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PSE index gets boost from BSP rate hike decision

By Arra B. Francia
Reporter
THE Philippine Stock Exchange index (PSEi) got a boost from the local central bank’s decision to hike interest rates last week, floating above the 7,770 level by Friday.
The bellwether index jumped 2.39% or 181.11 points to close at 7,752.11 on Friday, amid thin trading for most of the week.
On a weekly basis, the PSEi soared 2.73% or 205 points, buoyed by a 4.9% increase in property and 2.3% rise in services.
“Optimists were favored for most of the week’s mixed trades, as first quarter 2018 GDP (gross domestic product) came within consensus and the central bank’s move to raise interest rates to address inflation,” online brokerage 2TradeAsia.com said in a weekly market note.
The Bangko Sentral ng Pilipinas (BSP) had increased interest rates by 25 basis points, the first rate hike implemented in around four years. The overnight lending rate is now at 3.75%, overnight reverse repurchase rate is at 3.25%, while the overnight deposit rate is now at 2.75%.
The rate hike is expected to temper inflation expectations in the coming months, as the general increase in prices of goods and services has been hitting five-year highs amid robust economic growth.
Eagle Equities, Inc. Research Head Christopher John Mangun noted that the 7,500 level has proven to be a strong support for the index.
“The index barely moved in the first four days of the week. However, it was able to stay above 7,500 which again cements its status as strong support,” Mr. Mangun said in a market report.
Investors had stayed on the sidelines before the release of economic data on Thursday, resulting in an average value turnover of P5.8 billion.
“Most of Friday’s gains came because of the lack of sellers which allowed buyers to push prices up on very little volume,” Mr. Mangun said.
Corporate earnings reports also allowed the market to register gains for the week, with most property firms reporting double-digit growth in the first quarter of 2018.
SM Prime Holdings, Inc. booked a 15% increase in net income to P7.6 billion driven by its provincial mall expansion. Ayala Land, Inc.’s profit went up 17% to P6.52 billion due to strong residential sales for the period. Andrew L. Tan’s Megaworld Corp. saw attributable profit go up 11.3% to P3.2 billion, while Gokongwei-led Robinsons Land Corp. improved its attributable profit by 12% to P1.54 billion.
US President Donald J. Trump’s decision to pull out of the Iran nuclear deal provided a temporary scare for investors last week, seen to trigger geopolitical tensions in the Middle East.
Overseas, on Friday, the Dow Jones Industrial Average gained 0.37% or 91.64 points to 24,831.17. The S&P 500 index went up 0.17% or 4.65 points to 2,727.72, while the Nasdaq Composite index dipped 0.03% or 2.09 points to 7,402.88.

How PSEi member stocks performed — May 11, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, May 11, 2018.

Domestic Market Capitalization of select stock exchanges in Asia Pacific

Domestic Markets

China ramps up checks on US pork imports in potentially costly slowdown

BEIJING — China has ramped up inspections of pork shipped from the United States, importers and industry sources said, the latest American product to be hit by a potentially costly slowdown at Chinese ports in the past couple of weeks.
Some trade experts said they believe Beijing is sending a defiant warning to Washington in response to sweeping US trade demands made on China last week.
The stepped-up checks have even hit China’s WH Group Ltd., the world’s largest pork company and owner of Smithfield Foods in the United States, and come amid increasing scrutiny of other US farm goods, including fruit and logs.
Ports are opening and inspecting every cargo that arrives, said Luis Chein, a director at WH Group, China’s top importer of US pork.
That compares with inspections carried out only “randomly” in the past, he told Reuters, significantly lengthening the time product stays at the port. The Chinese imports account for only about 2% of WH Group sales.
China’s General Administration of Customs, which oversees food imports, did not respond to a fax seeking comment.
“The President has been clear that China needs to treat US agricultural products more fairly, and we are troubled by reports that China continues to impose unjustified restrictions on US products,” said a US Agriculture Department spokesman.
Increased checks on US products are “not terribly surprising,” said Even Rogers Pay, an agriculture analyst at China Policy, a Beijing-based consultancy.
“In a situation where trade tensions are high, China will enforce every possible regulation on its books. It makes strategic sense to do so at this point,” she said.
Late on Monday, China’s customs agency announced it was stepping up quarantine checks on apples and logs from the United States after detecting pests in imports of the products at Chinese ports.
US President Donald Trump has threatened tariffs on up to $150 billion of Chinese goods, largely because of US allegations that Beijing misappropriates US technology through joint-venture requirements, unfair licensing practices, outright theft and state-backed acquisitions of US technology firms.
Beijing denies those accusations.
China’s top economic official, Liu He, will visit Washington next week to resume trade talks, the White House said on Monday, after a US delegation led by Treasury Secretary Steven Mnuchin came away from a visit to Beijing last week with no agreement over a long list of US trade demands.
US pork is now sitting at Chinese ports for up to two weeks, instead of a few days, industry sources told Reuters.
Most of the imported pork is frozen and not at risk of perishing. But the move comes on top of the additional 25% duties Beijing slapped on American pork and a slew of other goods last month, in retaliation for US tariffs on steel and aluminum imports.
The United States is one of China’s top overseas pork suppliers, shipping $489 million worth of the meat last year.
A person working at a Shanghai-based meat trading firm said customs officials were also taking samples from about 20% of US pork shipments since last month, up from about 5% previously.
He declined to be named because of the sensitive nature of the topic.
There had been no change for imports from other destinations the company buys from, including Canada and Europe, he added. Two German pork exporters said they were not aware of any changes to inspections.
Stepped up inspections and sampling were also cited in an April 30 report by the United States Department of Agriculture attaché in Beijing, which said the new measures had started on April 23 but gave no further details.
The tariffs have already cut off demand for muscle cuts, or higher value pork meat, and pressured the price of so-called “variety” meat, such as offal and feet, the biggest portion of US pork exports by volume.
In addition, China’s domestic hog prices have plunged in the first quarter, and are still hovering around eight-year lows of about 10 yuan ($1.57) per kg. That has led WH Group to sharply reduce its imports anyway this year, added Chein.
China’s total pork imports declined 10% to 595,611 tons in the first three months of the year, according to Chinese customs. — Reuters

German online bank uses Bitcoins to transfer loans

BERLIN — German Radoslav Albrecht has founded an online bank that allows clients to transfer loans anywhere in the world using Bitcoin.
Bitbond uses cryptocurrencies like Bitcoin to bypass the Swift international transfer system to lend money across the globe rapidly and at low cost.
“Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days,” Albrecht told Reuters TV in his office in Berlin’s fashionable neighborhood Prenzlauer Berg. “With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”
Clients hold the loans in digital tokens like Bitcoin only for seconds or minutes until they are exchanged back into the currency of the country where they wish to receive the funds, avoiding the crypto currencies fluctuating exchange rates.
Bitcoin has been used as collateral for loans, but never as a way of transferring credit in currency internationally.
Albrecht’s service has been growing in popularity among clients since he launched the company in 2013. His office employs 24 people from 12 countries who manage loans for 100 clients amounting to around $1 million each month. — Reuters

DoF confident China-backed projects will pay off

THE PHILIPPINES will sign its second loan agreement with China in July, the Department of Finance (DoF) said, adding that the Philippines is capable of meeting its obligations despite higher Chinese interest rates compared with other funds on offer.
Asked which projects will be up next for signing loan agreements with China, Finance Secretary Carlos G. Dominguez III told reporters that funding will go to the New Centennial Water Source-Kaliwa Dam project.
This is the second of three projects under the “first basket” of China-funded projects. The Philippines last month signed the first loan agreement with China for the P3.14-billion Chico River Pump Irrigation Project with an interest rate of 2% per annum and a maturity period of 20 years, inclusive of a seven-year grace period.
The financing agreement for the P151.3-billion North-South Railway Project (NSRP) South Commuter Line, meanwhile, is expected to be signed in the third quarter.
The loan agreement signed with Japan for the P51-billion Metro Manila Subway Phase 1 has a 0.10% interest rate payable in 40 years with a 12-year grace period.
Mr. Dominguez said that loan rates from China are “higher than Japan,” but noted that Chinese loans are cheaper than the funds borrowed from the US in January, in the form of $2 billion worth of dollar-denominated bonds.
“It’s 2%, we can pay it. We borrowed at 3% in the US, why can’t we borrow 2% from China,” he said, while noting that Japan debt also involves third-currency exchange rate risk.
Asian Development Bank President Takehiko Nakao has warned countries participating in China-funded infrastructure projects under its Belt and Road Initiative against falling into a “debt trap” due to unsustainable borrowing.
Sri Lanka failed to repay China for loans taken on to build Hambantota port, which struggled to attract shipping traffic. As a result, it handed the port over on a 99-year lease in exchange for debt relief.
Mr. Dominguez, however, said that the Philippine projects funded by debt have better revenue-generating prospects.
“If you borrow money for projects that don’t already have underlying demand, there’s a chance that your estimates are going to be wrong and your revenue is not going to be enough. However, what are we borrowing for… we already have obvious demand and there are people willing to pay for that,” he said.
“People need that. We can pay for those projects we are financing with Chinese money.”
Mr. Dominguez described the Kaliwa Dam project as a “need” which is “long overdue.”
China has pledged about $7.34 billion in soft loans and grants to the government after the Philippines announced a China-centered foreign policy.
The projects being considered for Chinese funding include the P57.6-billion Subic-Clark Railway, the P25.63-billion Davao City expressway, and the P27.16-billion Panay-Guimaras-Negros Inter-Island Bridge.
“We have a very good credit standing, we don’t owe anybody any collateral and we are borrowing very prudently,” Mr. Dominguez said. — Elijah Joseph C. Tubayan

GSIS offers loan relief program for teachers

THE Government Service Insurance System (GSIS) will start to accept on Tuesday applications for the GSIS Financial Assistance Loan (GFAL) program for teaching personnel of the Department of Education (DepEd).
In a statement, the state-run pension fund said it will lend a maximum of P500,000 to DepEd borrowers under the GFAL program in pay down outstanding balances of loans extended by eligible private lending institutions.
Under GFAL, qualified applicants may borrow up to P500,000 provided that they have a take home pay of P5,000 after deduction of monthly obligations.
Borrowers may consolidate their loans and transfer the total amount to GSIS if they are indebted to more than one private lender.
The interest rate of the GFAL program is 6% per annum computed in advance payable in monthly installments for six years. Payments will be automatically deducted from the borrower’s salary.
Jesus Clint O. Aranas, GSIS president and general manager, said the GFAL program is a balance transfer and debt-consolidation facility in one.
“It allows the members to take a second look at their spending habits — if they are heavy borrowers, they might be spending beyond their means,” Mr. Aranas was quoted as saying in the statement.
DepEd personnel may qualify for the GFAL program if they are active and regular GSIS members with permanent status and paid premiums for the last three years.
Borrowers must not be on leave without pay, have an outstanding loan from DepEd-accredited lending institutions and have no due and demandable loan account with the pension fund.
Mr. Aranas added that the pension fund opted to open the GFAL program nationwide instead of conducting a pilot run in selected areas.
“We decided to open it to all teachers and teaching personnel nationwide because we want more teachers to benefit from lower interest rates and better terms of payment from GSIS,” Mr. Aranas said.
“Reduced interest rates and smaller amortization spells savings and higher take-home pay for our members. This will definitely lighten their load.”
Last month, GSIS and DepEd signed a memorandum of agreement witnessed by President Rodrigo R. Duterte to help teachers and other employees manage their finances, and keeping them from becoming too indebted. — Elijah Joseph C. Tubayan

Chelsea in advanced talks with foreign partners for ‘third player’ telecom bid

CHELSEA Logistics Holdings Corp. (CLC) is in “advanced” talks with foreign companies seeking to become the third entrant in the Philippine telecommunications industry.
“We’re in talks with some of the local players… We’re in advanced talks with players from countries within the region, like India, China, and Singapore,” CLC President and CEO Chryss Alfonsus V. Damuy said in a phone interview.
Mr. Damuy said the company hopes to take a minority stake in the so-called “third player,” with a larger stake to be taken by a company within its Udenna group, which is controlled by Davao businessman Dennis A. Uy, or the parent company itself, Udenna Corp..
While he did not identify the companies involved in the talks, China Telecommunications Corp. is the company nominated by the Chinese government to participate in third-player selection. Leading Indian telcos include Bharti Airtel Ltd., Idea Cellular Ltd., and Reliance Jio Infocomm Ltd. The top Singapore telcos are Singapore Telecommunications Ltd. (SingTel), which has a partnership with domestic incumbent Globe Telecom, Inc.; M1 Ltd., and Starhub Ltd.
Mr. Damuy said the company is awaiting the final terms of reference (ToR) for third-player selection to be released by the Department of Information and Communications Technology (DICT).
“It all depends on the final ToR if necessary, and if it’s aligned with what we want to do,” Mr. Damuy said.
Last month, the company amended its Articles of Incorporation, in particular the second article, to expand its primary purpose to include infrastructure facilities and systems.
Mr. Damuy had said that the move will also be beneficial in the long term once the company enters e-commerce. The company has been studying an e-commerce venture due to the growth and potential of the segment.
Chelsea reported a net profit of P115 million, up 326%, due to the acquisition of Starlite Ferries, Inc. and Worklink Services, Inc.
The government is set to select the third player within the year.
The DICT amended provisions of its memorandum order on the policy guidelines or selecting the third player. The company or consortium must have paid-in capital of at least P10 billion; experience in providing, delivering, and operating of telecommunications services for the last five years; a congressional franchise not related to either PLDT, Inc. or Globe Telecom, Inc.; and no uncontested liabilities with the National Telecommunications Commission (NTC) as of Jan. 31, 2018.
The DICT has said that the re-inclusion of the P10-billion paid-in capital requirement for the selection of the third player will not deter interested parties.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Patrizia Paola C. Marcelo

Clean Air Act review to tighten standards, tackle rural pollution

THE Department of Environment and Natural Resources (DENR) said it is conducting its periodic review of the Clean Air Act of 1999 with an eye towards stricter standards and enlisting local governemnts to crack down on rural pollution arising from the burning of fields.
Section 19 the Clean Air Act authorizes the DENR to review emissions standards every two years, especially for stationary sources of air pollution such as fuel-burning equipment and industrial plants.
With around 70% of the air pollution especially in urban areas generated by vehicles, the government’s main concern in rural areas is controlling biomass burning, which includes the slash-and-burn method known as “kaingin” as well as the post-harvest burning of fields to clear them for the next planting.
Environmental Quality Division Engineer III Jundy Del Socorro said the review hopes to make emissions standards stricter, with a Chinese crackdown set as the model. Mr. Del Socorro also said that the DENR is closely coordinating with local government units (LGUs).
“We need the LGUs [to regulate things like] open burning or kaingin,” he added.
“Although that’s not much of a big contributor to pollution, the transboundary pollutants, which are haze, are very tiny, small aerosols. They’re very light and can [stay in] the atmosphere for very long time.”
Tsinghua University Dean of the School of Environment and Chinese Academy of Engineering member He Kebin said that China was able to reduce its air pollution levels in the last five years due to stricter policies.
In a seminar at the Asian Development Bank on Friday, Mr. He said that this included the national government applying “pressure” to lower levels of government.
“We started measuring pollution monthly, and made a ranking system so that they would be pressured to arrive at their own solutions,” he added.
Mr. He, who is also a trustee of the non-government organization Clean Air Asia, noted that even though agricultural is a small source of pollution, biomass burning continues to affect China’s efforts to curb air pollution.
“Biomass burning is not largest emittor but when it reaches summer or harvest period, it becomes the source of peak emissions for the season,” he added. — Anna Gabriela A. Mogato

Napocor activates Calapan-Puerto Galera transmission line after rehab

NATIONAL Power Corp. (Napocor) brought online on Saturday the 69-kilovolt (kV) Calapan-Puerto Galera transmission line in Oriental Mindoro to help improve the reliability of power dispatch in the province, the Energy department said.
“The completed and ongoing rehabilitation projects are consistent with the orders of President Duterte and Energy Secretary Alfonso Cusi in addressing energy resiliency and supporting the economic activities of the Mindoreños,” said Department of Energy (DoE) Undersecretary Felix William B. Fuentebella said in a statement on Sunday.
He said power project in the area support the booming tourism industry in Puerto Galera and elsewhere on Mindoro Island.
Government-owned Napocor is mandated to energize far-flung, off-grid areas and islands.
Pio J. Benavides, Napocor president and chief executive officer, said the completion of the P37-million rehabilitation project will help Oriental Mindoro Electric Cooperative, Inc. (Ormeco) improve the efficiency of its 13.8-kV distribution line and save money from reduced systems loss.
“The 41-km transmission line has undergone rehabilitation works which covered the replacing of wood poles with steel and the installing of new insulators, power conductors and other line hardware,” he said.
“It can contribute to the efficiency of electricity services that will result in more savings to Mindoreños,” he added.
Right-of-way issues remain a challenge for the area, resulting in the exclusion of six structures from the rehabilitation that covered 336 pole structures of the transmission line.
“Right-of-way issues are the usual factors that hamper our energy projects. Nonetheless, we see to it that we find ways to resolve them either through further negotiations with assistance from the local government units or through re-routing measures,” Mr. Benavidez said.
He said the company “continues to explore other methods in dealing with [right-of-way] disputes.”
Earlier in the week, Napocor energized the 69-kV Mobo-Cataingan transmission line in Masbate to assist the 13.8-kV distribution line of the Masbate Electric Cooperative, Inc. (Maselco).
Napocor is also implementing other projects in the provinces of Oriental and Occidental Mindoro “to complete the transmission system loop that will allow for a more stable and reliable power supply,” it said.
The company said the projects include the construction of a switching station in Mansalay, expansion of substations in Bansud and San Jose, rehabilitation of the Calapan-Bansud 69-kV transmission line, and the installation of a 69-kV line along Bansud to Mansalay and Mansalay to San Jose. — Victor V. Saulon

Gateway airport decision up to future governments — NEDA

A FUTURE government will end up making the decision to designate a main international gateway airport for Metro Manila, the National Economic and Development Authority (NEDA) said, due to the long timelines for the airports under development around the nation’s capital.
Designating a main gateway “is not within our control. Because (the development of airports) is 10 years, at least, down the line. So it may not be the next administration, but the next after the next. We can only make definite plans for the time when the administration is still in position,” Socioeconomic Planning Secretary Ernesto M. Pernia told reporters on May 4.
After the NEDA Board approved San Miguel Corp.’s proposal to build a P735-billion airport in Bulacan, Mr. Pernia said economic planners are also looking at proposals to rehabilitate and decongest Metro Manila’s current international gateway, the Ninoy Aquino International Airport (NAIA).
Sangley Airport Infrastructure Group, Inc., led by All-Asia Resources and Reclamation, Corp. and Belle Corp., in March proposed to the government a $12-billion airport that can accommodate about 120 million passengers annually at Sangley Point in Cavite, currently a naval base with a small airport, with a concession period of 50 years.
“But there is no full feasibility study yet, or full submission of requirements,” Mr. Pernia said when asked for updates on the unsolicited proposal.
“It can only be a maximum of three, because NAIA will be one of those. They cannot operate at the same time, NAIA and Sangley,” Mr. Pernia said.
Mr. Pernia added that the NAIA redevelopment would be a “fallback” if the Bulacan or Sangley airport are delayed.
However, he said that proponents should still evaluate scenarios for “the coexistence of two big airports.”
Conglomerates Aboitiz Infra Capital, Inc., AC Infrastructure Holdings Corp., Alliance Global Group, Inc., AEDC, Filinvest Development Corp., JG Summit Holdings, Inc. and Metro Pacific Investments Corp., submitted to the government in February a P350-billion proposal to redevelop NAIA, with a concession of 35 years.
Megawide Construction Corp. and India-based GMR Infrastructure Ltd. also submitted an offer to rehabilitate NAIA for $3 billion.
Apart from the new unsolicited airport proposals, the government is currently constructing a new terminal of the Clark International Airport to help decongest NAIA. — Elijah Joseph C. Tubayan

Cash utilization by government agencies falls to 65% in April

NATIONAL GOVERNMENT agencies’ cash utilization fell to 65% in April, the Department of Budget and Management (DBM) said.
The utilization rate measures funds usage relative to the disbursement authority issued at the start of the second quarter. A year earlier, the utilization rate was 67.6%.
The Notice of Cash Allocation (NCA) is a quarterly disbursement authority issued by the DBM to government agencies, allowing them to withdraw funds from the Bureau of the Treasury to pay for contracted projects.
A total of P222.14 billion was spent by government offices in April out of the P647.83 billion the DBM authorized them to disburse, leaving a balance of P425.68 billion.
Although NCA utilization was higher a year earlier, the absolute amounts were much smaller at P143.67 billion out of P212.55 billion released, with P68.87 billion left unutilized.
Agencies have until the end of the second quarter before their NCAs lapse.
The Department of Tourism had the highest utilization rate in April at 74%, followed by the Office of the President at 73%.
The Department of Information and Communications Technology was third at 72%, followed by the 71% of the Department of Finance.
The Department of Social Welfare and Development, meanwhile, was at the bottom of the table at 41%, followed by the Department of Agriculture’s 42%.
Some 88% of NCAs released for Government Owned and Controlled Corporations was used, while the rate was 74% for local government NCAs.
The government has a P3.767-trillion budget this year, and 84% or P3.165 trillion has been released as of the first quarter, leaving a balance of P601.67 billion. — Elijah Joseph C. Tubayan