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Gov’t debt yields end flat

By Mark T. Amoguis
Senior Researcher

YIELDS ON government securities (GS) ended flat last week, mirroring the safe-haven US Treasuries as they dropped on the back of ongoing trade war between the world’s two largest economies.

GS yields, which move opposite to prices, declined by a week-on-week average of 7.9 basis points (bps), the PHP Bloomberg Valuation Service Reference Rates as of May 24 published on the Philippine Dealing System’s Web site showed.

“GS yields tracked the move of US Treasuries which dipped in reaction to escalating trade tension with the US and China trading tariffs recently. Risk-off tone forced dealers into relatively safer assets,” ING Bank NV Manila Branch senior economist Nicholas Antonio T. Mapa said in an e-mail.

“Market players were also reacting to the move of the BSP (Bangko Sentral ng Pilipinas) to reduce RRR (reserve requirement ratio) for smaller banks, a move well telegraphed and received by the market given the downward trajectory for inflation,” he added.

“With the US Fed[eral Reserve] minutes showing a patient policy stance and US Treasury yields nearing year-to-date lows, local bond market yields tracked foreign market counterparts. The recent announcements on the BSP cuts in small banks reserve ratio did not have much impact on government securities,” UnionBank of the Philippines, Inc. chief economist Ruben Carlo O. Asuncion said in a separate e-mail interview.

Last week’s movement was due to “improved liquidity due to looming effectivity of RRR (reserve requirement ratio) cuts, better CPI (consumer price index) outlook for the rest of the year, and slower growth as signaled by less government spending in April,” a bond trader said via text message last Friday.

Due to the trade war between the world’s two largest economies, US Treasury yields dropped across the board last week with US 30-year bond yields sinking to roughly 16-month lows, while those on benchmark 10-year notes fell to their lowest level since December 2017, according to a Reuters report.

Back home, after cutting the reserve requirement of big banks last May 16, the BSP’s policy-making Monetary Board on Thursday likewise announced a cut in the RRR of thrift, rural, and cooperative banks.

Thrift banks’ RRR will be gradually slashed by 200 bps to six percent from eight percent in three moves: 100 bps effective May 31, 50 bps effective June 28, and 50 bps effective July 26.

Mandatory deposit reserves of rural and cooperative banks will also be trimmed by 100 bps to four percent from five percent effective May 31.

A percentage point cut in big banks’ RRR will free up to P90-100 billion, while that for smaller banks will unleash around P22 billion into the financial system.

At the close of the trading last Friday, GS yields went down across the board. Three-month, six-month, and one-year debt were down by 15.5 bps, 9 bps, and 7.3 bps, respectively, to fetch 5.359%, 5.694%, and 5.895%.

The two-, three-, four-, five-, and seven-year bonds also declined by 12.0 bps, 8.5 bps, 5.8 bps, 4.3 bps, and 4.7 bps, respectively, to yield 5.674%, 5.673%, 5.682%, 5.696%, and 5.716%.

Yields on the 10-, 20-, and 25-year notes likewise dipped by 7.9 bps, 8.4 bps, and 3.2 bps, respectively, to 5.709%, 5.867%, and 6.014%.

Market watchers pointed to the central bank’s May inflation forecast as the likely catalyst for this week’s trading.

The bond trader expects “steady tone with downward bias” on GS yields movement this week.

“Market will still be waiting for significant market movers [this] week. At this point, the external environment has been largely influencing the GS yields’ performance,” UnionBank’s Mr. Asuncion said.

“Market players will likely take their cue from the overall global sentiment, BSP’s inflation forecast for May inflation and on the 10-year auction [this] week,” ING’s Mr. Mapa said.

The Bureau of the Treasury will offer P15 billion worth of Treasury bills today. It will also auction off reissued 10-year Treasury bonds with a remaining life of nine years and seven months tomorrow.

Nestlé, Valenzuela launch plastics recovery program

NESTLÉ Philippines has teamed up with Valenzuela City government, alongside the Department of Education of Valenzuela City branch and Green Antz Builders, Inc., to introduce a citywide program to recover post-consumer waste laminates such as sachets and beverage cartons.

In a statement over the weekend, Nestlé Philippines said its chairman and CEO Kais Marzouki signed the memorandum of understanding for “May Balik! Sa Plastic!,” along with Valenzuela Rexlon T. Gatchalian, DepEd Assistant School Division Superintendent Dr. Benjamin D. Samson, and Green Antz Builders, Inc. President Rommel Benig.

The program will provide incentives for street sweepers and schoolchildren who turn in waste laminates and beverage cartons at designated booths in the barangay and schools. They will receive Nestlé products or school supplies as reward.

The scheme is seen to encourage the collection of waste laminates and used beverage cartons which can be used for co-processing in cement kilns, or for recycling and upcycling.

“There is a need to accelerate action on the issue on plastic. For Nestlé, this means addressing post-consumer wastes that would otherwise go to landfills and leak into waterways and oceans,” Mr. Marzouki was quoted in a statement.

Mr. Marzouki said the pilot program in Valenzuela City may be later replicated in other cities. “The best thing about it is that the approach involves the participation of various stakeholders. Our partnership with Valenzuela City, one of the most progressive cities in Metro Manila, is a milestone not only for us at Nestlé and Valenzuela City, but more importantly, for the environment,” he said.

As mayor, Mr. Gatchalian said his approach has not been to ban plastics, but to recycle, reuse and repurpose plastic.

“In our city, we already have a system in place for larger waste plastic materials which are segregated and sold for extra income by our haulers. ‘May Balik! Sa Plastik!’ gives us a solution for what to do with smaller plastics, laminates, sachets,” he said.

For the program, Green Antz will serve as training partner, main hauler of collected wastes, and recycler under the program, utilizing a portion of the waste materials.

In April 2018, Nestlé announced a global commitment to make 100% of its packaging recyclable or reusable by 2025. — Janina C. Lim

Palm oil regulator to create separate standards for smallholders

JAKARTA — A global palm oil industry watchdog is planning a separate standard for smallholders to help them adopt sustainable practices and get green certification, the Indonesian director of the Roundtable on Sustainable Palm Oil (RSPO) said.

Indonesia is the world’s biggest palm oil producer and smallholders account for roughly 40 percent of the country’s 14 million hectares of palm plantations, and are often blamed for practices such as burning to clear land, causing forest fires.

The European Commission earlier this year determined that palm oil has resulted in excessive deforestation and it should no longer be considered a renewable transport fuel, albeit with some exemptions, a decision that angered the Indonesian government.

Independent Indonesian farmers, with land no larger than 25 hectares, will have to meet environmental and social sustainability standards, but some requirements will be adjusted soon, RSPO Indonesia director Tiur Rumondang said in an interview this week.

Getting farmers to obtain sustainable certification would encourage them to comply with good agricultural practices and reduce the risk of forests being converted or damaged, she said.

“Imagine if this 40 percent is not looked after, this is potentially a massive land conversion if we don’t manage it.”

Small Indonesian farmers generally suffer low productivity due to the use of poor quality palm seeds and substandard farming practices.

Indonesia currently runs a subsidized palm replanting program for small farmers to help boost yields without expanding plantation size. The government aims to replant 2.4 million hectares of palm cultivation area by 2025.

Details of the new smallholder standards are still being discussed, Rumondang said, but among requirements that will be changed are those related to labor, since farmers managing only a few hectares of land generally get help from family members.

These farmers would still have to comply with rules such as when teenaged family members work, they should not do so during school time and only for a certain amount of time per day.

The RSPO will also allow farmers to enjoy the benefits of certification in stages so that, for example, they can start to get RSPO benefits as soon as they confirm the legality of their land ownership.

Access to the RSPO credits would help farmers to finance further audits needed for the certification, Rumondang said.

Proving land is legally owned or farmers have the right to use land had been among the main hurdles for Indonesian farmers wanting to join the replanting program, farmers have said.Bambang Gianto, a farmer in South Sumatra, whose plantation has been certified by RSPO, said the process had been quite costly, including improving farming methods and fertilizer use.

“Costs at the beginning were pretty big,” Gianto said.

In addition, he said getting certified did not guarantee better pricing for palm fruits, but the improved methods made his output jump by up to 20 percent.

RSPO has certified 2,919 independent smallholders in Indonesia, its data showed, covering 7,272 hectares of cultivation area. — Reuters

Prada bans fur from catwalk, bowing to ethical fashion demand

ONE OF the fashion industry’s most iconic designers is turning her back on fur.

Miuccia Prada, the creative director and controlling shareholder of Milan-based Prada SpA, said in a statement that her company — also the maker of MiuMiu apparel and Church’s shoes — would no longer feature the material starting with her next runway show in September.

The brand joins the ranks of labels like Burberry Group Plc and Kering SA’s Gucci in giving up the material’s use, which has drawn ire from animal rights and environmental groups for decades. As consumers become increasingly concerned about the social and environmental impact of fashion, banning fur has become a way for brands to show they’re serious about curbing the industry’s most harmful excesses.

The move makes Prada — who used fur in some of her most notable collections, like spring 2011’s “banana” show — one of the biggest names to agree to an outright ban. She has already experimented with fur alternatives like the plush fabrics from German teddy bear-maker Steiff in recent seasons.

‘NEW BOUNDARIES’
“Focusing on innovative materials will allow the company to explore new boundaries of creative design while meeting the demand for ethical products,” Prada said Wednesday.

Even as animal welfare concerns have seen fashion’s tide turn against real fur, and cities like San Francisco and Sao Paolo banned its sale, advocates for the material like LVMH’s Fendi brand have insisted that fur farming can be done ethically. They have also raised questions about the environmental impact of fake furs, arguing that the small plastic fibers they shed are not biodegradable and can easily find their way into the water supply when items are cleaned.

Other recent industry measures to clean up its reputation include a pact to stop hiring extremely thin models by LVMH and Kering, and internal audits on diversity at Gucci and Prada after the brands released products that were called out as insensitive for resembling blackface imagery. — Bloomberg

Sand and sea with the Mitsubishi Strada

Words and photos by Manny N. de los Reyes

SAN VICENTE, PALAWAN — Drive a nice car in heavy bumper-to-bumper traffic and you’d be hard-pressed to appreciate it.

Conversely, drive a crappy car or truck on a scenic or picturesque location and it’ll flatter to deceive.

Mitsubishi probably didn’t have the latter intention when it brought the local media to this beautiful and largely unoccupied city in Palawan for three days. But it certainly didn’t hurt.

But first things first: the Mitsubishi Strada is not a crappy truck. Now on its fourth generation, the Strada, whose prices range from P1,165,000 to P1,670,000, has established itself as one of the best and most refined among the half-dozen pickup trucks on the market.

Considered as one of the most important models of Mitsubishi, the Strada, which is produced in Mitsubishi’s Laem Chabang plant in Thailand, is sold around the globe in no less than 150 countries. Yet it sings to a different tune relative to most of pickup truckdom.

While most trucks exude muscle and brawn, the Strada expresses an altogether different character — one that’s not all about machismo, but of an almost futuristic sleekness. Under the brand’s design concept “Rock Solid,” which embodies a strengthened structure inside and out, the latest Strada flaunts Mitsubishi’s new-generation “Dynamic Shield” design language. The high hood, slim LED headlamps, and aggressive grille and bumper design present a compelling and upscale fascia. The sculpted body curves with contrasting sharp lines express a car-like sleekness. The sharp and distinctive character lines that start at the front fenders and terminate at the front doors then emerge again from the rear doors and end at the rear fenders express a sense of upscale futurism.

The trademark rising rear windowline and the J-shaped rear door opening serve to tie up the latest Strada’s cutting-edge styling with that of its forebears. Even the palette of seven available colors — White Diamond, Graphite Gray Metallic, Sterling Silver Metallic, Jet Black Mica, Red Solid Clear, Grayish Brown Metallic and Impulse Blue Metallic — was carefully chosen to serve as the finishing touch to the very detailed body design.

Inside the new Strada is a functional and contemporary dash and console trimmed with silver and piano black accents. All variants feature a 2-DIN touchscreen monitor with tuner/MP3/USB/iPod/Aux/Bluetooth connectivity and Mirror Link. All variants are also equipped with a GPS navigation system. There is even a front smartphone tray which includes USB terminals. A rear smartphone tray is also available and is located at the rear of the center console including two USB power sockets.

The new Strada boasts a spacious interior which can comfortably seat five adults, thanks to the cab’s unique J-Line design that offers class-leading legroom for greater comfort, especially on long drives. The door panels may be a tad too plasticky — fabric covering for some of the panels would’ve helped — but are nonetheless good-looking and functional, thanks to generous-sized bottle holders.

The cabin is truly big on comfort and space. The tilt-and-telescope steering wheel with audio and cruise control buttons is covered in smooth leather. The front seats are very comfortable and supportive and are covered in a plush yet seemingly durable fabric. The rear seats, often the bane of most pickups, are reasonably comfortable, thanks to a more inclined rear backrest and supportively sculpted cushioning. It’s certainly a long way from the hard, flat, and upright bench seats of pickups of yesteryear.

The Strada is powered by Mitsubishi’s super-smooth state-of-the-art 4N15 2.4-liter Clean Diesel engine with Variable Geometry Turbo and MIVEC (Mitsubishi Innovative Valve timing Electronic Control System). The powerplant delivers 181ps and 430Nm of torque. It’s one of the smoothest and quietest diesel powerplants in existence.

This cutting-edge motor is mated to an equally advanced six-speed automatic with Sports Mode and paddle shifters. It was an absolute joy wringing the truck from corner to corner during our rushed drive back to Puerto Princesa airport to catch our return flight to Manila. The engine delivered on the power side while the paddle shifters made short work of gearshifts, especially on winding roads and during overtaking maneuvers.

The Strada’s already (relatively) comfortable ride is improved with the use of larger rear dampers, which contain more damping oil. There is still some jarring on choppy surfaces, but the overall riding comfort is still at the top of its class. Braking power was also improved with the use of larger front discs and caliper pistons for the GLS and GT variants.

A pickup truck will never handle as confidently as a car, but the Strada hung on impressively well, even during hard cornering maneuvers. The generously sized 265/60R-18 all-terrain rubber proved just as adept at high-g cornering on pavement as they were driving on sand on the beach — despite our truck being a 4×2 and not a 4×4 model. The suspension is just very well sorted out.

The new Strada hosts an array of advanced passive and active safety features, including Mitsubishi’s RISE (Reinforced Impact Safety Evolution) body, which absorbs the impact of collision. It retains the current model’s high-durability and high-reliability ladder-type chassis and high-impact safety cabin structure. Active Stability Traction Control (ASTC), Hill Start Assist (HSA) and Trailer Stability Assist (TSA) are now standard on all variants. A nice touch is the push-button engine start/stop and keyless Smart Entry system.

All things considered, while most other pickups are playing the tough truck card, the Strada is confident in its sheetmetal skin just being an exceedingly capable truck — one that pushes the envelope in pickup refinement, comfort, and safety.

Financial markets outlook positive as inflation eases, in line with expectations

By Mark T. Amoguis, Senior Researcher

THE FURTHER EASING in domestic inflation buoyed investor sentiment for much of the first quarter this year even as upside risks — mostly from the external front — remain.

In the first three months of the year, headline inflation slowed to 3.8% compared to 5.9% in the fourth quarter of 2018 according to data from the Philippine Statistics Authority. The 3.8% first-quarter average is now within the 2-4% target range by the central bank.

The first-quarter deceleration, according to the Bangko Sentral ng Pilipinas’ (BSP) first-quarter inflation report, reflects mainly the slowdown in food inflation amid improved supply conditions.

The inflation slowdown was mostly broad-based with much of the downtrend seen in the heavily weighted food and non-alcoholic beverages index at 4.6% in the first quarter versus the 8% in the fourth quarter of 2018. Food alone averaged 4.1% in the January-March period against the 7.7% average in the preceding quarter.

With the decelerating inflation, analysts that time have said that the conditions are ripe for policy easing. The BSP’s Monetary Board, however, maintained benchmark rates and the banks’ reserve requirement ratio (RRR) in its first and second policy reviews on Feb. 7 and March 21 albeit cutting their headline inflation forecast for the year by a tenth of a percentage point in each of those meetings to a flat three percent from 3.2%.

It was in its May 9 meeting when the BSP slashed key policy rates by 25 basis points (bps). A week later, it announced cuts in RRR imposed on big banks in three phases: 100 bps by May 31, 50 bps by June 28, and 50 bps by July 26.

The central bank also revised lower its inflation forecast this year to 2.9% (from three percent previously) and hiked next year’s forecast to 3.1% (from three percent).

The bellwether Philippine Stock Exchange index (PSEi) peaked during the quarter at 8,144.16 on Feb. 1, to which the BSP attributed mainly to the slower-than-expected domestic inflation in December as well as the US Federal Reserve’s dovish stance on its first policy meeting this year, and the perceived easing trade tensions between the US and China that time. However, the delayed enactment of the 2019 fiscal budget as well as the concerns in global economic growth and the growing uncertainty over the US-China trade tensions caused the index to decline to end the quarter at 7,920.93.

Nevertheless, the end-quarter reading marked a 6.1% increase compared to the 2.6% growth in the fourth quarter of 2018 and the 6.8% drop in the first quarter of 2018.

Gains were also made in the money and bond markets as the peso appreciated for much of the quarter while bond yields declined.

The same three months brought the value of the peso up with the currency averaging P52.37-to-a-dollar versus the P53.26-per-dollar average from the previous quarter, according to BSP data.

As of end-March, yields on government securities (GS) declined on average by 111.8 bps relative to the end-December 2018 levels as GS yields in the secondary market for all tenors declined except for that in the 91-day debt paper, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates published on the Philippine Dealing System’s website.

During the quarter, GS debt yields were lower by a range of 57.4 bps for the 182-day GS to 167.2 bps for the 20-year GS compared to yields in end-December 2018.

“Developments in 2019 were similar to those faced by the Philippines in 2018 but in reverse polarity,” ING Bank NV Manila Branch senior economist Nicholas Antonio T. Mapa said in an e-mail.

On the local front, Mr. Mapa said that while inflation — considered as the “bane of 2018” — is on a decelerating trend, government spending “disappeared after supporting growth in 2018,” which resulted in “disappointing” economic growth in the first quarter.

Economic growth grew at a four-year-low 5.6% in the first quarter. Largely blamed for this was the slowdown logged by government spending, which in turn was blamed on the delay in passing the 2019 fiscal budget. The government operated on a reenacted 2018 budget from the start of the year until April 15, when President Rodrigo R. Duterte signed the latest general appropriations into law, but vetoed P95.3 billion in appropriations.

On the external front, the economist also noted the turnaround in the monetary policy stance of the Federal Open Market Committee (FOMC), the US Fed’s policy-making body.

“[T]he FOMC suddenly halted its rate hike march, now seen to be on hold for rest of the year,” Mr. Mapa said.

“Possibly the only development that was not in reverse was oil prices, which climbed sharply from January levels, but this still has had limited effect on inflation and thus also only a marginal impact on [foreign exchange] and fixed-income securities,” Mr. Mapa added.

Moving forward, economists are betting that inflation could even go lower this year due to base effects.

“Inflation in 2Q 2019 may ease further to 2%-3% in 2Q 2019 and could even average below 3% in 2019, largely due to the continued decline in food prices… even before the full effects of the Rice Tariffication Law are felt in terms of further increase in rice imports,” said Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort in an e-mail.

For Sun Life Financial economist Patrick M. Ella: “I still fully expect inflation to remain lower than [the first quarter] and I would not be surprised if it will break under 3% by June,” he said in a separate e-mail.

“For the balance of the year, we think inflation can reasonably touch close to 1% by [third quarter] before turning up as the base effects are responsible for this as well as the absence of inflationary pressures in the food and energy prices.”

ING Bank’s Mr. Mapa was of a similar view: “Even with oil prices surging, we still see inflation hovering about the 3% target and with the Philippines now touting its single best inflation fighter in history (i.e. the rice tariffication law), we can expect this to be an integral part of keeping cost push inflation in check for the time being.”

The government signed the Republic Act No. 11203 — the rice tariffication law — last February to curb rising food prices by removing quantitative restriction on rice imports and replacing it of tariffs.

Similarly, economists expect the economy to grow within target despite the first-quarter letdown.

“Despite the Q1 snafu, the budget passage will mean that growth in [the second half] will receive a substantial boost. Household spending continues to recover while the BSP rate cut (and further easing) are seen to help revive slowing capital formation,” ING’s Mr. Mapa said.

“The 6%-7% GDP growth target for 2019 may still be achieved amid the country’s improved economic and credit fundamentals, as well as the country’s favorable demographics,” RCBC’s Mr. Ricafort said.

Here are the economists’ forecasts on the financial market this year:

EQUITIES
ING’s Mr. Mapa: Positive as GDP recovers.

Sun Life’s Mr. Ella: Our equities team has a bottom-up PSEi index target of 8,750, which is a 17.2% upside from 2018. This implies a P/E (price-to-earnings ratio) of 18.4 times and earnings growth expected at 11.7% for 2019.

RCBC’s Mr. Ricafort: Further declines in both inflation and interest rates would fundamentally increase net profits/income of listed companies, assuming all other factors are the same, thereby may support higher valuations.

Any further increase in foreign portfolio inflows after the S&P credit rating upgrade on the country may also provide support for the local equities market.

FIXED INCOME
ING’s Mr. Mapa: Yield curve to normalize on BSP rate cuts and RRR reductions.

Sun Life’s Mr. Ella: Fixed income will likely see lower yields in response to the BSP that is on a clear easing mode. I’m looking at 5% for the benchmark 10-year bond yield by yearend.

RCBC’s Mr. Ricafort: Continued easing trend in inflation, as well as any further cut/s in local policy rates and any cut in RRR (additional P90 billion in liquidity/money supply infused into the financial system for every 1-percentage-point cut in RRR) may lead to further easing in local interest rate benchmarks, or at least sustain local benchmark yields at relatively lower levels.

The latest S&P [Global Rating] credit rating upgrade on the Philippines by one notch to BBB+ (two notches above the minimum investment grade) would increase international investor confidence on the Philippines in terms of increased inflow of foreign portfolio investments and foreign direct investments into the country, thereby may lead to further gains in the local economy as well as in the local financial markets.

FOREIGN EXCHANGE MARKET
ING’s Mr. Mapa: Depreciation pressure given fundamental C/A (current account) deficit but tactical strength to be seen during times of risk on [sentiment].

Sun Life’s Mr. Ella: our USD/PHP view is at P53.20 and we have not changed this view since the start of the year.

RCBC’s Mr. Ricafort: The peso exchange rate may continue to remain relatively stable, as partly supported by the sustained easing trend in inflation, as well as some narrowing in the trade deficit date since late last year.

Going forward, any pick up in foreign portfolio investments and foreign direct investments after the latest S&P credit rating upgrade may provide some support on the local currency.

Grab PHL sees strong growth of food delivery service

GRAB PHILIPPINES (MyTaxi.PH, Inc.) said it has seen robust growth for its food delivery service, Grab Food, in the last six months.

“GrabFood Philippines, compared to GrabFood in other markets, is growing (at) a very nice (rate)… It’s not profitable… (but) we’re growing in a way that it’s sustainable for the company,” Grab Philippines President Brian P. Cu told reporters last week.

In the Philippines, Grab noted the food delivery service now contributes 10% to 12% of total revenues. GrabFood was launched in November.

“We’re growing at a very decent 3-6% week on week. So we are tapping the market. We are expanding by adding more food partners, by making the app easier to navigate,” Mr. Cu added.

While Grab continues to develop its transportation services, Mr. Cu said there are challenges to introducing these in the Philippines.

One of these is the Trip Planner feature that Grab currently has in Singapore and Indonesia, which allows a user to book a multi-modal trip through the Grab app. Mr. Cu said this could not be launched in the Philippines yet because it would require the different transport modes to have a working global positioning system (GPS) and automated fare collection system.

“That’s why we’re moving outside of transport… Food is a very big growth driver for us. Since the start of the year, we’ve grown maybe 3 time already. Only by a low base, but it’s significant growth that we’re seeing,” he said, noting the opportunity is big for GrabFood in Metro Manila.

Mr. Cu said Grab Philippines is targeting to double the number of daily orders through GrabFood by yearend. It plans to add Grab’s in-app mobile wallet GrabPay as a payment option for GrabFood orders.

“GrabPay will be available as a payment channel of Food, which means drivers don’t have to carry a working capital. Ngayon si driver nag-carry ng [Right now drivers carry a] working capital, so that limits how big of an order size we can get,” he said. — Denise A. Valdez

Sarangani targets upland coffee and banana areas for road construction

SARANGANI province has set a target of 100% access to upland areas within the next three years in order to support high-value crops like coffee and banana.

“We will finish opening the roads to the upland areas. The office of the President committed to help us open the roads up to the mountains,” Gov. Steve C. Solon said in an interview, noting that P2 billion has been allocated to the program.

High-value crop production and food processing are among the sectors considered the province’s priority investment areas.

“We have to open the uplands because those are productive areas,” said the governor, who won his reelection bid in the May 13 midterm polls, giving him another three-year term.

Currently, about 60% of the province’s roads going to and from the mountain areas are paved.

The province currently has a main road network of about 145 kilometers connecting its seven towns and providing a link to General Santos City, which has an airport and an international wharf.

Mr. Solon said paved roads to the mountains would also help the provincial and municipals governments deliver better services to the indigenous communities in these areas.

“It is the mission of the province of Sarangani to provide food security and increase the productivity of the marginalized farmers, particularly those in the upland areas,” he said.

Another priority project lined up is the establishment of a state college in Alabel, the provincial capital.

The governor said Senator Juan Edgardo M. Angara has promised to help set up the Sarangani State College with funding from the national government. — Maya M. Padillo

Peso to move sideways vs dollar

THE PESO will likely move sideways against the dollar this week on the back of a seasonal pickup in remittances as well as uncertainties abroad.

The local unit closed last week at P52.16 versus the greenback, 34 centavos stronger than its P52.50 finish on Thursday.

Week on week, the peso also strengthened from its P52.63-per-dollar close last May 17.

Michael L. Ricafort, Rizal Commercial Banking Corp. economist, said the peso will likely strengthen versus the dollar this week on the back of the “seasonal increase” in cash sent home by overseas Filipino workers to fund tuition payments, which may spill over until June.

He added that the peso will also be supported by the latest decline in the greenback against major global and Asian currencies amid the ongoing trade war between the US and China.

“[T]he intensified US-China trade war…led to lower US benchmark bond yields to a 1.5-year low of 2.32% for 10-year bonds (that reduced the interest rate return/attractiveness of the US dollar),” Mr. Ricafort said in a text message.

However, a market analyst said the greenback is seen to move sideways with an “upward bias” this week due to safe-haven buying amid lingering US-China trade tension, heightened Brexit uncertainties, and potentially mixed Chinese economic data.

The analyst noted that the effectivity of the reserve requirement ratio (RRR) cuts earlier announced by the Bangko Sentral ng Pilipinas “may also strengthen the dollar by tempering expectations of future domestic returns.”

A percentage point cut in big banks’ RRR will likely unleash P90-100 billion into the financial system, while another P22 billion is seen to be released due to a 100-basis-point cut in the reserve ratios of smaller lenders.

For this week, Mr. Ricafort expects the peso to move between P51.90 and P52.20, while the analyst gave a P52.05-P52.65 range. — K.A.N. Vidal

Rihanna’s fashion label for LVMH opens for business in Paris

RIHANNA revealed her first Fenty collection in Paris on Wednesday evening. She arrived wearing a blazer as a dress — the white canvas number had exaggerated shoulders and was cinched in at the middle with a built-in corset — paired with strappy going-out heels in gold leather, all from her new label.

The mood was boss lady on top, party girl below. This mix of high and low took on menswear inspirations with a feminine twist. And it’s exactly what the 31-year-old pop star says she wants to bring to the table as the first woman to start a new brand from scratch at LVMH, France’s biggest company by market value.

“How I dress is about what I feel like in that moment,” Rihanna said during an interview in the Paris showroom. “How comfortable I want to be, how badass I want to be, how conservative or sexy. I feel like women are multifaceted in that way, and Fenty celebrates that.”

On the eve of her first “drop” for the brand — which will release the products online on May 29 in a “see now, buy now” model — Rihanna hosted press and friends of the new venture in Paris’s posh Marais district, where 18th century hotels particuliers and medieval churches are interspersed with design bookshops and contemporary art galleries.

After nearly two years of work behind the scenes, Fenty’s debut offer was a mix of ready-to-wear pieces like slouchy denim overshirts, leather shoes, and costume jewelry with crystal cuffs and giant white-lacquer hoops. Fenty sunglasses, produced by LVMH’s joint venture with Italian eyewear-maker Marcolin, were stacked high on columns in the middle of the room. Some of the suits had matching pants, while others, such as the one sported by Rihanna, are meant to be worn as dresses.

The prices range from €200 ($223) for a T-shirt to €1,100 for a parka. They are quite a few notches below the usual fare at such LVMH brands as Louis Vuitton, where cocktail dresses often retail above €2,500. Rihanna says she wants to keep prices as accessible as possible while still using luxurious materials and technique.

“I hope I can reach a broad audience,” she said. “I can’t wait to walk outside and just run past someone who’s wearing it. I think that’ll be a huge moment for me.”

Her vision for a more inclusive luxury brand doesn’t stop at the price. Her team designed the collection with Rihanna’s body in mind instead of a runway model. “I’m a curvy girl, and if my stuff doesn’t fit me, that’s not going to work,” she said. “I had to check how every piece works on my hips, my thighs, and make sure this isn’t something that just looks good on a fit model.”

A RELATIONSHIP FORGED IN BEAUTY
LVMH partnered with Rihanna to launch Fenty Beauty, a makeup brand, in September 2017. (The name comes from the singer’s full name, Robyn Rihanna Fenty.) After the venture surged to nearly €500 million in sales during its first year in business, the owner of luxury stalwarts such as Dior, Celine, and Givenchy says it has given carte blanche to the Barbadian musician to lead the new label. The company brings investment funds, supply chain expertise, and business and design talent to support the project, while Rihanna is set to boost the products’ visibility with a broad swath of consumers — and give LVMH’s corporate image a shot in the arm.

“She has this charisma,” said Jean Baptiste Voisin, LVMH’s chief strategy officer. “She isn’t the most famous person in the world; there are some people with more followers.” (Rihanna has more than 70 million Instagram followers, while Kim Kardashian has 140 million.) “I’m sure some of them are very professional,” Voisin continued, “but they’re not Rihanna.”

Rihanna’s profile as a fashion industry darling has only risen in the past two years. During several years as guest creative director at Puma (then owned by Gucci and Saint Laurent owner Kering) and as the star of ad campaigns for LVMH’s Dior, the singer was one of only a handful of stars with the status to work in a high-profile way between the two rivals.

Mixing established names with fashion up-and-comers, Rihanna’ helped win new fans for such designers as France’s Simon Jacquemus and Y/Project’s Glenn Martens (both of whom attended Wednesday’s event) and British designer Molly Goddard. Before skipping this year’s Met Gala, Rihanna reigned over fashion’s biggest party with show-stopping looks, including a canary yellow gown from Guo Pei and a pope-inspired couture ensemble from Maison Margiela.

“This is a long-term initiative, and she’s in the same mindset as us for that,” Voisin said. “I don’t think it’s likely we’d start another brand like this soon.”

“YOU BETTER GET IT GOOD, GIRL”
As Rihanna’s press conference morphed into a party of its own on Wednesday, designers such as Christian Dior’s Maria Grazia Chiuri and Balmain’s Olivier Rousteing came by to welcome her.

The brand even served Jay Z’s Armand de Brignac Ace of Spades Champagne, rather than one of LVMH’s own prestigious labels such as Veuve Clicquot Ponsardin or Möet & Chandon. The move might have raised eyebrows if it weren’t for the bottles of Veuve Clicquot that bartenders swapped in before the arrival of LVMH Chief Executive Officer Bernard Arnault. (The brand, as it happens, is named for the French widow who, at the age of 27, became the first woman to run a Champagne house — the original unlikely boss lady of French luxury.)

“There’s pressure every minute,” Rihanna said, “but it’s not, like, a crushing pressure. It’s like: You better get it good, girl.”

While the addresses of luxury headquarters such as Chanel’s Rue Cambon or Dior’s Avenue Montaigne often turn into meccas for fans of a brand, Rihanna hopes she can keep the top-secret headquarters of her own label under wraps.

“You think I’d get any work done if it wasn’t secret?” she asked. “I’d have to fight through a mob just to get to my office.” — Bloomberg

UnionBank sees income boost from CitySavings

UNIONBANK OF THE Philippines, Inc. is optimistic its thrift banking arm will recover this year amid better market conditions as well as acquisition of Philippine Resources Savings Bank Corp.

In a media briefing on Friday, UnionBank President and Chief Executive Officer Edwin R. Bautista said the Aboitiz-led lender is positive City Savings Bank, Inc. (CitySavings) will contribute more to the income of its parent lender due to better lending conditions.

“They were like 30% of our income, they moved down to 15%. If they can move back up to 20-25%, I’ll be very happy,” Mr. Bautista told reporters following UnionBank’s annual stockholders’ meeting in Pasig City.

In early 2018, the Department of Education (DepEd) suspended its automatic payroll deduction system for loans and insurance payments until June last year as it worked on new guidelines, making CitySavings as well as other thrift banks unable to issue loans for public school teachers.

Now that the thrift bank can lend to teachers again, Mr. Bautista said CitySavings will be able to push its loan volume anew.

“They (CitySavings) need to get their old volumes back up to pre-moratorium days. So far, last month, we’re already there,” he said.

“They also need to reduce their funding costs, and the good news is interest rates are going down. Plus the reserve requirement ratio (RRR) cut will also help.”

Earlier this month, the Bangko Sentral ng Pilipinas (BSP) cut benchmark interest rates by 25 basis points to a 4-5% range on the back of “manageable” inflation outlook, as food prices declined and supply conditions improved.

The central bank also announced last week that it will reduce the RRR of thrift banks thrice until it becomes 6% in July from the current 8%. This comes a week after the BSP’s Monetary Board announced a similar cut in big banks’ RRR to 16% from the current 18%. The first stage of the phased implementation of the reductions will be effective on May 31.

“As interest rates move down and the RRR move down…your margins will go back to where they were,” Mr. Bautista said.

Apart from teachers’ loans, the bank president added that motorcycle lending will also drive the growth of CitySavings after it absorbed PR Savings Bank.

CitySavings completed the acquisition of PR Savings Bank in March, allowing the Aboitiz-led lender to venture into motorcycle loans.

“Definitely the growth increase will be faster on the motorcycle than on DepEd’s. Kasi (Because) with DepEd, we’re the market leader already…pero sa (but in) motorcycles, bago eh (we’re new),” Mr. Bautista said.

UnionBank posted a P2.16-billion net income in the first three months of the year, down 26% from P2.93 billion recorded in the same quarter in 2018.

Shares of UnionBank closed at P59.60 apiece on Friday, up 20 centavos or 0.34%. — Karl Angelo N. Vidal

More volatility seen on US-China spat, RRR cuts

LOCAL SHARES may experience more volatility in the week ahead as markets continue to monitor the US-China trade war, with potential upsides in anticipation of the impact of the reserve requirement ratio (RRR) cuts taking effect this Friday.

The benchmark Philippine Stock Exchange index (PSEi) slumped 0.73% or 56.94 points to 7,747.09 last Friday. It was up on a weekly basis by 163 points or 2.2%, thanks to holding firms which jumped 4% and to industrials which climbed 1.4%.

Turnover improved by 22% to P6.99 billion on a daily average last week, while net foreign selling slimmed to P1.23 billion, 16% lower from the week before.

“Expect another volatile week to prevail, with attention glued to the US-China trade war talks and other local headlines,” online brokerage 2TradeAsia.com said in a weekly market note.

The US and China continue their trade spat with no news of potential negotiations. US President Donald J. Trump earlier doubled tariffs on $200 billion worth of Chinese goods, then imposed an import ban on Huawei Technologies Co. Ltd. China has replied with its own tariff increase on US goods and has vowed further retaliations.

“While there are no quick fixes in resolving the trade spat, investors need to see clearer outline how the US and China intend to resolve the impasse by itemizing discussion objectives. This would winnow out unnecessary rhetoric that only discards early efforts, and pacify tension in the business and investing community,” according to 2TradeAsia.com.

The online brokerage also noted that the movement of stocks will be affected by month-end portfolio closing and the effect of the recently announced MSCI rebalancing.

“Cross-country weightings might favor China, while others might also look into safer havens in the securities market over the short run,” the company added.

Meanwhile, Eagle Equities, Inc. Research Head Christopher John Mangun looked to local headlines, highlighting how the RRR cuts taking effect this week will release about P200 billion into the economy. This in turn is seen to spur growth in the succeeding quarters.

“As economic fundamentals continue to improve and government spending starts to pick up, we will see investors gain more confidence which will continue to bring them back into the market which will fuel the rally as it breaks above the heavy resistance level at 8,000. It is only a matter of time,” Mr. Mangun said in a research report.

The analyst added that local investors have started coming back to market, supporting its ascent despite the heavy selling seen from foreign investors.

“We’ve seen massive foreign selling in the last two weeks which means local investors have been picking up the slack and buying equities at much attractive prices than they have been for months.”

Mr. Mangun placed the market’s support level from 7,590 to 7,500, with resistance from 7,800 to 7,840. — Arra B. Francia

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