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Gov’t fully awards T-bills at mostly higher rates

BW FILE PHOTO

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday even as rates mostly rose as the market’s preference shifts to higher-yielding long tenors ahead of the Bangko Sentral ng Pilipinas’ (BSP) anticipated policy easing cycle. 

The Bureau of the Treasury (BTr) raised P20 billion as planned from the T-bills it auctioned off on Monday as total bids reached P47.298 billion, or more than twice the amount on offer.

The demand was higher than the P35.99 billion in tenders seen at the July 29 T-bill auction.

Broken down, the BTr borrowed P6.5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P12.791 billion. The three-month papers were quoted at an average rate of 5.828%, 4.9 basis points (bps) above the 5.779% recorded last week. Accepted rates ranged from 5.8% to 5.865%.

The government likewise made a full P6.5-billion award of the 182-day securities as bids for the tenor reached P12.11 billion. The average rate for the six-month T-bill stood at 6.062%, up by 4.8 bps from the 6.014% fetched last week, with accepted rates at 6.019% to 6.094%.

Lastly, the Treasury raised the planned P7 billion via the 364-day debt papers as demand totaled P22.397 billion. The average rate of the one-year debt decreased by 3.4 bps to 6.074% from the 6.108% quoted for the tenor last week, with the BTr only accepting bids with this yield.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7871%, 6.0643%, and 6.1631%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.

“Rates were higher week on week because investors would like to lock in rates by buying longer tenors,” a trader said in a text message.

The preference for longer tenors is due to expectations that the BSP will implement its first rate cut in over three years as early as this month, the trader said.

The Philippine central bank can keep policy settings unchanged but can consider a rate cut if price pressures continue to ease, BSP Governor Eli M. Remolona, Jr. said on Monday, Reuters reported.

The balance of inflation risks has shifted to the downside and inflation expectations are well anchored, Mr. Remolona told legislators at a budget hearing.

“Evolving inflation conditions show the BSP can hold its policy settings steady for the time being,” Mr. Remolona said. “If price pressures continue to ease, it will be possible for BSP to consider a less restrictive monetary policy stance.”

The Monetary Board in July kept its policy rate at a 17-year high of 6.5% for a sixth straight meeting after raising interest rates by a cumulative 450 bps from May 2022 to October 2023.

Mr. Remolona earlier said the BSP may begin cutting rates at its Aug. 15 review — the only policy meeting scheduled in the third quarter — as they expect inflation to continue easing this semester.

The Monetary Board could reduce borrowing costs by 25 bps in the third quarter and by another 25 bps in the fourth quarter, he said.

T-bill rates mostly tracked the increase in secondary market yields last week ahead of the release of July inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

The Philippine Statistics Authority will release July inflation data on Tuesday (Aug. 6).

A BusinessWorld poll of 15 analysts yielded a median estimate of 4% for the July consumer price index (CPI). This matched the lower end of the BSP’s forecast for the month.

If realized, July inflation would be faster than 3.7% in June but slower than 4.7% a year earlier. It would also mark the eighth straight month that the CPI settled within the BSP’s 2-4% annual target.

“Some investors also opted to lock in funds for longer-term tenors before the possible US Federal Reserve and local policy rate cuts in the coming months,” Mr. Ricafort added.

Fed Chair Jerome H. Powell last week said interest rates could be cut as soon as September if the US economy follows its expected path, putting the central bank near the end of a more than two-year battle against inflation but square in the middle of the nation’s presidential election campaign, Reuters reported.

The Fed ended its latest two-day policy meeting with a decision to hold its benchmark interest rate steady in the 5.25%-5.5% range that was set a year ago, but its statement softened the description of inflation and said the risks to employment were now on a par with those of rising prices — neutral language that opens the door for rates to fall after more than two years of tightening credit.

Mr. Powell pushed the message even further forward in his post-meeting press conference, noting that price pressures were now easing broadly in the economy — what he called “quality” disinflation — and that if coming data evolve as anticipated, support for cutting rates will grow.

Investors saw Mr. Powell’s comments as clearly setting the stage for a reduction in borrowing costs at the Fed’s Sept. 17-18 meeting.

On Tuesday, the BTr will offer P30 billion in reissued seven-year Treasury bonds (T-bonds) with a remaining life of four years and nine months.

The Treasury wants to raise P220 billion from the domestic market this month, or P80 billion through T-bills and P140 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at P1.48 trillion or 5.6% of gross domestic product for this year. — A.M.C. Sy with Reuters

Meralco: Malampaya gas plants not excluded from 1,000-MW bidding

BW FILE PHOTO

MANILA Electric Co. (Meralco) said on Monday that power plants utilizing the Malampaya gas field may participate in its bidding for 1,000 megawatts (MW) of power supply.

“It is important to clarify that power plants utilizing Malampaya gas are not excluded from participating in the bidding process. [T]hey are among the prospective bidders who have shown interest in submitting their offers,” Meralco Senior Vice-President and Head of Regulatory Management Jose Ronald V. Valles said in a statement.

The statement responds to the temporary restraining order (TRO) issued by Taguig Regional Trial Court (RTC) Branch 267 on Aug. 2, which extended the order’s duration to 20 days from three days. 

The TRO stemmed from a petition for injunction filed by members of the Malampaya consortium — Prime Energy, UC38 LLC, Prime Oil and Gas, Inc., and the Philippine National Oil Company-Exploration Corp. — to stop Meralco’s competitive selection process (CSP) for 1,000 MW of new power supply.

“There exists an extreme urgent necessity for the writ as to warrant the issuance of a temporary restraining order… to prevent further damage to the plaintiffs’ interests, the government, and the environment,” Executive Judge Byron G. San Pedro said in a five-page order promulgated on July 31.

Meralco had earlier invited bids for a contract capacity of 600 MW, involving a 15-year power supply agreement targeted to start on Aug. 26, 2025, with a bid deadline originally set for Aug. 2, 2024. It also invited bids for an additional capacity of 400 MW to secure a contract, scheduled to start on Aug. 26, 2025.

Government regulations mandate distribution utilities to select the most cost-effective electricity supply through a CSP.

Mr. Valles said that the company has received the court order on the TRO extension initiated by the consortium, which he noted “does not participate in the CSP as it does not directly supply to or contract with Meralco.”

He said Meralco is reviewing the court order, including its potential impact on the bidding process that may be delayed and could lead to higher power rates.

Mr. Valles also said that the biddings are conducted “in strict accordance” with the rules set forth by the Department of Energy (DoE) and the Energy Regulatory Commission (ERC).

“Notably, the DoE has granted a Certificate of Conformity for Meralco to proceed with the CSPs, and neither the DoE nor the ERC has identified any irregularities in the Terms of Reference for the 1,000-MW CSPs,” he said.

He noted that the DoE and ERC are the administrative agencies that have primary jurisdiction over the bidding processes.

“Both play a crucial role in setting the regulatory framework and ensuring the integrity of the competitive selection process for power supply,” he said.

“Meralco appreciates the public’s understanding as we navigate through this legal process. We assure our customers and stakeholders of our continued efforts to advocate for their best interests and secure a stable and least-cost power supply,” Mr. Valles said.

Terry L. Ridon, convenor of think tank Infrawatch PH, said that the disruption poses “significant risks to the stability and fairness of the power sector, potentially leading to higher electricity costs and unreliable service for millions of consumers.”

“It is baffling and concerning that entities with no qualifications or direct stake in the power generation industry are being allowed to challenge these proceedings,” Mr. Ridon said in an e-mailed statement on Monday.

“This is a clear overreach and should be dismissed outright. Their interference is unwarranted and detrimental to the interests of consumers who rely on a stable and competitive power market,” he added.

ANOTHER BIDDING
Meanwhile, PacificLight Power Pte. Ltd., the Singapore-based subsidiary of Meralco PowerGen Corp. (MGen), is eyeing participation in a bidding to build, own, and operate a new gas power plant.

“We might participate in the bidding for the new plants that Singapore wants to build — two 600 MW units — so we might bid for one, 600 MW,” MGen Chairman Manuel V. Pangilinan told reporters last week.

In June, the Energy Market Authority (EMA) of Singapore launched a request for proposals for new generation capacity to meet the country’s growing electricity demand. EMA invited the private sector to build, own, and operate two new hydrogen-ready combined cycle gas turbine generating units to be ready by 2029 and 2030, respectively. Each generating unit is expected to be at least 600 MW in capacity.

For the first half of the year, energy delivered by PacificLight was down by 1% to 2,875 gigawatt-hours as it conducted efficiency improvements in early months of 2024.

MGen President and Chief Executive Officer Emmanuel V. Rubio said that PacificLight was granted the right to build, own, and operate a 100-MW hydrogen-ready gas turbine in May by EMA.

Based on its website, PacificLight currently owns an 800-MW liquefied natural gas-fired power plant in Jurong Island, Singapore.

Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Sheldeen Joy Talavera and Chloe Mari A. Hufana

Music labels’ AI lawsuits create new copyright puzzle for US courts

Cover ofTift Merritt’s “Traveling Alone”

COUNTRY musician Tift Merritt’s most popular song on Spotify, “Travelling Alone” (https://tinyurl.com/2m3xh6df), is a ballad with lyrics evoking solitude and the open road.

Prompted by Reuters to make “an Americana song in the style of Tift Merritt,” the artificial intelligence (AI) music website Udio instantly generated “Holy Grounds” (https://tinyurl.com/55f5nuc8), a ballad with lyrics about “driving old backroads” while “watching the fields and skies shift and sway.”

Ms. Merritt, a Grammy-nominated singer and songwriter, told Reuters that the “imitation” Udio created “doesn’t make the cut for any album of mine.”

“This is a great demonstration of the extent to which this technology is not transformative at all,” Ms. Merritt said. “It’s stealing.”

Ms. Merritt, who is a longtime artists’ rights advocate, isn’t the only musician sounding alarms. In April, she joined Billie Eilish, Nicki Minaj, Stevie Wonder and dozens of other artists in an open letter warning that AI-generated music trained on their recordings could “sabotage creativity” and sideline human artists.

The big record labels are worried too. Sony Music, Universal Music Group, and Warner Music sued Udio and another music AI company called Suno in June, marking the music industry’s entrance into high-stakes copyright battles over AI-generated content that are just starting to make their way through the courts.

“Ingesting massive amounts of creative labor to imitate it is not creative,” said Merritt, an independent musician whose first record label is now owned by UMG, but who said she is not financially involved with the company. “That’s stealing in order to be competition and replace us.”

Suno and Udio pointed to past public statements defending their technology when asked for comment for this story. They filed their initial responses in court on Thursday, denying any copyright violations and arguing that the lawsuits were attempts to stifle smaller competitors. They compared the labels’ protests to past industry concerns about synthesizers, drum machines, and other innovations replacing human musicians.

UNCHARTED GROUND
The companies, which have both attracted venture capital funding, have said they bar users from creating songs explicitly mimicking top artists. But the new lawsuits say Suno and Udio can be prompted to reproduce elements of songs by Mariah Carey, James Brown, and others and to mimic voices of artists like ABBA and Bruce Springsteen, showing that they misused the labels’ catalog of copyrighted recordings to train their systems.

Mitch Glazier, Chief Executive Officer of the music industry trade group the Recording Industry Association of America (RIAA), said that the lawsuits “document shameless copying of troves of recordings in order to flood the market with cheap imitations and drain away listens and income from real human artists and songwriters.”

“AI has great promise — but only if it’s built on a sound, responsible, licensed footing,” Glazier said.

Asked for comment on the cases, Warner Music referred Reuters to the RIAA. Sony and UMG did not respond.

The labels’ claims echo allegations by novelists, news outlets, music publishers and others in high-profile copyright lawsuits over chatbots like OpenAI’s ChatGPT and Anthropic’s Claude that use generative AI to create text. Those lawsuits are still pending and in their early stages.

Both sets of cases pose novel questions for the courts, including whether the law should make exceptions for AI’s use of copyrighted material to create something new. The record labels’ cases, which could take years to play out, also raise questions unique to their subject matter — music.

The interplay of melody, harmony, rhythm, and other elements can make it harder to determine when parts of a copyrighted song have been infringed compared to works like written text, said Brian McBrearty, a musicologist who specializes in copyright analysis.

“Music has more factors than just the stream of words,” Mr. McBrearty said. “It has pitch, and it has rhythm, and it has harmonic context. It’s a richer mix of different elements that make it a little bit less straightforward.”

Some claims in the AI copyright cases could hinge on comparisons between an AI system’s output and the material allegedly misused to train it, requiring the kind of analysis that has challenged judges and juries in cases about music.

In a 2018 decision that a dissenting judge called “a dangerous precedent,” Robin Thicke and Pharrell Williams lost a case brought by Marvin Gaye’s estate over the resemblance of their hit “Blurred Lines” to Gaye’s “Got to Give It Up.” But artists including Katy Perry and Ed Sheeran have since fended off similar complaints over their own songs.

Suno and Udio argued in very similar court filings that their outputs do not infringe copyrights and said US copyright law protects sound recordings that “imitate or simulate” other recorded music.

“Music copyright has always been a messy universe,” said Julie Albert, an intellectual property partner at law firm Baker Botts in New York who is tracking the new cases. And even without that complication, Ms. Albert said fast-evolving AI technology is creating new uncertainty at every level of copyright law.

WHOSE FAIR USE?
The intricacies of music may matter less in the end if, as many expect, the AI cases boil down to a “fair use” defense against infringement claims — another area of US copyright law filled with open questions.

Fair use promotes freedom of expression by allowing the unauthorized use of copyright-protected works under certain circumstances, with courts often focusing on whether the new use transforms the original works.

Defendants in AI copyright cases have argued that their products make fair use of human creations, and that any court ruling to the contrary would be disastrous for the potentially multi-trillion-dollar AI industry.

Suno and Udio said in their answers to the labels’ lawsuits on Thursday that their use of existing recordings to help people create new songs “is a quintessential ‘fair use.’”

Fair use could make or break the cases, legal experts said, but no court has yet ruled on the issue in the AI context.

Ms. Albert said that music-generating AI companies could have a harder time proving fair use compared to chatbot makers, which can summarize and synthesize text in ways that courts may be more likely to consider transformative.

Imagine a student using AI to generate a report about the US Civil War that incorporates text from a novel on the subject, she said, compared to someone asking AI to create new music based on existing music.

The student example “certainly feels like a different purpose than logging onto a music-generating tool and saying ‘hey, I’d like to make a song that sounds like a top 10 artist,’” Albert said. “The purpose is pretty similar to what the artist would have had in the first place.”

A Supreme Court ruling on fair use last year could have an outsized impact on music cases because it focused largely on whether a new use has the same commercial purpose as the original work. This argument is a key part of the Suno and Udio complaints, which said that the companies use the labels’ music “for the ultimate purpose of poaching the listeners, fans, and potential licensees of the sound recordings [they] copied.”

Ms. Merritt said she worries technology companies could try to use AI to replace artists like her. If musicians’ songs can be extracted for free and used to imitate them, she said, the economics are straightforward.

“Robots and AI do not get royalties,” she said. — Reuters

Residential prices expected to rise 2.2% annually through 2026

PHILIPPINE STAR/RUSSELL A. PALMA

RESIDENTIAL real estate prices in Metro Manila are projected to increase by 2.2% annually through 2026, reflecting a “flattish recovery” amid the exit of Philippine Offshore Gaming Operators (POGOs), according to Colliers Philippines.

“Prices are likely to revert to pre-pandemic levels in the third quarter of 2029,” Joey Roi Bondoc, director and head of Research at Colliers Philippines, said during a briefing on July 31.

The Philippine residential segment will see elevated vacancies as POGOs are set to vacate the country by year-end, according to consulting firms.

Colliers forecasted that rents are set to grow by 1.6% annually from 2024 up to 2026 and will return to pre-pandemic levels in the second quarter of 2028.

“The growth of residential real estate loans is slowing down. From 2017 to 2019, which was a peak period for residential demand across the Philippines, especially in Metro Manila, demand was partly influenced by POGO demand,” Mr. Bondoc said.

President Ferdinand R. Marcos, Jr. has ordered a total ban on all POGOs due to their ties to illicit activities such as financial scams, money laundering, prostitution, and human trafficking.

Metro Manila central business districts currently have 159,000 condominium units as of the second quarter of 2024.

“Currently, vacancy is at 17.7%. With POGO demand, we’re likely to see that inching up to 25.4% by the end of 2024,” Mr. Bondoc said.

The Metro Manila vacancy rate will reach 24.9% in 2025, he said.

He added that for the Bay Area, where POGO employees and residents are mostly concentrated, vacancy is expected to surge to 55% from the current 28% without POGOs by the end of the year, and 53% in 2025.

Meanwhile, Leechiu Property Consultants, Inc. Founder and Chief Executive Officer David Leechiu said the residential sector’s high-end condominium market will continue to be resilient, but the middle market “will be hurt badly.”

He added that the middle market condominium will become cheaper to rent and will fall even faster and deeper than the office segment.

“I think what used to rent for P600 per square meter will very soon be renting for P300 or P250 per square meter in residential,” Mr. Leechiu told BusinessWorld.

POGOs will vacate a million square meters of residential space, he said.

“I think a lot of the consumer sector will also be impacted because these POGOs employ thousands of Filipinos that are local that have to submit their recordings, and then, now, it’s going to be harder,” he added. — Aubrey Rose A. Inosante

PSBank net profit up 18% in 1st half

COMMONS.WIKIMEDIA.ORG

PHILIPPINE SAVINGS Bank’s (PSBank) net income climbed by 18% in the first half amid strong demand for consumer loans and improving asset quality, it said on Monday.

The net profit of the thrift banking arm of Metropolitan Bank & Trust Co. (Metrobank) stood at P2.56 billion at end-June, up from P2.17 billion in the same period last year, it said in a disclosure to the stock exchange.

This translated to an annualized return on equity of 12.5%.

PSBank’s financial statement was unavailable as of press time.

“By prioritizing customer-centricity and a proactive sales approach in our strategy, the bank has seen consistent growth in its core business. Apart from providing top-notch quality service to our patrons, we ensure that the products we offer can pave the way for Filipinos to achieve their financial goals and aspirations. We are hopeful that the positive performance in the first half will be sustained for the rest of the year,” PSBank President Jose Vicente L. Alde said.

The bank’s net interest income grew by 4% year on year to P6.08 billion in the first semester.

Its total operating income, which includes service fees, commissions and other income, stood at P7.74 billion.

On the other hand, PSBank’s operating expenses grew by 5% to P4.62 billion in the period.

The bank’s gross loan portfolio expanded by 10% year on year in the first half.

This growth was mainly driven by an 18% increase in auto loans amid strong vehicle sales in the country, PSBank said.

Even as its loans grew, the bank’s gross nonperforming loan ratio improved to 2.9% at end-June from 3.5% a year ago.

On the funding side, total deposits reached P170 billion.

PSBank’s assets stood at P220 billion at end-June.

Total capital was at P42 billion. The bank’s capital adequacy ratio stood at 24.3%, while its common equity Tier 1 ratio was at 23.2%, both above the regulatory requirements.

PSBank’s shares climbed by five centavos or 0.09% to close at P56.15 apiece on Monday. — A.M.C. Sy

SM Prime’s Q2 income rises to P11.6B, fueled by mall business

SM Prime Holdings, Inc. reported a 16% increase in consolidated net income for the second quarter (Q2), reaching P11.6 billion, up from P10 billion year on year.

This growth was primarily driven by the company’s mall operations, SM Prime said in a statement to the stock exchange on Monday.

The company recorded a 9% rise in consolidated revenue, totaling P34 billion compared to P31.2 billion in the previous year.

The mall segment contributed 58% of total revenue, with rental income climbing 10% to P16.3 billion from P14.9 billion.

SM Prime’s residential business accounted for 29% of consolidated revenue, with earnings up 23% to P10.4 billion, from P8.5 billion in 2023.

For the first half of the year, SM Prime achieved a 13% increase in consolidated net income to P22.1 billion, compared to P19.4 billion previously.

Consolidated revenue for January to June rose by 8% to P64.7 billion from P59.9 billion.

First-half mall rental revenue increased by 9% to P32.1 billion, up from P29.4 billion.

Total mall revenue for the first half reached P37.5 billion, an 8% increase from P34.6 billion in the prior year.

The residential business saw an 8% rise in revenue, totaling P18.9 billion compared to P17.6 billion a year ago, with reservation sales hitting P40.2 billion in the first half.

Additionally, SM Prime’s offices, hotels, and convention centers segments generated P7 billion in revenue for the first six months, marking a 13% increase from P6.2 billion last year. Specifically, the office segment contributed P3.6 billion, while hotels and convention centers generated P3.4 billion.

“SM Prime’s growth in the first half of 2024 remains steady as we realize value from our past expansion projects across our business portfolio. As we celebrate this year our 30th anniversary as a public company, we are determined to continue expanding our core businesses across the Philippines, and introduce innovative and bigger projects in the coming years,” SM Prime President Jeffrey C. Lim said.

“SM Prime remains steadfast in bringing the SM brand closer to more Filipinos through our integrated property developments that promote climate resilience environmental sustainability, and prosperity to all,” he added.

On Monday, SM Prime shares fell by 4.45% or P1.30 to P27.90 per share. — Revin Mikhael D. Ochave

Good governance and laying the groundwork for sustainable growth

PARTYSTOCK-FREEPIK

(First of two parts)

As the world continues to confront many social, economic and environmental issues, this has increased shareholder expectations on long-term value and the impact corporates have on the triple bottom line of people, planet, and profit.

This sentiment has also underscored the key role of governance in fostering economic growth, social inclusion and environmental stewardship. Strengthening corporate governance (CG) is vital to building an environment of trust, transparency and accountability crucial to a more sustainable business.

Good governance rests on the principles of fairness, accountability, and integrity. As a cornerstone of the Environmental, Social, and Governance (ESG) framework and often referred to as the economic pillar, good governance reflects how boards of directors and management match the interests of shareholders, especially minority shareholders, the company’s customers, value chains, and the community.

WHY GOVERNANCE WORKS
A good CG framework adds value to the company as it enhances investor confidence and helps mitigate risks.

CG has been pushed to the top of the agenda in the aftermath of many financial, health, and economic crises as investors become more engaged with companies on how they are run and how they impact stakeholders.

There is evidence of how better CG is paying off for investors. Take for instance the case of Japan. In a recent article published by Bloomberg, the country’s government urged companies to strengthen their focus on shareholders for nearly a decade. This was further pushed after the Tokyo Stock Exchange started telling company executives to hike returns for shareholders. Today, Japanese firms are returning more value to shareholders and increasing the number of women directors among other notable efforts.

Dividends from Japanese firms more than doubled to ¥19 trillion in the financial year to March 2023, from around ¥8 trillion 10 years ago, according to data compiled by Okasan Securities in the Bloomberg report. The dividend payout ratio has also increased to 36% from around 26% during the same period. Share buybacks, as a means to return value to shareholders, also registered a five-fold increase from a decade ago.

There is also increasing board diversity as Japanese firms have added more women to the board with women now holding 17% of board seats in Japanese companies from 2.3% a decade prior, Bloomberg reported.

The independent view is important as this helps manage the equitable treatment of all stakeholders and potential conflicts of interest that may be disadvantageous to the interests of minority shareholders.

Let us look at a local example.

In SM’s case, the appointment of an independent director as Chairman of the Board in 2023 was a first in its history. This speaks volumes about the company’s desire to uphold the highest standards of CG by going beyond mere compliance. Independent judgment and independent leadership remain fundamental parts of the principles of CG.

SM’s Board is composed of nine highly qualified directors, five of whom are independent directors. Out of the five independent directors, two are female. CG standards prescribe at least 30% of boards to be comprised of independent directors; current regulatory requirement prescribes at least 20%. SM’s current Board is already beyond minimum compliance relative to these standards. With the fifth independent director, SM’s independent director Board composition is at a higher level of compliance as the company adheres to the best practices in CG.

On top of this, SM’s Related Party Transactions Committee is composed entirely of independent directors with the right to review any transactions or related relationships in the group. Deals are reviewed by this committee and recent deals have had both auditors review alongside independent fairness opinions by third party firms recommended by the Securities and Exchange Commission or the Philippine Stock Exchange. SM’s Audit, Corporate Governance and Risk Management Committees are also composed entirely of independent directors.

INVESTING IN THE TRUST CURRENCY
The foundation of a good relationship is trust.

In business, it matters that the stakeholders — employees, customers, investors, tenants, suppliers, depositors, and others — trust the governance and leadership of the company to foster confidence in the company’s direction and decisions.

Why is it important to invest in the “trust” currency?

Good CG ensures that there is equitable treatment of and engagement with stakeholders — all shareholders, including minority shareholders, are treated fairly and equitably. This likewise promotes long-term performance and sustainability by aligning the interests of all shareholders with business resilience and continuity.

Based on investor feedback from SM’s non-deal roadshows, investors from Asia, Europe, and the US prefer to invest in markets with a better governance structure and track record.

A study on the Impact of ESG performance on firm value and profitability by Mahmut Aydogmus published in the Borsa Istanbul Review in 2022 indicated that the ESG combined score has a positive and highly significant relationship with firm value. Social and Governance scores have significant positive relationships with firm value too. This means shareholders, investors, creditors, governments, and other stakeholders expect the firms to do more on ESG. When they meet and exceed these expectations, the market most likely rewards them.

Well-governed companies often attract huge investment premiums, gain access to cheaper debt, and outperform their peers, according to a study by the International Finance Corp. in 2006. A commitment to good CG — well-defined shareholder rights, a solid control environment, high levels of transparency and disclosure, and an empowered board of directors — draw both investors and lenders, and attract premium valuations.

According to a McKinsey survey in 2023, about 85% of the chief investment officers they surveyed said that ESG is an important factor in their investment decisions. A significant majority are prepared to pay a premium for companies that show a clear link between their ESG efforts and financial performance.

 

Amando “Say” M. Tetangco, Jr. has served as the first independent director chairman of the Board of SM Investments Corp. since 2023. He is also the vice-chairman of SM Prime Holdings, Inc., and is an independent director of other companies. Prior to joining SM, Mr. Tetangco was a career central banker for over four decades.  He eventually assumed the post of governor of the Bangko Sentral ng Pilipinas and chairman of the Monetary Board, serving two consecutive six-year terms from July 2005 to July 2017.

map@map.org.ph

pujuan29@gmail.com

Regal Entertainment matriarch ‘Mother’ Lily Monteverde, 84

COURTESY OF THE FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES

FILM producer Lily Monteverde, known by most people as “Mother Lily” due to her role as the matriarch of the Regal Entertainment showbiz family, died on Sunday, Aug. 4. She passed a few weeks’ shy of her 85th birthday on Aug. 19.

The production company confirmed the passing of its founder in a statement made by her family. Described as “a true visionary and cornerstone of the movie industry,” the Monteverdes mentioned how their matriarch provided opportunities to Filipino filmmakers.

“Throughout her years she has not only been a mother to her children but also the ‘Mother’ to so many generations of Filipino filmmakers who have helped define what Philippine cinema is today,” they said in the statement. No cause of death was disclosed.

The family went on to say that Mother Lily was “not merely a matriarch and the face of Regal films, but a true mother to artists and workers who had the chance to know her beyond the confines of work.”

Her husband of more than 60 years, Leonardo “Remy” Monteverde, died on July 29 and was laid to rest the day before her passing.

Mrs. Monteverde founded Regal Films in 1962, beginning first as a distributor of American and European movies. Since then, the company has produced thousands of local films that have left an indelible mark on the Philippine movie industry, from cheap quickies, to blockbusters, to critically acclaimed titles. These include Sister Stella L, Manila By Night, Scorpio Nights, Temptation Island, Underage, the Mano Po trilogy, and the Shake, Rattle, & Roll horror franchise.

“She has helped so many and will never be forgotten,” Senator Grace Poe-Llamanzares said in a Facebook post. Her parents, the late Philippine cinema icons Fernando Poe, Jr. and Susan Roces, were friends with Mrs. Monteverde, who was also her godmother.

“She was, and will always be, a Titan in the Philippine movie industry,” said Ms. Poe-Llamanzares.

Veteran filmmaker and Film Development Council of the Philippines chairperson Jose Javier “Joey” Reyes credited the matriarch for his career, since she was the one who had first hired him as a screenwriter in 1979.

“I find peace with the thought that hers is a legacy that can never be ignored or forgotten because if it were not for Lily Monteverde — if it were not for this Mother — the shape of Philippine cinema would not have been what it is today,” Mr. Reyes said in a Facebook post.

He added that the loss is “eased by the thought that she is now with her partner in life, Father Remy, as they walk together to that place in eternity where they can be finally together.”

The Monteverde family also said in their statement that they are at peace knowing that their parents “remain together where there is no space or time.” Mr. and Mrs. Monteverde are survived by their children Winston, Sherida, Roselle, Dondon, and Goldwin, and their grandchildren.

The wake and memorial service are ongoing until Aug. 9 at 38 Valencia Events Place, New Manila, Quezon City, with a daily mass at 7 p.m. Interment is scheduled for Aug. 10 at the Heritage Park in Taguig. — B.H. Lacsamana

Highlands residential dev’ts highlight 40% open space

SM Prime Holdings, Inc. subsidiary Highlands Prime, Inc. said it has unveiled multiple residential projects within its residential and recreational leisure estate to meet the increasing demand for open spaces in community living.

These projects include the Highlands Residences, Trealva at Midlands West, Primrose Parks, and Horizon Terraces Garden Villas Scottsdale, all located within the 1,500-hectare Tagaytay Highlands, Lennie Mendoza, the company’s senior vice-president, said in an e-mailed statement last week.

“Tagaytay Highlands’ residential and recreational spaces will be complemented by commercial, service, and recreational amenities, fostering a vibrant, sustainable, and holistic environment,” she said.

Its main enclaves include The Highlands, The Midlands, and The Greenlands and Midlands West.

The company also noted the growing demand for open spaces, with 40% of the total development area of the residential communities allotted to unconfined areas, providing residents with views of Taal Lake and the Highlands’ mountainscape.

It also features areas for trekking, hiking, jogging and a bird sanctuary for bird watchers.

Located in Tagaytay, the development provides residents with proximity to services and support facilities, including hospitals, schools, shopping areas, industrial and technological parks, churches, banks, and gasoline stations. The Highlands Residences is a low-density condominium development that promotes open-air activities.

“Tagaytay Highlands is confident that there will be continued strong interest in its premium themed residential communities as it remains committed to sustaining its vision to be the exclusive leisure property of choice amid the demand for luxury mountain resort living,” the company said.

It was recently awarded a “Safety Seal” by the City Government of Tagaytay for upholding sustainability, safety, and security. — Aubrey Rose A. Inosante

Peso stablecoin may exit regulatory sandbox within one or two months

THE PESO-BASED stablecoin launched by cryptocurrency platform Coins.ph could exit the regulatory sandbox stage earlier than expected in the next month or two amid stable demand, an official said on Monday.

“I don’t think there was a specific time, but we do think that we can exit it quite soon, actually, given the current trend. There wasn’t really a specific amount of time but we’re probably looking at another month or so,” Coins.ph Global Marketing Director Katrina Gonzalez told reporters at an event.

Coins.ph Country Manager Jen Bilango said the adoption of PHPC has been strong and demand has been stable.

“Today is the first monthly report that we will submit to the BSP (Bangko Sentral ng Pilipinas). I think in terms of KPIs (key performance indicators), we’re actually more than 50% there,” she said.

“The reception has been good. Actually, we’re asking BSP if we can expand the sandbox,” Ms. Bilango added.

Coins.ph previously said it aims to have at least 20,000 to 30,000 users of PHPC during the sandbox period.

PHPC is the Philippines’ first regulated peso-pegged stablecoin.

Coins.ph received sandbox approval for its launch from the central bank in May.

Stablecoins are pegged to a fiat currency or commodity to give it a stable value, unlike other cryptocurrencies like Bitcoin or Ethereum, which have volatile prices as they are not backed by assets.

PHPC will remain at a stable value of one-to-one to the peso and is backed by cash and cash equivalents stored in Philippine bank accounts.

Ms. Gonzalez said the BSP’s sandbox restrictions include limits on the volume of PHPC being issued.

Holders of PHPC can use the stablecoin to transfer funds or for payments, she said.

Ms. Bilango added that Coins.ph has already conducted a pilot for cross-border payments from Australia to the Philippines using PHPC.

“We have that case study up and running. We received interest from different corridors in terms of making PHPC available. Obviously, you have the likes of Dubai, Singapore, and the United States using that. So cross-border is really the biggest and most important use case for us,” she said.

PHPC can be used to buy other cryptocurrencies such as Bitcoin and Ethereum, as well as other stablecoins, and for hedging amid market volatility, Ms. Bilango added. — A.M.C. Sy

PSE adds DoubleDragon, DigiPlus to MidCap Index, removes CEB, Shell

THE PHILIPPINE STOCK Exchange (PSE) said it will update the companies in the MidCap, financials, industrial, property, services, and mining and oil indices on Aug. 12, but the PSE Index (PSEi) will remain the same.

For the 20-member PSE MidCap Index, DoubleDragon Corp. and DigiPlus Interactive Corp. will be added, while Cebu Air, Inc.  (CEB) and Shell Pilipinas Corp. will be removed, the PSE said in a document on Monday.

The PSE MidCap Index aims at evaluating the performance of midsized companies in the Philippine market.

According to the PSE, a listed company qualifies for inclusion in the sector indices if it is among the top companies in terms of liquidity and has a free float level of at least 20% of its outstanding shares. 

At the same time, the market operator said it also considered other relevant financial criteria as well as eligibility for early inclusion during the index review.

Under the industrial index, Alternergy Holdings Corp., Roxas and Co., Inc., and RFM Corp. will be new inclusions, while Raslag Corp. will be removed.

The property index will include Villar-led VistaREIT, Inc., while D.M. Wenceslao & Associates, Inc. and Ever-Gotesco Resources and Holdings, Inc. will be removed. 

For the services index, DigiPlus, Pacific Online Systems Corp., and STI Education Systems Holdings, Inc. will be added, while Chelsea Logistics and Infrastructure Holdings Corp. and Premiere Horizon Alliance Corp. will be removed. 

Asia United Bank Corp. will be added to the financials index, while Benguet Corp. “A” and “B” shares will be included in the mining and oil index.

The modifications to the local bourse were finalized after a regular review of the indices covering the July 2023 to June 2024 trading period, the PSE said.

“The index review ensures that market barometers feature the most qualified stocks based on the set criteria,” PSE President and Chief Executive Officer Ramon S. Monzon said. 

No changes were made to the benchmark PSEi, PSE Dividend Yield Index (DivY), or holding firms index.

The PSEi consists of the 30 largest and most active common stocks listed on the local exchange, while the PSE DivY Index includes 20 companies that regularly provide high-yielding dividends.

“The current PSEi members remain to be among the top stocks in terms of market capitalization, liquidity, and free float level,” the PSE said in an e-mailed statement. 

“The review of the composition of the indices was based on the policy on index management,” the PSE said. 

Sought for comment, AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message that the addition or removal from the sectoral indices “has almost no effect.”

“To a certain extent, some funds might track the DivY and Midcap indices, but the flows related to these additions/deletions would be negligible,” he said.

“There would only be an effect if a company is added to the PSEi, since it is the benchmark that is tracked by a lot of fund managers,” he added. — Revin Mikhael D. Ochave

Is Japan ready for a ‘world with interest?’

FREEPIK

JAPAN is on the cusp of a brave new world — one where bank deposits yield 0.1% a year.

OK, that might not sound like a revolution. But in a country where an entire generation has grown up knowing nothing but yields near zero, and mortgage rates that seemed to get cheaper by the year, Mitsubishi UFJ Financial Group, Inc.’s move to raise what it pays savers is exceptional.

It followed the shock rate hike by the Bank of Japan, and considering that the megabank slashed its return on deposits to a mere 0.001% in 2016, it’s easier to see why it matters. That shift is just one example of how Japan is stepping into a place many commentators have dubbed the “world with interest.” Anyone under the age of around 40 has no map to navigate this. If the Bank of Japan (BoJ) can stick to its promise and continue to hike — and in view of its history of choosing the worst possible time to raise rates, that’s a big “if.” Many things in the country are about to change.

The question remains: Is Japan really ready for it?

Initial reactions are concerning. In stark contrast to when the BoJ abandoned negative rates in March and markets shrugged, this time the yen tumbled and stocks panicked as many asked if the economy can handle higher rates. On the ground, things feel different, too, with friends and relatives with floating rate mortgages scrambling to establish when, how, and if their repayments will increase.

The BoJ seems to think those concerns will pass. “An improving economy and the resulting rise in interest rates can be expected to lead to an improvement in household income,” the bank said in April. Governor Kazuo Ueda echoed this in his remarks on July 31, punting question after question of the impact on consumers.

It’s true that on balance, households have far more in deposits than they owe in mortgages and other loans. Japan faces little prospect of a mortgage-rate panic like that seen in the UK during Liz Truss’s short term as prime minister. Multiple protections are in place for existing homeowners, with caps to prevent sudden increases.

However, assets are not distributed equally — older households, who’ve had time to pay down mortgages and build wealth, are net asset rich; younger generations in their 30s and 40s, working families with mortgages and car loans, owe more than they have in the bank, according to data from the Japan Research Institute. That means older and richer households will disproportionately benefit.

Ever since Ueda arrived at the central bank 15 months ago, economists have been debating what the “world with interest” will look like. One hope is that, given that the value of money decreases over time in an interest-positive inflationary environment, consumers will spend more. That would be encouraging given their tendency to save. But Japan is frequently a place where economic textbook theories go to die, and it’s entirely possible that asset-poor young couples, already spooked by inflation, will scrimp and save to afford pricier mortgages instead.

Another thing that has economists excited is the prospect that the rising price of debt will spell a potential end to Japan’s “zombie” companies, unproductive entities artificially kept alive by cheap money. That would mean a rise in bankruptcies among debt-laden small- and mid-sized firms — and perhaps lead to the type of unemployment not seen since the early 2000s. But things are changing here, too: The country is in the throes of a chronic labor shortage, and the death of non-productive companies might instead free up resources to do something more useful.

The optimistic take is that the labor shortage means there might not be a better time to set out on a different path. Ueda was bullish in his view that, during the period that mortgage caps keep higher repayments at bay, wages will continue to increase — meaning homeowners will be better off by the time larger repayments roll around. The bank is increasingly confident in its “virtuous cycle” of price hikes and wages increases, believing, as Ueda outlined in May, that the tight labor market and the jolt from inflation has changed firms’ habits permanently.

It seems certain that these changes will work to further break down the cocoon that has sheltered a generation, creating a nation where, in return for flat prices and wages, unemployment and all its downstream social problems were largely warded off.

But things are changing anyway, regardless of what Ueda does. The old social compact is fracturing among a new generation with different attitudes toward risk-taking and company loyalty, and the labor crisis encouraging more workers to jump between firms. A return to the world with interest will almost certainly mean an increase in the bifurcation of haves and have-nots. The government will need to be ready with policies to cushion the blow, and direct spending in the most productive ways. That task will be made trickier when it can no longer rely on cheap cash to finance its debt.

The ultra easy-money policy of previous BoJ Governor Haruhiko Kuroda was frequently seen as a gamble, a jolt that would wake Japan from its slumber. But this new world feels as risky as anything he ever did. It might shock Japan in new and unexpected ways — whether the country is ready or not.

BLOOMBERG OPINION

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