise tax per pack of cigarettes also took effect last month, as provided under the Tax Reform for Acceleration and Inclusion law. Together with alcoholic drinks, these so-called “sin” products have seen the biggest year-on-year increase in prices.
At the same time, monsoon rains and three tropical cyclones that hit parts of the country in July wreaked damage to agriculture worth P2.579 billion, according to the National Disaster Risk Reduction and Management Council.
The Philippine Statistics Authority will report July inflation data on Tuesday next week.
If the BSP forecast were realized, it would mean a fresh high for monthly inflation, in line with expectations that price spikes will peak this quarter.
“Going forward, the BSP will continue to keep a watchful eye on the risks to the inflation outlook and will take necessary action to help ensure that inflation expectations remain firmly anchored to the target,” the BSP said.
BSP Governor Nestor A. Espenilla, Jr. has assured that the central bank has kept a firm hand on prices, and is considering “strong follow-through” to two 25-basis-point rate hikes announced in May and June that were designed to help rein in inflation pressures.
Yesterday, Mr. Espenilla assured lawmakers at the House of Representatives that the BSP “stands ready to take decisive monetary policy responses” to keep prices stable. — Melissa Luz T. Lopez

Increase in money supply slows

MONEY SUPPLY continued to grow in June — although at a slower pace — amid a tempered increase in bank lending, the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.
M3, or the broadest measure of money in an economy, reached P11.1 trillion in June as it grew by 11.7%, slowing from the 14.3% increase clocked in May. This is the slowest pace seen since an 11.5% rise recorded in May 2017.
Month on month, money supply actually declined by 0.1%.
Funds from local sources rose by 16% in June, slower than the 16.8% pickup in May as growth of bank loans eased, the central bank said in a statement.
Growth of net claims on the government eased to 12.5% from 17.3% the previous month, which came even after the government borrowed more money. The Bureau of the Treasury raised P121.765 billion from three-year retail bonds in June, on top of its weekly float of debt notes.
Net foreign assets (NFA) in peso terms went up by 2.4%, easing from May’s 5.4% pickup following a decline in dollar reserves maintained by the BSP.
Gross international reserves slipped to $77.525 billion in June from $79.202 billion the preceding month.
Despite the softer increase, the BSP said overall money supply growth “remains in line” with inflation and economic activity, as it continued to support key production sectors.
Credit growth likewise eased to 19.1% in June from the downward-revised 19.3% growth in May, the central bank said, logging the slowest climb since March.
Computed to include reverse repurchase agreements availed by banks, bank lending grew by 17.6% compared to 17.7% a month earlier.
Some 88.6% of the loans funded productive sectors, growing by 19.2% in June versus 19.3% the preceding month.
Lending for community, social and personal activities nearly doubled, while credit for finance and insurance increased by a third.
Other sectors that got bigger loans were wholesale and retail trade, repair of motor vehicles and motorcycles (24.9%); manufacturing (17.8%) and real estate activities (16.1%).
On the other hand, borrowings for administrative and support services fell by 52.9%, while credit for the farm sector slipped by 7.8%.
Consumer lending also softened in June as credits grew by just 17.7%, slower than the 18.4% clocked in the previous month. This came as loans for motor vehicles slowed while other borrowings declined, versus an increase in salary-based borrowings and bigger credit card debts.
The BSP raised interest rates by another 25 basis points in its June policy meeting, following an increase of the same magnitude in May as policy makers sought to rein in inflation pressures.
“The BSP will continue to ensure that the expansion in domestic credit and liquidity proceeds in line with overall economic growth while remaining consistent with the BSP’s price and financial stability objectives,” the central bank said.
Debt watcher Fitch Ratings affirmed the Philippines’ investment grade status last month, but flagged overheating risks given rapid bank lending growth, a bigger trade gap and rising inflation. — Melissa Luz T. Lopez

Economic managers say rising revenues to help keep budget gap manageable

THE DEVELOPMENT Budget Coordination Committee (DBCC) said on Tuesday that government revenues are “strong” enough to help finance a bigger deficit next year, supported by bigger collections as a result of ongoing tax reform.
The DBCC presented at a hearing of the House of Representatives Committee on Appropriations the economic assumptions of the P3.757-trillion proposed national budget for 2019 that is slightly less than the P3.767-trillion spending plan for this year.
In 2019, the government has programmed a bigger deficit equivalent to 3.2% of gross domestic product (GDP) from three percent of GDP this year in a bid to accelerate infrastructure and social spending, but will revert to three percent from 2020 to 2022.
REMAINING TAX REFORMS SUBMITTED
Finance Secretary Carlos G. Dominguez III told reporters after the hearing that his department has submitted to Congress the remaining planned tax reform packages.
The first package — Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) — slashed personal income tax rates but increased or added taxes on several items when the law took effect on Jan. 1, while the second package now being discussed in the House seeks to slash corporate income tax rates gradually to as low as 20% from 30% currently while removing redundant fiscal incentives.
Mr. Dominguez said the other packages submitted this month to Congress provide further increases in excise tax rates for tobacco and alcohol products, a bigger government share in mining earnings, a simplified, uniform property valuation scheme and rationalized capital income taxation.
“The key to fiscal stability is revenue generation,” Mr. Dominguez said during the hearing.
He noted that the revenues reached P1.41 trillion last semester, 20% more than last year and eight percent higher than target, adding that collections under Republic Act No. 10963 — or the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect on Jan. 1 — accounted for P33.7 billion of that amount.
“These are truly promising growth figures. Rest assured that our main revenue agencies are committed to maintain the momentum,” he said.
“The remaining four packages will generate additional revenue streams which will be used to invest more in our massive infrastructure build-up and human capital through expanded social amelioration programs,” said Mr. Dominguez.
He said that revenues are projected to reach P3.2 trillion in 2019, 16.2% more than the revenue target for this year and equivalent to 16.5% of GDP.
Mr. Dominguez said that the TRAIN — the first of up to five tax reform packages that slashed personal income tax rates but increased or added taxes on several items — as well as Package 1B providing for general and estate tax amnesty as well as an increase in motor vehicle users charge that is still in Congress are estimated to generate a total of P181.4 billion next year.
“Between now and 2022, with tax reforms and continuing improvement in tax administration, we are looking to improving the ratio of revenues to GDP (gross domestic product) from 15.6% in 2017 to 17.6% by 2022.”
He added that tax-to-GDP ratio is programmed to increase from 14.2% last year to 16.9% by 2022. “This will bring our tax effort to about the regional average,” said Mr. Dominguez.
“This administration is committed to long-term fiscal sustainability. Be assured we will continue to exercise fiscal responsibility and maintain sound fiscal policies to support higher and more inclusive growth. Fiscal strategy remains to be prudent, sustainable, and supportive of the government’s development objectives,” Mr. Dominguez said.
ERADICATE UNDERSPENDING
Budget Secretary Benjamin E. Diokno said that the 2019 cash-based budget — which allocates only those funds that can be used within 2019 — would “virtually eradicate underspending,” as projects intended to be implemented in the fiscal year should be paid and delivered in the same year, as opposed to the current obligation-based budget that allows agencies to enter into contracts even if implementation will actually start in succeeding years. “Past years it was slow and inefficient. In 2014 and 2015, forgone projects due to underspending amounted to P630 billion.”
Socioeconomic Planning Secretary Ernesto M. Pernia meanwhile said that the economic outlook was “upbeat” with GDP growth targeted at 7-8% annually until 2022, when President Rodrigo R. Duterte ends his six-year term, from 6.3% in 2010-2016.
Risks to this outlook include rising inflation and delays in infrastructure projects due to bottlenecks, as well as tightening in global financial markets and an escalation in trade tensions between the United States and China, among others.
Lawmakers at the hearing questioned the proposed reduction in the national budget, fearing this would mean an interruption of development projects.
“We passed the TRAIN law. Now they come us, asking why hold muna tayo sa buildings, barangay health centers. Nasaan ang (Where are the) 2019 projects?,” said House Appropriations committee chairman Rep. Karlo Alexei B. Nograles (Davao City 1st district).
“All of these could have been addressed if DBCC gave us a bigger budget.”
Mr. Diokno explained that, under the new cash-based system, the Budget department allocated funds based on agencies’ absorptive capacity. — Elijah Joseph C. Tubayan

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