Peso strengthens to one-year peak

June 21, 2019 | 6:47 pm

THE PESO strengthened further against the dollar on Friday to hit a one-year high after the central bank kept interest rates unchanged.

The local unit ended the week at P51.57 versus the greenback, 7.5 centavos stronger than the P51.645-per-dollar finish on Thursday.

This was the peso’s best showing in more than a year or since it closed at P51.48 against the dollar last Feb. 9, 2018.

The peso opened the session stronger at P51.40 against the US currency. It climbed to a high of P51.395 per dollar, while its intraday low was its closing rate.

Dollars traded surged to $1.17 billion from the $829.16 million that changed hands the previous session.

Traders said the peso surged against the dollar after the Bangko Sentral ng Pilipinas (BSP) kept interest rates unchanged at its meeting on Thursday.

“We saw heavy selling in the morning session…on the back of the MB (Monetary Board) not decreasing rates [on Thursday], which triggered heavy selling of the dollar-peso overnight,” a trader said in a phone interview.

The BSP rates unchanged on expectations of steady inflation and economic growth, and as it monitors the impact of recent monetary adjustments.

At its meeting last May 9, the MB trimmed key rates by 25 basis points. Last month, the BSP also announced the phased reduction of lenders’ reserve requirement ratios to 16% for universal and commercial banks, 6% for thrift banks and 4% for rural and cooperative banks.

“The peso strengthened today after the BSP decided to keep its policy rates steady despite some earlier market expectations of a BSP policy rate cut,” another trader said on Friday.

The first trader added that the dollar recovered in the afternoon session as market participants took profits, closing the session at the local unit’s intraday low. — K.A.N. Vidal

Stocks up as BSP retains key rates

June 21, 2019 | 6:45 pm

By Arra B. Francia, Senior Reporter

STOCKS continued to climb on Friday as investors repositioned their portfolios following the Financial Times Stock Exchange index (FTSE) rebalancing, alongside the Bangko Sentral ng Pilipinas (BSP) decision.

The bellwether Philippine Stock Exchange index (PSEi) rose 0.41% or 33.05 points to close at 8,055.47. The broader all shares index likewise advanced 0.75% or 36.43 points to 4,927.81.

“Heavier turnover as a result of the FTSE rebalancing drove investors to realign with their respective portfolios. In addition, these same investors made timely moves after all key central banks, including our own BSP released their latest policy statements,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile phone message.

The BSP decided to keep rates steady in their June policy meeting after trading hours on Thursday, citing lower inflation and optimistic domestic growth prospects. The central bank also adjusted its inflation forecast downward to 2.7% from 2.9% in 2019 and 3% from 3.1% in 2020.

Philstocks Financial, Inc. also attributed the market’s performance to results of the latest BSP policy meeting.

“Last-minute buyers erased afternoon losses, lifting the PSEi to 8,055.47 amid steady interest rates,” the company said in a market note.

Regina Capital’s Mr. Limlingan added that sentiment was further boosted by the rally in regional stocks due to the possibility of a rate cut by the US Federal Reserve next month.

The Dow Jones Industrial Average jumped 0.94% or 249.17 points to 26,753.17, while the S&P 500 index surged 0.95% or 27.2 points to 2,954.18. The Nasdaq Composite index also firmed up 0.8% or 64.02 points to 8,051.34.

Asian stocks however failed to mirror Wall Street’s positivity due to weak manufacturing data from Japan. Nikkei 225 plunged 0.95% or 204.22 points to 21,258.64, while the Hang Seng index shed 0.27% or 76.72 points to 28,473.71. In contrast, the Shanghai Composite rose 0.50% or 14.86 points to 3,001.98.

All sectoral indices closed in positive territory back home. Financials gained 0.78% or 13.62 points to 1,756.86; services went up 0.68% or 11.55 points to 1,703.95; industrial added 0.62% or 72.39 points to 11,849.99; property rallied 0.47% or 20.01 points to 4,324.56; holding firms jumped 0.33% or 24.98 points to 7,693.30, while mining and oil was up 0.18% or 12.75 points to 7,304.10.

Turnover improved to P9.36 billion after some 752.29 million issues switched hands, compared to the previous session’s P6.74 billion.

Advancers outpaced decliners, 109 to 86, while 49 names were unchanged.

Foreign investors were net sellers for the third straight session at P143.98 million, lower than Thursday’s P588.08 million.

Good Design Award Philippines highlights ‘malasakit’ as central to design excellence

June 21, 2019 | 2:57 pm

In its inaugural run of the Good Design Award Philippines, the Design Center of the Philippines is recognizing outstanding local objects, systems, places, and images addressing social problems to enrich the quality of human life.

“Design is an innovation enabler,” said Department of Trade and Industry Secretary Ramon Lopez. “At a time when we face tumultuous changes on every front—from technology to economics, the environment, and our institutions—the role of design becomes increasingly critical. Thus, our efforts will not just support our design industry; it will also push design skills to develop design-driven organizations and innovative industries.”

“The most meaningful designs, creative works, and innovations are those that solve social problems, not just design for design’s sake,” he said. “We want to promote a culture of design and innovation that can serve as higher-value services that our country can be known for.”

Good Design Award Philippines is a national design excellence recognition system that aims to promote design as a key tool in developing and providing solutions to social challenges as well as strengthen the country’s global competitiveness and increase its innovative quotient. This system is in support of AmBisyon Natin 2040 through the Philippine Development Plan 2017-2022.

Design Center Executive Director Maria Rita O. Matute says the Good Design Award Philippines adds more value to design as a driver of economic growth and innovation. It pushes for design excellence that is impact-driven, providing design solutions that address human needs and societal challenges to protect future generations and secure a more livable society for them.

“We envision Good Design Award Philippines to be one of the platforms through which Design Center nurtures the Philippines’ culture of design excellence,” Matute explains. “Aside from

Malasakit as a PH brand of design excellence

With the creative industries, particularly the design sector, steadily emerging as a driver of national competitiveness, the Philippines’ neighboring countries in the Southeast Asian region likewise invest in their respective design industries, encouraging a prolific design culture by recognizing good design across sectors.

“What the Good Design Award Philippines brings to the fore of the global design industry is the Philippines’ unique approach to design excellence,” Matute remarks. “The Philippines is a nation with innate creativity; we are malikhain by nature. But what really sets Philippine design apart is the malasakit that is embodied in our design solutions, whether it be a product, place, image or system.”

Malasakit, or closely translated in English as compassion, is the sympathetic consciousness of the distress of others and acting to alleviate it. Matute points out that the Good Design Award Philippines boldly puts this specific Philippine value as an additional pillar to the traditional parameters of good design—innovation, form, and function.

Matute cites as examples the four homegrown products and service that were recognized in Japan’s Good Design Award-ASEAN Design Selection in 2018.

Make a Difference (MAD) Travel offers social tourism tour packages that afford Aeta communities in San Felipe, Zambales sustainable living while tackling SDGs 1, 2, and 3 on No Poverty, Zero Hunger and Good Health and Well-being. Moreover, MAD Travel encourages tourists and guests to aid in their goal of planting a 3,000 hectare forest, which is in line with SDGs 13 and 15 on Climate Action and Life on Land.

Red Palm Ventures’ banana stalk wallpapers is geared towards the empowerment of women in a community in San Pablo, Laguna through livelihood, and addresses Sustainable Development Goal (SDG) 12 on Responsible Production and Consumption through the optimal use of banana stalks.

Likewise, Bambike’s Bambino balance bike reinforces SDG 12 as well through the use of the highly abundant bamboos in their production, and SDG 8 on Decent Work and Economic Growth by providing livelihood to the Bambuilders (bamboo builders) of a Gawad Kalinga Community in Victoria, Tarlac.

Malasakit as a mark of good design

The Good Design Award Philippines has its criteria the principles of good design–innovativeness, form, and functionality—plus malasakit, which will be evaluated based on design solution’s impact on the 17 SDGs listed by the United Nations. The inclusion of malasakit in the criteria carry the Philippine value beyond simply a quality of Philippine good design; it shows how local innovations can also impact on global challenges. From a community level of compassion, Philippine design sees itself committed as well to developing solutions on a much larger perspective.

Matute expounds that perceiving Philippine design in a wider picture adds to the commitment of nurturing a culture of design excellence in the country. “By understanding that design impacts a bigger cause than one’s self or one’s community, you would naturally want to come up with the best ideas and solutions because you become responsible to a larger matter.”

The Good Design Award accepts entries from Philippine-registered enterprises, designers, and creatives from both private and public sectors with fully realized and/or executed products or systems in the design disciplines of object making (furniture, furnishing, décor; fashion accessories; mobility; and material innovation); image making (packaging, and communication); place making (architecture, and interior architecture); and service/system design.

Winners will be evaluated in a two-step screening process by a jury composed of thirteen interdisciplinary and industry-respected individuals, including the private sector representatives of the Design Advisory Council (DAC).

Winning entries can be awarded the Good Design Philippines Red and Gold Awards based on the judging criteria, while the Good Design Philippines Green Award will recognize the entry with the most impact on SDGs related to environment and sustainability. The Grand Prix for Good Design Award Philippines is the Orange Award, and it will be awarded to the design that makes the greatest impact and contribution to the attainment of the United Nations SDGs.

Entries can be submitted until 15 August 2019. For more information on Good Design Award Philippines, please visit their website here.

Staging the Philippines’ masterpiece

June 21, 2019 | 11:38 am

By Joseph L. Garcia, Reporter

“EVERY country has its grand canvas… the so-called masterpiece that hangs in a hallowed hall and sums up the national identity for generations to come,” said Count Rostov, the main character in A Gentleman in Moscow by Amor Towles. If this is true, that might be Luna’s Spoliarium for this country, and your guess is as good as mine as to what that says about us as a nation. In the case of literature, we’ll have Dr. Jose Rizal’s novels, the Noli me Tangere and El Filibusterismo to look to, and that’s subject to your interpretations as well.

Speaking of interpretations, Noli me Tangere was adapted as an opera in 1957, with music and libretto by National Artists Felipe Padilla de Leon and Guillermo Tolentino. The opera had a run at the Cultural Center of the Philippines (CCP) last March, and will run again this weekend until June 23.

The opera is produced by J&S Productions Inc. Executive Producer Edwin Josue told BusinessWorld that they decided to produce the opera again “Because of the clamor for a rerun from the millennials. And also, the CCP. So it fit that it should be part of the pre-50th year (celebration) of the CCP.”

The rerun also lands near the birthday of National Hero and Noli author Jose Rizal, but Mr. Josue says that that was just a matter of the venue’s availability.

The production this weekend will see new artists joining the cast (such as a new Maria Clara, Mehco Manlangit). Mr. Josue also says that the set has been improved.

BusinessWorld sat through a dry run of the opera this week, and while the new LED screens for the Noli opera didn’t work quite as well at the beginning, leading to a delay, when they finally got it up and running, it looked like a pure work of art, especially in the scenes in Maria Clara’s bedroom, where magnified capiz windows and a giant vision of the Virgin Mary looms over her and highlights her despair.

The costumes are also brilliant, and Maria Clara’s costumes, especially the gown worn when fishing and her peignoir, are a study in Filipiniana frou-frou. Class, an important factor in the novel, was highlighted through the costumes — speaking of which, while the Dona Victorina role is mostly silent, she’s a presence onstage with several costume changes and geisha makeup approaching the grotesque.

As for the singing: Bianca Lopez’s Maria Clara displays a rich and refined coloratura soprano, but her voice achieves the fragility and depair needed for the character in the second act. Furthermore, she embodies pathos almost completely, and her sickly and weak movements makes her seem inhabited by the ghost of despair itself. The parts of Elias and Basilio are rousing, and the voice of that evening’s Basilio, played by Miguel Suarez, has a quality made for crying (or singing telenovela theme songs). I would argue as well that Bernadette Mamauag’s Sisa is the best singer in this production after Maria Clara, and her vocal acrobatics as she descends into madness need to be heard.

It’s a fine work, and puts the novel in better context.

It’s surprising to note that the rerun was prompted by a desire on the part of young people, and of this Mr. Josue says, “I think the purchasing power of the Filipino has improved. People have gone out and watched Broadway shows all over. Coming back to the Philippines, they’re more hungry now to see more Filipino things.”

An art exhibit titled Ang Sampung Pangarap ni Rizal, which features the artworks of the Pasig Art Club members and other guest artists, will be on display on media partner BroadwayWorld.com. Part of the proceeds will go to 10 different youth organizations and groups, which include Tanghalan Mandaluyong, Natasha Goulbourn Foundation, Soup Kitchen of Pasig, Phil-Asia Assistance Foundation, Gota de Leche, Pasig Catholic College Center for Culture and Arts, Sagip Batangpalengke, Teach Peace Build Peace Movement, San Pablo Apostol of Tondo Youth Ministry, and Hospicio de San Jose. To buy tickets, call 0915-593-4777, 0947-168-1714 or the CCP Box Office at 832-3704/06, or visit https://ticketworld.com.ph/.

A consumption-driven economy

June 21, 2019 | 9:05 am

Consumer spending has traditionally been the driving force behind the growth of the Philippine economy in recent years, with households contributing majority of aggregate expenditures. This year, the outlook for the country’s economy remains strong, which is still expected to be led by robust consumer spending as a result of lower inflation.

While annual private consumption growth declined from 5.9% in 2017 to 5.6% in 2018, the World Bank said it is likely to rebound to 5.9% at the end of the year and to 6% in the following year due to declining inflation and the continued job generation in the economy.

The organization added that this will further fuel remittances that are expected to remain steady as new employment opportunities for Filipinos abroad, including Japan, Germany and Poland, become available.

“The country’s growth outlook remains positive,” World Bank Country Director for Brunei, Malaysia, Philippines and Thailand Mara K. Warwick was quoted as saying in a statement. “Higher private consumption due to lower inflation, steady growth of remittances, and election spending will fuel growth this year. Growth in public investment will be tempered in the first half of 2019 but is expected to recover in the second half of the year.”

A consumption-driven economy like the Philippines is backed by favorable demographics. According to multinational retail and commercial bank Banco Santander, the country has a youthful and vibrant consumer market. For instance, it said that Filipinos put great importance to shopping experience; they visit malls not only to make purchases but also to get along with their families or do some social activities.

“Philippine consumers enjoy visits to retail stores in which they are able to touch and feel the product, and value the services throughout the shopping process,” Banco Santander said in its Web site.

While aspiring Filipino middle-class consumers see shopping in modern retail as a representation of urban lifestyle, they don’t like ostentatious expenditure, the financial institution said, noting that they are conformist and spontaneous rather.

The Banco Santander also noted that Filipinos are among the most socially-conscious consumers in the world, with 86% of them are willing to pay extra for products and services that come from companies committed to positive social and environmental impact.

Moreover, the institution said that advertising also plays a significant role in increasing the consumer culture among Filipinos by portraying physical attractiveness and material goods as a gateway to happiness and success.

According to a KPMG report titled “Philippine Consumer Market Report,” published in 2017, income growth is the main factor behind the growth in consumption of Filipinos, and there are key drivers behind this expansion.

On the demand side, remittances from overseas Filipino workers (OFWs) have played a major role in the changes seen in the domestic economy in the last few decades, said the report.

“Money sent home from abroad by OFWs has become a large and steady source of income for households in the Philippines. A study by the Asian Development Bank (ADB) has pointed out that remittances allow households to spend more on non-essential goods and services. In particular, remittance-receiving households spend less on food as a proportion of income and spend more on clothing, communication, transportation and leisure,” the KMPG report said.

On the supply side, it said that rapid growth in the services sector has transformed the country into a predominantly service-based economy. Among the services subsectors, real estate, finance, trade, and telecommunications are considered as long-time leaders, while tourism is being acknowledged as fast-emerging and high-potential subsector.

Moreover, the business process outsourcing (BPO) services industry has emerged as a major source of employment and dollar-earner, the report added, noting that it is catching up with OFW remittances in terms of contribution to the economy.

As the report further explained, consumption behavior is changing as income grows, with those who earn more have greater spending power.

“One of the peculiarities of the Filipino consumer is that lower-income households tend to buy products that are smaller in volume or mass even if these turn out to be more expensive than larger packages in terms of unit costs. This is best seen in shampoos which are sold in sachets instead of in bottles and are very popular with consumers,” the KMPG report said.

This sachet culture — aside from the convenience of smaller product packages — may be attributed to low incomes of Filipino consumers in general. Many consumers cannot afford to buy in bulk even if these are more cost-effective on a per unit basis because the one-time costs are simply beyond their spending budgets, the report explained.

“But sustained income growth that significantly increases the incomes at the bottom of the population has the potential to alter this dynamic in consumer markets. It goes without saying that the behavior of consumers will differ according to their income levels,” the KMPG report said. — Mark Louis F. Ferrolino

Getting to know the global consumers

June 21, 2019 | 9:00 am

More interesting insights are being discovered about the global consumers, their lifestyles, and their preferences.

Recently, global strategic market intelligence company Euromonitor International came up with “Top Ten Global Consumer Trends for 2019”, presenting a fresh look into how consumers think, what they want, and why they make such choices.

First among the trends is the emergence of “Age Agnostics”. Identified as a new kind of mature consumers, Age Agnostics “enjoy the same things as their younger counterparts and want to continue to be themselves for as long as possible”.

Next, consumers are seen to look for authenticity in products and services in order for them to express their individuality. Tagged as the “Back to Basis for Status” consumers, they are “reevaluating their spending habits” and are “moving away from overt materialism”.

Furthermore, consumers have grown conscious, “seeking out ways to make positive decisions about what they buy and look for a solution to the negative impact consumerism is having on the world.” An example the study pointed out is the growing concern for animal welfare being translated to animal-friendly products.

Consumers are also creating and experiencing things “Digitally Together.” With high-speed Internet and mobile Internet becoming more available globally, live interaction and collaboration are possible.

Meanwhile, the “Everyone’s An Expert” trend explains the switch in power between retailer and consumer. “Previously shoppers relied on a certain brand or information source to get what they wanted, now companies must constantly innovate, drive prices down and streamline and aestheticize their offerings to entice shoppers,” the research stated.

Whereas the fast delivery of information brought by the Internet has prompted the “fear of missing out,” people are now actually looking for the “joy of missing out” (JOMO) by re-appropriating self-time. “To protect their mental well-being,” the study discussed, “Finding My JOMO consumers want to be more intentional with their time, to set their own boundaries and be more selective in their activities.”

Also, consumers are beginning to say “I Can Look After Myself” as they set a preventive measure against illness, unhappiness, and discomfort without having to consult a professional. “They make use of apps and personalization services to create a product uniquely for them without the need to constantly engage with social media and brand marketing,” the study explained.

With plastic seen as a waste in the global environment, consumers are wanting a plastic-free world. “Consumers will increasingly use their wallets to protest the irresponsible use of plastic, which could, in turn, create a virtuous circle where industry… stand to gain by improving sustainability,” the study stated.

Spurred by efficiency-driven lifestyles, consumers are also seen to demand more instantly. “I Want it Now!” consumers seek frictionless experiences that mesh with their lifestyles, allowing them to dedicate more time to their professional or social lives,” the research noted.

Lastly, single-person households apparently outpace other household sizes. Explaining this rise in “Loner Living”, the study explained: “While baby boomers may have been well known for the high rate of divorce among their cohort, many of those in the younger generations have rejected marriage and cohabitation altogether.” — Adrian Paul B. Conoza

BSP leaves policy rates untouched

June 21, 2019 | 12:33 am

THE Bangko Sentral ng Pilipinas (BSP) on Thursday kept rates unchanged on expectations of steady inflation and economic growth, and as it monitors the impact of recent monetary adjustments.

The central bank’s policy-setting Monetary Board (MB) left the interest rate on the BSP’s overnight reverse repurchase (RRP) facility untouched at 4.5%, it announced after its review on Thursday. The interest rates on the overnight lending and deposit facilities were likewise held steady at five percent and four percent, respectively.

Six out of the 10 economists polled by BusinessWorld earlier this week expected the central bank to hold fire.

“The Monetary Board believes that the manageable inflation outlook and firm domestic growth prospects support keeping monetary policy settings steady for the time being,” BSP Governor Benjamin E. Diokno said in a briefing.

The BSP chief said latest baseline forecasts show inflation is likely to remain within the 2-4% target range for this year and 2020, although the prolonged El Niño phenomenon continues to be an upside risk.

Headline inflation accelerated in May following six consecutive months of slowdown, settling at 3.2% last month, up from the three percent in April but still slower than the 4.6% recorded in May 2018. Year to date, inflation averaged 3.6%, past the midpoint of the BSP’s target.

Economic growth in the coming months is likewise expected to recover after first quarter’s slowdown, “supported by a projected recovery in household spending and the continued implementation of the government’s infrastructure spending program,” Mr. Diokno said.

Gross domestic product (GDP) grew by 5.6% in the first quarter, its worst performance in four years. This was lower than the 6.3% pace in the preceding quarter and 6.5% in the first quarter of 2018, as well as the downward revised 6-7% target of the government for the year.

“A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July,” Mr. Diokno added.

At its meeting last May 9, the MB cut key rates by 25 basis points. The BSP also reduced the reserve requirement ratios (RRR) of lenders by a percentage point effective May 31 to 17% for universal and commercial banks, 7% for thrift banks, and 4% for rural and cooperative banks. The reserve ratios of big banks and thrift lenders will be reduced further to settle at 16% and 6%, respectively, on June 28 and July 29.

BSP Deputy Governor Diwa G. Guinigundo said in the same briefing that these RRR reductions are expected to unleash a total of P200 billion into the financial system once the phased implementation is completed.

INFLATION FORECASTS CUT
The BSP sees inflation slowing further this year and in 2020 on the back of likely lower global oil prices and the peso’s appreciation.

Mr. Guinigundo said the central bank revised its inflation forecasts to 2.7% from the 2.9% expected in May for this year and to 3% from 3.1% for 2020.

“For 2019, we expect the peso to be around P52.01 and for 2020, some appreciation to P51.50,” Mr. Guinigundo said.

The official said the forecasts were reduced as price increases remain manageable despite May’s slight uptick. Inflation expectations are also “beginning to be more well-anchored,” he said.

“Growth continues to be resilient and robust,” Mr. Guinigundo added, noting that the policy easing done by the central bank last month serves as a “cushion” and a “preemptive action” against uncertainties.

“There is room for easing monetary policy because the view on inflation is quite optimistic, that it’s going to continue to be moderate,” Mr. Guinigundo said. “But…we need to show and establish the firmness of the downtrend of inflation down the road.”

Nicholas Antonio T. Mapa, senior economist of ING Bank N.V.-Manila branch, said the BSP is likely waiting for further data to assess economic conditions and the impact of the global trade war on the country.

“The next policy meeting (August 8) coincides with the release of 2Q GDP growth, which should by all indications be an improvement from the 1Q print with the economy benefiting from the recent round of policy easing (RRP and RRR cuts) with the fiscal support also seen to boost growth momentum after being sidelined for most of the year,” Mr. Mapa said.

Michael L. Ricafort, head of the economics research division of Rizal Commercial Banking Corp., said policy makers are also awaiting the US Federal Reserve’s next move after it opened the door to more cuts in the coming months at its June 18-19 meeting.

“We likewise expect RRR cuts to be on hold in the meantime as the full effect of the tranches have yet to be felt,” said Security Bank Corp. Chief Economist Robert Dan J. Roces. — R. J. N. Ignacio

Gross revenue across key industries up 8.1% in Q1

June 21, 2019 | 12:32 am

By Marissa Mae M. Ramos
Researcher

REVENUE across all industries grew in the first quarter of 2019 as stronger sales were reported across key industries, the Philippine Statistics Authority (PSA) reported yesterday.

Data from the PSA’s latest Quarterly Economic Indices (QEI) report showed total gross revenue index, which measures sales generated by companies, expanding by 8.1% in the first three months of the year.

The latest QEI report used 2016 as the base year for the first time. In previous versions, it used 1978 as the base year.

The first quarter reading was slower than the 9.3% recorded in the fourth quarter of 2018, albeit faster than the 7.3% logged in the first quarter of 2018.

To compare, the Philippine economy grew 5.6% in the first quarter of 2019, its worst performance in four years, or since the 5.1% logged in the first quarter of 2015.

Analysts expect the economy to bounce back in the second quarter. The PSA will report on the second quarter gross domestic product (GDP) on Aug. 8.

“Despite the sub-six percent economic growth for the same quarter, the growth in major industries’ gross revenues reflect an improved economic environment amid tapering consumer prices during the period,” Security Bank Corp. chief economist Robert Dan J. Roces said in an e-mail.

UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion noted the Philippine economy’s steady growth consequently led to higher employment and wages.

“The continued increase in foreign direct investments, fiscal policy reform, steady level of prices, and a productive population with a favorable demographic mix — all contribute to a growing economy resulting in more jobs and better opportunities for everyone,” Mr. Asuncion said in a separate e-mail.

Expansion was observed across all industries during the period. Leading the way was financial and insurance activities whose revenues grew 14.6% in the first quarter of 2019, faster than the 12.4% growth in 2018’s comparable three months.

Next in line were growth seen in transportation, storage and communication (14.5% from 5.6%); trade (14.4% from 7.3%); real estate (12.4% from 8.9%), other services (6.7% from 1.5%).

On the other hand, revenue growth slowed in manufacturing (5.3% from 7.4%); electricity, gas and water supply (4.7% from 13.2%); and mining and quarrying (2.6% from 16.9%).

“Some industries have done better in terms of higher year-on-year revenues growth in the first quarter of 2019 amid the sharp decline in inflation and interest rates that increase the incomes and spending power of both consumers and businesses, as the slowdown in first quarter GDP (gross domestic product) growth was largely due to the delay in the approval of the 2019 national budget…,” Michael L. Ricafort, Rizal Commercial Banking Corp.’s (RCBC) economics research division head, said in an e-mail interview with BusinessWorld.

“Thus, the faster revenues growth in the first quarter for some sectors in the economy does not come as a surprise, as consumer spending (which accounts for about 70% of the economy) and services (which account for nearly 60% of the economy) both managed to grow much faster from a year ago and vis-a-vis headline GDP growth,” he added.

Security Bank’s Mr. Roces noted that a rebound in household spending drives industrial gross revenues as well.

“Services, tied with better consumption, remain a major driver in industry especially BPOs (business process outsourcing), which provides a steady stream of employment and wage growth.”

Meanwhile, the total employment index expanded 1.7% in the first quarter compared to 1.3% during the same quarter last year. Sectors posting growth during the period were transportation, storage and communication (4.3%); trade (2.7%); manufacturing (2.5%); mining and quarrying (2.3%); financial and insurance activities (1.6%); real estate (1.3%); electricity, gas and water supply (1.2%); and other services (0.8%).

Construction, on the other hand, saw its employment index decline by 0.3%.

Compensation growth accelerated to 4.6% during the period from 3.3% growth in the first quarter of 2018. Backing this growth were electricity, gas and water supply (9.8%); mining and quarrying (9.2%); construction (8.6%); manufacturing (7.7%); other services (4.7%); financial and insurance activities (2.4%); real estate (1.9%); transportation, storage and communication (1.8%); and trade (0.3%).

On a per employee basis, compensation grew 2.9% from 2.0% last year.

RCBC’s Mr. Ricafort said that the faster growth in the compensation index per employee at current prices reflected the effects of the elevated inflation in the latter part of last year up to the early part of this year. In particular, he attributed construction’s 8.9% growth in its compensation per employee index to “some tightness in the labor supply of construction workers as reported in recent years.”

“[A]t constant prices, [total] compensation index per employee declined by 0.9% after excluding the effects of higher inflation,” Mr. Ricafort explained.

He added that the faster growth seen in the employment and compensation indices in the first quarter “may be attributed to strong Philippine employment data” amid “continued growth in both local and foreign investments… that entailed the creation of more jobs in the economy.”

Preliminary results of the PSA’s April 2019 round of the Labor Force Survey (LFS) put the employment rate at 5.1%, down from the 5.5% rate in the same survey round last year. Meanwhile, the underemployment rate — or the proportion of those working but looking for more work in order to increase their incomes — improved to 13.5% from 17%.

Among the April LFS rounds, both the unemployment and underemployment rates in April 2019 were the lowest since 2005, the year the government adopted new definitions for the LFS.

Moving forward, economists expect these economic indices to improve in the coming quarters.

For Security Bank’s Mr. Roces, the central bank’s “pro-growth” stance, along with increases in investments and infrastructure spending “may drive revenues up further in the coming quarter.”

UnionBank’s Mr. Asuncion said the impact of the first quarter economic growth slowdown “will not be significant and will be temporary.”

“Second quarter [industry gross revenue growth] may be an improvement from last year and better quarter-on-quarter,” he said.

Quarterly economic indices of key industries

June 21, 2019 | 12:32 am

REVENUE across all industries grew in the first quarter of 2019 as stronger sales were reported across key industries, the Philippine Statistics Authority (PSA) reported yesterday. Read the full story.

SEC tweaks rule on REIT property manager

June 21, 2019 | 12:31 am

THE Securities and Exchange Commission (SEC) has proposed to amend rules covering the property manager of a real estate investment trust (REIT), in time for the issuance of such a product within the year.

In a notice posted on its website, the SEC said the amendments will cover Rule 7 of the Implementing Rules and Regulation of Republic Act No. 9856, otherwise known as the REIT Law.

Under the rule, a REIT is tasked to appoint a property manager that should be “independent of the REIT, its promoter/s or sponsor/s.”

The SEC is seeking to add provisions that would ensure the independence of the property manager, saying that “majority of the members of the board of the REIT property manager must be independent directors with working knowledge of the real estate industry.”

“The directors (including independent directors) of the REIT and its sponsors/ promoters cannot occupy more than 49% of the board of directors of the property manager,” according to the proposed amendment.

The commission also added a section that defined the “related party transactions committee,” which will review such deals.

“Majority of its members must be independent directors who shall vote unanimously in approving such related party transactions.”

The commission is requesting all interested parties to comment on the proposed amendments until July 4.

SEC Commissioner Ephyro Luis B. Amatong earlier said they can finish the consultation process within 15 days, after which they can approve the guidelines.

Issues on the independence of the REIT’s property manager have been one of three factors that dissuaded real estate industry players from launching such a product. The other two factors are the high minimum public ownership requirement of 40-67%, and the 12% value-added tax on transfer of real properties into the REIT vehicle.

The taxation issue has been removed following the passage of the Tax Reform for Acceleration and Inclusion law last year. On the other hand, while some companies have complained of the high MPO requirement, Mr. Amatong noted that there are some who are willing to comply with this.

For instance, Ayala Land, Inc. said it is prepared to file for a REIT offering under existing rules. It earlier announced that it wants to raise P25-26 billion through a REIT anchored on its prime office assets in the Makati Central Business District.

Once rules on the REIT property manager have been resolved, Mr. Amatong is optimistic that the first REIT listing in the country may finally hit the ground this year. — Arra B. Francia

Fed sees case building for interest rate cuts this year

June 21, 2019 | 12:30 am

WASHINGTON — The US Federal Reserve on Wednesday signalled interest rate cuts beginning as early as July, saying it is ready to battle growing global and domestic economic risks as it took stock of rising trade tensions and growing concerns about weak inflation.

Even as the US central bank left its benchmark interest rate unchanged for now, the shift in sentiment since its last policy meeting was marked.

The bulk of Fed policy makers slashed their rate outlook for the rest of the year by roughly half a percentage point, and Fed Chairman Jerome Powell said others agree the case for lower rates is building; the Fed dropped its pledge to be “patient” before rate moves in a sign it was poised to act; and Powell stopped referring to weak inflation as “transient.”

Although economic growth is expected to continue, Mr. Powell said policymakers’ concerns congealed in the few weeks since the Fed last met in early May, with the unpredictable outcome of President Donald Trump’s trade dispute with China and other countries at the top of their minds.

Trump slapped new tariffs on China on May 5, took other steps that upended markets, and yet of late has sent hopeful signals of progress in the dispute when he meets Chinese officials next week — difficult terrain for the Fed to navigate.

The U.S. president has repeatedly accused Mr. Powell’s Fed of undermining his administration’s efforts to boost economic growth and has repeatedly demanded that rates be cut.

“Seven weeks ago we had a great jobs report and came out of the last meeting feeling that the economy and our policy was in a good place,” Mr. Powell said. “News about trade has been an important driver of sentiment in the interim.”

“We are quite mindful of the risks to the outlook and are prepared to move and use our tools as needed,” he said in a press conference following release of a policy statement in which the central bank said it “will act as appropriate to sustain” a nearly 10-year economic expansion.

‘ACT AS NEEDED’
Fresh economic projections released by the Fed show nearly half of the 17 policymakers now show a willingness to lower borrowing costs over the next six months, and seven see rates likely to warrant being lowered by a full half a percentage point — near what bond investors have anticipated.

Though the baseline economic outlook remains “favorable,” Powell said, risks continue to rise, including the drag that rising trade tensions may have on U.S. business investment and signs that economic growth is slowing overseas.

“Ultimately the question we are going to be asking ourselves is, ‘are these risks going to be continuing to weigh on the outlook?’” Mr. Powell said.

“We will act as needed, including promptly if that’s appropriate, and use our tools to sustain the expansion,” he said, adding that if the Fed does ease monetary policy by cutting rates, it may also halt a gradual slimming of its massive balance sheet.

Interest-rate futures surged in response to the dovish remarks, and traders are now betting heavily on three rate cuts by the end of the year. U.S. stocks turned higher, with the benchmark S&P 500 index up about 0.3% from the previous day’s close.

In the Treasury market, expectations the U.S. central bank would be cutting rates before long drove the yield on 2-year notes, often a proxy for Fed policy, to the lowest in a year and a half at around 1.75%.

“I think the big surprise was how many folks moved into the cut camp on the Fed side. You had seven members that are now looking for two cuts in 2019,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets.

“Maybe this goes to the point that the China trade situation is such a critical pivot for whether the Fed cuts or not.”

MISSED TARGETS
The new economic projections showed policymakers’ views of growth and unemployment were largely unchanged from March. But they now project headline inflation to be just 1.5% for the year, down from the previous projection of 1.8%.

They also expect to miss their 2% inflation target next year as well, a blow for a central bank that has missed that goal for years.

Policymakers “expressed concerns” about the pace of inflation’s return to 2%, Mr. Powell said. Wages are rising, he added, “but not at a pace that would provide much upward impetus” to inflation.

The long-run federal funds rate, a barometer for the state of the economy over the long term, was cut to 2.50% from 2.80%.

St. Louis Fed President James Bullard, who had argued that rates should be cut, dissented in Wednesday’s policy decision. — Reuters

AGI eyes tie-ups with tech firms

June 21, 2019 | 12:08 am

ALLIANCE Global Group, Inc. (AGI) wants to partner with tech companies as it embarks on a five-year innovation program that will digitally transform its businesses.

In a statement issued Thursday, the listed conglomerate said the innovation program will focus on addressing the needs of its subsidiaries so that they can adapt to the technological changes they are facing.

“We are open to acquiring platforms, and even companies, that focus on particular innovations that are relevant to our various businesses,” AGI Chief Executive Officer Kevin Andrew L. Tan said in a statement.

“Part of the program is to be able to partner with relevant providers and technology-makers. Our vision is to make each company become ready for the future of business in the next 10 years.”

AGI’s strategies will include introducing smart home technology for its property, e-commerce, logistics, transportation, property technology, and customer service management.

“This will also give us the opportunity to look for other new technological innovations, platforms, and companies where we can invest in, in order to support and improve our current business operations, and at the same time, make them profitable businesses on their own.”

Under this strategy, AGI will form a core group composed of representatives from its subsidiaries, which will be encouraged to come up with their own initiatives.

AGI’s subsidiaries include Megaworld Corp. for property development, Emperador, Inc. for liquor, Travellers International Hotel Group, Inc. (TIHGI) for gaming, Golden Arches Development Corp. (GADC) for quick-service restaurants, and Infracorp Development, Inc. for infrastructure.

Megaworld, for instance, has already launched its iTownship concept in 2018. This program promotes innovation in design, home technology, smart mobility, and environmental sustainability that seeks to prepare Megaworld’s townships for the demands of the future.

For its part, Emperador is looking to develop an e-commerce platform for its consumer products. The liquor manufacturer has also upgraded its facilities for brandy and whisky in Spain and some distilleries in Scotland.

TIHGI, which owns and operates Resorts World Manila, wants to further enhance its mobile application to provide convenience to its guests when making restaurant and hotel reservations.

GADC, the local licensee of the McDonald’s brand, has also been rolling out what it calls as NXTGEN stores, or those that feature self-ordering kiosks, modern menu boards, and card payment acceptance.

AGI has committed to spend P85 billion in capital expenditures for 2019, as the company ramps up the expansion of its property and gaming businesses.

AGI booked a net income attributable to the parent of P4.35 billion in the first quarter of 2019, 21% higher year on year after gross revenues also improved by 19% to P39.47 billion.

Shares in AGI rose 0.66% or 10 centavos to close at P15.30 each at the stock exchange on Thursday. — Arra B. Francia

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