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P.A. Properties, Hankyu Realty break ground of joint venture development

The joint venture between the Laguna-based P.A. Alvarez Properties and Development Corporation (P.A. Properties) and Japanese real estate firm Hankyu Realty Co. Ltd. has borne fruit as the two companies broke ground of the first phase of their Idesia township project in Dasmariñas, Cavite.

Breaking ground on Dec. 9, 2017, the 11-hectare, Phase 1 masterplanned community seeks to attract middle-income Filipinos, particularly starting couples, growing families, young professionals, and overseas Filipino workers and their families. Offering about 900 residential houses comprised of three different model units, Idesia will bring together modern Asian aesthetics and environmentally friendly features.

The houses, single detached, single attached, and townhouse units, are characterized by their clean and contemporary look. Gaia, the two-storey single detached model offers 63 square-meter total floor area and a 100 square-meter lot area. The two-storey single attached Talia, meanwhile, offers a 52.25 square-meter total floor area and an 80 square-meter lot area. Finally, Aria, a two-storey townhouse unit, covers 42 square-meter total floor area and a 60 square-meter lot area.

P.A. Properties President Jonathan G. Lu (left) leads the capsule laying for Idesia, the company’s first project with its joint venture with Japan’s Hankyu Realty Co., Ltd. on Saturday, December 9 in Dasmarinas, Cavite.

Amenities to be developed in Idesia comprise of different zones. An active zone will include the basketball court, covered badminton courts, a children’s playground, and a jogging path. The recreation zone will feature the swimming pool, a clubhouse with function rooms, indoor and outdoor gyms, an activity area, and a provision for an open-air cinema. The Idesia garden, picnic and pond areas, a reading area and a leisure games area are built for the relaxation of the township’s residents.

The Idesia project’s location in San Agustin, Dasmariñas, Cavite is defined as mixed-used zone, with industrial parks, educational and medical institutions, and commercial/office/retail establishments like neighborhood centers, supermarkets, shophouses, and malls. The township is located near the Coastal Road and the South Luzon Expressway.

The joint venture between P.A. Properties and Hankyu Realty was created out of a mission to realize the dreams of the people to “live in a place they truly want to live in.” Hankyu Realty, which was founded in 1947 and is the property arm of Japanese conglomerate Hankyu Hanshin Holdings, Inc., chose the Philippines as the third country after Thailand and Vietnam for its expansion.

P.A. Properties Chairman Romarico T. Alvarez (left) leads the capsule laying for Idesia, the company’s first project with its joint venture with Japan’s Hankyu Realty Co., Ltd. on Saturday, December 9 in Dasmarinas, Cavite.

Choosing the Philippines as the third country for Hankyu Realty’s expansion is timely considering the country’s growing economy, which is showing an increased demand for buying a house among the young people, and they see that P.A. Properties is able to address such demand, the company noted.

“This will be our first project here in the Philippines,” Hankyu Realty Deputy General Manager Toda Masahiko told reporters through an interpreter following the groundbreaking event. “Since we have a very long experience in building housing in Japan, we would like to partner with [P.A. Properties] here in the Philippines and combine with their know-how or knowledge to provide better houses.”

With the new township project, P.A. Properties, which has already built about 19,000 housing units in Laguna, Batangas, Bulacan, Cavite, Pampanga, and Metro Manila, seeks to realize its advocacy of helping ease the more than six million housing backlog in the Philippines. The company pledged to embark on strategic expansion efforts to further build 15,000 more housing units in the next five years, creating comfortable, safe, and joyful Filipino communities.

P.A. Properties hopes to complete all the remaining phases of the Idesia development around 2025.

To know more about Idesia, visit its website http://www.idesia.com.ph/. Follow Idesia on Facebook, https://www.facebook.com/idesiaph/; Intstagram, https://www.instagram.com/idesiaph/; and Twitter, https://twitter.com/idesiaph.

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The drama behind Diet Diva

SPARKUP: The drama unfolds when Diet Diva founder Kakki Teodoro, theater extraordinaire and TV personality, got caught in a quandary of epic proportions. During a fitting for a show, Ms. Teodoro stood in front of the dressing room mirror with a questioning look. Tucking in her tummy and sucking in her cheeks, she glared at the big fat truth staring her in the eye.

DIET DIVA: I gained 20 pounds.

(Camera zooms in to a two‑floor residence in the neighborhood near Maginhawa Street, Quezon City. Parked outside the house are rows of motorcycles with large insulated boxes labeled with Diet Diva, now an award‑winning household name in food delivery.)

SPARKUP: How did you recognize the business opportunity when you couldn’t fit in your costume?

DIET DIVA: What I realized is with everything I was doing, I would resort to fast food or food delivery that was unhealthy, and the only existing food delivery service at that time was Rachel Alejandro’s The Sexy Chef, which I really couldn’t afford.

Photo Samantha Gonzales

So the following day, I was on my way to a shoot in Ilocos. Through the long 16‑hour trip, I couldn’t sleep. That was when the whole concept was formed. I texted my nutritionist‑dietician friend Clark Francis Dela Riva, who is also a theater and stage performer, and asked him to help. He said that the simplest and cheapest method is portion and calorie control, which a lot of people don’t realize is actually very easy to do.

My mom, who retired from a pharmaceutical business, was then in the catering business and I asked, “Can you cook for me? I’ll pay for my baon.” She offered, “Your friends might want to join so that we can make the most of the ingredients.” I easily gathered 10 friends—high school friends, their officemates! On the second day, we already got bookings and inquiries and more than doubled our volume. That was the point where I talked to Clark seriously: can we make this meal plan calorie and portion control for everyone?

(The camera moves inside the commissary, where the focal point is a dining area where Ms. Teodoro now sits, surrounded by framed portraits of fresh, healthy food. While the house has the feel of a typical home, what sets it apart from the rest of the residences in that upper middle class community is its professional‑grade, restaurant‑style kitchen: a tall, stainless steel station, and a small office, where a staff of 20+ cater to the diet needs of 280 clients across Metro Manila.)

SPARKUP: What’s it like behind the scenes?

DIET DIVA: Food prep starts at 2 or 3 p.m. Ingredients are cut, and the hot kitchen will start at 6 p.m. and will run until 9 p.m. The goal is always to finish by 9 p.m. We’ll cool and then chill the food. By then, the night shift folks arrive. They pack until 2 or 3 a.m. then take out the meals and group them per client. After that, they review, then bring the meals inside the insulation boxes. Riders are not allowed in the kitchen.

SPARKUP: Did it take some time before you figured out that this workflow would, in fact, work?

DIET DIVA: During that first week, when it was still just my mom and I, we followed a call center schedule: we started at 12 m.n. Sometimes, we’d end at 4:30 a.m. and by then, we were flustered. I would pack, mom would drive, then I would go down to each house. We braved the rush hour traffic through Quezon City, Pasig, and Makati until 8 a.m. We would sleep and then wake up to do groceries. What I didn’t foresee then was that I would be responding to inquiries, and also had to ask people how the food was. Then at the same time, I was also setting up our Facebook page. By the third day, we already decided to get a rider. By the second week, we had two riders. It took months for us to figure out how to streamline handling the food and packing more efficiently. We also had to change the box and put insulators, and make sure to cut the delivery time to a maximum of four hours. We also made it a rule to deliver directly to the customer, not leave the packed meals to the guard or at the office lobby. The more people handle the food, the more we couldn’t guarantee the quality. It took around two years for some semblance of stability in our workflow. For those years, I survived on naps.

As all this was happening, I was in TV and theater. I was in Meralco Theater, I was the lead in 2013 or 2014. Instead of resting backstage, every break, I would get the Diet Diva cellphone because I needed to get to my clients. My performance was affected. I barely got any sleep and then I had to sing—my voice was hoarse. As the business grew, I also learned to let go little by little. When you’re so passionate about your baby, you have the tendency to micromanage. You have to train yourself to leave it to your staff and trust them that they can handle it.

Photo Samantha Gonzales

SPARKUP: Was there also drama involving people outside Diet Diva?

DIET DIVA: After we soft opened in September, we secured all our permits and finished all our paperwork, and were ready to bring our service to the wider public. It was really my goal to do it right because we’re dealing with healthy food. We had to have all the sanitary permits, etc.

By the end of December, I started hearing about other diet delivery services that copied our business model. There is one particular brand. The chef who started it, we worked with him for a time, so I was super hurt but I charged to experience the importance of non‑disclosure agreements. I guess the other companies worked also because they would accept our fallouts, or those that didn’t make it to our cut‑off. I was hurt because the whole thing, I, my mom and Clark were the ones who figured it out: calorie count, five days a week, three meals a day, one snack, delivery time. I went on the internet and Googled “How do you deal with people who stole your idea.” But in the end, you just have to accept that when a business idea is good, people will copy.

Photo Samantha Gonzales

SPARKUP: How about The Sexy Chef, did Ms. Alejandro consider you as a rival?

DIET DIVA: For The Sexy Chef, she wasn’t my rival because they do South Beach. So if I get inquiries for South Beach, I would refer them to Sexy Chef. Idealistic, fine, but I think that’s how you should deal with it in the industry. Walang nakawan, walang bastusan. It’s still the same market of people who want to change their lives and be healthy. I won’t compete. We’re aiming for the same goal after all. We’d still see each other in events.

SPARKUP: How did you market Diet Diva?

DIET DIVA: It’s very personal. We still rely on word of mouth. Now, virtually, there’s social media. We have influencers. We still find that it’s our biggest marketing tool: testimonies. It will really be people who liked the food and lost weight. Everything else, like Facebook boosted posts, is just support. It’s a combination of technology and people.

SPARKUP: Do the unhealthy food trends threaten you?

DIET DIVA: I believe in balance. If there are food parks, they will eat. When they feel like they’ve been living an unhealthy life, then we step in. For some people, it’s Diet Diva during weekdays, cheating on weekends. It’s the food industry e. It’s a blessing that Filipinos like to eat and like to explore. If Filipinos were innately healthy to begin with, we wouldn’t be in the business.

(DIET DIVA stands up and shows off her memorabilia from working with Hong Kong Disneyland, Repertory Philippines, TRUMPETS, PETA—playbills and posters that show the Diva sans the Diet.)

Photo Samantha Gonzales

SPARKUP: Having been a theater actress all your life what lessons from theater do you apply in business?

DIET DIVA: The “Yes, and…” approach in improv. In theater, you’re taught to respond to anything. Be ready, accept, and move on. For example, a rider meets an accident. The consequence will be the client will complain because the food is late. “Yes, and…” dictates that we acknowledge, accept that, “okay, yes this happened,” and then think,“now what?” When you’re given a role, you accept it and move on with the scene. You have to be quick. But the kind of response always has to be a yes.

(Fade to black. The end.)

Tax reform fuels bullish sentiment

By Krista M. Montealegre
National Correspondent

SPIRITS ARE HIGH following Philippine stocks’ stellar run in 2017, with the tax reform program and sustained strong economic momentum stoking bullish sentiment for the new year.

The Philippine Stock Exchange index (PSEi) — a barometer of investor confidence — ended 2017 at a record-high 8,558.42, rebounding from a two-year slump that had raised doubts that the bull run had lost steam.

The benchmark index delivered a full-year gain of 25.11%, thanks to the return of foreign investors to the local equities market.

Net foreign purchases reached roughly P55 billion last year compared to P2.8 billion at the close of 2016, PSE Chief Operating Officer Roel A. Refran said in a phone interview.

Bulls showed up big time last year, capping the year with a late surge fuelled by the optimism on the passage of the tax reform law that will help fund President Rodrigo R. Duterte’s P8.44-trillion infrastructure program.

“Ultimately, (local stocks) grow with the economy. We grow with Philippines, Inc. The infrastructure story definitely has an impact on how we will be viewed by certain investors,” Mr. Refran said.

The tax reform program hopes to increase take-home pay for most wage earners, compensating for the lost revenue together with excise taxes on fuel, cars and sugar-sweetened beverages, among others.

For those who missed out on last year’s gains, most market analysts are anticipating the rally could have another leg up, as the economy feels the impact of the tax program.

ATR Asset Management, Inc. (ATRAM) sees a base case scenario of 9,600 and a best case of 10,800 for the bellwether index, anchored on the impact of the tax reform program and 10-12% growth in corporate earnings.

“The Philippines is (undergoing a) structural change. We are seeing (a) structural improvement in the economy and expect that to generate a strong multiplier effect across sectors as jobs are created (and) incomes grow up,” Julian P. Tarrobago, Jr., head of equities at ATRAM, said in a recent interview.

COL Financial Group, Inc., sees upside potential for the PSEi, with a base case forecast of 9,300.

“We still see some capital appreciation. Growth is intact and we are positive because of the tax reform (program),” COL Financial Head of Research April Lynn L. Tan said in a phone interview.

PCCI Securities Brokers Corp. chose to be more conservative, with its research head, Joseph James F. Lago, saying in an e-mailed response to a request for comment: “Potential upside of the PSEi is at least 8,800 should the current record high… be surpassed. The support levels of expected corrections along the way are seen at 8,100 and 8,000.”

Philstocks Financial, Inc. Senior Analyst Justino B. Calaycay, Jr. is projecting PSEi at 10,000-11,000 in 2018 provided the country contains political noise and international geopolitical risks remain manageable.

“The market may be able to sustain its optimism going into 2018 on the back of expectations the TRAIN (Tax Reform for Acceleration and Inclusion) will be a boost. The year’s growth narrative is seen to focus on public and private infra[structure] spend[ing] as the former (public sector) ramps up its ‘Build, Build, Build’ push and the latter (private sector) enjoys the perks of more spending cash in light of the higher income tax threshold,” Mr. Calaycay said in an e-mail, even as he cautioned that tax reform could raise the prices of some basic goods.

To be sure, not everyone is aboard the tax reform train.

Abacus Securities, Inc. has a muted view for local stocks because the higher excise taxes that come with the new law could hurt household spending, which accounts for more than two-thirds of the economy.

“You’re putting P100 into people’s pockets but then you’re going to take out P200-250 in the other pocket. For me personally, it is less of tax reform than actually a tax hike,” Abacus Securities Head of Research Raymond S. Franco explained in an interview.

“You’re trying to justify higher revenues to finance infrastructure and expand the capacity of the economy, which is very good intention indeed but I think we should be more realistic that not all of these projects can be rolled out in the next five years.”

Mr. Franco is “not looking for much movement” in the PSEi this year even though a break of the 9,000 level is possible.

“Hope is pushing up the market and if the government doesn’t deliver, you’re probably going to see a de-rating for the market,” he said. — with Arra B. Francia

Poll bares view of steady Dec. inflation

By Melissa Luz T. Lopez
Senior Reporter

THE GENERAL INCREASE in prices of widely used goods and services likely steadied in December from the preceding month’s pace, according to analysts asked in a poll last week, keeping the full-year pace within target for the first time in three years.

A poll among 12 economists yielded a 3.3% estimate median for the month, which if realized would match November’s pace but would still be faster than the 2.6% reading in December 2016.

This also falls in the middle of the 2.9-3.6% estimate range given by the Bangko Sentral ng Pilipinas (BSP) on Dec. 29.

The Philippine Statistics Authority will report official inflation figures on Friday.

“The main drivers are the increase in seasonal demand for goods and services, the continuing increase of oil prices and price shocks brought by weather disturbances of late,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

Tropical storm Urduja (international name: Kai-tak) and typhoon Vinta (Tembin) barrelled through parts of MIMAROPA region (consisting of Occidental and Oriental Mindoro, Marinduque, Romblon and Palawan) in southern Luzon, the Visayas and Mindanao days before Christmas. Heavy rains and floods killed at least 48 and caused over P1.3 billion worth of agriculture products, according to the National Disaster Risk Reduction and Management Council.

Other economists cited higher food costs in December as producers faced stronger demand during the Christmas season.

Victor A. Abola, economics professor at the University of Asia & the Pacific, said lower electricity rates may have offset food inflation.

“The unexpected appreciation of the local currency might have also contributed to lower inflation by making imported goods more affordable in local currency terms,” added Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

The month saw the peso gain strength versus the dollar to end at P49.93 in its last trading day for 2017, its best performance in over six months.

BSP Governor Nestor A. Espenilla, Jr. has attributed the peso’s recovery to “attractive” domestic fundamentals which have been reinforced by the enactment of the tax reform package.

Abroad, a softer dollar has emerged in the face of market uncertainty over the legislative fate of a parallel tax reform in the United States.

The economists’ estimates assure that full-year inflation will settle at a 3.2% average, matching the BSP’s forecast and settling comfortably within the 2-4% target band. This will mark the first time since 2014 that the full-year pace will finish within target, as prices increased slower than expected over the past two years to hover below two percent.

Several economists believe the “manageable” inflation rate will allow the central bank to maintain borrowing rates so far. The Monetary Board will not review its policy stance until Feb. 8.

“Relatively benign inflation compared to recent years could still provide leeway to keep BSP policy rates steady over the near term,” said Michael L. Ricafort, economist at the Rizal Commercial Banking Corp.

Monetary authorities maintained their policy stance during their Dec. 14 meeting, saying that within-target inflation and firm domestic demand do not warrant any rate adjustments even after a fresh “lift-off” was introduced by the US Federal Reserve.

Some analysts, however, said tightening moves may be on the table this year should inflation pick up steam, largely due to the initial price impact of the first of up to five planned tax reform packages that took effect on Jan. 1.

“If inflation drifts closer towards the upper end of the target range at the start of the year, we might see the central bank raise key interest rates — albeit modestly — in the near term,” said Security Bank Corp. economist Angelo B. Taningco.

The BSP expects 2018 inflation at 3.4%, only slightly faster than last year’s print it believes that the higher levies on fuel, sugary drinks, cars and other items covered by the tax reform law will be “transitory.”

Economic managers of President Rodrigo R. Duterte kept the annual inflation target at 2-4% from 2018 until 2020 during their Dec. 22 review, with the impact seen tempered by improving productive capacity as the national government invests more on infrastructure and services.

Poll bares view of steady Dec. inflation

Business leaders say economy ‘yet to run on all cylinders’

By Elijah Joseph C. Tubayan
Reporter

A STABLE ENVIRONMENT helped the economy rev up in 2017, and business groups now believe tax reform, further ease of doing business, lifting of foreign investment restrictions and increasing the pace of infrastructure development should help spur the country’s growth momentum further.

The Philippine economy has kept its growth pace above six percent since 2012 — with 2013 recording 7.1% — but business leaders said that it needs to expand by an even faster clip to keep up with competitors in the Association of Southeast Asian Nations (ASEAN). Gross domestic product grew by 6.7% in 2017’s first three quarters against the government’s 6.5-7.5% full-year target and 2016’s actual 6.9%.

“The Philippine economy maintained its high growth rate, low inflation, stable exchange rate environment in 2017 with domestic and foreign investment levels at record levels,” John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, said in an e-mail.

“But the country’s economic engine has yet to run on all cylinders.”

Mr. Forbes said that foreign investors are anticipating the acceleration of infrastructure development as the government tries to put economic growth on a faster lane. “Investors are concerned by worsening airport and traffic congestion, so the privatization proposal for NAIA and early passage in Congress of the traffic crisis legislation would be welcome,” said Mr. Forbes, referring to Ninoy Aquino International Airport — the country’s premier air gateway.

The current government hopes to spur gross domestic product growth to 7-8% annually from 2018 until it ends its six-year term in 2022, and is banking on an P8.44-trillion infrastructure development drive — financed partly by increased revenues from the Tax Reform for Acceleration and Inclusion (TRAIN) program — to make this happen.

For European Chamber of Commerce of the Philippines President Guenter Taus, “We need to build a more solid employment/job creation basis, for this will be the backbone of sustained growth.”

“This past 2017, there have undoubtedly been reforms in helping improve the Philippine business climate. Much headway has been made, but still a lot can be done to improve the competitiveness of the Philippine in terms of FDIs (foreign direct investments). We need to keep moving faster in order to become and remain competitive versus our ASEAN neighbors.”

Easing restrictions to foreign ownership in local sectors, Mr. Taus said, “will surely have a substantial effect on the Philippine economy through opening up the market to foreign players and thus opening the floodgates to investors who see the high potential and wealth of opportunities in the Philippines.”

The administration of President Rodrigo R. Duterte is currently finalizing the next foreign investment “negative list” in its bid to lift restrictions on foreign ownership and participation in certain sectors. That list was supposed to have been released late last year.

After the just-enacted first TRAIN package — which cut personal income tax rates but raised levies on cars, fuel and other items and reduced value-added tax exemptions — foreign business groups said they are now looking forward to the next tranche that will reduce the corporate income tax rate to 25% from 30% currently and streamline fiscal incentives given to investors.

Finance Secretary Carlos G. Dominguez III has said his department hopes to submit the second TRAIN package to Congress on Jan. 15, when lawmakers return from their one-month Christmas and New Year break.

“The TRAIN 2 package will be watched carefully in two respects: (1) to see if it reduces the corporate income tax to a level close to large ASEAN economies and (2) whether competitive fiscal incentives are maintained for new and expansion FDI projects,” Mr. Forbes said.

“Despite reaching much higher levels, FDI in the country remains significantly lower than amounts flowing into Vietnam, for example.”

Mr. Taus, meanwhile, said: “Further challenge in line with the tax reform will be to keep the incentives scheme attractive enough to retain and actually grow the BPO (business process outsourcing) sector, a vital industry to continue the emerging middle class.”

Local business groups on the other hand are banking on further steps to develop micro, small and medium-scale enterprises (MSMEs).

The Philippine Chamber of Commerce and Industry (PCCI) President George T. Barcelon said the government should complement further liberalization of the economy with steps to strengthen small local businesses.

“We welcome competition because it benefits the customers. But it has to be a level playing field. Foreign companies coming in will be using funds from abroad. MSMEs will find it difficult — the cost of financing is higher, it’s a disadvantage,” he said in a telephone interview.

He also cautioned against the government’s plan to further cut the paid-up capital threshold for foreign retailers’ entry, arguing that this could allow lower-quality businesses to come in.

“What we would like to see is the quality investments. We need to put some qualifiers, that if they come in, it’s going to help us in upgrading our know-how or management,” Mr. Barcelon said, noting US micro-level businesses’ $2-million minimum paid-up capital.

Socioeconomic Planning Secretary Ernesto M. Pernia earlier said that the government was looking to reduce the $2.5-million paid-up capital threshold under Republic Act No. 8762, or the Retail Trade Liberalization Act of 2000, to just $200,000.

“So if you put it too low, what are we attracting?” Mr. Barcelon said.

He added that institutionalization of efforts to ease the cost of doing business — embodied in Senate Bill No. 1311 and House Bill No. 6579 — will complement the reduction of the corporate income tax in spurring more business activity.

“We need to be more efficient,” Mr. Barcelon said, explaining that this would help businesses cope with high electricity and logistics costs that make them uncompetitive against regional peers.

“We still want hopefully the legislative side — both national and local government — to review the ease of doing business,” the PCCI chief said.

“Whether it be the benefit of the local business establishments or to attract foreign investments, we really need to streamline.”

Sergio R. Ortiz-Luis, Jr., president of Philippine Exporters Confederation, Inc. (Philexport), meanwhile hoped that the government would also provide new sources of financing for small businesses.

“We would like a portion of the CCT fund to be allocated to MSME financing,” Mr. Ortiz-Luis said of conditional cash transfers in a telephone interview, adding that the government should sustain the increase in infrastructure spending, arrest worsening traffic and give “more attention to the agriculture sector.”

PHL net liability position expands in third quarter

By Melissa Luz T. Lopez,
Senior Reporter

HIGHER INVESTMENT inflows drove the country’s net external liability position to widen further during the third quarter of 2017, the central bank said, amid sustained optimism among foreign investors on domestic economic prospects.

The country’s international investment position (IIP) widened to a net liability of $35.207 billion as of end-September from $33.514 billion logged during the first semester, the Bangko Sentral ng Pilipinas (BSP) said in a statement sent over the weekend. This also grew compared to the $28.436-billion net liability posted in September 2016.

The IIP takes stock of a country’s financial claims and liabilities. The wider liability came as the growth in foreign investments outpaced the increase in foreign assets accumulated by the government and local corporates from a year ago.

Foreign direct investments (FDI) and hot money inflows to the Philippines supported a 4.1% increase in liabilities to reach $201.782 billion, against a 0.7% pickup in foreign assets to $166.575 billion year on year.

“The expansion in liabilities reflected the higher outstanding debt instruments held by non-resident affiliates and increased holdings by non-residents of equity securities issued by residents,” the BSP said in a report.

For July-September, the central bank said FDIs posted a 4% rise compared to the second quarter, while flighty portfolio investments went up by 1.5%. The “significant” inflows and revaluations of these investments are supported by the country’s “sustained positive economic performance and growth prospects,” the BSP added.

This came despite a weaker peso-dollar exchange rate after the local unit traded above the P51 level during the quarter.

The peso depreciated by 1.2% to P51.073 against the US dollar as of end-September, which meant that outstanding foreign liabilities had a lower equivalent when expressed in the greenback.

On the other hand, foreign assets held by Filipino players posted a modest increase as local banks extended more loans to foreign borrowers, and with more residents investing abroad.

Dollar reserves maintained by the BSP kept the central bank at a net asset position, albeit at a lower level of $81 billion. This accounted for nearly half the country’s external claims.

Bank assets totalled $26.214 billion, up by a tenth from the previous year. Assets held by other sectors also grew by an annualized 8.5% to reach $59.335 billion, according to central bank data.  

By type of instrument, debt instruments to support intercompany lending between multinational firms and their local units accounted for 15.1% of the total liabilities, while placements on shares of stock of issued by Philippine companies took a 12.5% share.

Puregold to open 25 stores this year

By Arra B. Francia, Reporter

PUREGOLD Price Club, Inc. will continue the expansion of its supermarket business in 2018 as it plans to open 25 new stores.

“We plan to roll out 25 new Puregold stores in 2018,” Puregold Vice-President for Investor Relations John Marson T. Hao said in an e-mail.

This will be the same number of stores Puregold has targeted to open last year. By the end of September 2017, the company had a total of 352 stores nationwide — comprised of 291 Puregold stores, 13 S&R membership shopping warehouses, 31 S&R New York Style quick service restaurants, nine NE Bodega Supermarkets, and eight Budgetlane Supermarkets.

Aside from expanding the Puregold brand, tycoon Lucio L. Co’s company will also be opening two more S&R warehouses in 2018.

Mr. Hao, however, declined to disclose the locations of the new stores. Last year, Puregold focused on expanding its footprint outside Luzon, as it tried to accelerate growth by entering new geographic areas.

Asked if the company would consider more acquisitions, the Puregold executive said they remain open should opportunities arise.

“We are always on the look out for possible M&A (mergers and acquisitions) of other supermarket chains,” Mr. Hao said.

The listed grocery operator has also given a positive outlook for 2018 given the implementation of the tax reform program.

“2018 will be exciting due to the tax reform by the government,” Mr. Hao said.

The first package of the Tax Reform for Acceleration and Inclusion program took effect on Jan. 1. The Department of Finance said the new law will allow employees to pocket higher take home pay, starting with those earning lower than P250,000 annually who will now be exempted from personal taxes.

Analysts said consumer stocks are to directly benefit from the tax reform program as Filipinos have more money to spend.

“Consumer-related sector is almost a given the increased disposable income of the Filipinos,” PCCI Securities Brokers Corp. Research Head Joseph James F. Lago said in a separate e-mail.

Incorporated in 1998, Puregold’s core business is in the trading of goods, particularly consumer products such as canned goods, housewares, toiletries, dry goods, food products, pharmaceutical and medical goods on a wholesale and retail basis.

The company’s stores operate in various formats, namely Puregold Price Club that caters to both retail customers and resellers; Puregold Junior, its neighborhood store format, and Puregold Extra, which are smaller stores that offer a more limited choice of goods.

Puregold realized a 6% increase in net income attributable to the parent in the first nine months of 2017 to P3.9 billion, following an 11% uptick in revenues to P90 billion during the same period.

Yields on gov’t securities go down at 2017’s close

YIELDS on government securities (GS) traded in the secondary market went down almost across the board last week as market players preferred to stay on the sidelines as the year came to an end.

On average, GS yields — which move opposite to prices — went down by 12.29 basis points (bps), data from the Philippine Dealing & Exchange Corp. as of Dec. 29 showed.

“It’s the market’s preparation for next year,” Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines (UnionBank), said.

“Demand, I think, was higher as the year ends. The general perception about the economy’s positive growth prospects was probably a factor as well,” Mr. Asuncion said.

Meanwhile, a bond trader said the yield curve saw a “steepening bias” with most dealers opting to stay at the short-end of the curve given a lack of fresh leads.

Volumes also thinned given the holiday season, according to a bond trader, with most investors staying on the sidelines.

Trading in local fixed-income securities last week was shortened in observance of Christmas day, with the government also extending the holiday for government offices nationwide last Dec. 26.

At the secondary market on Friday, in the short end of the curve, the 91-day Treasury bill (T-bill) lost 74.34 bps to yield 2.4316%. The 182- and 364-day T-bills also saw their yields decline by 6 bps and 4.62 bps to 3.3075% and 3.032%, respectively.

In the belly, yields on the three-, four-, five- and seven-year Treasury bonds (T-bonds) were down by 14.59 bps (4.2977%), 3.08 bps (4.9211%), 1.22 bps (4.7437%), and 11.06 bps (5.3279%), respectively.

On the other hand, the rate of the two-year security went up by 2.47 bps to yield 3.9864%.

In the long end, the 10- and 20-year T-bonds decreased by 12.83 bps and 3.01 bps to yield 5.6986% and 5.7038%, respectively.

For this week, UnionBank’s Mr. Asuncion said: “[This] week, as a new year begins, I see more of positive perception and I expect a further pick up on demand as the market prepares for a robust 2018.”

As the market resumes sessions, the bond trader noted that investors will take their cue from the inflation data set to be released by the Philippine Statistics Authority on Friday.

Inflation likely stood steady in December to match the previous month’s pace, analysts tapped in a BusinessWorld poll said last week.

A poll among 12 economists yielded a 3.3% median forecast for the month, which if realized will match November’s pace but will jump from the 2.6% reading in December 2016. — R.O.R. Reusora

WESM operator mulls possibility of shifting to ‘for profit’ operations

By Victor V. Saulon Sub-Editor

PHILIPPINE Electricity Market Corp. (PEMC), the governance arm of the country’s wholesale electricity spot market (WESM), is studying a proposal to allow market operations to become a “for-profit” entity to attract interest from the private sector.

Francis Saturnino C. Juan, PEMC spokesperson, said the company has not closed its doors to the possibility of an entity such as the Philippine Stock Exchange (PSE) to operate the electricity market.

“In the future, there is that possibility,” he said in a recent interview.

Mr. Juan said the proposal came from stakeholders when PEMC invited industry participants on how they wanted the entity to evolve after a transition period that is to end in February 2018.

“One that we gathered in this consultation process… is later on allow for the market operation function to evolve as a for-profit activity,” he said, adding current WESM rules specifically stated that it be a nonprofit entity.

“But then if you would do that, who would be the interested parties to participate in any tender for the market operations function.”

The proposal has been presented to Energy Secretary Alfonso G. Cusi, who has yet to give his stand on the matter.

Mr. Juan became the spokesman for PEMC when Mr. Cusi in July last year ordered the creation of transition committee for the management of PEMC.

The committee is chaired by Oscar E. Ala, who exercises the function of PEMC president “until one is appointed by the PEMC board.”

Early last year, Mr. Cusi asked the previous members of the board to submit their courtesy resignation. No official reason was given for the move, which had surprised many in the industry.

WESM is the country’s centralized venue for buyers and sellers to trade electricity as a commodity where its prices are based on actual use, or demand, and availability, or supply.

The Department of Energy (DoE) said the transition panel is also mandated to assess PEMC’s existing structures, systems, and resources and propose a way forward for the WESM to meet the challenges ahead. The order gave the committee seven months from Aug. 1, 2017 to complete its tasks.

Mr. Cusi said the creation of the transition committee was in line with President Rodrigo R. Duterte’s thrust of ensuring the protection of the Filipino electricity consumers, who are affected by the operations of PEMC and the WESM.

He said PEMC “shall continue to effectively govern the operations of WESM for the benefit of all electricity stakeholders.”

Mr. Ala, as PEMC chairman, is joined in the committee by Jose Mari T. Bigornia, Jose M. Layug, Jr., Francis C. Saturnino Juan and Rauf A. Tan.

PEMC’s new board is composed of Mr. Cusi as chairman, and the following as members: Ronald Dylan P. Concepcion, Victor Emmanuel B. Santos, Emmanuel V. Rubio, Neeraj Bhat, Deon James, Rolando M. Cagampan, Octavius M. Mendoza, Allan L. Laniba, Noel V. Aboboto, Jesus L. Arranza and Peter L. Wallace as board members.

PEMC, a nonstock, nonprofit private corporation, was incorporated in November 2003 upon the initiative of the DoE. It has representatives from various sectors in the power industry and serves as the governance arm of WESM.

WESM started commercial operations in Luzon in June 2006 and in the Visayas in December 2010.

The electricity spot market was created by Republic Act 9136, the Electric Power Industry Reform Act of 2001 (EPIRA).

Mr. Juan said one of the mandates of the transition team is create an independent market operator (IMO).

“For the IMO, we envision it to be a small organization that is purely technical, dealing mostly with operations,” he said.

Davao firm generates P2.1-B sales from Matina

DAVAO CITY — Escandor Development Corporation (ESDEVCO) has generated P2.1 billion in sales from the expansion of its Matina Enclaves project.

“This year, we sold 30% more of what we have produced last year. We only made P1.6 billion in a span of three years in the industry,” Matina Enclaves project director Gerald Kent Garces said in an interview.

For the expansion of the Matina Enclaves, ESDEVCO is planning to build four condominium towers with 25 floors each on a 1.7-hectare property adjacent to the existing project.

Mr. Garces said the company saw strong sales of the two condominium towers, which were launched earlier this year. The first tower is already sold out, while the other tower has half of its inventory remaining.

He noted ESDEVCO President Glenn Y. Escandor wants the company to turn over the project on time. The company is targeting to complete a condominium tower every year starting 2020 through 2023.

“When G1 (Mr. Escandor) mentioned it delivering it on time, I supposed it entails a lot of commitment and hard work from our group to comply with this. This represents a true commitment of a local developer. In fact, when we started the project, we made it a point not to disappoint the locals, especially our buyers in terms of quality and deliverables,” Mr. Garces said.

The first five medium-rise buildings of Matina Enclaves have already been sold out. One building has been completed, while another one will be turned over in the first quarter of 2018. Construction of the third tower is on-going, and will likely be finished by end-2018. The fourth and fifth towers are targeted to be completed in 2019.

“What does it say about ESDEVCO as a developer? We are very aggressive in one sense because for this particular project, we didn’t only approach things very conservatively through development of the residential. But for this project, we have residential, and house-and-lots that we were able to develop. We turned over one condo building in mid-2016 and we will be able to turn over another one by next year,” Mr. Garces said.

In time for summer next year, Mr. Garces said the company aims to complete the Arcadia, the sports facility of Matina Enclaves. — Maya M. Padillo

Goldman sees cryptocurrencies, credit shadowing robust 2018 US economy

FINANCIAL IMBALANCES including those in credit markets and cryptocurrencies will shadow an otherwise robust 2018 US economy, said Goldman Sachs Group, Inc. economist Jan Hatzius.

Hatzius has already made some predictions for the new year: four Federal Reserve rate hikes, real US gross-domestic product growth quickening to an average of 2.6%, the jobless rate dropping to about 3.5%, and the yield curve not inverting.

In a new report, Hatzius reiterated his expectation for overall economic strength, while flagging some concerns.

“Asset valuations in some areas — especially credit — have risen to high levels by historical standards,” Hatzius said in the “10 Questions for 2018” report issued late Friday. “While we have not seen the type of large credit expansions that would be most worrisome for Fed officials concerned about financial imbalances, there are now some signs of speculative behavior in financial markets, e.g. the cryptocurrency boom.”

Goldman isn’t the only firm to send up a warning flag about cryptocurrencies. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon labeled bitcoin a “ fraud.” Fed Chair Janet Yellen has said it is a “ highly speculative asset,” and Bank of Japan Governor Haruhiko Kuroda said it’s being used for speculation. (Note that Goldman is also reportedly building a cryptocurrency trading desk.)

On the positive side of the economic ledger, according to Hatzius: Single-family housing starts will rise further as the supply-demand imbalance continues to tighten, despite adverse changes from tax legislation signed into law by President Donald Trump.

US wage growth will resume acceleration as statistical distortions fade, and there’s “evidence that upper-income households have been trying to defer income in the hope of lower tax rates,” which could have held back some wage data until now, Hatzius said.

Core inflation will also accelerate from the current 1.5%, Hatzius said. Import prices weighing on the core personal consumption expenditures (PCE) could turn into a boost in the coming year, Also, “base effects” should help — such as when the weak March 2017 reading, which partially reflected mobile phone service-price measurements, drops out.

The Fed won’t adjust its balance-sheet normalization plan either way, and market pricing of the terminal funds rate will rise as the Fed increases rates by more than currently priced, if markets view the additional tightening as appropriate, Hatzius said.

Still, as solid a picture as Goldman’s economist paints of the economic situation, the asset-valuation issue is seen as one to watch. And though the firm doesn’t see continued easing of financial conditions in 2018, it does view that as something that could alter the picture significantly.

Fed officials are “likely to view further easing of financial conditions as increasingly undesirable,” Hatzius said, “and an argument in its own right to normalize policy.”

“The economy is already at or slightly beyond full employment, growth momentum is strong, and a further boost from fiscal policy is already in the offing,” Hatzius said. “Adding more fuel to the fire via yet easier financial conditions looks undesirable.” — Bloomberg

Anticipated fuel price hikes start off new year

OIL COMPANIES will be raising the prices of petroleum products this week at rates generally milder than what consumers feared in view of the implementation of the tax reform.

Retailers will be raising the cost of diesel products by P0.65 per liter and gasoline products by P0.20 per liter. They will also raise the price of kerosene by P0.75 a liter. Most will be increasing prices at 6 a.m. today, Jan. 2.

The increase comes as the Department of Energy (DoE) advised consumers a day before the new year about the impact of the Tax Reform for Acceleration and Inclusion (TRAIN) on petroleum prices.

It reminded the public, in an advisory, that the new excise tax rates do not apply to the old stocks of petroleum products. Excise taxes are levied upon importation and not at the point of sale to the consumers, the DoE said.

The advisory by the DoE’s Oil Industry Management Bureau (OIMB) and the Department of Finance (DoF) came amid warnings in some quarters the start of the year will see a spike in prices of basic goods owing to the impending higher cost of petroleum products.

Under the TRAIN, an additional P3 per liter was to be added to the existing petroleum excise rate of P4.35.

The two agencies pointed out, however, that the retailers were still disposing of the old stocks at the start of the year, and these were acquired at the existing rate.

“The OIMB has issued an advisory to petroleum products stakeholders not to levy new excise tax rates on old stocks, considering that excise taxes are levied upon importation and not at the point of sale to the consumers,” officials said.

But for the value-added tax, new rates under TRAIN that are applicable to consumers become effective on Jan. 1, 2018.

With these rates factored in, the price increases for gasoline and diesel this week were higher than the DoE’s expectation, which it based on last week’s international oil trade, excluding Friday’s trading activities.

The DoE expected gasoline prices to increase by only around P0.15 per liter; diesel by around P0.60 per liter; and kerosene by around P0.55 per liter.

It also reminded retailers that upon a declaration of a state of calamity, the DoE is implementing a price freeze on kerosene and household liquefied petroleum gas in some areas of the country.

Provinces struck by recent disasters, however, remain under a price freeze for kerosene and household LPG for 15 days since these areas were declared under a state of calamity.

Parts of the Visayas and Mindanao were struck by back-to-back tropical storms Urduja and Vinta. — Victor V. Saulon with News5/interaksyon.com

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