Facebook Instagram Linkedin Twitter Youtube
Home Blog Page 11574

Merger proposals

Merger proposals, or marriage proposals by some Freudian slip: some are a good match, some are not. Or maybe we just don’t know well enough.

After a 10-year engagement to be “married,” the Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) literally “died in each other’s arms” like Shakespeare’s Romeo and Juliet (see Amelia HC Ylagan/Corporate Watch: “The Landbank-DBP merger: erase/delete/trash,” BusinessWorld, July 11, 2016). The idea of a merger between DBP and LBP started in the presidency of Gloria Arroyo and was said to be encouraged by the Bangko Sentral ng Pilipinas (BSP) “in anticipation of the wave of foreign banks that may enter the Philippine market upon the occurrence of ASEAN integration in 2015 (PNA/Asia Pulse, Feb. 16, 2016).”

In his term, President Benigno S. C. Aquino III earlier objected to the merger bill, but in February 2016, barely two months before the national elections and the sure end of his term, he signed and issued Executive Order (EO) No. 198 to merge LBP and DBP, with LBP as surviving entity. The proposal was approved in the House of Representatives; however, it was disapproved in the Senate. (Inquirer.net, Feb. 9, 2016).

Comes the new administration of President Rodrigo Duterte. The new Finance Secretary, Carlos G. Dominguez III noted “First of all, both [were] created for different purposes. I don’t see any rational reason to put them together…One is a development bank (DBP) tasked to give long-term finance. The skills you need to do that are very different from the skills you need to do short-term finance (as with LBP), particularly for farmers (BusinessWorld, June 5, 2016).” End of the affair.

Also in the term of Aquino was the brewing “affair” between the Philippine Stock Exchange (PSE), who was giving the Philippine Dealing Exchange (PDEx) the eye. The PSE was targeting to buy at least 67% of the Philippine Dealing System Holdings Corp. (PDSHC), that owned and operated the Philippine Dealing Exchange — to merge the PSE and PDEx therefrom (BusinessMirror, Oct. 01, 2014). After a year of bank funding solicitation and the courtship of shareholders of PDSHC, PSE President Hans Sicat announced, “We’re confident we can make the minimum 67% super majority. But we think we can get probably 94% to 95% stake (Rappler.com, Oct, 06, 2015).”

“PSE requested for exemptive relief on the 20% industry ownership limit of Exchanges and Exchange Controllers under Section 33.2 (c) of the Securities Regulation Code (SRC). This is required before PSE can proceed to acquire 100% of the outstanding capital stock of Philippine Dealing System Holdings, Inc. (PDS), which is the parent company of the Philippine Dealing & Exchange Corp. and the Philippine Depository and Trust Company (PDTC) and is considered an Exchange Controller. PDEx is the dealing exchange for fixed income securities while PDTC acts as depository and registry for participants for both fixed income and equity securities” (http://www.sec.gov.ph FAQs 10/2015).

The SEC raised concerns that the PSE would then be a de facto monopoly owner of all the exchanges in the country. This would significantly reduce any incentives to lower costs or improve quality on their part. This would be detrimental to public interest. Worse, the PSE’s Share Purchase Agreement with the Bankers’ Association of the Philippines (BAP) includes a 5-year non-compete clause, and Banks are largest players in the bond market (Ibid.).” End of the affair.

But see the quick rebound: “in a letter dated Jan. 16, Landbank President and CEO Alex Buenaventura sought the board’s approval for the acquisition of at least 66.67% of the PDS. He also asked the board to allow the DBP to formally engage in the transaction as the financial advisor (The Philippine Star, Jan. 19). Finance Secretary Dominguez III, ex-officio chairman of LBP, confirmed that the government will have controlling interest in the PDS/PDEx, while expressing disappointment with the PSE for not having explained how its erstwhile proposed merger with the PDS would have been for the best interest of the public (Manila Bulletin, Jan. 21).

Landbank has officially started to do due diligence on PDS (Philippine Daily Inquirer Jan. 30, 2018). It has also filed for exemptive relief on the 20% industry ownership limit in the same way that the PSE worked on this with the SEC for its proposed acquisition of the PDS then. Will the SEC rule similarly on the implications of anti-trust and perhaps monopoly?

Per computation based on 6.256 million outstanding PDSHC shares, LBP’s additional ownership of 66.67% would be equivalent to 4.171 million PDHSC shares. This, plus 1.56% (already owned through BAP), would give Landbank majority control of 68.23%, which would translate to 4.268 million PDHSC shares (Emeterio SD. Perez “Why not sell Philippine Dealing System shares to the public via an IPO? The Manila Times, Feb. 2).

Is there here a “crowding-out” of private sector opportunities vis-à-vis government, in the majority ownership by a government bank of a private dealing system? Would this be some sort of reverse privatization (government buying private)? What is the implication of a government bank owning the majority shares of a system that trades and sells mostly government bonds — 95% of its inventory?

LBP President Buenaventura said that at a price of P320 per share (which was the effective acquisition from BAP), PDS is “undervalued,” adding that purchasing the country’s bond exchange shares could be a profitable investment for Landbank (philstar.com, Jan. 19). Is BAP complaining? Has it accepted the pricing of P320 per share? Are other shareholders of PDS happy, indifferent, or unhappy?

Will the Department of Finance say whether the Landbank has or does not have “skills” or the synergy of the business, with owning the majority (and effectively primarily being responsible for) a dealing system — as Landbank is in the business of “(doing) short-term finance, particularly for farmers,” as quoted earlier, in the aborted DBP-LBP merger dreamed of for 10 years? Were there strategic plans made? Will LBP income improve, by this acquisition?

There are no details yet, and it would be unfair to accuse of self-dealing or conflicts of interest at this early time. Though SEC will not comment at this stage, informal queries assure that SEC investigation and evaluation will not be hasty. The FAQs answered in detail in the SEC website regarding the aborted PSE-PDS merger comfort the public that the same meticulous care will be undertaken to fully evaluate why a government bank should be so decided to invest so much in a private endeavor.

Will the Landbank desire for the PDS survive and last? Will a “marriage” happen at all?

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

PHL wind projects require scale to create more local jobs — Vestas

THE PHILIPPINES can benefit more from renewable energy if the government comes in to help scale up projects, resulting in job creation and boosting local production of power plant components, the regional head of Danish wind turbine maker Vestas Wind Systems AS said.

“What I want to see is bigger scale,” Clive Turton, president of Vestas Asia Pacific Wind Technology Pte Ltd., told reporters.

“The renewable energy industry needs to grow to a certain scale in the Philippines, so you can have local jobs, local production and local manufacturing that will enable the Philippines to exploit its wind and solar resource at a much much lower cost,” he said.

Mr. Turton’s statement comes months after he made a comment on the need for clarity in the local regulatory environment, especially on the government’s stance in boosting the development of renewable energy.

“There is progress,” he said, when asked what has changed since November, when he said investors wanted a clearer policy in the sector.

“We haven’t got any orders in the Philippines but I can see the market developing. I can see investors getting more and more interested in the wind sector here,” he said.

Still, he said there is room for growth in renewables, especially in replacing the capacity provided by conventional technologies.

“I think you can do a lot more to develop the local renewable energy industry. Renewable energy can supply power that’s below the coal and gas prices,” he said.

Even wind energy can be competitive with coal- or gas-fired power plants if the local industry is sizable enough, he added.

“The government needs to kind of help to jump-start the industry to create a bit of scale. It’s a scalable industry. You see it around the world,” he said. “It’s much cheaper than coal. It’s much cheaper than gas and it’s zero-emission.”

“Hybrid” power plants can also be adopted locally, he said.

“In November, we announced Kennedy wind farm in Australia and that’s a combination of wind, solar panels and storage all in one place. So you have the advantage of wind blowing at night, blowing in the mornings … and the sun shining very strongly in the middle of the day,” he said.

Aside from offering guaranteed rates under a feed-in-tariff (FiT) system for renewable energy projects, the government can offer large-scale auctions for thousands of megawatts of new capacity, Mr. Turton said.

“A FiT would do it fine or you (can) create an environment where the local utilities have tax incentives perhaps like they do in the US to develop renewable energy,” he said.

“With the scale comes the cheapness. If you look at a lot of countries in the world, when they do a big auction they will announce [that] in order to participate in the auction, a certain portion of your production has to come from this country,” he said.

“So the manufacturers were oblige to set up production inside the country where the auction is being held so long as the scale is sizeable enough,” he added. — Victor V. Saulon

‘Mindful investing’ and strategic asset allocation

Be mindful of where you are headed. This is the Desiderata of the current investing climate, and investors may wish to be reminded of this philosophy. Against a backdrop of increasingly complex business environments, socioeconomic redirection, intensive regulations and disruptive developments, institutions may find it timely to review their investment strategies and asset allocation by conducting a process called Strategic Asset Allocation (SAA).

What is SAA? It is a process whereby investment opportunities and investment vehicles are identified, tested and evaluated, along with the related risks and regulatory requirements. It is a management tool used in establishing the optimal investment portfolio mix and is often conducted simultaneously with asset-liability management and business modelling. It can also be considered a technique for determining the asset mix that optimizes returns, given specific risks taken and general risks faced. It provides a common view for any institution’s boards and management on their current state and allows discussions — from straightforward to spirited — on the direction of their investment strategies. As the risks and regulatory requirements mark the boundaries of the investments, a path is drawn to meet specific investment objectives and mandates. This process of “mindful investing” helps define both the direction and quality of investments that management can take. It answers the question “Where are we headed?”

Typically, the first vital step is to determine the target asset universe — management’s universe of investment opportunities and vehicles or instruments. The granularity of the research entailed to determine such a universe shall depend on the system processing capacity and the desired depth of analysis as set by management. The investment universe could range from familiar assets like bonds, loans and stocks to alternative assets such as property, venture and private equity, to emerging types that have not been understood or embraced by the mainstream financial system. 

Once the investment universe is clear, the next step is an assessment of the potential performance of the investments and the portfolio. This involves the analysis of historical data as well as the integration of market predictions to come up with expected risks and returns of the investment. An option is to include an asset liability management exercise where the institution’s liability profile is matched with the asset universe — a procedure that should be helpful for insurers, pension funds and other asset management companies, and even banks with increasingly long-term and development-oriented business models.

Given these considerations, an “efficient frontier” may be drawn using generalized maximization techniques. Each point of the frontier represents a portfolio with a specific mix of assets together with its returns and risks, taking into consideration the economic and business environment, market challenges and regulatory requirements. In developing the risk-return metrics for each investment or asset class, both the historical and expected returns should be evaluated against the investment objectives, while the risks should take an integrated view, covering at least market, liquidity, credit and operational risks, as well as actuarial and solidarity risks (in the case of insurers and pension funds). At this stage, the process of testing against historical results and constraints can inadvertently constrict opportunities, particularly for investments with long-term horizons. To provide a healthy check of the historical review and risk assessment process, the SAA process should always include an investment mandate review and allow asset reallocation only when the medium-term outlook has significantly changed and there is evidence of investment drift.

The final step involves the SAA tool, which can help provide an asset mix that optimizes the return at the current level of risk, and even as well at the maximum level of risk that the institution may take. The SAA process can run with multiple interdependent iterations as newer sets of information and predictions become available. Fast iterations coupled with heuristic evaluations are now possible, as scientific computing power becomes more accessible and with the fusion of the computational and data requirements. The visualized results are then used in board and management discussions for capital allocation and business modelling decisions, hopefully contributing to clarity in strategy and direction.

SAA is viewed not as a step that may be taken but rather as a necessary step for management to test, distill and clarify its investment objectives and mandates, squarely answering the question “Where are we headed?” But there are nuances that we need to consider given the heightened intensity of sociopolitical disruptions, economic realignments, digital innovations, and market dynamism — “where are we headed” is not the same as “where are we going?”

The level of investing complexity has rapidly moved from the purview of risk and volatility to the region of uncertainty and extreme conditions. There is a limit to what we can clarify from direction and in rediscovering objectives. Perhaps the question that we need to start answering now is “Why are we investing?” and using this rationale as a springboard to evolve from mindful to purposeful investing.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Christian Lauron is a Partner and Renz Kristofer Cheng is a Senior Associate, respectively, of SGV & Co.

Brazilian women say ‘No Means No’ at carnival

RIO DE JANEIRO — “No Means No” is a new battle cry for Brazilian women mobilizing against assault at carnival, a raucous party whose free-wheeling atmosphere leaves women particularly vulnerable to unwanted sexual contact.

In the wake of the Harvey Weinstein episode that triggered the #MeToo campaign against harassment in the United States, Brazilian women are out in full force — with some even sporting temporary tattoos with the message emblazoned across their shoulders, arms and chests.

Rio’s carnival — the world’s largest — falls during the city’s pre-Lenten blowout which draws millions of near-naked revelers dancing as the alcohol flows, and flows.

The feast of excess is also often the backdrop for a slew of sexual assaults, particularly against women.

Luka Borges, therefore, is tirelessly distributing the temporary “No Means No” tattoos as part of a street parade — known as a “bloco” — set to samba tunes in Rio’s center.

“There is a lot of machismo in Brazil — so doing this for carnival is really pressing,” the 28-year-old project manager told AFP.

“We women spend much more time out in the streets, wearing less clothing — then this is their pretext for aggression.”

Ms. Borges created with four friends “No Means No” tattoos, and began distributing them to women last year during some of the city’s blocos, after one of them was harassed.

Thanks to social media and a crowdfunding campaign, some 27,000 tattoos have been produced for the 2018 carnival, in Rio as well as cities including Salvador, Sao Paulo and Olinda.

POLITICAL ACT
“A lot of the time, at past carnivals, we were harassed and did not even realize it,” said Anna Studard, a 27-year-old theater producer. “We thought it was normal! But I think in the past couple of years we’ve started to realize that ‘no means no.’”

Carnival, with its totally uninhibited and ultra-sexy atmosphere is widely seen as a moment partiers can kiss and touch strangers without concern.

Yet far from taking a puritanical turn, the women behind this campaign simply say they’re simply trying to bolster the “my body, my rules” concept already familiar to many in Brazil.

“If we continue to cover ourselves, to hide, the youngest girls will have to continue to protect themselves,” said Ms. Borges. “I think it’s a political act to walk around with bare breasts, for example.”

For some Brazilians, the “No Means No” temporary tattoo sends a message beyond feminism.

“My fiance is traveling. And this tattoo will prevent anyone from spoiling my party; I feel safer,” said Caroline Fachetti, 19, who sports a striped swimsuit top and blue short shorts.

Beside her, six English tourists drink beers and take in the scene.

“It’s totally appropriate,” said James Allan, 28, of the campaign. “Brazil is years behind Europe.”

The situation for women in Brazil is not only precarious during carnival.

One in three women over the age of 16 has reported being physically, verbally or emotionally abused, according to a Datafolha survey published in March 2017, looking at data from the previous year.

That’s why Ms. Borges refuses giving the tattoos to men, despite welcoming their moral support. “It is our struggle,” she said. “It is on our body that ‘no’ must be written.” — AFP

North Korean leader invites South Korea’s Moon to summit

SEOUL/PYEONGCHANG — North Korean leader Kim Jong Un invited South Korean President Moon Jae-in for talks in Pyongyang, South Korean officials said on Saturday, setting the stage for the first meeting of Korean leaders in more than 10 years.

Any meeting would represent a diplomatic coup for Moon, who swept to power last year on a policy of engaging more with the reclusive North and has pushed for a diplomatic solution to the standoff over North Korea’s nuclear and missile program.

The recent detente, anchored by South Korea’s hosting of the Winter Olympic Games that began on Friday, came despite an acceleration in the North’s weapons programs last year and pressure from Seoul’s allies in Washington.

The personal invitation from Kim was delivered verbally by his younger sister, Kim Yo Jong, during talks and a lunch Moon hosted at the presidential Blue House in Seoul.

Kim Jong Un wanted to meet Moon “in the near future” and would like for him to visit North Korea “at his earliest convenience,” his sister told Moon, who had said “let’s create the environment for that to be able to happen,” Blue House spokesman Kim Eui-kyeom told a news briefing.

A Blue House official said Moon “practically accepted” the invitation.

“We would like to see you at an early date in Pyongyang,” Kim Yo Jong told Moon during the lunch, and also delivered her brother’s personal letter that expressed his “desire to improve inter-Korean relations,” the Blue House said.

The prospect of two-way talks between the Koreas, however, may not be welcomed by the United States.

Washington has pursued a strategy of exerting maximum pressure on Pyongyang through tough sanctions and harsh rhetoric, demanding it give up its pursuit of nuclear weapons first for any dialogue to occur.

“This is the strongest action yet by North Korea to drive a wedge between the South and the United States,” said Kim Sung-han, a former South Korean vice-foreign minister and now a professor at Korea University in Seoul. Moon asked the North Korean delegation during Saturday’s meeting to more actively seek dialogue with the United States, saying that “early resumption of dialogue (between the two) is absolutely necessary for developments in the inter-Korean relations as well,” the South said.

It said the two sides held “a comprehensive discussion… on the inter-Korean relations and various issues on the Korean peninsula in an amicable atmosphere,” but did not say whether the North’s weapons program was mentioned.

A visit by Moon to the North would enable the first summit between leaders from the two Koreas since 2007, and would mark only the third inter-Korean summit to take place.

EXTREME PRESSURE
Pyongyang conducted its largest nuclear test last year and in November tested its most advanced intercontinental ballistic missile that experts said has the range to reach anywhere in the United States.

US President Donald Trump and the North Korean leadership traded insults and threats of nuclear war as tensions rose, with Trump repeatedly dismissing the prospect or value of talks with North Korea.

US Vice-President Mike Pence, who had attended the opening ceremony seeking to counter North Korea’s attempt to use the Olympics for propaganda, said the United States, South Korea and Japan were in complete agreement on isolating Pyongyang over its nuclear weapons program.

“There is no daylight between the United States, the Republic of Korea and Japan on the need to continue to isolate North Korea economically and diplomatically until they abandon their nuclear and ballistic missile program,” Pence told reporters on his flight back to the United States.

A senior US official said Pence and Moon, while watching speed skating together on Saturday night, discussed intensifying sanctions. Moon shared details with Pence of his meeting with North Korean leaders, but did not talk about the invitation to talks in Pyongyang.

As part of his push against North Korean propaganda, Pence attended the short track speed skating with Fred Warmbier, the father of an American student who died last year after being imprisoned in North Korea for 17 months. Moon joined Pence in the arena and sat next to him, turned around to greet Warmbier, according to a White House pool report.

Later, Moon watched the joint Korean women’s ice hockey team — the first ever combined team at the Olympics — take on Switzerland, joining Kim Yo Jong and Kim Yong Nam, the North’s nominal head of state, who is also visiting the South for the Games. — Reuters

Olympic Games organizers confirm cyber attack

PYEONGCHANG — PyeongChang Winter Olympics organizers confirmed on Sunday that the Games had fallen victim to a cyber attack during Friday’s opening ceremony, but they refused to reveal the source. The Games’ systems, including the Internet and television services, were affected by the hack two days ago but organizers said it had not compromised any critical part of their operations. Asked if organizers knew who was behind the attack, International Olympic Committee Spokesman Mark Adams said: “I certainly don’t know. But best international practice says that you don’t talk about an attack.” Russia, which has been banned from the Games for doping, said days before the opening ceremony that any allegations linking Russian hackers to attacks on the infrastructure connected to the PyeongChang Olympic Games were unfounded. — Reuters

Hong Kong police probe deadly bus accident

HONG KONG — Hong Kong police said Sunday they were investigating a deadly bus accident that left 19 people dead and scores more injured, with the bus driver arrested for dangerous driving. The double-decker bus overturned Saturday evening near the town of Tai Po in the northern New Territories, flipping onto its side and appearing to smash into a lamppost. Nineteen people were killed and 65 people were injured, some critically, according to local police. “The 30-year-old male bus driver was arrested for dangerous driving causing death and dangerous driving causing grievous bodily harm. He is still being detained for further enquiries,” police said in a statement early Sunday. Most of the injured and some of the dead were on the upper deck of the bus. The driver was suspected of being over the speed limit as he went down a slope and lost control of the vehicle. — AFP

UN rights chief calls on PNG to safeguard refugees

SYDNEY — Papua New Guinea (PNG) is responsible for the human rights of refugees sent to a remote island by Australia, the UN human rights chief has said, as advocates warn the men are living in fear of violence from local residents. Some 600 men were moved out of an Australian-run camp on PNG’s Manus Island in November to three transit centers after a local court ruled the facility was unconstitutional. The men have expressed fears for their safety at the centers, and also accused Australian and PNG authorities of not providing them with adequate health care. In a day-long visit to PNG on Thursday, UN High Commissioner for Human Rights Zeid Ra’ad Al Hussein raised his concerns about the refugees’ plight during meetings with the government. — AFP

Myanmar says soldiers, police face action over deaths

NAYPYIDAW — Action will be taken against 10 members of Myanmar’s security forces in connection with the killing of captured Rohingya Muslims in Rakhine state, a government spokesman said on Sunday. Reuters on Friday published a report laying out events that led up to the killing of 10 Rohingya men in the northern Rakhine village of Inn Din who were buried in a mass grave after being hacked to death or shot by Buddhist neighbors and soldiers. A Myanmar government spokesman, Zaw Htay, said that “action according to the law” would be taken against seven soldiers, three members of the police force and six villagers as part of an army investigation that was initiated before the Reuters report was published. The arrests were “not because of Reuters news. The investigation was being conducted even before Reuters news,” Zaw Htay said, adding that he was unable to specify what action would be taken against the 16 people. On Jan. 10, the military said the 10 Rohingya men belonged to a group of 200 “terrorists” who had attacked security forces. Buddhist villagers attacked some of them with swords and soldiers shot the others dead, the military said, adding that it would take action against those involved. — Reuters

Peso to weaken further on mixed US, Japan data

THE PESO is seen to weaken further this week as the greenback is expected to be supported by slightly upbeat US economic data and possibly weak Japan fourth-quarter economic growth.

On Friday, the local unit closed at P51.48 and traded as low as P51.79 against the dollar, weaker than the P51.31 close on Thursday, due to wider trade deficit recorded in December.

Week on week, the peso finished slightly weaker than its P51.45 close last Feb. 2.

“The dollar might continue to move with an upward bias this week, supported by likely mixed to strong US reports on inflation and retail sales,” Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (Landbank), told BusinessWorld in an e-mail.

Mr. Dumalagan said the dollar is seen to strengthen starting Wednesday due to “potentially mixed to upbeat US data on retail sales and inflation,” which will, in turn, weaken the peso.

On Thursday, the National Retail Federation said retail sales will grow 3.8-4.4% this year, faster than the 3.2-3.8% growth projections it gave last year. The faster outlook was boosted by the robust holiday season for retail sales.

The US consumer price index and producer price index, which will be released midweek, are  likewise seen to show a moderate or faster pace.

The data will be supported by upbeat employment data released early this month, as non-farm payrolls grew by 200,000 in January and as average hourly earnings were up 0.3%.

Mr. Dumalagan added that expectations on inflation and retail sales “may support the dollar by lending support to views of another US rate hike in March 2018.”

On Thursday, Kansas City Federal Reserve (Fed) President Esther L. George said the economic growth boosted by the American tax reform, provides pressure on the central bank to “reasonably” hike its interest rates three times this year.

New York Fed President William C. Dudley, meanwhile, said in an interview with Bloomberg TV that there was a potential to hike more than three times in 2018 “if the economy looks stronger as we go through the year.”

Landbank’s market economist also noted that the dollar is expected to get a boost from safe-haven buying as “possibly weaker fourth-quarter GDP (gross domestic product) growth data from Japan may also strengthen the dollar by fuelling demand for safer dollar assets.”

However, a report from Reuters showed that higher factory output in Japan might signal a solid fourth-quarter growth.

On Wednesday, the Japanese trade ministry showed factory output grew 2.7% in December from the previous month, faster than the 1.6% median estimate of the economists as well as the 0.5% gain booked in November.

For this week, Mr. Dumalagan sees the peso moving between P51.25 and P51.85, while Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, gave a slimmer forecast range of P51.40 to P51.70.

“The factors that could reverse the dollar’s forecasted upward bias include weaker-than-expected US reports on retail sales and inflation, stronger-than-expected fourth-quarter GDP report from Japan, and any positive updates on the Duterte administration’s tax reform and infrastructure program,” Mr. Dumalagan said. — Karl Angelo N. Vidal

PHL shares to continue decline on consolidation

By Arra B. Francia, Reporter

LOCAL STOCKS are seen to continue falling in the week ahead before the main index can establish momentum to propel it back to the 9,000 level.

The 30-member Philippine Stock Exchange index (PSEi)plunged 1.63% or 141.39 points to close at 8,503.69 on Friday, tracking the movement of international counterparts which already lost over 2,000 points last week.

On a weekly basis, the local stock barometer fell by 307.06 points, with all sectors posting negative finishes. Foreigners preferred to move their funds out of the country, as net outflows averaged to P940 million, although lower than the P1.35 billion recorded the week before. 

“I will not be surprised if we lose another 200 points [this] week, however, I am also confident that if we do, we will see it hold our major support at 8,300,” Eagle Equities, Inc. Research Head Christopher John Mangun said in a report.

With economic fundamentals still unchanged, Summit Securities, Inc. President Harry G. Liu said the market could rally in the following weeks.

“(The market’s decline) is not caused by any immediate crisis… I expect the market to rally very soon,” Mr. Liu said by phone last Friday.

The Bangko Sentral ng Pilipinas chose to keep rates steady during their first policy meeting last Thursday, although raising its inflation forecast in 2018 to 4.3% in anticipation of price increases mandated under the Tax Reform for Acceleration and Inclusion program.

“Inflation (as a gauge for growth) is good, so long as propelled by improved employment, which should trickle in as more infra projects are rolled out,” online brokerage 2TradeAsia.com said in a weekly market note. 

The brokerage added that liquidity is intact, as companies tap the capital market to raise funds. Included in the lineup of firms set to conduct fund-raising activities in the February to March period are Metropolitan Bank & Trust Co., Bank of the Philippine Islands, Robinsons Land Corp., Integrated Micro-Electronics, Inc., and the Philippine Stock Exchange, Inc. 

“Given this, it is normal to see liquidation considering share prices have breached an attractive zone where cash outs are the usual reaction,” according to 2TradeAsia.com. 

Eagle Equities’ Mr. Mangun also noted that should the market bounce back to the 9,000 level, this trend is called the bear trap. 

“This is beneficial for our market as more of the “weak hands” will be shaken out. A bear trap is a false signal that the rising trend of a stock or index has reversed when it has not.”

2TradeAsia.com placed the market’s immediate support at 8,400 this week, while resistance will play within the 8,600 to 8,650 range. 

How many times did the PSEi hit record high this year?

The Philippine Stock Exchange index (PSEi) soared to record-high levels 14 times for the entire 2017 — the last peak marking that year’s final trading day on Dec. 29 — with analysts citing investors’ unwavering confidence in the Philippines’ solid economic fundamentals. As of Feb. 11 this year, the PSEi had already peaked ten times. The last all-time high was recorded on Jan. 29, when the main index finished at 9,058.62. Partly credited with lifting the PSEi was enactment on Dec. 19 last year of the first tax reform package that forms part of an entire program aimed at making Philippine taxation fairer — by shifting the burden more on those who can afford to pay more — while raking in more revenues. There are three to four more packages in the pipeline that will provide periodic boosts to equities in the months ahead.

Philippines’ stock index’s record high finish by MBG / BusinessWorld

1...11,57311,57411,575...12,754Page 11,574 of 12,754
© 2024 BusinessWorld Publishing.
All rights reserved.
Read our privacy guidelines
Facebook Instagram Linkedin Twitter Youtube