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Peso slips to fresh 12-year low

THE PESO slid to a fresh 12-year low against the dollar on Thursday following the interest rate hike of the US central bank.
The local currency ended the session at P53.27 against the greenback on Thursday, four centavos weaker than the P53.23-per-dollar finish logged the previous day.
This is a new low for the local unit in nearly 12 years or since it closed at P53.55 per dollar on June 29, 2006.
The peso declined against the dollar immediately, opening the session at P53.30. It slumped to a P53.37 low, while its best showing for the day stood at P53.26 against the US currency.
Dollars traded rose to $796.45 million from the $773.17 million logged the previous day.
Traders said the peso weakened against its US counterpart following the decision of the Federal Reserve to raise its interest rates, the second increase of the year.
At its two-day review, the policy-setting Federal Open Market Committee (FOMC) hiked its benchmark rates by a quarter of a percentage point amid low unemployment and higher wages. The federal funds rate now stands at a 1.75%-2% range. The Fed also signalled two more rate hikes this year and four more in 2019.
“The economy is very well,” Fed Chairman Jerome Powell said in a press conference after the FOMC released its unanimous policy statement.
Reuters reported the Fed’s move was considered a milestone in the shift of the monetary authority from policies used to mitigate the effects of the financial crisis and recession in 2007-2009.
“The peso weakened following increased expectations of two more rate hikes from the Fed this year after increasing policy rates by 25 basis points,” a trader said in an e-mail.
Another trader said the number of rate hikes this year “came a little bit of a surprise” as the market previously expected the Fed to hike rates only thrice this year.
For next week, the trader expects the peso to consolidate against the dollar as investors await for the monetary policy meeting of the Bangko Sentral ng Pilipinas on June 20.
Financial markets are closed on Friday in observance of Eid al-Fitr. — Karl Angelo N. Vidal

Argentina to sell up to $7.5 billion from IMF in FX market

Argentina plans to sell as much as $7.5 billion in the foreign exchange market to support budget expenditures once it gets access to a credit line from the International Monetary Fund.
The central bank will conduct daily auctions on behalf of the Treasury to sell the dollars, the Finance Ministry said in a statement Wednesday. Separately, the IMF said its executive board will vote on the credit line June 20. It also noted that Argentina requested 30 percent of the credit line be disbursed upon approval and half of that be made available for budget support.
Argentina’s economic plan “creates a solid basis for the $50 billion stand-by arrangement,” IMF Managing Director Christine Lagarde said in the statement. “The plan will also help reinforce Argentina’s institutional framework. For example, it has measures to improve the medium-term budget process and to ensure central bank independence.”
The peso strengthened 0.4 percent in early trading Wednesday before erasing gains to drop nearly 2 percent to 26.26 per dollar, a record low. It is down 29 percent this year, the worst performer in emerging markets. Argentina’s central bank held its key rate at 40 percent Tuesday and indicated it would stay high until inflation starts to cool.
Some analysts saw the government’s announcement as an attempt to quell peso volatility while some economists saw it strictly as a way to cover Argentina’s current account deficit, which could in turn have a positive impact on the peso.
Traders by and large welcomed the government mapping out how it will deploy the credit line.
“It seems healthy to me that the government intends to give certainty about what it’s going to do with the disbursement from the IMF,” says Santiago Herrera, a currency trader at BLD Trading, a foreign exchange firm. — Bloomberg

No letup for bitcoin as biggest cryptocurrency extends collapse

Bitcoin extended losses, bringing its four-session slide to as much as 20%, as questions mount about whether the world’s biggest cryptocurrency was manipulated during last year’s record price surge.
After rallying more than 1,400% in 2017 amid an investor frenzy for digital assets, Bitcoin is down almost 70% to around $6,325 as of 2:52 p.m. in New York, from its record high of $19,511 set in December. It traded at a few cents after being launched in 2009.
“Things have changed for Bitcoin and the crypto space,” said Craig Erlam, senior market analyst at online trading firm Oanda Corp. in London. “There doesn’t seem to be as much hype, or positive news. Every time we get a negative news story now — after a period of consolidation — we don’t see bullish sentiment come in to support it. It’s almost as if people are waiting to sell it.´´
The virtual currency has struggled to reverse a selloff that coincides with negative news, most recently a study of possible price manipulation using the Tether coin. Bloomberg News reported in May that the Justice Department opened up a criminal probe into illegal trading practices that can manipulate the price of Bitcoin and other cryptocurrencies.
Tether, one of the most-traded cryptocurrencies, shows a pattern of being spent on Bitcoin at pivotal moments, helping to drive the world’s first digital asset to a record price in December, according to research by a University of Texas professor known for flagging suspicious activity in the VIX benchmark.
Questions about Tether and Bitfinex have dogged the cryptocurrency world since last year when Bitfinex lost banking relationships yet continued to operate. The U.S. Commodity Futures Trading Commission subpoenaed both firms in December, seeking proof that Tether is backed by a reserve of U.S. dollars, as it claims. Tether and Bitfinex haven’t been accused of wrongdoing.
The digital coin has closed below its 50-, 100- and 200-day moving averages for the past 16 days, the longest stretch below those support levels this year.
In other technical measures, Bitcoin’s relative-strength index has fallen below 30, a level often used in equities and some other asset classes as indicating oversold. It typically rises, snapping back above 30, in a matter of days, according to a five-year analysis.Many of Bitcoin’s closest peers have also tumbled. Ethereum, the No. 2 coin by market value, and No. 3 Ripple have both dropped about 20% this week.
“The entire crypto space seems to be taking the hit now,” Erlam said. “For Bitcoin, $6,000 seems to be a support level now. If I’m bearish, I’m desperate to see it break below $6,000.” — Bloomberg

People smugglers make billions: UN report

Vienna, Austria — People smugglers made billions on the backs of some 2.5 million desperate migrants in 2016, the UN said in a report Wednesday as the plight of refugees worldwide continues to top the headlines.
The report, issued by the UN Office on Drugs and Crime, said people smuggling rings earned some $7.0 billion (7.0 billion euros) in 2016 — an amount, it noted, equal to US and EU humanitarian aid that year.
The figures are the latest available covering 30 major migrant routes in Africa, Europe, North America and Asia but they quite likely understate the extent of the problem, according to the report.
The real tragedy remains the plight of human beings fleeing war and poverty so desperate that they put their trust in smuggling gangs who have little regard for their safety, with thousands of migrants dying each year.
“This transnational crime preys on the most vulnerable of the vulnerable,” said Jean-Luc Lemahieu, UNODC Director of Policy Analysis and Public Affairs in a statement.
“It’s a global crime that requires global action, including improved regional and international cooperation and national criminal justice responses.” — AFP

Half of the world’s ‘too big to fail’ banks are in a bear market

If a bear market is considered failing in equities, then half of the “too big to fail” financial institutions across the globe aren’t succeeding.
There are 30 banks that qualify as systemically important financial institutions ( SIFI), according to the Financial Stability Board’s most recent list. Half have seen their stocks fall at least 20% from the most recent peaks, according to a Bloomberg analysis. Notably, no large U.S.-based banks make the list.
The pain has been felt most acutely in Europe, where weaker economic data has been turning heads of late. The region’s central bank is expected to signal an end to its stimulus program when it meets Thursday, and the Organization for Economic Cooperation and Development said last month that its indicators point to slowing growth in the euro area.
Prominent market observers, from Harvard University economist Carmen Reinhart to Allianz SE’s Mohamed El-Erian, also have been sounding the alarm on emerging markets.
“It would be hard to put together a bull case for European financials if you think the economy is going the other way,” said Mike Bailey, director of research at FBB Capital Partners in Bethesda, Maryland. “You’ve got kind of a double whammy where the economy is kind of flattish or worsening, and then you’re seeing the central bank still easing. You don’t have the light at the end of the tunnel for rate hikes, which would help them.”
Meanwhile in the U.S., recent economic data has painted a Goldilocks picture and the Federal Reserve is expected to raise rates for the second time this year. Although none of the SIFIs that have fallen into a bear market are U.S. banks, some aren’t far from the 20% drop.
Citigroup Inc., another designated SIFI, isn’t in a bear market, but it could be headed there, according to Matt Maley, an equity strategist at Miller Tabak & Co. From its January highs, the stock is down more than 15%, and it’s struggled to break above its 200-day moving average. According to Maley, if Citigroup breaks through its recent low of $66, it could confirm that the bank’s price trend is downward.
“We’d be a lot more concerned if this ‘negative potential’ was facing JPM instead of Citi, but the under-performance of these global banks (and their European counterparts) is not getting enough attention right now,” Maley wrote in an email to clients Wednesday.
JPMorgan Chase & Co. is down about 7.5% since reaching a high on Feb. 26. Goldman Sachs Group Inc. and Wells Fargo & Co. are both down around 15% from their respective peaks. — Bloomberg

Germany says `isolationist' Trump opens global power vacuum

German Foreign Minister Heiko Maas called on the European Union to unite and fill the void left by the U.S. drawback from global agreements that have underpinned trans-Atlantic relations for decades.
Maas’s warning that the post-World War II order “no longer exists” signals that Germany is starting to confront a president who seems to delight in challenging allies on issues from security to exports. Chancellor Angela Merkel earlier challenged Trump over U.S. services exports to the EU.
“The Atlantic has gotten wider under President Trump,” Maas said in a speech in Berlin on Wednesday. “Trump’s isolationist policy has opened a huge worldwide vacuum. Therefore our common response today to ‘America First’ must be ‘Europe United.”’
Merkel rebuffed Trump’s sustained criticism of Germany’s export prowess in a speech on Tuesday, arguing that the U.S. runs a trade surplus with Europe when services are included.
The U.S. has a $14 billion dollar current-account surplus with the EU, Economy Ministry spokeswoman Tanya Alemany told reporters in Berlin when asked about Merkel’s remarks. In contrast, the U.S. Census Bureau says the EU had a $101 billion trade surplus in goods and services with the U.S. last year and a $30.3 billion surplus in the first quarter of 2018.
‘Old-Fashioned’ Calculus
“Trade surpluses are still calculated in a pretty old-fashioned way, based only on goods,” Merkel told a business conference of her Christian Democratic Union party in Berlin. “But if you include services in the trade balance, the U.S. has big surplus with Europe.”
While measures of international trade in services vary, Merkel may have in mind U.S. companies such as Facebook Inc. and Apple Inc., said Carsten Brzeski, chief economist at ING-Diba in Frankfurt.
“Merkel obviously has a point that not all services are included in the traditionally measured trade balance,” he said in an interview. “It’s as much cherry picking as singling out steel, aluminum and autos.”
To counter U.S. retrenchment, Maas said the EU must redefine its relationship with the U.S. and take on greater global responsibility, including on foreign policy and defense.
German Economy Minister Peter Altmaier, a close ally of Merkel, vowed to defend the country’s steel industry against the effects of U.S. tariffs.
“I will make sure that the German and the EU steel industry will not become victims of U.S. policy,” Altmaier said at a steel lobby event in Berlin on Wednesday evening. The EU would present a united response in the next few days, he said.
Filling the Vacuum
“Who will fill this vacuum? Authoritarian powers? No one?” Maas said. “Germany has to be part of the answer.”
Another way to strengthen Europe is to close prosperity gaps between euro-area countries by going further than recent proposals by Merkel, he said.
“Saving is a virtue, but tight-fistedness is a threat to what we want to preserve and build out: Europe’s unity and strength,” said Maas, whose Social Democratic Party is Merkel’s junior coalition partner. — Bloomberg

Twitter to predict what you want to see, when it happens

Twitter Inc. will personalize news for users and send them notifications of events, trying to attract a bigger, broader audience with one of its most comprehensive product updates in years.
The changes follow several iterations to make the social-media platform less cumbersome for new users, who may find it hard to decide whose opinions to follow and how to engage in conversations. Now, Twitter will predict relevant topics and send breaking-news notifications based on a person’s interests. It’s overhauling the explore section of the mobile app to show curated content for major events and stories that are organized by topics like news, entertainment and sports.
Chief Executive Officer Jack Dorsey “often says we want Twitter to be the little bird on your shoulder that tells you what you need to know, when you need to know it,” said Keith Coleman, the San Francisco-based company’s vice president of product. “When something important happens on Twitter, we want Twitter to tap you on the shoulder and say ‘hey, this is going on and we want you to check it out.’”
For example, with the volcanic eruption in Hawaii, Twitter could alert people with a notification that would take them to the most relevant tweets, photos, and live videos of the news. Currently, to get the most in-depth experience, a user would have had to search for a specific hashtag that identifies the event, follow the tweets of Hawaiian government officials, or search for other accounts. Twitter wants to make it as easy for someone to stay connected to an event as it is to follow an individual person, Coleman said.
Dorsey, in a tweet, said the effort “really gets closer to what Twitter wants to be.” Sriram Krishnan, the company’s senior director of product, said the changes will be rolling out to users beginning Wednesday and in the coming weeks. “We will be learning and iterating based on feedback,” Krishnan tweeted.
Twitter shares have rallied more than 80% this year, as investors grow confident in the company’s turnaround strategy and pace of product innovations. Dorsey has focused on using artificial intelligence to personalize content for people and improve the algorithms to filter out spam and automated accounts called bots. Yet while the changes have encouraged existing users to spend more time on the platform originally known for its 140-character posts, monthly active users gained 2.8% to 336 million in the first quarter compared to a year earlier — the slowest pace of growth in two years.
The company is betting that this major makeover will draw in a more general audience, outside of its power base of journalists, politicians and entertainers. As part of the effort, Twitter will roll out a World Cup experience with individual pages for each game that will keep track of the score and commentary. The global soccer tournament begins Thursday in Russia. Executives believe these kind of curated experiences around big events will entice new users to download the app.
Dorsey also embraces Twitter’s role as a curator of news and a place to discover “what’s happening now” at a time when social-media companies have come under fire for fake news and harassment. Facebook Inc. recently adjusted its News Feed algorithm to prioritize posts from friends and family, and it scrapped the trending news feature that was criticized for anti-conservative bias. Technology companies have tried to position themselves as platforms, rather than media publishers that are arbiters of truth.
Bloomberg LP produces TicToc, a global breaking news network for the Twitter service.
Joanna Geary, Twitter’s director of curation and former journalist at The Guardian, said the company isn’t a newsroom defining the biggest news of the day for its audience.
“We’re there to reflect the conversations that are already happening on the platform,” she said. The curation is done by a blend of humans and machines.
The product changes could aid Dorsey’s goal to rid the platform of rancorous and toxic conversation. Earlier this year, the company started accepting proposals from the public for how to make Twitter a more civil place. By increasingly curating and personalizing the content that users see, the company may have more power over the way information is spread across the platform. — Bloomberg

US Federal Reserve raises key interest rate to 1.75-2%

Washington — The US Federal Reserve raised the benchmark lending rate on Wednesday, the second increase of the year, and signaled two more hikes were coming in 2018 and four in 2019, a possible sign of concern about accelerating inflation.
The unanimous vote brings the federal funds rate to a range of 1.75-2.0 percent but the quarterly economic forecasts show central bankers now expect the rate to end the year at 2.4 percent rather than the 2.1 percent projected in March.
That implies four total rate increases this year. The Fed last raised the benchmark in March, the sixth increase since December 2015 as it tries to keep the economy growing at a sustainable pace without fueling inflation.
The median forecast of members of the Fed’s rate-setting Federal Open Market Committee puts the benchmark at 3.1 percent at the end of 2019, up from the previous 2.9 percent, which signals four hikes next year rather than three.
The reflection of increased fears about rising prices is likely to surprise markets, as most economists had not expected the Fed to give a clear sign that an additional rate increase was likely until later in the year.
That shift came as a single FOMC member shifted his or her forecast for this year and next, breaking a virtual tie in the projections released in March.
Fed Chairman Jerome Powell is due to give a press conference at 2:30 pm (1830 GMT) to explain the thinking behind the rate increase and outlook.
However, the FOMC statement stressed that rising interest rates were unlikely to derail economic growth — which it now characterizes as “strong” rather than “moderate” — and again made clear the Fed had some tolerance for inflation above its two percent target.
Inflation mounts
In another slight change of language — something sure to catch the attention of Fed watchers — it said “further gradual increases” in the key rate “will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric two percent objective over the medium term.”
The use of the term “symmetric” and “medium term” is a clear indication the Fed is not in a hurry to get inflation to two percent and will be comfortable if prices rise above that level for a short time.
In its quarterly Summary of Economic Projections, officials projected the Fed’s preferred inflation measure will accelerate only slightly, ending this year at 2.1 percent rather than 1.9 percent, and holding at that level through 2020.
That index currently is at two percent, but other measures of consumer and producer prices have accelerated, pushed by rising fuel prices, as well as metals prices that could be the result of the steep import tariffs President Donald Trump imposed.
The Fed watches price measures closely to determine how fast to raise interest rates but has signaled that the two percent target is not a ceiling and that it would be comfortable with inflation rising slightly above that level for a time.
The FOMC’s economic growth forecasts were little changed, with 2018 GDP seen rising 2.8 percent rather than 2.7 percent but unchanged at 2.4 percent in 2019 and two percent in 2020.
The already historically low unemployment is projected to fall even further, ending the year at 3.6 percent before settling at 3.5 percent in 2019 and 2020.
Only eight of the participants voted on policy at this meeting but all join the discussion and submit forecasts. — AFP

Central bank faces ‘complex’ policy environment

THE MONETARY BOARD (MB) is gearing up for an earlier rate-setting meeting next week as it faces a “fairly complex” mix of faster inflation, a weakening peso and robust economic growth.
The policy-making body of the Bangko Sentral ng Pilipinas (BSP) will meet on Wednesday, June 20 — a day earlier than the regular Thursday policy reviews done every six weeks.
BSP Governor Nestor A. Espenilla, Jr. described the one-day adjustment as purely “logistical” due to “tight” schedules of central bank officials. He clarified that the change will not affect the regular schedules of succeeding policy meetings.
“The MB will be evaluating a very rich and broad range of information at its policy meeting next week. Recent developments on inflation and economic activity are key inputs, but these are certainly not the only consideration,” Mr. Espenilla told reporters in a mobile phone message.
Mr. Espenilla made the remarks when asked to comment on the continued depreciation of the peso, which weakened further on Wednesday to a fresh 12-year-low to P53.23 per dollar.
Some analysts have attributed the local currency’s weakness partly to uncertainty over the BSP’s next moves, coupled with uncertainty over policy decisions of the United States Federal Reserve and the European Central Bank due this week.
Faster inflation remains a key concern locally, following a 4.6% reading in May that was the quickest pace seen in at least five years. Price stability is the BSP’s main mandate, with five-month inflation now at 4.1% which remains past the 2-4% target range for 2018.
“We’ll be examining closely all the potential drivers of future inflation through the various transmission channels as affected by global developments, expectations formation and uncertainty. It’s a fairly complex environment that we need to navigate,” Mr. Espenilla said about their upcoming monetary policy assessment.
The BSP hiked rates by 25 basis points (bp) in its May 10 review — the first time it did so in nearly four years — as inflation continues to breach the target, citing the need to temper inflation expectations in the market.
BSP Deputy Governor Diwa C. Guinigundo has said that the 25bp increase in rates last month should be “sufficient” to bring inflation back to target next year, even if monetary authorities have conceded to missing the 2018 target at a projected 4.6% full-year average.
Some economists see at least one more rate hike from the BSP later this year, which they said will be needed to keep at bay “second-round” inflation pressures from expected higher minimum wages and public transport fares. — Melissa Luz T. Lopez

Asia central banks juggling risks find solace in food

ASIAN central bankers grappling with wobbly markets, higher energy costs and simmering trade tensions are getting relief from an old foe: food prices.
In a region vulnerable to wild price swings, food inflation has been largely contained, thanks in part to favorable weather and increased investment in production, storage and distribution.
For developing nations like India and China — where food makes up a higher share of spending and consumer price indexes — that’s helped keep a lid on inflation and left them better placed to grapple with the strains caused by US monetary tightening.
Less clear is how long the calm will hold.
“Food price inflation across Asia is subdued, but I don’t think central banks can afford to nod off,” said Sumiter Singh Broca, a Bangkok-based official at the Food and Agriculture Organization (FAO) of the United Nations.
Malaysia, the Philippines, Indonesia and India have already raised interest rates this year in a bid to support weakening currencies amid a sell-off in emerging markets and to get ahead of inflation pressures linked to rising fuel costs.
Economists at Citigroup Inc. led by Johanna Chua note that although volatility in Asia’s food prices has receded, the oil rally and a cyclical bottoming of food inflation should generate higher risks — especially for fuel-sensitive economies like Thailand and Indonesia.
Food has a weighting in Asia’s consumer price index that’s more than three to four times larger than fuel and energy, according to Citigroup.
Shikha Jha, a Manila-based economist at the Asian Development Bank, warns that rising oil prices will push up fuel and transportation costs in the region. “Energy and food prices are moving together very closely,” she said, adding that risks associated with ongoing trade tensions between the United States and China also bear watching.
Food costs across Asia can vary considerably, both by item and by country, making an overall reading hard to gauge. Globally, prices are already inching higher. The FAO’s Food Price Index averaged 176.2 points in May to hit its highest level since October. The Cereal Price Index was almost 17% higher than a year ago.
Sizable purchases by Southeast Asian buyers kept rice prices firm, according to the FAO. Thai rice prices are up more than seven percent so far this year and the Philippines has shown strong demand for imported rice.
Yet for now at least, the overall picture in Asia is largely benign.
“Weather has been rather favorable, which means not so much disruption on food supply coming from mother nature, which has traditionally been disruptive for countries such as India, the Philippines and Vietnam,” said Trinh Nguyen, a senior economist for emerging-market Asia at Natixis Asia Ltd. in Hong Kong.
But unfavorable base effects, higher oil prices, weather risks and weaker currencies mean the cost of imported goods are likely to pick up, she said.
In a sign that pressures can quickly rebound, India’s inflation picked up for a second straight month in May to 4.9%, giving ammunition to the central bank to raise interest rates again. Food prices rose 3.1% in May from a year ago, up from 2.8% in April.
Indonesia has seen food prices pick up considerably. They climbed 4.5% in May from a year ago, following a 5.2% gain in April — the fastest pace since December 2016.
In China’s case, food is estimated to make up about 30% of the overall inflation basket and is often whipped by pork. Wholesale pork prices have dropped more than 18% this year due to excessive supply. A consolidation of China’s pig industry has seen small farms shut due to environmental concerns, while large-scale operations are expanding.
With the Federal Reserve all but certain to raise interest rates again this week, Asia will continue to face pressure to keep in step or see their currencies weaken. In that environment, contained food prices may not be enough to keep Asia’s central bankers sidelined, but will at least give them more flexibility than they’ve enjoyed in the past.
“Food prices are likely to remain stable over the near term,” the FAO’s Mr. Broca said.
“But we can’t be sure over the longer term.” — Bloomberg

Electronics firms brace for higher tax cost

ELECTRONICS companies in the country — a key driver of merchandise exports — are bracing for bigger costs once planned changes to current fiscal incentives are implemented.
“The bottom line is it was going to increase the cost for the companies on the average by about 40%,” Danilo C. Lachica, president of the The Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), said in a press briefing in Pasay City on Wednesday.
Mr. Lachica was referring to the proposed shift of a fiscal incentive scheme for economic zone locators from the current five percent tax on gross income in lieu of all other national and local taxes to a 15% tax on net income for five years as proposed by the Department of Finance.
The proposal forms part of the second tax reform package that also removes tax incentives deemed redundant and slashes the regular corporate income tax rate to 20-25% from 30% currently.
SEIPI has proposed a preferential rate of 10%, inclusive of local business and real property taxes.
The industry group projects outbound shipments of its members increasing in value by about six percent this year. Electronics sales, which made up 56.07% of total merchandise exports as of April, increased by 3.3% to $11.749 billion in that period from $11.378 billion in 2017’s comparable four months.
“It’s going to be additional cost but it’s a cost that our member-companies will and are willing to live with because we understand the role of corporate citizens to pay for, you know, the use of infrastructure the government is building for our country,” Mr. Lachica said, referring to SEIPI’s 10% proposal.
Richard Cohen, SEIPI board member and vice-president of chip-maker Maxim Philippine Operating Corp., said fiscal incentives are an “important aspect” of the company’s plans, adding that “uncertainties” have led to the Philippines losing to Thailand a $100-million expansion program by its California-based parent Maxim Integrated.
“Last year we had a choice. And the choice went to Thailand… it should be here. Look at all the companies that are here, the talents that are here. It should be here,” Mr. Cohen told BusinessWorld.
Kosei Koba, president and chief executive officer of Ibiden Philippines, Inc., said its parent company in Japan has approved a $60-70 million three-year program to expand its Batangas plant.
However, he said, “[t]hat is based on the current incentive.”
“In the future we may consider the additional investment… [But] again we have to consider the investment stability, how is the cashflow.”
CHANCES GOOD
Wednesday also saw think-tank Action for Economic Reforms (AER) saying that there is a good chance for fiscal incentives reform to hurdle Congress.
“We think that the chances are highest now than ever,” AER Industrial Policy Coordinator Jenina Joy Chavez said in a separate press briefing.
She said that moves to streamline fiscal incentives began in the 10th Congress but had always floundered on differences between the Finance department (DoF), which was focused on increasing tax collections, and the Trade and Investments department (DTI), which focused on making the country more attractive to foreign investors.
“DoF and DTI are now united,” she noted.
“You can find the convergence of the essential reforms that — for both the government departments and the major [business] chambers — it’s just the question of working that compromise.”
Ms. Chavez added that now would be an “opportune time” to push the reform given the availability of relevant data after the enactment of the Tax Incentives Management and Transparency Act.
Another concern raised by industry, however, is that the changes in corporate tax structure will be implemented even if existing incentives form part of contracts with investors, AER noted. — Janina C. Lim and Elijah Joseph C. Tubayan

Blackstone raises $9.4B for Asia real estate, private equity funds

HONG KONG — Blackstone Group LP said it has raised about $9.4 billion for two new funds — the largest-ever fund dedicated to real estate investments in Asia as well as its first private equity fund for the region.
The funds add to a massive industry-wide pool of money for Asian acquisitions and investments, with investors attracted by rapid economic growth compared to other major markets.
It raised $7.1 billion for what it called its second regional “opportunistic” real estate fund.
Growing urbanization and rising incomes, particularly in China and India, have boosted investor appetite for shopping malls, warehouses and other property assets.
“The size of this fund… gives us flexibility to pursue a range of opportunities and commit capital with speed and scale,” Ken Caplan, global co-head of Blackstone Real Estate, said in a statement.
Blackstone’s real estate business was founded in 1991 and has about $120 billion in capital under management. The portfolio includes hotel, office, retail and industrial properties in the United States, Europe, Asia and Latin America. Its first Asia-focused property fund, which closed in 2014, raised $5.08 billion.
The Asian private equity fund closed at about $2.3 billion, Blackstone said, adding that it now has at least $3.8 billion to invest in Asia equity when “associated commitments” from its global buyout fund are counted.
Roughly two-thirds of the private equity fund, as well as the contribution from its global fund, will be used to invest in China and India, said one person with direct knowledge of the matter, declining to be identified as details of the investment plans were not made public.
The fund will focus on buying controlling or significant minority stakes in sectors such as healthcare, high-end manufacturing and services, as well as goods and services geared to consumers who want to upgrade their lifestyles, people familiar with the plan told Reuters last year.
Blackstone, whose previous private equity investments in Asia were from its global funds, did not immediately respond to a request for comment on its capital deployment plans.
Asia private equity deals have increased in size following corporate restructuring and as global funds become more established players in key markets such as China, India and Japan.
Rival Carlyle Group is set to close its biggest Asia private equity fund at $6.5 billion, Reuters reported last month, after other global groups including KKR & Co. raised fresh capital.
Hong Kong-based private equity firm PAG is planning a new Asia fund that aims to raise as much as $6 billion.
Last year, a total of 342 funds raised a combined $107 billion in Asia, according to data provider Preqin. — Reuters

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