MONEY SENT HOME by Filipinos working abroad surged in May to the highest level in five months, the Bangko Sentral ng Pilipinas (BSP) reported Monday, signalling continued growth of household spending that contributes close to 60% to gross domestic product (GDP). Read the full story.
By Melissa Luz T. Lopez
Senior Reporter
MONEY SENT HOME by Filipinos working abroad surged in May to the highest level in five months, the Bangko Sentral ng Pilipinas (BSP) reported Monday, signalling continued growth of household spending that contributes close to 60% to gross domestic product (GDP).
Overseas Filipino workers (OFWs) sent home $2.469 billion in cash that month, up 6.9% from the $2.31 billion received in May 2017.
May inflows were also the biggest since December 2017’s record-high $2.741 billion, according to central bank data.
In a statement, the BSP said cash remittances from land-based workers grew by 5.3% year-on-year to $1.9 billion, alongside a bigger 13.2% jump in amounts wired by Filipinos working at sea.
By source, remittances from the United States, United Kingdom and Singapore were the “main drivers of growth” that month.
May inflows compare to the 9.2% growth forecast from HSBC Global Research, amid expectations that the cash transfers will see sustained recovery following a 9.8% annualized decline in March.
This brought the five-month tally to $11.822 billion, 4.2% bigger than the $11.346 billion in remittances received in January-May 2017.
Sought for comment, an analyst said the weak peso-dollar exchange rate may have fuelled the rise in remittances. The local unit averaged P52.1948 versus the greenback in May, weaker than the preceding month’s P52.0986.
Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., said OFWs may have taken advantage of currency movements “to get more peso proceeds,” effectively boosting household incomes and spending power of their families back home.
“The resumption of OFW deployment to Kuwait as of May 2018 after a brief deployment ban by the government may have also increased the OFW remittance amount recently,” Mr. Ricafort added.
President Rodrigo R. Duterte ordered Filipinos in Kuwait to return home last February and the government issued a deployment ban soon after reports that an OFW was murdered. The ban was lifted after the two nations signed an agreement early May.
Mr. Ricafort said a pickup in global economic activity coupled with higher world crude oil prices may have also boosted OFW incomes, especially those based in the Middle East.
The US remained the biggest source of remittances worth $3.976 billion year to date, followed by Saudi Arabia ($973.051 million), United Arab Emirates ($882.309 million), Singapore ($743.957 million) and Japan ($634.003 million), according to BSP data.
Mr. Ricafort added that strong remittance growth could contribute to faster second-quarter growth — which state economic managers hope will clock at least seven percent against the government’s 7-8% full-year 2018 target, the first quarter’s 6.8% and 6.6% in April-June 2017 — when the Philippine Statistics Authority reports official data on Aug. 9.
“[F]aster growth in OFW remittances in recent months (especially since the start of 2Q 2018) could possibly contribute to faster Philippine GDP growth in 2Q 2018, after 6.8% in 1Q 2018, among the fastest-growing in ASEAN/Asia,” the economist said.
Cash transfers from OFWs put more money into the pockets of their families back home, which in turn supports domestic activity and overall economic growth.
They also provide a counterweight to the country’s huge import payments.
The BSP expects remittances to touch a new all-time high and grow by another four percent this year, coming from 2017’s record-high $28.06 billion.
THE GOVERNMENT is looking to raise about P40 billion through retail bonds sold in tranches to help finance the rehabilitation of Marawi City in the next five years, the Department of Finance (DoF) said in a press statement on Monday.
The statement quoted Finance Secretary Carlos G. Dominguez III as saying that rehabilitation of Marawi City, which was nearly levelled by five months of fighting last year between government forces and Islamic State-inspired militants, would cost about P62 billion, with some P10 billion already allocated in this year’s national budget.
P10 BILLION A YEAR
“This is over five years. This is not immediate… it’s over five years and there is a progression — the total is P62 billion. So we will have to do now our financial planning,” Mr. Dominguez said.
He said that the bond sale “depends on the market at that time so, roughly P10 billion a year, probably we will end up raising maybe P40 billion of the P62 billion.”
Retail bonds were the chosen instrument “so that people will really feel that they are participating in the rebuilding of Marawi City,” the Finance chief said.
“We will issue it definitely in tranches because we should not borrow more than what we need for that year. We already have P10 billion already budgeted so we will go and get more details on how much is actually required and at what dates,” Mr. Dominguez added.
The government funding is separate from the planned public-private partnership for rehabilitation of the city’s most affected area.
Mr. Dominguez said that the P12-billion balance will come in the form of grants.
“Now that we have a hard number, we will now go to the details on where the money will come from. Certain portions of the money will come from grants,” he said. — Elijah Joseph C. Tubayan
OFFICIALS of the International Monetary Fund (IMF) are in town for an annual health check on the Philippine economy, at a time the multilateral lender sees uneven prospects for global growth amid trade tensions.
A team of IMF economists flew in from Washington last week for their Article IV mission.
IMF country representative Yongzheng Yang confirmed the “yearly” visit of IMF officials.
This is part of the multilateral lender’s regular surveillance work among member-economies, as required under Article IV of the IMF articles of agreement.
Representatives monitor economic and financial developments and discuss fiscal and monetary responses with government and central bank officials in countries they visit.
The IMF has published its World Economic Outlook update, where it kept a 3.9% growth forecast for global output this year and in 2019. While the projection is unchanged from the April report, the IMF pointed out that overall growth “is becoming less even” and that risks to the outlook are “mounting.”
Gross domestic product (GDP) growth in the United States is seen strengthening to 2.9% from 2.3% in 2017. In contrast, growth prospects are dimming for Japan, the United Kingdom and the euro area.
“The balance of risks has shifted further to the downside, including in the short term. The recently announced and anticipated tariff increases by the United States and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions,” read the report published on Monday.
“Avoiding protectionist measures and finding a cooperative solution that promotes continued growth in goods and services trade remain essential to preserve the global expansion. Policies and reforms should aim at sustaining activity, raising medium-term growth, and enhancing its inclusiveness.”
The US imposed an additional 10% tariff on $200 billion worth of Chinese products last week, escalating its trade war with the world’s second-biggest economy. Beijing will retaliate, Chinese Vice-Minister of Commerce Wang Shouwen had said before the World Trade Organization.
The IMF also flagged interest rate increases in major economies as a source of concern, saying: “Tighter financial conditions could potentially cause disruptive portfolio adjustments, sharp exchange rate movements and further reductions in capital inflows to emerging markets, particularly those with weaker fundamentals or higher political risks.”
In contrast, the IMF sees growth among Southeast Asian economies will remain robust as it kept a 5.3% estimate for the ASEAN-5 composed of the Philippines, Indonesia, Malaysia, Thailand and Vietnam.
Growth will be sustained by “healthy” domestic demand and a recovery in exports, the lender said.
Prior to the IMF’s ongoing review, the multilateral lender saw Philippine gross domestic product growing by another 6.7% this year, replicating 2017’s pace.
This compares to the 6.8% growth estimate given by the Asian Development Bank and 6.7% of the World Bank, but short of the 7-8% annual growth goal set by the Duterte administration. — Melissa Luz T. Lopez
FOR SOUTHEAST ASIA’S biggest economies, 2018 wasn’t supposed to be like this.
If a widening trade war wasn’t enough to contend with, a global wave of policy tightening, strong oil prices and domestic politics are also weighing on growth prospects for the region.
Policy makers are rewriting economic strategies as volatility surges, in some cases putting greater emphasis on currency stability or even structural changes.
“With trade war risks now materializing, this suggests stronger headwinds for exports,” said Tamara Henderson, an economist at Bloomberg Economics in Singapore.
“Investment, already buffeted by tighter monetary policy, is also likely to be a casualty.”
Election uncertainty in Indonesia and Thailand, as well as questions around the new Malaysian government’s commitment to fiscal consolidation, could add to investor angst in the region for the rest of 2018, said Henderson.
Growth outlooks for Southeast Asia’s six biggest economies are being tested in various ways.
INDONESIA
First-quarter gross domestic product (GDP) expanded by 5.1% against the central bank’s 5.1-5.2% 2018 forecast and a 5.3% Bloomberg survey median for this year.
Policy makers in Indonesia have been working to temper expectations around growth as they’ve turned their focus to promoting financial stability amid a slumping rupiah.
A widening current-account deficit and investment outflows are keeping more rate hikes on the cards for 2018, and the government’s pledges for lower spending and import curbs will probably damp growth further.
Bank Indonesia’s next decision is on Thursday.
MALAYSIA
GDP increased by 5.4% in the first quarter against the central bank’s 5.5-6% 2018 forecast and a 5.5% Bloomberg survey median for this year.
Uncertainty abounds in Malaysia, where a two-month-old government is only starting to give a clearer picture of economic policy. A new sales tax planned for later this year could slow consumer spending, and with more infrastructure projects on ice, investment and government spending outlooks are also clouded.
While Bank Negara Malaysia left its benchmark interest rate on hold last week, analysts have been trimming predictions for an increase amid the limp growth outlook and weak inflation. A more dovish stance from the central bank would buck regional and global trends.
PHILIPPINES
GDP grew by 6.8% in the first quarter against the government’s 7-8% 2018 target and a 6.7% Bloomberg survey median for this year.
Inflation shooting far beyond the ceiling of its target range is giving the Philippines central bank some nerves that overheating might already have set in.
The rapid price gains also could take some shine off the otherwise solid economic growth, particularly if the central bank is forced to move faster on raising interest rates.
A third hike for this year now looks more likely for the Aug. 9 decision.
SINGAPORE
GDP grew 3.8% last quarter against the central bank’s 2.5-3.5% 2018 forecast and a 3.1% Bloomberg survey median for this year.
While economists see steady growth for Singapore in 2018, the second half may stumble.
The city-state’s recent property-market curbs could damp sentiment and translate to crimped consumer spending.
Singapore may also struggle to buoy the confidence of manufacturers, whose expectations were already lowered after a stronger-than-expected 2017 for global trade.
“We had projected slower growth in the second half, but the negative trade developments are increasing the downside risks,” economists at Standard Chartered Plc in Singapore said in a research note last week.
“New export orders within the PMI readings have also decelerated.”
THAILAND
GDP expanded by 4.8% in the first quarter against the central bank’s 4.4% 2018 forecast and a 4.2% Bloomberg survey median for this year.
The Thai economy is something of a regional outlier, with the first quarter’s 4.8% annual growth the fastest in five years.
Inflation has only recently broken into the lower end of the central bank’s 1-4% target band, allowing policy makers some room to hold interest rates near the record low they’ve remained at since 2015.
“Economic growth in Thailand should remain reasonably strong in the near term, but a slowdown in global growth and rising political uncertainty suggest the recent upturn will run out of steam by next year,” economists at Capital Economics Ltd. said in a research note last week.
Thailand, run by a military government since a coup in May 2014, is expected to have an election early next year.
VIETNAM
GDP grew 6.8% last quarter against the central bank’s 6.5-6.7% 2018 forecast and a 6.8% Bloomberg survey median for this year.
Given that Vietnam’s trade as a share of GDP is about 200%, its economy is particularly sensitive to any worsening tensions that threaten global supply chains.
The economy will be especially attuned to China’s growth slowdown for knock-on effects in regional trade, and has also felt the weight of rising US interest rates.
Growth eased in the second quarter from the previous three months on reduced mining output and state investment.
The government expects a further slowing in the second half and is adding measures to boost business, the General Statistics Office said last month. — Bloomberg
SOLAR DIGITAL Media Holdings, Inc. has announced the entry of the newest digital receiver in the Philippine market aimed at giving consumers options and access to “quality entertainment at a more affordable price,” according to a company release.
“EasyTV is unique — -we offer all the free digital channels plus you get premium content,” Rene Esguerra, COO of Solar Digital Media Holdings, Inc., told reporters during a roundtable interview on July 2 at the Solar offices in Mandaluyong City.
EasyTV SUPERDIGIBOX, which retails at P2,999, comes with the digital receiver (which also acts as a media player) and a year-long subscription to 15 premium channels from Solar Entertainment including a dedicated Korean drama channel called K Plus, a History channel, a 24-hour horror channel, BOO, and three sports channels — Solar Sports, BTV (Basketball TV), and NBA Premium TV. If a customer wants to keep the subscription for the 15 premium channels after the initial year, it will then cost P999 a year.
“We’re looking at positioning ourselves between those with [ABS-CBN’s] TVplus and those with [pay TV] subscription,” Mr. Esguerra said.
ABS-CBN TVplus is a digital terrestrial television product and service owned and operated by ABS-CBN Convergence, a subsidiary of ABS-CBN. It was launched commercially in 2015. The product gives customers access to free-to-air channels such as ABS-CBN and ABS-CBN Sports+Action, as well as premium channels including CineMo!, YeY!, the Knowledge Channel, and DZMM Teleradyo. It is currently priced at P1,499.
He noted that more often than not, viewers who have pay TV subscriptions are not able to watch all the channels on their service, and this is why EasyTV is an attractive alternative: they have access to free-to-air channels alongside a couple of other premium channels. But all of that doesn’t mean they’re out to replace pay TV operators.
“We’re not going after [pay TV] operators, they have their own market; we’re not after TVplus, they have their own market. We’re creating an alternative. Those who want cheaper pay TV and those who want better than the free digital broadcast, we’re in that segment,” he explained.
In May, ABS-CBN Corp. announced it was targeting to sell six million boxes in the country and had sold 4.3 million boxes as of end-2017.
EasyTV was launched in late May and Mr. Esguerra noted that so far “the performance has exceeded our expectations. The pick-up was very good and probably, it’s because it offers something very unique.”
He added that the company is expecting deploy 500,000 units in the first 12 months with a focus on Metro Manila despite having people request they bring the device to other regions like Davao and Cebu.
“We wanted to compete in the most competitive market. We wanted to see how EasyTV will hold up in Metro Manila,” Mr. Esguerra said.
“What we’re doing right now is, before moving to provincial areas, we want the service to be solid in Metro Manila,” he said before explaining that they currently have only one tower in Metro Manila and are building two more so the coverage will be wider.
Aside from the current 15 premium channels, EasyTV is also looking at adding more channels including a Tagalog movie channel and a movie channel dedicated to films from the Solar Pictures library.
“We’re really hoping that with (EasyTV), we will be changing the viewing habits of the Filipino people. Given the attention span of Filipinos, you have to give them good content, as some of them do not have the time to surf. We’re looking at adding more channels but we are very selective with the channels we want to air. What we want is what the people want,” Mr. Esguerra said.
EasyTV is currently available in ShopTV (www.shoptv.com.ph) and on its own website (www.easytv.ph). Mr. Esguerra said they are looking at bringing the box to retailers such as Ace Hardware and Handyman in the near future. — Zsarlene B. Chua
By Denise A. Valdez
THE cities of Cebu and Davao should consider investing in smart solutions into its infrastructure and services, if they want to become more liveable and sustainable.
McKinsey & Co. partner and co-head of Infrastructure and Real Estate practice Mukund Sridhar said smart solutions are needed in cities like Cebu and Davao to “expand access to services, reaching residents who were once left out.”
“Mid-size cities like Cebu and Davao could benefit most from Smart Cities development by taking an integrated view, and equipping their existing infrastructure with hardware and software solutions to deliver high-value, cost-effective impact,” Mr. Sridhar told BusinessWorld via e-mail.
In its report “Smart Cities in Southeast Asia,” McKinsey Global Institute (MGI) identified mid-sized cities Cebu and Davao as “emerging champions,” along with Hanoi, Phnom Penh and Yangon.
Mr. Sridhar said these cities would require large-scale investments to roll out these smart solutions, and may exceed their financial capacity.
“Cities may choose to prioritize and focus on smaller districts or pilot zones in order to showcase the impact of these technologies,” he said.
The McKinsey executive noted the city government does not have to be the sole funder and operator of each type of service and infrastructure system.
“They have to be able to identify those areas where they can step back and make room for other players, including private-sector companies, utilities and transport firms, universities, foundations, and nonprofits,” Mr. Sridhar said.
He added, “Forming alliances, setting industry standards, and shifting toward open standards and interfaces may help cities move forward at speed and scale.”
PRIME MOVERS
MGI noted Manila, Bangkok, Ho Chi Minh, Jakarta, and Kuala Lumpur are “prime movers,” with existing infrastructure systems in place but are often strained.
“The biggest priority is expanding systems and services to serve more people, which includes reaching segments of the population who lack access today and planning ahead to absorb future growth. Retrofitting existing infrastructure systems with smart technologies (for example, using Internet of Things [IoT] sensors for predictive maintenance on metro lines) can optimize their performance and get more capacity and lifespan out of them,” the think tank said.
“The sheer scale of these cities makes smart city initiatives financially viable even at modest levels of adoption. When prime movers implement smart solutions successfully, they can capture big wins and touch millions of lives,” it added.
MGI said other countries have succeeded in making use of open data to allow private institutions innovate and create technological solutions to the problems it observes in the community.
The government and private sector must work from the perspective of the residents if they want to create solutions that are tailor-fit to the citizen’s needs.
“The entire point of Smart City planning is to respond more effectively and dynamically to the needs and desires of residents, therefore any strategy and prioritization exercise has to start with people rather than technology,” Mr. Sridhar said.
By Gideon Isidro
THE MANILA Symphony Orchestra (MSO) has given us some of the best classical music performances in the country, and from time to time, they do small-scale collaborations with other artists on fusion genres and add some musical variety to their plate.
This time around, the MSO is going out of its comfort zone in a big way with Rockestra 2018, its first classical-rock fusion concert which will be held on July 29 at The Theatre at Solaire.
Under the baton of MSO Principal Conductor Arturo Molina, Rockestra will feature composer, arranger, and freelance guitar sessionist Noli Aurillo. He has performed with such local artists and groups such as Asin, Side A, Johnoy Danao, and Glaiza de Castro. In 2002, he won Best Musical Arranger at the Awit Awards. Mr. Aurillo is regarded by many as the Philippines’ premier solo acoustic guitarist.
The MSO will also collaborate with Silent Sanctuary, a top OPM band, in Rockestra. Started in 2001, this five member group has toured the country and Dubai, and was named Myx Favorite Group twice. Its best known singles include “Pasensya Ka Na,” “Sa’yo,” and “Kundiman.” Silent Sanctuary is not alien to classical traditions, as it has collaborated with the MSO before; furthermore two of its members, Anjo Inacay (cello) and Kim Mirandilla Ng (violin), are former members of the MSO. The bands three other members are Sarkie Sarangay (vocals/guitar), Jason Rondero (bass/backing vocals) and Allen Calixto (drums).
The Silent Sanctuary members are excited about the concert, noting the new music they will make and how different the sound will be.
I look forward to how the Orchestra will sound with us. Having more strings will make the sound louder, and will make it more exciting,” said Mr. Rondero.
“It’s more exciting now that we have new music made in collaboration with MSO,” said Mr. Sarangay. “I feel very excited to play with them. I remember playing with them previously and it was excellent and hair raising.”
Rockestra 2018 will be held on July 29, 6 p.m., at The Theatre at Solaire,, Solaire Resort & Casino, 1 Aseana Ave., Entertainment City, Parañaque City.
Tickets are available at Ticketworld (891-9999, www.ticketworld.com.ph). For details on group and student discounts, send a message to the MSO Facebook page at facebook.com/manilasymphony or call 523-712.
By Mark Louis F. Ferrolino
Special Features Writer
KMC SOLUTIONS recently launched three flexible workspaces in Metro Manila, and is looking to open more in the Visayas region as part of the company’s plan to ramp up its portfolio to 10,000 seats by the end of the year.
The three new office spaces are located in Robinsons Zeta Tower in Quezon City, Rockwell Sheridan 1 in Mandaluyong City, and Robinsons Cyberscape Gamma in Pasig City.
KMC offers almost 500 seats at its office space in Zeta Tower, located at the corner of Ortigas Ave. and E. Rodriguez, Jr. Ave. Most of the seats are in private rooms, but there are also desks and co-working spaces available.
KMC’s workspace at Rockwell Sheridan 1 has more than 500 seats, with work floors, manager’s cabins, and director’s offices. These setups are suitable for multinational companies that want to have a presence in Makati City
At its office space in Robinsons Cyberscape Gamma, KMC offers around 600 seats. There are modern plug-and-play spaces with common areas such as bars, multi-function rooms, and pantries.
According to Tracy G. Ignacio, KMC Solutions chief operating officer, the three workspaces have different styles and characters. “The look and feel is generally different from one site to the other,” she said.
But they all have fast and reliable Internet connection.
At present, KMC has 8,800 seats in 29 floors in 19 different buildings, for a total of about 48,000 square meters (sq.m.).
The company is looking to expand its footprint, as it negotiates with landlords in various locations, including Iloilo and Cebu.
Michael T. McCullough, KMC Solutions managing director and cofounder, said the flexible workspace is the future. He is optimistic that at least 15% of the offices spaces in Asia will be flexible by 2030.
In the Philippines, demand for office space has reached as much as 1.2 million sq.m. this year, and clients continuously look for flexible workspaces as the traditional office model slowly becomes obsolete, the company said.
“With the growing number of start-ups and entrepreneurs and the increasing number of foreign companies who want to establish a presence in the Philippines, the need for co-working and flexible working space is booming,” said Mr. McCullough.
Mr. McCullough is already advising his team to be ready for the massive expansion of the company, which will be 10 times bigger than what it is right now, he said.
The biggest driver contributing to the growing demand for flexible workspaces in the country is the opportunity and freedom it gives to the companies, especially start-ups, where they can open an office without investing a lot, said Ms. Ignacio.
“We at KMC are committed to help local and foreign businesses, entrepreneurs, and small to medium-sized enterprises in the Philippines in providing initial support, working spaces, even up to the growth and expansion of their operations,” said Mr. McCullough.
QUEBEC CITY, Canada — With smooth minimalist electro pop and lush vocal harmonies, Milk and Bone has found a growing audience while charting an unusual path for French Canadian artists — singing entirely in English.
The Montreal duo of Camille Poliquin and Laurence Lafond-Beaulne met studying jazz together and playing as back-up musicians when, sensing a chemistry between them four years ago, they posted on their personal social media accounts a snippet of a song that became “New York.”
To their surprise and delight, they quickly amassed a following. The two friends had suddenly become a band. They rushed to find management, figure out a look and choose the duo’s name, whose meaning they still struggle to explain.
“We never saw it coming because at first this was just a platform for people we knew to listen to our music,” Ms. Poliquin told AFP alongside Ms. Lafond-Beaulne at their hotel in Quebec City where they played the historic provincial capital’s summer festival.
“Pressure” — like many of Milk and Bone’s songs, marked by chill but dominant percussion, melancholic keyboards and delicate, complementing layers of the two women’s voices — has been streamed nine million times on Spotify or the sharing site SoundCloud.
The lyrics delve into emotional sagas, often on uncertain romances. “Pressure” likens a lover to the solace of a robust shower while “Daydream” — a track off their second album, Deception Bay, which came out earlier this year — conjures up a dreamy fantasy boyfriend.
One consistency is that the songs are always in English. Both women, who are in their 20s, speak English fluently although they are French Canadians.
“When I do write in French I find myself writing something outside of what happens to me, while we like to write music that is from the heart,” Ms. Poliquin said.
“It’s a generation thing as well. People our age are a bit more open and just want to do whatever we want to do,” she said.
Montreal, with its complicated linguistic politics, has generated plenty of native English-language artists, from the iconic poet turned singer Leonard Cohen to indie rockers Arcade Fire.
But French Canadians crossing over entirely to English is less common. Celine Dion, Quebec’s best-known singer, performs in both English and French.
Ms. Lafond-Beaulne — who feels that French carries a “harder” sound when sung — said Milk and Bone has not faced much backlash over singing in English.
“People like to know why, and when we say it’s not a conscious decision, they get it,” Ms. Lafond-Beaulne said.
FINDING AN AESTHETIC
As Milk and Bone pulls in larger audiences on the road, the duo is also planning to release collaborations with other musicians, although they cannot yet publicly reveal details.
At Quebec City’s summer music festival, known in French as the Festival d’ete de Quebec, Milk and Bone opened for Cyndi Lauper and Lorde on an all-women night on the vast main stage.
The duo perched themselves on a podium behind their drums and synthesizers, the group’s name written out in oversized balloon letters as two air dancer puppets shot out of vents.
When the duo first tasted success, the pair tried to find a persona. At first they thought to associate with anime culture and released songs with subtitles not only in French but in Japanese before settling on a stage look that is somewhere between free-spirited partying and lounge chic.
Ms. Poliquin said that visuals amounted to a new, and sometimes overlooked means of self-expression for musicians.
“You can see right away if a major (label) is behind the aesthetic and it doesn’t quite fit,” she said.
“It’s fun to think about the visuals,” added Ms. Lafond-Beaulne. “It’s like you’re a teenager finding who you are. And now we’re adults — young adults.” — AFP
IT’S $500 more, each and every month. That’s the additional cost of a mortgage payment if you bought a median-priced home in San Jose, California, in the first quarter of 2018 compared to late last year. The mortgage payment would be about $4,600 compared to $4,100 due to higher lending rates and increasing home prices.
Bloomberg calculated the monthly aggregate housing cost, for both new buyers and renters, by weighting each region’s share of housing units that were occupied by owners and renters, respectively.
The financial burden of living in coastal neighborhoods reveals itself quickly in the Bloomberg study. San Francisco, Seattle, Portland, Jacksonville, and the Bridgeport-Stamford-Norwalk, Connecticut area rounded out the top five areas with the fastest increase in mortgage payments. Altogether, new buyers in almost one-third of metropolitan housing markets faced higher mortgage costs of $50 or more per month in the first quarter.
Rental costs weren’t any better. Slightly over 10% of all metro areas saw rents rising faster than inflation. In three locations, rents increased by more than 5%.
Overall, eight of the top 20 most expensive markets are in California, with three of them among the 100 largest metro areas in the US. San Jose, San Francisco, and Los Angeles are the three priciest markets.
Among the largest 100 markets, for a typical house hunter, only Albany, New York, saw a decrease in the average mortgage payment in the first quarter. Average monthly obligations in Albany fell $27 to $760. But, the drop is a reflection of the 7.6% fall in median home prices in the region compared to a one quarter earlier.
“By many metrics, the US housing market in 2018 is on sound footing,” said Chris Herbert, managing director of the Harvard Joint Center for Housing Studies, but “in many respects the situation has worsened for both the lowest-income Americans and those higher up the income ladder.”
The increases in home prices and rents means that in the first three months of 2018, in more than one fifth of metropolitan areas, housing expenses drain more than 30% of income, a widely accepted metric for home affordability.
In nine metro regions, aggregate housing costs breached 50% of income. Eight of them are located in California and the ninth is Honolulu. High incomes in San Francisco, the second-most-expensive market in the Bloomberg study, kept that area from crossing this threshold, however, its residents spend 46.6% of income on housing. — Bloomberg
By Arra B. Francia, Reporter
FIRST METRO Investment Corp. (FMIC) expects the local bourse to stage a rebound in the second half of 2018, albeit revising downward its year-end target for the Philippine Stock Exchange index (PSEi) due to higher oil prices, the global trade war, likely rate hikes by the US Federal Reserve, higher domestic inflation and the weakening peso, coupled with some political concerns.
From its year-end target of 9,400 announced last January, FMIC now expects the PSEi to settle within a range of 7,900 to 8,200 at the end of 2018. This will translate to a price-to-earnings (PE) ratio of 18-19x. The PE ratio indicates how expensive a market is. FMIC also expects an earnings per share growth of 11.5% to support the index’s rally.
The downward revision came after the index hit a low of 6,986 last June, which officially placed the PSEi in bear territory — or a 20% drop from its high of 9,058 in January.
“For the rest of the year, as the economy remains strong, fiscal policy continues to support growth, corporate earnings deliver and preparations for the 2019 elections take-off, the PSEi may end on a stronger note,” FMIC Senior Executive Vice President Jose Pacifico E. Marcelo said during the FMIC Midyear Economic and Capital Markets briefing in Taguig City yesterday.
FMIC Vice President Cristina S. Ulang noted that the benchmark index’s slump was due in part to the economy’s continued expansion, which brought with it higher inflation, rising interest rates, and the weaker peso-dollar rate.
“We would like to view it as a reality check. The market is trying to make sense of what’s happening… we may be having a 6.8% GDP (gross domestic product) growth, but the growth is bringing with it a lot of challenges, a lot of pain,” Ms. Ulang said.
NEW NORMAL
The PSEi’s exit from bear territory indicates that it is now adjusting to a “new normal,” as investors become more comfortable with the higher interest rate environment, faster inflation and the weakening peso-dollar exchange rate.
Data released by the Philippine Statistics Authority earlier this month showed headline inflation accelerated to a fresh five-year high of 5.2% in June.
The inflation print last month picked up from the 4.6% figure logged in May and exceeded estimates from the BSP and the Department of Finance.
BSP Governor Nestor A. Espenilla, Jr. said the central bank will review its forecast inflation path as this will shape the strength and timing of its next monetary policy response to temper inflation expectations.
The BSP has already raised its rates twice this year, with borrowing costs now within a 3-4% range.
FMIC also blamed the outflow of foreign funds from the stock market, which has so far reached P69 billion for 2018. The company noted that foreign investors are “unfairly lumping” the Philippines with weaker emerging markets, when the country is actually “the strong part of that space.”
For instance, FMIC noted that the country’s external debt to GDP is the lowest among its peers in the ASEAN region at 23.3% of GDP. Meanwhile, Malaysia’s external debt to GDP is at 67.4%, Thailand’s is at 32.3%, while Indonesia’s is at 37.4%.
The Philippines also has the highest reserve requirement ratio at 18%, compared to Indonesia’s 65%, Malaysia’s 3.5%, and Vietnam’s 3%.
“In terms of boosting liquidity, the BSP has room to cut the reserve requirements. The timing will be key as any further cuts should not undermine the inflation-controlling efforts of the BSP. So we expect to see around 1-2% more cuts before the year ends,” FMIC President Rabboni Francis B. Arjonillo said.
Given the higher interest rates, fund raising initiatives at the country’s capital markets also slowed down by 11% to P327 billion in the first half of 2018. FMIC expects capital raising to recover in the next semester, driven by the fixed income market.
Total capital raised for the year is projected to grow by 7% to P773 billion, P220 billion of which will come from the equities market while P553 billion will be fixed income issues.
