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Stockholders OK Petron’s preferred shares issuance

MAJORITY of stockholders of Petron Corp. has agreed to the company’s plan to issue preferred shares amounting to up to P20 billion, the company told the stock exchange on Tuesday.
In a disclosure, Petron said it had received the written assent of stockholders “representing more than a majority of the total outstanding common capital stock” of the company.
On March 12, 2019, the board of directors of Petron approved the issuance of 20 million preferred shares under the features provided under its Articles of Incorporation and under such terms as may be determined by its executive committee.
The board’s approval also includes the registration of the preferred shares with the Securities and Exchange Commission and the listing of the shares in the Philippine Stock Exchange.
The approval of the stockholders holding common shares was sought for the listing of the shares at the stock exchange.
Petron is the country’s largest refiner and provides close to 40% of local fuel requirements through its Bataan refinery, 30 terminals, and at least 2,400 service stations nationwide.
Petron reported a 50% drop in its net income in 2018 to P7.1 billion after a “sustained decline” in world crude prices that resulted in inventory losses of P10 billion in November and December last year.
Petron President and Chief Executive Officer Ramon S. Ang had described 2018 as a challenging year, although the company was able to capture majority of the market and remained the largest and fastest growing oil company in the country.
He said that while Petron’s long-term fundamentals remain attractive, the company would continue to be prepared and responsive to market conditions.
Last year, operating income fell 32% to P18.9 billion from P27.6 billion previously. Profits would have been higher by 21% at P17 billion if the one-time item is excluded, the company said.
On Tuesday, shares in Petron slipped 0.31% to close at P6.53 each. — Victor V. Saulon

Going Flexible: A Q&A on KMC Solutions, Inc. on the future of flexible working spaces

By Christine Joyce S. Castañeda, Senior Researcher
THE OFFICE workplace is usually associated with partially enclosed spaces and fixed working hours. Amid technological innovations and circumstances, however, it is no exception to changes. At present, the office could mean a flexible and open workspace — a stark contrast to the cramped environment employees are accustomed to.
The demand for such workspaces has been increasing and this trend is seen to be sustained in the coming years. For instance, a JLL report titled “Technology firms transforming the office landscape in Southeast Asia” released last September showed a 40% compounded annual growth rate (CAGR) in flexible offices in Southeast Asia, accounting for 2% of the office stock in the region from 0.5%-1% in 2015.
In the same report by JLL, they expect the segment to account for as much as 30% of corporate portfolios by 2030.
Similarly, a report by Pronove Tai showed a 258% surge in demand for flexible workspace in the Philippines last year to 37,000 square meters (sq.m.) from 10,000 sq.m. the previous year.
Lastly, Colliers International expects flexible workspaces in the Philippines to grow by at least 10% annually in the next three years in its report titled “Top 10 Forecast for 2019: Flexibility is the Name of the Game.” The demand, Colliers said, will be driven by the rise in the country’s micro, small and medium enterprises as well as the additional entry of multinational corporations (MNCs) and outsourcing companies searching for plug-and-play offices.
To help understand this emerging industry more, BusinessWorld sought the insights of KMC Solutions, which is one of the major flexible space providers in the country. Last month saw KMC Solutions formally launching its 36th co-working space in Filinvest City in Alabang, Muntinlupa City.
Muntinlupa was the ninth city the co-working space provider has a presence in after Makati City, Quezon City, Pasay City, Mandaluyong City, Taguig City, Pasig City, Iloilo City, and Cebu City. At present, KMC Solutions has 57,151 sq.m. of space or 10,367 seats.
All these offices have floor-to-ceiling windows and a manager’s office convertible into a meeting room. Other amenities include a community area, pantry, conference rooms, phone booths, clinic and lactation room, and a training room for health activities.
The company targets to have at least 4,000 more seats, or around 20,000 sq.m. of office spaces this year. This would bring KMC Solutions’ portfolio to about 77,000 sq.m. or around 14,000 seats.
With these, KMC Solutions’ Chief Operating Officer Tracy G. Ignacio discussed with BusinessWorld her thoughts on the future of flexible workspace and the company’s plans for the future.
Below are excerpts of the interview:
How strong is KMC Solutions’ brand in the flexible workspace provider market?
We are the largest in the Philippines with more than 40% share of the total flexible workspace inventory. We are proud of the fact that we are a Filipino company serving multinational businesses and that we are ready to compete with known brands across the globe when it comes to serving this country.
How do you make yourself distinct to clients?
Our business model is what differentiates us. KMC is focused on helping businesses enter, operate and grow in the Philippines. When we face clients, we offer them a one-stop-shop for all requirements/needs, regardless of the size and/or the growth stage their business is in.
Office space is only one KMC service, we put emphasis on other necessities such as staffing requirements, IT services, legal advice and office build-outs to name a few.
What are the advantages of renting flexible office spaces? How about its disadvantages?
The major advantages of renting flexible offices are:
(a) Less cost on operating expenses. In flexible offices, businesses would not need to spend much on office construction/maintenance. Flexible office operators provide the facility, equipment, and amenities needed by businesses. For businesses who are trying to feel their way through the market, or in the process of building a base of operations, going for a flexible office is a practical choice. It minimizes financial risk overall — definitely a practical choice for startups, SMEs (small and medium enterprises) or foreign businesses entering the Philippines.
(b) Ability to scale fast. Flexible offices provide businesses with room to scale. Whether they expand in manpower or opt for leaner operations, flexible offices allow them to do this with minimal or no cost at all for physical adjustments. With flexible offices having all the tools ready for operations at any time, ideally, all the clients need to do is to plug in and do their work.
The main consideration that businesses must make when occupying flexible office spaces is its shared environment. Commonly, flexible offices have dedicated private rooms, but the entire facility is shared — specifically the common areas such as the pantry or the lounges. Giving respect for the other clients and employees is a top priority in our spaces.
Can you explain to us how the system between you and your client works?
We treat our clients as business partners and fellow entrepreneurs. We make it a point to know and understand their business as well as form close relationships with them. We adjust our work relationship based on how much guidance and support they need from us.
Normally, we empower our clients to make the business decisions themselves. Our role is only to provide advice and support through those decisions. We also make sure that they are involved in our endeavors. Whenever there is an opportunity to share knowledge or celebrate milestones, we get them involved in it. We make them part of the entire KMC community.
Were there any challenges you experienced when you started this business?
This is a very capital-intensive business as most of the costs are upfront without the guarantee of when you will sell the seats. The first few years, we were very conservative and when we had enough cash saved, we grew and the rest is history. Aside from that, scouting new locations to expand in was tough as the idea of the flexible workspace was quite new to landlords.
Can you tell us what your company has attained over the past five years? How did your company perform last year?
We have experienced rapid growth in the last five years of operating. From 2014, we have nearly quadrupled the number of flexible spaces we operate. From 10, we now operate 36. In 2018 alone, we opened 10 offices — the most we have in a year’s time. Seat count-wise, that’s an additional 8,500 seats, translating to 8,500 jobs. We saw our products and services improve as well. A side-by-side comparison of our space offerings between 2014 and 2019 show our improvement in overall design and location selection. Revenue-wise, we reached our target for 2018 and are expecting to replicate the same feat this year.
What are your prospects for expansion across the country? What are the factors that determine where to expand?
There are a few factors that help us decide why we need to expand and where we should expand next. We regularly base our expansion decisions on the speed of our occupancy and the demand from both current and new clients. Aside from catering to new client requirements, our current clients continue to grow. To keep up with the changes, we continuously search for the right venues that will serve both types of clients properly.
With the help of our sister company, KMC Savills, we update ourselves with the latest trends in the property sector through their research. There are a few basic things we keep an eye out for when expanding in a new location:
(a) Infrastructure. We make sure that the office we’re setting up is accessible to both private and public transportation. We want our clients to work in locations that are conducive to do business in, thus the selected location’s development plan plays a role in our decision. The infrastructure should also have room for expansion should there be a need to scale in the area.
(b) Convenience. We also look into what surrounding establishments can help our clients and employees have better work experience. The availability of restaurants, malls, convenience stores, etcetera, also plays a role.
(c) Population. Populated areas have relatively large talent pools to tap and we see this as an important factor in opening a new site. We want to provide more jobs for the people living in the selected area, and at the same time, provide accessible talent to our clients who will be operating in the new locations.
Where do you see growth in flexible workspace rental coming from? (Which industry and region)?
BGC (Bonifacio Global City), Taguig and the Makati CBD (central business district) are still the hottest areas for flexible office space growth given the infrastructure and the amount of business growing in the areas. The cities we believe that are great for flexible workspace expansion are Ortigas (Pasig), Quezon City and Alabang.
The main driver for flexible office space is flexible work. Right now, the IT-BPO (information technology-business process organization) industry still leads in flexible office space occupancy because they apply flexible work terms for their employees more often than other industries do. Their utilization of technology plays a big part in their ability to do so.
Flexible working spaces have seen tremendous growth according to various reports. Do you see this trend to be the same for the Philippines?
We do confirm that there is an increasing trend for flexible workspace growth in the Philippines. From our end, the occupancy of all 10 new offices we launched last year showed that demand for the spaces is strong. We now see MNCs requiring their headquarters here to transfer to this kind of setup, which is something we did not see in the past.
Another significant sign of a growing market for flexible workspace industry in the Philippines is the entrance of international players. Their presence in the country shows that we are embracing new ways of working — and this is favorable to international businesses.
We see further expansion in this industry as flexible workspaces are transforming the image of the office. It is no longer just a place for business, the activities you can do in it promotes a lifestyle.
What is your outlook for the company in terms of revenue?
Our target for 2019 is to increase our revenue by almost 80% —something we have not done in recent years and especially not when we are already at this size. However, we continue to be bullish as we see inevitable growth in this market as a response to the changing work culture, globally and here in the Philippines.

Security Bank plans to issue P20B in LTNCDs

SECURITY BANK Corp. is set to issue P20 billion worth of long-term negotiable certificates of deposit (LTNCD) to raise fresh funds.
It is also planning to redeem P10 billion in unsecured subordinated debt notes in July, ahead of its maturity date of 2024.
In a disclosure to the local bourse on Tuesday, Security Bank said its board of directors approved the issuance of up to P20 billion in LTNCDs.
“[It’s] still premature for us to give details,” Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. told BusinessWorld in a text message.
Like regular time deposits offered by banks, LTNCDs offer higher interest rates. However, LTNCDs cannot be pre-terminated but can be sold on the secondary market, making them “negotiable.”
Security Bank raised P5.8 billion in May last year, marking the second tranche of its P20-billion bond program and following the P8.6 billion raised in LTNCDs in November 2017.
On Thursday, Mr. Salcedo said the bank is looking at issuing some LTNCDs and peso-denominated bonds within the second half of 2019.
“We are looking at that in the second half, not in the second quarter,” he said.
Meanwhile, the universal lender is set to exercise its option to call on its P10-billion subordinated securities on July 12, according to the regulatory filing.
Carrying a 5.375% interest rate, the unsecured subordinated notes were issued on July 11, 2014 and was supposed to mature 10 years later. The debt papers were callable after five years.
“There is step up in interest rate paid if we don’t redeem,” Mr. Salcedo said yesterday.
The central bank ordered universal and commercial banks at the start of 2014 to shore up its buffers against financial stress — a requirement under the Basel 3 regime introduced by the Basel Committee on Banking Supervision in the wake of the 2008 global financial crisis.
Call options are usually exercised to take advantage of low interest rates regimes.
Security Bank booked a net profit of P8.6 billion in 2018, down 16% from a year ago due to decrease in trading gains and higher provisions for income tax.
Shares in Security Bank closed at P172 apiece on Tuesday, up P4.30 or 2.56%. — Karl Angelo N. Vidal

Of poetry and the National Anthem

THE Cultural Center of the Philippines’ Performatura: Performance Literature Festival is back for its third installment as it once again “highlights the rich tapestry of Philippine artistic traditions that leap beyond the written word.”
The festival will be held from April 5 to 7 in various venues inside the Cultural Center of the Philippines (CCP) in Pasay City.
This year’s theme, “Ang Mamatay nang Dahil Sa ’yo” (To die for you), tackles the issue raised last September by Senate President Vicente C. Sotto III who said he wanted to change the last line of the Philippine National Anthem to give it a more positive spin.
“The Philippines has so many more important issues but what our legislators busy themselves doing is changing the last line of the National Anthem,” multi-awarded poet and festival director, Vim Nadera Jr., told the media during a forum on March 20 at the Kamuning Bakery and Café in Quezon City.
Performatura is a biennial festival which features performances, poetry readings, literature classes, art talks, regional chanters, book discussions, a slam poetry contest, film screenings, a book fair, art exhibits, and interviews with renowned writers at various venues in the CCP.
But beyond the National Athem, this year’s Performatura (a term Mr. Nadera coined by combining the words “performance” and “orature”) also “alludes to issues that are relevant and [are] being discussed in our society today,” said a press release.
“‘Ang Mamatay nang Dahil Sa ’yo,’ can mean a lot of things to different people,” Mr. Nadera said, noting that this is what he wants to achieve in the poetry slam that will be held during the festival.
A poetry slam is a competition in which poets perform spoken word poetry and are judged by a panel.
The first day of the festival will be dedicated to literature in general and spoken word performances. Among the highlights of the first day will be an interview with Resil Mojares who was named National Artist for Literature last year, while Dumagats from Mauban, Quezon province will stage the story of their local hero, Gat Uban.
Kuwit, the literary group of the Philippine High School for the Arts, will lead a set of performances such as storytelling with the National Library of the Philippines’ Storytellers and Puppeteers.
In the afternoon, a film by poet and filmmaker Khavn dela Cruz will be screened for free at the CCP Dream Theater while US-based poet and visual artist Sam Roxas-Chua will teach Asemic Writing during the Literaturo segment. His artworks will also be on view during the festival.
The second day will honor National Artist for Visual Arts Francisco V. Coching, who is best known as a master illustrator and storyteller behind Filipino comics from the 1950s to the ’60s.
The Coching family, through Lulu Coching and Marabini Coching Williamson, will “give an intimate portrait of Coching as father, uncle, and lolo (grandfather),” said the release.
Students from the Eastern Samar National Comprehensive High School will read Mr. Coching’s comic book Lapu-lapu in front of an audience, while the Pinoy Reads Pinoy Books Book Club will hold a book discussion about Mr. Coching’s El Indio.
Tadhana, a spoken word group, will also pay homage to Mr. Coching through a set of literary performances by female spoken word artists in honor of Mr. Coching’s women warrior characters like Mara-bini, created in 1935.
Noted comics artists Rico Rival, Randy Valiente, and Shaun Garcia will give tribute to Coching through talks and art activities while Liwayway Magazine’s Ernie Patricio will share his techniques in illustrating comics.
Veteran illustrator Danny Acuña can be commissioned to do on-the-spot portraits at the CCP Main Lobby that day. Performatura visitors may also view the ongoing Coching Birth Centennial Exhibit entitled Nasaan ka na, Mara-bini?, curated by Alice Sarmiento.
The last day of the festival is in honor of the National Artist for Literature Edith Tiempo in commemoration of her birth centennial.
Fictionists and poets who were influenced by Tiempo will be having a tribute performance including poetry reading and talks. An interactive centennial exhibit curated by Ateneo de Manila University professor Danilo M. Reyes and artist Gwen Bautista will also be on view.
Podcast producers Pakinggan Pilipinas will lead a series of readings of Ms. Tiempo’s works, while Silliman University’s Kahayag Dance Company, opera singer Katrina Marie Saga, and pianist Jasper Domingo will perform “Bonsai,” one of Ms. Tiempo’s most anthologized poems.
Artist Annie Pacana Lumbao will show her projection art based on Ms. Tiempo’s poem, “City Man.”
Performance literature expert Azam Rais of Malaysia will showcase his talent while a workshop conducted by University of the Philippine’s Dr. Belen Calingacion will teach how to use Ms. Tiempo’s poems as material for a speech choir.
Film critic Ed Cabagnot will discuss Ms. Tiempo’s milieu using the film A Nation is Born, believed to be the first film shot in Dumaguete.
The Performatura: Performance Literature Festival will run from April 5 to 7 at the Cultural Center of the Philippines, Pasay City. Admission is free though visitors are encouraged to donate a book which will serve as an admission ticket. A book is equal to a whole day admission and the books will go to CCP partner libraries. For more information, visit https://www.culturalcenter.gov.ph/index.php/events/literature/performatura-2019-performance-literature-festival/details. — Zsarlene B. Chua

Regal Hotels looking for opportunities to expand

By Vincent Mariel P. Galang, Reporter
HONG KONG-BASED Regal Hotels International is looking for opportunities to bring its hospitality services overseas, including the Philippines.
“I believe our company is always looking into expanding outside of Hong Kong, and mainland China if there is a right deal…. if the location is right… why not? We’d love to,” Peter Chiu, vice- president for project of Regal Hotels, told reporters in Makati City on March 25.
Formed in 1979, Regal Hotels is the hospitality arm of Hong Kong-based Century City Group. It currently has over 10,000 rooms across 24 locations in Hong Kong and Mainland China.
Twelve hotels are in Hong Kong, while rest are spread across China. The company also owns Campus La Mola, a hotel located in Barcelona, Spain.
Peter Martin, group director for project of Regal Hotels, said what sets the company apart is it owns the property where the hotel stands.
“The group is always interested in expanding. Generally, we look to buy our own property. We’re very particular to make sure this… location can offer a lot of value to customers if it does then we know if we do a good job we can make it pay. Sure, we’re interested always and exploring but it depends in the location,” Mr. Martin told BusinessWorld in an interview.
Mr. Martin said Regal Hotels is very particular about choosing the right location for the hotel.
“Since we own the properties, we are very particular to make sure… Is this the destination (guests) would like?… Because if not, we’re not going to spend a huge amount of money investing on our own… A lot of effort goes into buying land, building the property and operating a hotel that we know customers are actually going to seek out and desire. This is a very different mindset from a management company wherein they don’t own the property,” he explained.
The company operates Regal Hotel and iClub Hotel. Regal Hotel is a full-service hotel that caters mainly to families.
“They are getting a traditional full-service (hotel) with full facilities.. They are designed for families,” Mr. Martin said.
On the other hand, iClub, a select-service hotel, attracts younger, tech-savvy travelers.
“[For] those young travelers traveling in ones or twos… They travel light. They didn’t want to pay for facilities they, rarely, will use. They want to explore the city. Hong Kong is one of the cities you can explore,” Mr. Martin said.
The company’s hotels are usually located near tourists spots. A shuttle is usually provided for guests who want to visit these spots.
For example, Regal Riverside Hotel, where Mr. Chiu is the general manager, is just a few minutes away from Hong Kong Disneyland.
“We’re not just one or two properties. If you’re coming and you just want a night to stay by the airport… then we’ve got that covered. If you want to do leisure in a traditional destination, we’ve got that covered. If you’re a little bit budget conscious… we’ve got that covered,” Mr. Martin said.

2019 a better year for property stocks following last year’s plunge


By Mark T. Amoguis, Researcher
INVESTORS were cautious last year on property stocks amid high interest rates that increased borrowing costs, but market watchers still consider the sector on their shopping lists account of strong demand for residential, office and retail spaces.
At the close of last year’s trading, the bellwether Philippine Stock Exchange index (PSEi) shed 12.8% year-on-year to 7,446.02 versus Dec. 29, 2017’s 8,558.42 finish.
This decline was also reflected in the 18-member property sub-index, which declined 8.8% to 3,627.98 by the close of last year’s trading, a turnaround from the 29.7% year-on-year uptick recorded at the close of 2017.
The Philippine stock market is composed of 270 member companies, with 38 belonging to the property sector.
Among property stocks, DoubleDragon Properties Corp. registered the biggest fall as it shed 55.1% of its stock price from last year. It was followed by the price declines seen in Belle Corp. (-40.5%); Starmalls, Inc. (-38.7%); Primex Corp. (-38.1%); and Philippine Realty and Holdings Corp. (-31.5%).
On the other hand, Philippine Infradev Holdings, Inc. (formerly IRC Properties, Inc.) was the top gainer as its share price surged by 204.1% year-on-year last year. Trailing behind were MRC Allied, Inc. (34.3%); Philippine Estates Corp. (32.4%); Sta. Lucia Land, Inc. (23.8%); and 8990 Holdings, Inc. (20.4%).
Market watchers attributed the tightening of monetary policy as the main cause of dampener for property stocks.
“Some factors that weighed on property firm’s performances were the prevailing interest rates, land appreciation prices, influx of POGOs (Philippine offshore gaming operators) to name a few,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said.
The Bangko Sentral ng Pilipinas (BSP) fired off a cumulative total of 175-basis-point (bp) increase to the policy rates to rein in surging inflation last year that went to as high as 6.7% in September and October, a near-decade high. Inflation averaged at 5.2% last year.
Mandarin Securities Corp. research analyst Zoren Philip A. Musgni had the same view, saying that many expected the higher market rates from rate hikes to “ultimately impact mortgage rates and the take-up of properties.”
For Jeffrey Lucero, equity analyst at RCBC Securities, Inc., mortgage rates increased by as much as 100 bp to 175 bp following interest rate hikes implemented by the central bank.
“Based on our estimates, a 100-bp increase in mortgage rates will increase monthly mortgage payments by an average of [approximately] 7% to 11%, which we reckon is manageable given annual wage increases and the additional disposable income provided by TRAIN 1,” he said, referring to the first package of the Tax Reform for Acceleration and Inclusion Law that took effect in the beginning of last year.
“The negative impact will likely be more pronounced on [real estate] sales to investors given that rental yield to opportunity cost has become little to negative…I think that impact of rising interest rates will be more pronounced to investors than to end-users,” Mr. Lucero said.
POTENTIAL GROWTH DRIVERS AND OUTLOOK
Despite last year’s dampener, analysts are still optimistic on the sector’s growth prospects given the sustained demand for residential projects as well as office and retail spaces.
“A lot of property companies are still undervalued because of the significant increase in land prices in recent years,” said Richard G. Laneda, research analyst at COL Financial Group, Inc.
“Demand for residential projects are still very robust. Demand for office spaces are still growing due to higher BPO (business process outsourcing) demand. Retail is also doing very well as increasing disposable income is translating to higher spending, especially in food-related products,” he added.
Mandarin Securities’ Mr. Musngi was likewise upbeat: “We have a positive outlook for property companies as they continued to provide strong earnings results despite difficult economic conditions such as higher inflation and interest rates.”
For Piper Chaucer E. Tan, client engagement officer and research associate at Philstocks Financial, Inc., the Philippines remains a “sweet spot” for investors due to its dynamic workforce and young demographics.
“We think that this may be an advantage against our Asian peers mostly on office and commercial leasing and this is also a driver in bolstering economic growth going forward,” he said.
Regina Capital’s Mr. Limlingan, for his part, was more cautious: “At the end of 2018, we were overweight on property companies. However, we have changed this to neutral given that prices have jumped in the last [two-and-a-half] months.”
“We believe that investors should be more selective with the timing, as to enter during any correction,” he said.
Following the downtrend in 2018, Philippine equities rebounded this year with the PSEi having already reached the 8,000-levels by the ninth trading day. This rally was fueled mostly by expectations of decelerating inflation and the optimistic views on trade relations between the US and China, which led to the continued flow of foreign funds back into the local bourse.
As of March 21, the property sub-index is up 10.1%. Upticks in share prices were seen in some member companies in the counter. One is that of 8990 Holdings, Inc., whose stock price grew 55% since the start of the year, followed by Vista Land & Lifescapes, Inc. (35.9%); Century Properties Group, Inc. (31.8%); DoubleDragon Properties Corp. (28.1%); and Megaworld Corp. (19.6%).
According to analysts, the expectations of loosening monetary policy from the central bank, revisions to the real estate investment trusts (REITs), and the passage of the second package of the government’s tax reform program will likely drive the stock prices of these listed property firms.
The Securities and Exchange Commission targets to release the revised guidelines on the REITs within the first half of the year after taking the requests of the Department of Finance and the Bureau of Internal Revenue to ensure that money raised through REITs will be reinvested in the country.
REITs are listed companies that own and operate income-generating real estate assets like offices, apartment buildings, hotels, warehouses, shopping centers, and highways.
Congress passed Republic Act No. 9856 — known as the REITs Law — way back in 2009, but taxation issues have prevented companies from offering this investment vehicle.
“REITs could significantly boost profitability. Under the REITs law, at least 90% of a REIT’s income should be distributed as dividends annually and such dividends are tax-exempt,” RCBC Securities’ Mr. Lucero explained.
“Hence, this would save a company 27% tax on its investment properties’ income, which in effect will boost the rental yield of investment properties,” he added.
On March 21, the BSP kept benchmark interest rates unchanged, which marks the third straight meeting that kept rates within 4.25-5.25% and the key rate of 4.75% still at a decade-high.
The central bank said it was not yet time to start reversing the 175 bp total increase made in 2018, as inflation has steadily dropped to 3.8% in February, from a nine-year peak of 6.7% in September and October.
Meanwhile, newly appointed BSP Governor Benjamin E. Diokno has said that there is room for monetary easing following inflation slowdowns, as he looks to cut the banks’ “very high” reserve requirement ratio (RRR) in four successive moves this year, which, if realized, could bring down the RRR to 14% by early 2020.
Meanwhile, the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, the government’s second tax reform measure, languished at the Senate’s committee on ways and means. The lower chamber’s version was approved in September last year.
It seeks to cut the corporate income tax rate gradually from 30% currently to 20% by 2029 via a two-percentage-point reduction every other year starting 2021. This will come alongside a uniform scheme for tax incentives that will replace various types granted by investment promotion agencies and likewise put a cap on the number of years in which a company can enjoy such perks. This reform has been flagged as a major risk by businesses.
As the market awaits the full-year 2018 reports of the listed property companies, analysts said companies’ will likely sustain their growth from the previous year.
“Earnings will likely grow at the same pace as last year, as industry drivers remain stable (residential demand, office & mall occupancies) and as most property companies have maintained the same level of capex (capital expenditure)/launches for 2019,” Mandarin Securities’ Mr. Musngi said.
“Possible sources of growth would be from the industrial or logistics side, as foreign manufacturing companies are slowly pouring in to the Philippines to escape the negative impact of the US-China tariffs/trade war,” he added.
For COL Financial’s Mr. Laneda: “Earnings this year will continue to grow owing to higher residential revenues from booking of sales made in the past 18 months. Leasing segment will also see higher revenues as all companies are expanding their portfolio.”
Philstocks’ Mr. Tan expects the sector’s “stellar growth” this year in terms of prices per square meter “mostly on office leasing and residential sales amid low supply of office spaces.”
“It is estimated that the office spaces would be exhausted by the year 2022,” Mr. Tan said.
Regina Capital’s Mr. Limlingan said that sales reservation for mid- to low-cost housing projects “will likely be tempered” by higher borrowing costs.
“Given this, we believe the higher-end residential segment will still see sustained growth given they are less sensitive to these changes. The retail sector will continue to experience stable growth as well through recurring income,” he added.

Goldman downplays menace of inverted yield curve

GOLDMAN SACHS Group Inc. added its voice to those advising against panic over the inversion of the US yield curve, which has served as a recession warning in the past.
The proportion of the yield curve that’s inverted isn’t as high as in past recessions, and part of the reason 10-year Treasury yields have slumped can be attributed to dynamics outside the US, Goldman strategists led by Alessio Rizzi and Christian Mueller-Glissmann wrote in a note Monday. American credit spreads also aren’t telegraphing stress, they highlighted.
While 10-year yields fell below three-month rates for the first time since 2007 on Friday, they remain above those on two year notes. Inversion has traditionally been considered an omen of recession in the US within the next 18 months or so.
“Recession risk remains somewhat low even amid an environment of lower returns” and a high rate of change for volatility itself, the Goldman strategists wrote. While the economic backdrop indeed may be less favorable, hurting profit growth, “equity and risky assets in general can have positive performance with a flat yield curve,” they wrote.
It’s all consistent with the Goldman strategists’ conclusion for some time now that risk assets will see “low but positive returns.”
Others agree that things aren’t so dire. Fidelity International is among those anticipating a pick-up in growth later this year. Andrea Iannelli, a London-based investment director at the fund manager, wrote Tuesday that “given how much pessimism is already baked into prices, we favor an underweight stance to US rates.”
At Morgan Stanley, strategist Matthew Hornbach thinks the three-month-10-year inversion would need to continue at least until the June Federal Reserve policy meeting before policy makers get “uncomfortable. If it continues beyond that, the Fed may begin to contemplate actions necessary to keep the party going.”
For his part, Chicago Fed President Charles Evans said Monday that yield curves recently have been “throwing off a slightly higher probability of recession” but they have “ often misfired” in the past. “It is certainly something to be paying attention to.”
Former Fed Chair Janet Yellen said in Hong Kong Monday that inversion happens very easily and doesn’t signal on its own that a US recession is imminent.
A simple model shows the probability of a US recession at a “relatively high 20% over the next 12 months,” according to Westpac Banking Corp. foreign-exchange strategy head Richard Franulovich. However, “a broader recession probability model that incorporates equities, credit spreads and the ISM manufacturing survey points to very negligible recession risk.”
Franulovich highlighted that “equity market momentum remains much stronger than what is typically seen into recessions,” and “the same applies for both the ISM index and credit spreads.” — Bloomberg

Superb Angels leaves one wanting more

By Giselle P. Kasilag
Theater Review
Angels in America Part One: Millennium
Approaches
by Tony Kushner
Directed by Bobby Garcia
Produced by Atlantis Theatrical
Entertainment Group
Ongoing until April 7
Carlos P. Romulo Auditorium,
RCBC Plaza, Makati City
WHEN THE Atlantis Theatrical Entertainment Group opened the Carlos P. Romulo Auditorium for the initial offering of its 20th season production last Friday, it performed for what could be the most theatrically star-studded audience possible. There was Lea Salonga, Monique Wilson, Michael Williams, and the cast of Ang Huling El Bimbo in attendance to name a few. It was like being in a family reunion of kindred spirits bound by love for the theater.
It was to this formidable group of spectators that Angels in America opened to. As if the material was not challenging enough, the company also had to perform before a massively knowledgeable audience — many of whom have either seen the original production or have performed in one of the various versions of Tony Kushner’s masterpiece.
But director Bobby Garcia is no stranger to Angels in America. He directed its Philippine premiere in 1995. Twenty-four years later, he returned to the material with a different perspective, a fresh approach, and a capable cast that went on to stun and engage what could have been a very difficult audience.
Set in 1980s New York, the curtain opened to a funeral, and a promise of sooner-than-expected death. Prior Walter (Topper Fabregas) has AIDS and his lover, Louis Ironson (Nelsito Gomez) was not taking the news well.
Elsewhere, Joe Pitt (Markki Stroem), a deeply religious, low-level Department of Justice employee, is being offered a good position by the very politically well-connected Roy Cohn (Art Acuña). The catch? He has to move to Washington DC and Joe is not sure his pill-popping wife Harper (Angeli Bayani) can handle the change.
Harper deals with the news the only way she knows how: more pills to escape the burdens of reality and her loveless marriage. Joe is drifting further and further away. And during a hazy hallucination that is somehow invaded by Prior, she wonders out loud for the first time if her husband is gay.
Roy has problems of his own. A visit to the doctor (Cherie Gil) reveals that he had AIDS — a disease, he insists, he could not possibly have since it only affects homosexuals. Regardless of his sexual activities, he is not a homosexual and cannot possibly have AIDS. Instead, he declares, he has liver cancer.
Eventually, all their lives end up weaving into each other’s — five lives struggling to survive in an unforgiving city.
Multi-dimensional best describes the performances of the lead characters, particularly of Art Acuña, Topper Fabregas, and Markki Stroem. In the hands of less experienced actors, the roles would have been reduced to the stereotypical sleazy politician, ailing drag queen, and closetted gay man. But in the hands of Acuña, Fabregas, and Stroem, the nuances of the characters were gently coaxed and allowed to blossom.
Clearly, Acuña understood that Roy is not a simple influence-peddler. He is a very complex character — a man who understood what made powerful men tick, and how to use it to his advantage. That scene where he learned he had AIDS was a stunning example of a nuanced and explosive performance. He was clearly scum but the audience couldn’t help but ache for him and his situation.
Fabregas, on the other hand, offered a particularly realistic portrayal of a person who knew the end was near. The acceptance, the regret, the conflict between wanting to fight for life and simply making do with what time still remains, his Prior was handled with much maturity and grace. And those little touches such as the particular way that he rubbed his nose with the back of his hand made it clear that Prior was in the house and Fabregas had left the building.
Stroem was a revelation. It was a tentative beginning but he grew into the character — allowing the conflict of his identity crisis to reveal itself through the gentle stressing of certain phrases in conversations rather than forcing a mannerism or action. It was a very thoughtful performance that clearly illustrated how much he has grown as an actor.
The successful performances, however, were made possible by the support of the other actors. Gomez’ Louis, Bayani’s Harper, Andoy Ranay’s Belize, and the various roles that Cherie Gil and Pinky Amador took on all served to move everyone’s performances to the next level. It was easy to see that there was much generosity in this cast.
But the 2019 version of Atlantis’ Angels in America is the stunning piece of theater that it is because of the vision of Bobby Garcia. The beautiful set design, the sounds, the costume, and the foreboding that the lighting design brought all had a clear purpose in Garcia’s grand vision.
At its heart, Angels in America is about the challenges of relationships. A loveless marriage, a partner that is ill, or not having a relationship at all — these are issues that anyone of any gender, race, or religion has experienced at one point or another. There was a quietness to Garcia’s approach that heightened the intensity of the material. It was gentle, and kind, and very introspective. There were bells and whistles but used with much restraint, and only to move the story forward. Angels in America is a wonderful example of why theater (and the arts) is very necessary at any day and age.
Despite the length of the material, time simply flew and the audience was left wanting more. By the time the curtains dropped to announce that the second half was “To be continued…” the audience was willing to stay in their seats and demand that the story be completed that same night. Unfortunately, it will be a year before the story finishes. Atlantis will stage the second half next year which will likely mean another family reunion for theater stars.
Tickets are available at TicketWorld (www.ticketworld.com.ph).

Zilingo aims to ‘democratize’ fashion industry in Philippines

SINGAPORE-BASED fashion and lifestyle e-commerce platform Zilingo has entered the Philippines hoping to “democratize the fashion and beauty industry” by streamlining the supply chain and “empower[ing] businesses” by providing services including product development and working capital.
“Zilingo isn’t just about B2C (business to consumers), we’re trying to help the entire ecosystem,” Ryza Dipatuan, marketing director for Zilingo Philippines, told BusinessWorld during the platform’s Philippine launch on March 21 at Antonio’s in Tagaytay City.
“We’re trying to solve the highly fragmented fashion supply chain,” she said during her presentation.
Zilingo, established in 2015 by Ankiti Bose and Dhruv Kapoor, does this by having six services — Zilingo, the consumer app; Asiamall, the business to business (B2B) site; Label by Zilingo which provides private label as a service; Z Seller which provides electronic point of sale (EPOS) and inventory management; Z Trends which provides trend forecasting; and FZ which serves as the company’s investment arm.
Ms. Dipatuan said that currently the Philippines has the Zilingo site, with some sellers having been given funding or are selling via the B2B platform.
The Zilingo site opened in the Philippines during the latter half of January.
“I think the goal really is to bring all these services to the Philippines soon,” she said.
Despite being in the country for barely three months, Ms. Dipatuan said they are optimistic Filipino shoppers will take to Zilingo because the current e-commerce market in the country is “mature enough” and it can handle a new player in the market with a different value proposition.
They might have a limited number of brands on the Philippine site but Ms. Dipatuan said they are actively recruiting sellers to their sites and are encouraging sellers, especially those selling plus size garments, to put their wares on the site.
“We’re very inclusive and we welcome everyone,” she said before adding that they aim to “democratize fashion and the freedom of its expression.”
They even have a dedicated tab for Muslim fashion.
Zilingo, Ms. Dipatuan explained started when Ms. Bose went to Thailand’s Chatuchak market which has over a thousand stores and wondered why some stalls didn’t sell their wares online.
Four years later, the site currently has 25,000 merchants and 1,200 factories across 15 countries including the United States, Australia, Bangladesh, and Vietnam.
Ms. Dipatuan said that while they cannot claim to have the lowest prices, they have lower prices than other platforms due to the company “optimizing the supply chain” by cutting out the middleman ensuring “30-70% efficiencies for merchants and customers.”
The company has partnered with the Panasonic Manila Fashion Festival and will be bringing the designs straight from the runway to the site.
Zilingo can be accessed via www.zilingo.com/en-ph or via the mobile app free for download on both the Google Play Store and the Apple App Store. — Zsarlene B. Chua

Is it getting more or less miserable in the economy?

Is it getting more or less miserable in the economy?

How PSEi member stocks performed — March 26, 2019

Here’s a quick glance at how PSEi stocks fared on Tuesday, March 26, 2019.

 
Philippine Stock Exchange’s most active stocks by value turnover — March 26, 2019.

Foreign domestic workers account for 3.6% of HK economy, study finds

By Gillian M. Cortez
Reporter
FOREIGN domestic workers account for 3.6% of Hong Kong’s gross domestic product (GDP) yet still suffer from financial inclusion, according to a study conducted by a Hong Kong charity trying to quantify the economic contribution of household help and caregivers.
Hong Kong-based Enrich, in its “The Value of Care” report for 2019, said: “This report reveals that migrant domestic workers contribute significantly to economies both in their home countries and destination cities, but yet are financially excluded and return home financially worse off.”
Some 3.6% of Hong Kong GDP is generated by migrant domestic workers, with Enrich noting, “(T)he research shows that in 2018, migrant domestic workers (MDWs) contributed an estimated $12.6 billion (HK$98.9 billion) to Hong Kong’s economy, representing 3.6% of the GDP.”
Over half, or 55%, of domestic workers in Hong Kong are Filipinos, Enrich reported. In Hong Kong, some of MDWs 71% work in child care and 40% have responsibilities in elderly care. The Labor Department of Hong Kong projects that 460,000 MDWs will be needed by 2030, with 180,000 required for elderly care.
Enrich also said that Hong Kong projects demand for 600,000 MDWs by 2047.
Enrich said employing MDWs enable women in Hong Kong to have a greater presence in the labor force. Without MDWs, 49% of married Hong Kong mothers between the ages of 25 and 54 may find it difficult to join the work force.
“(I)f they do employ a MDW, the labour force participation increases to 78%. By enabling more women to join the labour force, MDWs indirectly add $2.6 billion (HK$20.1 billion) to Hong Kong’s economy, USD$2.6 billion (SG$3.5 billion) to Singapore’s economy and $0.23 billion (929 million ringgit) to Malaysia. This has an additional contribution to family well-being,” Enrich reported.
The study also underlined the economic impact of MDWs in Hong Kong, with 385,000 such workers generating an estimated HK$71.2 billion.
Despite the positive impact MDWs bring to the Hong Kong economy, Enrich said over 80% of MDWs are in debt, much of it incurred to leave their respective countries. Hong Kong MDWs take an average of 19 months to clear off their debt.
It said the indebtedness level of Hong Kong MDWs is the highest in the Asia-Pacific region, the study reported.
Enrich recommends “Improved educational opportunities and financial literacy training to ensure domestic workers are equipped with the knowledge to ensure their long-term financial security.”

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