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PSEi returns to 8,000 level ahead of GDP report

THE local barometer climbed back to the 8,000 level on Tuesday, as the market regained composure following easing tensions between North Korea and the US, complemented by optimism on Philippine economic growth for the second quarter.

The 30-member Philippine Stock Exchange index (PSEi)inched up by 0.59% or 47.29 points to end at 8,009.41 yesterday. The all-shares index also climbed 0.5% or 23.69 points to 4,729.73.

“The market stayed upward today, closing above 8,000, [due to] positioning in anticipation of good GDP (gross domestic product) figures to be reported on Thursday. Investors also cheered the reduction of tensions between North Korea and the US,” PNB Securities, Inc. President Manuel Antonio G. Lisbona said in a text message on Tuesday.

Regina Capital Development Corp. Managing Director Luis A. Limlingan was of the same mind, noting that Philippine stocks, while “not out of the woods,” continued their uptrend amid easing geopolitical concerns.

US stocks recovered further on Monday from last week’s sell-off, with the S&P 500 posting its biggest one-day percentage gain since April as worries eased about a conflict between the United States and North Korea.

US officials on Sunday played down the risk of an imminent war with North Korea. Those concerns had helped wipe out nearly $1 trillion from global equity markets last week.

The Dow Jones Industrial Average rose 135.39 points or 0.62% to close at 21,993.71, while the S&P 500 gained 24.52 points or 1% to 2,465.84. The Nasdaq Composite added 83.68 points or 1.34% to 6,340.23.

Analysts said investors are awaiting tomorrow’s release of official second-quarter GDP data by the Philippine Statistics Authority.

“With earnings season coming to an end, GDP on Thursday could make or break the index prior to official start of ‘ghost month,’” Mr. Limlingan said.

PSEi_081617

The mining and oil sector was the lone counter in the red yesterday, dropping 0.07% or 9.49 points to 12,577.88.

The industrials counter led gainers with an increase of 1.2% or 130.18 points to 10,959.57, followed by holding firms, which added 42.26 points or 0.53% to 7,883.06. Services rose 0.4% or 6.81 points to 1,696.7, financials added 0.36% or 7.21 points to 1,996.78, and property gained 0.35% or 13.42 points to end at 3,781.31.

A total of 938.03 million issues changed hands for a value turnover of P4.79 billion, lower than Monday’s P5.11 billion. “[Tuesday’s] relatively thin value turnover indicates slowing investor participation… We may see some profit taking in the next few days as the market nears resistance,” PNB Securities’ Mr. Lisbona said.

Advancers outpaced decliners, 121 to 82, while 44 issues were unchanged.

Net foreign buying thinned to P197.52 million yesterday from the P265.61 million recorded on Monday. — A.B. Francia with Reuters

Overseas Filipinos’ cash remittances

MONEY SENT HOME by overseas Filipino workers (OFWs) — a driver of household spending that contributes more than 73% to gross domestic product (GDP) — grew faster in June to hit a three-month high amid strong deployment, the central bank said yesterday. Read the full story.

Remittances in June biggest in three months

PHL volleyball

Alyssa Valdez was, needless to say, the toast of volleyball fans on this side of the globe following the Philippines emphatic victory over highly favored Vietnam in the classification round of the Asian Women’s Senior Championship the other night. Even as all eyes invariably turned to her given her status as the country’s most decorated player, she proved her mettle by scoring a tournament-high 20 markers, punctuated by aces to claim the first and second sets via sterling comebacks, and then a kill to clinch the match in the fourth. To be sure, those who have followed her exploits in the Asian Volleyball Confederation-organized event over the last week see it as par for the course; for all the talent such notables as Jaja Santiago, Mika Reyes, Maika Ortiz, and Abi Maraño possess, she remains the tent pole from which the hosts’ campaign progresses.

All the same, it’s fair to argue that Valdez wasn’t even the best performer for the Philippines against reigning Southeast Asian Games silver medalist Vietnam. That distinction can be said to have belonged to diminutive libero Dawn Macandili, whose floor defense from the get-go kept the opposition at bay despite the astuteness of setter Nguyn Linh Chi in reading block configurations. She was literally all over the court, making up for her teammates’ miscues and inability to properly adjust to the action. And the extent of her coverage is astounding; what she lacks given her 5’3” frame, she makes up for in unparalleled instinct, outstanding lateral movement, and utter fearlessness.

True, Macandili isn’t entirely unknown. In fact, her mantel is replete with Best Receiver and Best Digger awards culled from her stints with De La Salle University at the University Athletic Association of the Philippines. That said, an absence of international experience proved to be telling for her heading into the meeting with Vietnam; in previous appearances against Hong Kong, Kazakhstan, and South Korea, she looked lost and out of her depth, so much so that, in crucial situations, head coach Francis Vicente actually thought best to tap substitute DenDen Lazaro, fresh off an injury and, until early this year, in prolonged hiatus from active duty.

On a prospective note, the Philippines cannot but be oozing with confidence. For the first time in a long, long while, it boasts of depth, and, under Vicente’s sure and steady mentorship, its exposure to well-honed competition figures to serve it in good stead. And while it benefits from the once-in-a-generation skill sets of Valdez and Macandili, it understands that sustainable success comes from making itself greater than the sum of its parts.

Anthony L. Cuaycong has been writing Courtside since BusinessWorld introduced a Sports section in 1994. He is the Senior Vice-President and General Manager of Basic Energy Corp.

From zero in 2015, ARMM now has 25 LGUs vying for good governance seal

TWO YEARS ago, no local government unit (LGU) in the country’s autonomous Muslim region passed the good governance seal. They did better last year with six — Maguindanao province, Lamitan City in Basilan, and the towns of North Upi and Parang in Maguindanao, Wao in Lanao del Sur, and Jolo in Sulu — getting the Seal of Good Local Governance (SGLG). This year, 25 are in the running after passing the regional level assessment, the Autonomous Region in Muslim Mindanao (ARMM) said in a statement. “The 25 LGUs will still undergo a more strict assessment and national validation next week before the final list of passers (will be released),” said ARMM Interior and Local Government Secretary Noor Hafizullah Abdullah. “It’s (a confirmation) that the LGUs in ARMM are really providing better services to their constituents,” he added. The SGLG is a progressive assessment system intended to give recognition and distinction to good local government performance across several areas. Qualified LGUs get a cash incentive through the Performance Challenge Fund to finance local development projects. — BW Mindanao Bureau

Asian neighbors protest as Abe sends offering to war dead shrine

TOKYO — China and South Korea called on Japan to face up to its wartime past after Prime Minister Shinzo Abe sent an offering to a shrine to war dead on Tuesday, the anniversary of Japan’s World War II surrender.

Masahiko Shibayama, a lawmaker who made the offering on Abe’s behalf, said he did so to express condolences for those who died in the war and to pray for peace. He added Abe said he was sorry he could not visit the Yasukuni shrine.

Past visits by Japanese leaders to Yasukuni have outraged Beijing and Seoul because it honors 14 Japanese leaders convicted by an Allied tribunal as war criminals, along with other war dead, sometimes chilling ties for months.

China’s relations with Japan have long been poisoned by what Beijing sees as Tokyo’s failure to atone for its occupation of parts of China before and during World War II. Japan occupied Korea from 1910-1945.

But maintaining harmony with China and South Korea is now more important than ever amid heightened tensions in the wake of North Korean missile tests, threats from North Korea to strike the area around the US Pacific territory of Guam and US President Donald J. Trump’s warning of retaliation.

“After the war, our country has consistently taken steps as a country that abhors war and treasures peace, and has made efforts to promote the peace and prosperity of the world,” Mr. Abe said at a national ceremony.

“We intend to keep this immovable policy firmly, throughout the ages, while facing history with humility.”

Dozens of Japanese lawmakers visited the shrine along with scores of ordinary Japanese, prompting protests from the South Korean and Chinese governments.

“We express our deep concerns that responsible leaders of Japan’s government and parliament are again paying tribute at the Yasukuni Shrine and visiting the shrine that glorifies the history of the war of aggression,” South Korea’s foreign ministry said in a statement.

In Beijing, Chinese Foreign Ministry spokeswoman Hua Chunying said China resolutely opposed Japan’s “wrong actions” over the shrine.

“China urges Japan to earnestly face up to and deeply reflect upon its history of militarism,” she told a daily news briefing.

Mr. Abe visited Yasukuni in 2013, an action that prompted criticism from key ally the United States as well as from Asian nations, but has since only sent offerings on August 15 and during Yasukuni’s twice yearly festivals. — Reuters

Car trouble

Car trouble

Peso sinks on Fed rate bets

THE PESO continued to drop against the greenback on Tuesday, hitting another near 11-year low, as investors flocked to the safe-haven dollar following hawkish remarks from a US Federal Reserve policy maker.

The peso closed at P51.34 against the dollar yesterday, dropping by 26 centavos from Monday’s finish of P51.08 against the greenback.

Yesterday’s close was the local unit’s weakest level in nearly 11 years or since it ended at P51.38 per dollar on Aug. 25, 2006.

The peso traded weaker the entire day after it opened the session at P50.20 against the dollar. Its best showing was just at P50.13, while its weakest intraday level was at P51.35 versus the greenback.

Trading volume on Tuesday was at $659 million, soaring from the $291.5 million that changed hands in the previous session.

A trader attributed the peso’s slump against the dollar to hawkish comments from New York Federal Reserve President William Dudley, which caused a risk-off sentiment among investors.

“The peso closed lower against the dollar due to hawkish comment of Mr. Dudley regarding the Fed being open for another rate hike despite US inflation being lower. The Fed is still hawkish,” the trader said by phone on Tuesday.

“Risk-off sentiment is still present despite easing tension between the US and North Korea, so they resulted to safe haven buying because of Mr. Dudley’s statement,” the trader noted.

Mr. Dudley, one of the Federal Reserve’s most influential members, expects to raise interest rates once more this year, and to soon begin shedding some of the Fed’s bond holdings.

His steady-as-she-goes comments on inflation and rates appeared to respond to growing skepticism in financial markets that the Fed will raise rates by December, and they prompted a rise in the dollar and in bond yields.

“It depends on how the economic forecast evolves,” Mr. Dudley told the Associated Press. “If it evolves in line with my expectations … I would be in favor of doing another rate hike later this year.”

The Fed has raised rates twice this year and aims, according to forecasts, to hike once more. However a slide in inflation readings in recent months to 1.5%, below a 2% Fed target, has raised doubts among investors who give about a 40% chance of the Fed following through.

For today, the trader said the exchange rate could settle within P51.10 to P51.50, but noted the peso could see a correction should second-quarter gross domestic product (GDP) data come out stronger, aligned with market expectations.

A BusinessWorld poll of 12 economists and analysts late last week yielded a median GDP growth estimate of 6.5% for second quarter, a bit faster than the first quarter’s 6.4% but slower than the 7.1% recorded a year ago.

If realized, the figure would put the first-half average growth at 6.45%, just a notch below the low-end of the government’s 6.5%-7.5% target for the year.

Official second-quarter GDP data will be released on Thursday by the Philippine Statistics Authority. — Janine Marie D. Soliman with Reuters

How PSEi member stocks performed — August 15, 2017

Here’s a quick glance at how PSEi stocks fared on Tuesday, August 15, 2017.

PSEi_081617

DoF seeking amendments to REIT law

THE Department of Finance (DoF) is seeking to amend the Real Estate Investment Trust (REIT) Act to eliminate ambiguities on its tax implications, which has stalled the development of a REIT industry nearly eight years since it was enacted.

property
The Real Estate Investment Trust Act lapsed into law in December 2009 with none of the major property developers coming forward with their prospective offerings. — BW FILE PHOTO

The House committee on economic affairs clashed in a hearing with the Department of Finance and Bureau of Internal Revenue (BIR) on the latter’s imposition of value-added tax (VAT) on property transfers connected with REITs. Finance Undersecretary Antonette C. Tionko said that there should be an amendment to the law instead of just having to amend the implementing rules and regulations (IRR).

“It should not be prone to different interpretations whenever there’s a change in Commissioner or Secretary of Finance. So that is the ideal situation, that is the ideally how it should be so there would be no doubt,” Ms. Tionko said on the sidelines of the hearing.

The concerns emerged after the BIR under former Commissioner Kim S. Jacinto-Henares issued a memorandum ordering gains from transfer of properties under REIT subjected to 12% VAT.

Assistant Commissioner Marissa O. Cabreros said during the hearing that the 12% VAT imposed was justified as “transactions deemed sale” under section 106 B of the National Internal Revenue code, as the REIT law has not explicitly stated that the transfer of properties will be exempt from paying VAT.

“VAT attaches only when the assets being transferred are classified as ordinary assets, meaning these are used in business. The fact that those manifested intention are malls, then those are ordinary assets,” said Ms. Cabreros.

Asked whether the DoF is open to withdrawing the VAT provision on the IRR, Ms. Tionko said that she has yet to consult Finance Secretary Carlos G. Dominguez III.

However, members of the committee said that an amendment of the IRR may be favorable, in order to implement the law immediately compared to delaying it further due to adding new provisions that have yet to undergo the legislative process.

The committee, chaired by Bohol Rep. Arthur C. Yap, ordered a technical working group to determine whether or not an amendment of the law is warranted, and also to address concerns from potential investors.

David Leechiu, Chief Executive Officer of Leechiu Property Consultants, said during the hearing that the Philippines is “in a good position” to take advantage of the law.

“The BPO (business process outsourcing) industry has helped the economy to become one of the largest office markets in the world. That’s massive office space that can be REIT-able, that’s an opportunity that we can’t waste. The time for the Philippines is now,” he said.

The REIT law, or Republic Act 9856, was signed into law in 2009, but has never been fully implemented as the VAT policy has discouraged property developers from establishing trusts.

SM Prime Holdings, Inc., Megaworld Corp., Century Properties Group, Inc. and other property developers have expressed an interest in forming REITs in the wake of plans to review the IRR.

REITs promote the development of the capital markets by expanding the participation of the investing public in real estate development including residential projects, hotels, hospitals, malls, power plants and even toll roads.

A REIT must distribute annually at least 90% of its distributable income as dividends to its shareholders.

On top of the issue on taxation, the assurance of reinvestment as well as the minimum public float requirements still remains an issue.

Mr. Dominguez earlier said that there is no assurance that the perks given under the REIT law are reinvested in the country.

Also, the law states that one third of the investment trust should be publicly owned, while the implementing rules and regulations mandate 40% for the first two years and at least two-thirds thereafter. The government also subjected the transfer of assets into REITs to tax and levies a 12% rate on additional income generated, while the law considers them to be tax-free. — Elijah Joseph C. Tubayan

BanKo to reach target branch count by October

BPI Direct BanKo, Inc. (BanKo), the microfinance subsidiary of Bank of the Philippine Islands (BPI), said it expects to reach 100 branches by October — ahead of the target date — with the bank also poised boost its lending activities.

BanKo
BW FILE PHOTO

“In fact, we are earlier than expected. We’re tracking October, in fact, to finish all of [the branches,]” BanKo President Jerome D. Minglana told BusinessWorld in an interview when asked if the bank is on track to end the year with 100 branches.

The lender previously said it plans to end 2017 with a total branch network of 100 in a bid to reach out to more to the micro, small and medium enterprises (MSME) sector, particularly self-employed micro entrepreneurs (SEMEs).

To date, BanKo has a total of 24 branches situated nationwide. The lender targets to open around 20 new offices per month.

Asked how much the bank shells out in building the new branches, Mr. Minglana declined to give a specific figure, but noted that they have trimmed expenses related to establishing new offices.

“The good thing about this model is it’s not a huge branch so we were able to bring down costs. That’s why we can afford more branches,” he said. “The most I can say for now is it’s not the cost at which BPI builds its branches.”

Its aggressive expansion strategy, the official said, could help the bank achieve loan growth higher than double digits, or even a “ten-fold increase” in terms of volume.

“[We are looking at] a lot more because we only have 10 branches to start with and we’re running after 100 [branches.] So in terms of volume, that itself would give you a ten-fold increase, but of course there’s a ramp-up, but it is a lot more because of the mere footprint that we will be in,” Mr. Minglana said.

“So a lot more in terms of volume and that’s really key for us to be able to reach out to more, the sooner the better,” he added.

To date, the bank has a total of around 870,000 accounts. Mr. Minglana said this total could hit a million by end-2017.

“If our branches deliver as we’ve expected them, yes. But we’ll see,” he said.

BPI formally launched BanKo last July 25. The new microfinance subsidiary was a result of the merger of two of BPI’s thrift bank units namely BPI Direct Savings Bank, Inc. and BPI Globe BanKo. — Janine Marie D. Soliman

How three guys built a business out of feels

Between matters of national importance, former government employees Ali Sangalang (a writer) and Panch Alvarez (a visual artist) like to fool around. Out of the monotony of news bulletins and sensitive information, an unintended pun comes up.

Obviously, they couldn’t put their unsolicited humor on the President’s speeches or the Official Gazette, so they channelled it elsewhere.

They started by posting their collaborative works on social media website Tumblr and Facebook, which initially received huge support from their friends and later on went viral.

As the artworks gained traction online, Yabang Pinoy, an organization that supports local startups, provided the duo with funding to put their illustrated wordplay on a t‑shirt.

Art Erka Capili Inciong

Thus, borne of a pocketful of puns, Linya‑Linya (which gets its name from the owners’ desired response to their work: “Uy, lumilinya‑linya ka!”) became a retail shop of items laced with memorable Pinoy lines. They now have 14 stalls in different malls.

“It took us a while before we had the courage and guts to launch Linya‑Linya because we were really pressured,” Mr. Sangalang told SparkUp in an interview. “We’re both from the literary circle, artists circle, and we were influenced by our peers who are award‑winning poets and artists, so we were pressured to follow in their footsteps.” The two entrepreneurs first met as members of Ateneo Heights and eventually became co‑workers at a digital marketing agency.

The tandem started selling their shirts at a weekend bazaar in Eastwood Mall, Quezon City, where the brand began to gain popularity.

“Our co‑sellers’ spaces were four times bigger than ours, but when the sales came out, ours were four times bigger,” Mr. Sangalang gleamed.

“Statement shirts are not new, but I think what’s unique with our products is their relatability. People see themselves on what’s written on the shirts,” Mr. Sangalang said, adding that the statements they put in their products are a “reflection of who we are as people.”

But the two said they initially had no plan to make a living out of what was then just a side hustle. In fact, Mr. Sangalang recounted that their initial earnings went to night‑outs.

In 2015, they tapped musician Jim Bacarro, who is also Mr. Sangalang’s classmate since grade school, to manage the business side of Linya‑Linya. Mr. Bacarro previously worked in marketing and branding units of companies like Del Monte Philippines Incorporated, Petron, and JB Music.

“I was shocked when he (Mr. Bacarro) called me because I had no idea that he knew Linya‑Linya,” Mr. Sangalang recalled, adding that Mr. Bacarro joining the company was “in perfect timing.”

“Our weakness was that we didn’t know anything about business. When we saw the potential of the business to grow, we looked for partners who would lead the business side,” Mr. Alvarez said.

With Mr. Bacaro’s addition, Linya‑Linya launched an online store and joined more bazaars. The new team also added other products like notebooks, bookmarks, bags, and keychains, among others. At the annual Trend Setters bazaar in World Trade Center, Pasay City in November that year, Linya‑Linya received an offer from a team from Ayala Malls to open its first shop in UP Town Center, Quezon City.

In the next five years, the company plans to further multiply its current shops into 33 and bring their products in different provinces.

But the business is “just a bonus,” Mr. Alvarez says. More than gaining profit, the two said that Linya‑Linya’s vision runs deeper.

“We’re not just a meme that people will forget after several years. Beyond the shirt, we want our statements to be on the tongue of Filipinos,” Mr. Sangalang said. “Words and art never get old.”

“We’ll continue to do what we do now but we would like to dream, hope, and believe that one day one of our statements will be part of the Filipino oral tradition,” Mr. Alvarez said.

Protest for peace

South Korean protesters shout slogans during an anti-US rally demanding peace in the Korean Peninsula in Seoul on August 15, 2017.

North Korean leader Kim Jong-Un said on August 15 he would hold off on a planned missile strike near Guam, but warned the highly provocative move would go ahead in the event of further “reckless actions” by Washington. — AFP

South Korea
AFP
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