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ICTSI to complete expansion of Iraq terminal by Q3 2019

International Container Terminal Services, Inc. (ICTSI) is expects the expansion of its terminal in Iraq to be completed by the third quarter of 2019.

The Razon-led port operator said in a statement the Basra Gateway Terminal (BGT) Phase 2 expansion will cost around $250 million.

“On completion of the current second phase expansion scheme, ICTSI will have invested in excess of $250 million, the lion’s share of which is for a new berth, yard construction, and state-of-the-art handling equipment,” ICTSI said.

The Phase 2 expansion will deliver 400 meters of new quay with a draft of 14 meters, together with a new 30-hectare yard area and a 15-hectare secure parking area.

“Underlining BGT’s ongoing commitment to maintaining high service levels, the latest round of development also includes the acquisition of a cutter suction dredger with the dual objective of ensuring strict adherence to the construction schedule and maintaining draft alongside the terminal’s new and existing births,” the company added.

The second phase development was triggered by strong demand, ICTSI said.

Last year, BGT, an ICTSI subsidiary, completed the first phase of its terminal greenfield project, which includes the construction of a new 250-meter berth and a 15-hectare yard area.

The subsidiary also undertook the development of quay and yard areas configured for the safe and efficient handling of oil and gas project cargo.

“Our commitment to helping Iraq develop international standard port infrastructure continues to expand,” said Hans-Ole Madsen, ICTSI senior vice president and regional head of Europe, Middle East, and Africa.

“We invested for the long term in fixed infrastructure since day one. We continue to receive strong and most encouraging assistance from the General Company for Ports in Iraq and other government bodies in this respect. We are confident that we can continue to build on this productive partnership to the benefit of port users and the country as a whole,” added Mr. Madsen. — Patrizia Paola C. Marcelo

North Korea says no plans to meet US officials at Olympics

SEOUL — North Korea has no intention of meeting US officials during the Winter Olympics that start in South Korea on Friday, state media reported, dampening hopes the Games will help resolve a tense standoff over the North’s nuclear weapons program.

US Vice-President Mike Pence, who described North Korea as the world’s most tyrannical regime on Wednesday, flies in to South Korea on Thursday ahead of the opening ceremony in the mountain resort of PyeongChang, just 80 km (50 miles) from the heavily armed border with North Korea.

The ceremony will also be attended by a senior delegation of North Korean officials, including the younger sister of leader Kim Jong Un and the North’s nominal head of state, Kim Yong Nam.

The sister, Kim Yo Jong, and other members of her entourage will travel by private jet to Seoul’s Incheon International Airport on Friday afternoon, North Korea informed the South on Thursday.

However the prospect of talks, which Mr. Pence downplayed but left open, appeared slim.

“We have never begged for dialogue with the US nor in the future, too,” the North’s KCNA news agency reported on Thursday, citing Jo Yong Sam, director-general of the North American department of North Korea’s foreign ministry.

“Explicitly speaking, we have no intention to meet with the US side during the stay in South Korea … Our delegation’s visit to South Korea is only to take part in the Olympics and hail its successful holding,” Mr. Jo said.

South Korea wants to use the event to re-engage with North Korea and open the way for talks to resolve one of the world’s most dangerous crises, in which US President Donald J. Trump and Pyongyang have swapped nuclear threats.

Mr. Pence had said after meeting Japanese Prime Minister Shinzo Abe in Tokyo on Wednesday that Washington would soon unveil “the toughest and most aggressive round of economic sanctions on North Korea ever.”

He said before departing for Seoul the United States wanted to peacefully dismantle North Korea’s nuclear program but warned Pyongyang not to underestimate US military strength or resolve.

In Beijing, Chinese foreign minister Wang Yi told reporters that China saw the Olympics as a first step towards “everyday, uninterrupted” dialogue.

All sides, not just the two Koreas, needed to work hard and dialogue between the United States and North Korea should be expanded for this to happen, Mr. Wang said.

“You can’t have it that one person opens the door and another closes it,” he said.

MILITARY PARADE
North Korea marked the founding anniversary of its army with a large military parade in Pyongyang on Thursday, a government official told Reuters, having last month changed the date of the celebration to the eve of the Olympics. The official asked not to be identified because of the sensitivity of the issue.

Domestic media reports said the parade was smaller than those of previous years.

Mr. Pence will meet South Korean President Moon Jae-in in Seoul later on Thursday. On Friday, before he attends the Olympic opening ceremony, he will visit a memorial for 46 South Korean sailors killed in 2010 in the sinking of a warship that Seoul blamed on a North Korean torpedo attack.

Mr. Pence is taking the father of Otto Warmbier, an American student who died last year after being imprisoned in North Korea for 17 months.

Kim Yo Jong, the 28-year-old sister of the North Korean leader, will be sitting in the same stadium as VIP guests along with ceremonial head of state Kim Yong Nam.

She will be the first member of the Kim family to cross the border into the South. Kim Yo Jong is a propaganda official and was blacklisted last year by the US Treasury department over alleged human rights abuses and censorship.

Japan’s Mr. Abe, whose nation has been within range of North Korean missiles for decades, will also attend the ceremony, adding to seating complications for the hosts.

South Korea asked the United Nations (UN) on Wednesday for an exemption to allow a UN-sanctioned North Korean official, Choe Hwi, to attend the opening ceremony with Kim Yo Jong.

The Unification Ministry in Seoul said no decision had been made yet on Choe Hwi and Pyongyang had not mentioned any change in their plans to send him.

A group of 280 North Koreans arrived in South Korea on Wednesday to support athletes from the two sides at the Games. The group included a 229-member cheer squad, taekwondo performers, journalists and the sports minister.

Preliminary competition at the Games began on Thursday, with events including curling and ski jumping. — Reuters

US Senate leaders reach bipartisan budget deal on eve of shutdown deadline

WASHINGTON — US Senate leaders said Wednesday they had reached a bipartisan budget deal for 2018 and 2019 — a move which, if approved by Congress, would avert a second government shutdown in just three weeks.

The deal, months in the making, was seen as a major achievement for both the ruling Republicans and opposition Democrats in a deeply divided Washington.

The breakthrough came on the eve of a midnight Thursday deadline for Congress to pass a stopgap spending measure — its fifth since October — or once again turn the lights out on the federal government.

The proposal would lift caps on federal spending that were mandated under a 2011 law, boosting military and nonmilitary funding by some $300 billion in total, aides said.

“The compromise we’ve reached will ensure that, for the first time in years, our armed forces will have more of the resources they need to keep America safe,” Senate Majority Leader Mitch McConnell said on the Senate floor.

Republican Senator Lindsey Graham, a defense hawk, said it was the “best news for the military… since 2011.”

The agreement would also ensure funding for domestic priorities pushed by Democrats including disaster relief, health centers and fighting a surging opioid epidemic.

“The budget deal doesn’t have everything Democrats want, it doesn’t have everything the Republicans want, but it has a great deal of what the American people want,” top Senate Democrat Chuck Schumer told his colleagues.

The deal raises the debt ceiling until March 2019, postponing a potential fiery clash within President Donald J. Trump’s own Republican Party, and essentially clears the decks for Congress to address other thorny issues such as immigration and infrastructure.

Before the deal was announced, the House passed a partisan bill that would fund government for six weeks and the military through the remainder of fiscal year 2018.

The Senate is now expected to rewrite that measure, pass it and send it back for House approval before Thursday’s funding deadline — provided there are no efforts to slow the process in the Senate.

‘HAPPY’ WHITE HOUSE
Messrs. McConnell and Schumer said the deal was the product of extensive negotiations between both parties and the White House, which reacted positively to developments on Capitol Hill.

“We’re certainly happy with the direction that it’s moving,” press secretary Sarah Sanders said, adding that the White House would need to see the final components.

That was a turnaround from Tuesday, when Mr. Trump had said he would “love” a shutdown if he did not get his way on immigration.

Several Senate Democrats, including John Tester of Montana, said they were buoyed by the deal but wanted to study the details before signing on.

House Speaker Paul Ryan urged all House members to support the deal, saying it breaks the “logjam” on public priorities and “will ensure that America’s armed forces have more of the resources they need to keep America safe.”

But the compromise could face stiff blowback in the lower chamber of Congress, where fiscal conservatives may balk at adding $300 billion to the national debt just months after passing a $1.5-trillion tax cut package.

But liberal stalwarts might also revolt over the sensitive issue of immigration and the fate of millions of undocumented migrants.

Immigration is not part of the compromise. Instead, Mr. McConnell will allow an open debate on possible immigration solutions on the Senate floor, beginning as early as next week — a promise he made to end a three-day shutdown last month. — AFP

Rescuers brave aftershocks as Taiwan quake toll rises

HUALIEN — Taiwanese rescuers continued the terrifying task Thursday of searching for survivors in a dangerously leaning apartment block that was partially toppled by a quake, despite regular aftershocks coursing through the building’s tottering structure.

At least ten people were killed and dozens remained missing after a 6.4 magnitude quake hit the popular eastern tourist city of Hualien late Tuesday.

The powerful tremor left a handful of buildings badly damaged — some of them leaning at precarious angles — as well as roads torn up and hundreds forced to shelter in local schools and a stadium.

The major focus for emergency responders remained the Yun Tsui apartment block where six of the deaths occurred and dozens are still missing.

The lower floors of the 12-storey tower — which also housed a hotel — pancaked, leaving the structure leaning at a fifty-degree angle and sparking fears of an imminent collapse.

Despite those risks rescuers kept going into the building throughout Wednesday night and Thursday morning in a desperate search for survivors.

Strong aftershocks continued to strike Thursday sending rescue teams scurrying from the building, only for them to return a little while later and resume their grim task.

Chu Che-min, the Hualien fire department’s rescue team leader at the scene, told AFP they located two more bodies overnight.

“We discovered the body of a Chinese woman at the hotel in Yun Tsui (building) earlier this morning and located another person who’s a hotel staffer,” he said.

A Red Cross worker at the scene estimated that the building had tilted another 5% overnight, adding he had little hope of finding survivors on its lowest floors.

“Floors one to three are all compressed so it’s hard to tell whether there are people,” he told AFP, requesting anonymity.

He said that there was no risk of a gas explosion in the building but the aftershocks and further slippage remained a persistent danger.

In a updated toll, the national fire agency said ten people had now been confirmed killed in the quake including three Chinese mainland nationals.

At least 66 people remain unaccounted for across the city, the national fire agency said. In the apartment block, 37 people are missing from flats alongside 10 hotel guests. More than 250 people were injured in the tremor, the strongest to hit Hualien in decades. — AFP

Main index declines anew ahead of BSP decision

STOCKS closed in negative territory again on Thursday, Feb. 8, as investors awaited the results of the local central bank’s first policy meeting for the year.

The bellwether Philippine Stock Exchange index (PSEi) dropped 0.25% or 22.48 points to finish at 8,645.08.

The broader all-shares index, meanwhile, posted a gain of 0.16% or 8.59 points to 5,094.67.

“I think investors opted to sell on strength after [Wednesday]’s rally. Considering that 8,550 was breached…, investors probably decided to cut losses for fear of another round of correction,” Garie G. Ouano, research director at Chinabank Securities Corp., said via text.

The market saw thinner trading as 1.03 billion issues valued at P7.11 billion switched hands. This is lower than the P9.08-billion turnover recorded on Wednesday.

“Value turnover was also below average so that could indicate that the market was on wait-and-see mode ahead of the BSP (Bangko Sentral ng Pilipinas)’s policy decision,” Mr. Ouano said.

“At their first meeting of the year, we expect the BSP to leave policy rates unchanged, keeping the overnight reverse [repurchase] rate at 3.00% and the overnight deposit rate at 2.50%. However, we see the risk that the BSP sounds meaningfully more hawkish than their meeting in December,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile phone message ahead of the meeting’s close.

The BSP kept rates unchanged at Thursday’s meeting, it announced after the close of trading, on the back of robust economic prospects and expectations of a moderation in inflation.

Property was the lone sub-index that gained on Thursday, adding 0.20% or 7.92 points to 3,920.35.

The mining and oil counter led the day’s losers, giving up 0.98% or 115.06 points to 11,538.72, followed by industrials, which dropped 0.38% or 44.92 points to 11,712.34. Financials shed 0.31% or 7.02 points to 2,205.45; services dipped 0.16% or 2.74 points to 1,711.91; while holding firms moved 0.03% down or 2.83 points to 8,752.29.

Advancers trumped decliners, 107 to 92, while 60 issues remained unchanged.

Foreigners continued their selling spree on Thursday, with net outflows recorded at P556.30 million, slightly lower than the P598.98 million posted the day before.

Most Southeast Asian stock markets edged lower on Thursday, signaling caution, as Wall Street’s early gains overnight fizzled out, leaving investors wary of further volatility in the global markets.

US stocks ended lower on Wednesday as bond yields climbed higher, and the threat of rising inflation kept investors on edge over the prospect of more interest rate hikes.

In Asia trade, the S&P e-mini futures slid 0.30%, suggesting the likelihood of another uncertain session on Wall Street, while MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.10%. — Arra B. Francia with Reuters

Meralco power rates to increase this month

The cost of electricity in February will increase by P1.08 per kilowatt-hour (kWh), Manila Electric Co. (Meralco) said, pointing to higher pass-through generation charge.

Meralco said the increase “will not be implemented in full, in the interest of consumer welfare.” It made the statement in an online message ahead of its regular monthly issuance on power rates.

The increase follows two straight decreases in the overall electricity rates that amounted to a total P0.90 per kWh for a typical household.

Meralco told its consumers “to await the official announcement on the final rate adjustment for February, and how the remainder of the increase will be implemented.”

“Meralco’s distribution, supply, and metering charges, meanwhile, have remained unchanged for 31 months, after these registered reductions in July 2015,” it said.

It reiterated that it does not earn from the pass-through charges, such as the generation and transmission charges. Payment for the generation charge goes to the power suppliers, while payment for the transmission charge goes to the National Grid Corporation of the Philippines. It added that taxes and other public policy charges such the feed-in-tariff allowance are remitted to the government. — Victor V. Saulon

Faster price pickup seen till June

INFLATION RATE will likely keep rising until June as the second-round effects of tax reform creep in, an analyst at a global bank said yesterday, adding that this in turn could trigger three rate hikes from the central bank this year.

Jose Mario I. Cuyegkeng, senior economist at ING Bank N.V. Manila, said inflation will likely average “at least four percent or higher” for 2018, reeling from the impact of Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion Act (TRAIN), that was enacted in December and which took effect last month.

“I think within the first half of the year, we’ll probably see a peak. Once we get the second-round effects… we expect that to happen within the next three months,” Mr. Cuyegkeng said on the sidelines of ING Bank’s annual financial markets road show yesterday.

He added that monthly inflation could clock “closer to 4.5%” before easing.

January inflation surprised at four percent, the fastest in over three years to hit the ceiling of the 2-4% target range set by the Bangko Sentral ng Pilipinas (BSP), against a market expectation of 3.5%.

State economic managers attributed January’s price spike partly to effects of the tax reform law, as well as to rising oil and food prices. However, BSP Governor Nestor A. Espenilla, Jr. said TRAIN’s impact is likely temporary and that inflation rate would eventually “stabilize.”

Mr. Cuyegkeng said last month’s faster-than-expected inflation pace bolstered the case for a tightening move from the Monetary Board, as he now prices in three rate hikes for 2018.

He added that there is now a 50% chance for the BSP to adjust rates at its policy meeting today.

“Now, there is a case to be made that the central bank has limited choices to stave off any policy rate hikes,” Mr. Cuyegkeng said at the forum, noting that such tightening would help anchor inflation expectations over the next 12-18 months.

“A two-peso increase in minimum transport fares would eventually mean that inflation will still rise by another half percentage point or more,” he added, pointing out that petitions for higher daily minimum wages would likewise have an impact on overall inflation.

The bank economist has also bumped up his inflation forecast from 3.7% previously, which was already above the 3.4% full-year estimate announced by the central bank in December.

By 2019, Mr. Cuyegkeng sees inflation to remain elevated at 3.5-3.6%, coming from another wave of sin tax increases for alcohol and tobacco products.

Despite this, he still expects the Philippine economy to sustain robust growth at 6.7%, matching the pace logged in 2017 on the back of household, public and business spending, as well as growth of industry and services.

The government’s ambitious spending goals for infrastructure may be doable, as he cited “significant improvement” in 2017 budget disbursements.

Despite rising inflation rates, Mr. Cuyegkeng said overheating risks have somehow eased following a moderation in the growth in bank lending and money supply.

ING chief economist Robert Carnell noted in the same event the continued underperformance of the peso against other Asian currencies, which Mr. Cuyegkeng attributed to a widening trade deficit as businesses import more capital equipment and other requirements of expansion. — Melissa Luz T. Lopez

BSP chief faces first major test

BANGKO SENTRAL ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. faces his first major test on Thursday: striking a balance between curbing inflation and calming financial markets.

Inflation is at the highest in more than three years, the currency is under pressure and financial markets are experiencing wild moves this week.

Mr. Espenilla has to decide whether now is the right time to tighten monetary policy for the first time since 2014 to prevent one of Asia’s fastest-growing economies from overheating.

“Bangko Sentral ng Pilipinas may finally deliver on rate hikes after the spike in inflation to four percent,” said Eugene Leow, a fixed-income strategist at DBS Group Holdings Ltd. in Singapore.

“With sentiment already jittery, higher rates may actually instill confidence in peso assets.”

Twelve of the 17 economists surveyed by Bloomberg predict the benchmark rate would be held at three percent, with the rest forecasting a hike to 3.25%.

The Philippines is among the top inflation-targeting central banks in Asia and its credibility now rests on the governor, who took office in July last year.

Policy makers in Asia face pressure to follow the US in tightening monetary policy, with Malaysia raising rates in January.

Financial market volatility is complicating the job of central bankers who seek to preserve stability while anchoring inflation and growth expectations.

In India, the central bank is forecast to hold its key rate on Wednesday.

The Philippine peso has lost more than two percent this year, the worst-performing currency in emerging markets after the Argentine peso. The Philippine currency and benchmark stock index gained on Wednesday, following an Asia shares rally.

The BSP is among the most predictable in Asia on monetary policy.

Former Governor Amando M. Tetangco, Jr. communicated potential changes in advance and the last unexpected decision was in July 2012 when authorities cut interest rates.

The implementation last month of the tax law that raised levies on fuel, sugary drinks and cigarettes is boosting inflation.

The surge in January prices was driven by food, beverages and tobacco.

VIEW FROM THE GROUND
Walking around the cramped alleys of Mega Q-Mart, one of the largest wet markets in Manila, Nenita Villamor lamented that prices of goods like chicken have gone up.

The mother of six has stopped buying poultry as the cost has risen more than 10% in recent weeks.

“I cook vegetables for my family instead of chicken which has gotten more expensive,” she said.

“We miss it but we can’t afford it now. The vendors say the price increase is because of new taxes.”

Public transport groups and ride-sharing companies Uber Technologies Inc. and Grab are calling for fare hikes, while labor unions are also seeking an increase in minimum wages.

The central bank will be closely monitoring the situation and stands ready to take timely action, Mr. Espenilla said on Tuesday.

“We’re not ruling out a rate hike,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, who forecast no change.

“The BSP is very sensitive to the inflation targets being breached. Given the tax law and oil, they probably would realize that the inflation outlook will only drift higher this year, so the target is more at risk.” — Bloomberg

Government mulls job fairs abroad to bring home workers for infrastructure development program

THE GOVERNMENT is thinking of holding job fairs abroad to bring home skills needed for its P8-trillion infrastructure development program till 2022, the Finance chief told reporters recently.

“I am told that getting skilled workers is getting a little bit tough. I am talking about technicians, finishing, welders. Probably its a good idea for our infra(structure) agencies together with the contractors to hold a job fair abroad where we have Filipinos,” Finance Secretary Carlos G. Dominguez III said.

“We should be prepared to conduct a job fair.”

Asked if the repatriation drive would dent growth of remittances, which have long fueled household spending that in turn have been an anchor of the country’s relatively fast economic growth, Mr. Dominguez replied: “I don’t think it will be that much.”

“I mean, you know that is P30 billion — that is a lot of money a year,” he explained, even as he acknowledged there will be “probably some [impact on remittances], but you know they (returning workers) will be contributing locally [so] it’s not a loss to us.”

Bangko Sentral ng Pilipinas (BSP) data show that cash remittances totaled $25.318 billion as of November last year, about four percent more than the $24.341 billion posted in 2016’s comparative 11 months, a pace that matches the central bank’s projection for 2017. The BSP expects overall remittances to have reach a fresh high of $28 billion that year.

Property consultants Santos Knight Frank, Colliers International Philippines and Pronove Tai have reported there is a labor shortage in the construction industry which has caused project delays.

Construction grew by a slower 5.7% last year compared to 2016’s 15.1%, Philippine Statistics Authority data show. The same comparative years saw growth of public construction ease to 13.5% from 28%, while that of private construction slowed to 3.3% from 11.5%.

Mr. Dominguez said that slowdown was due to the heightened demand for construction workers around the globe.

“You know, local companies have to understand that skilled workers are acceptable anywhere in the world and if you want to get skilled workers you have to compete. I think that’s just inevitable. Quite frankly a lot of other countries are also getting into infrastructure projects,” he said.

“We want to talk to TESDA (Technical Education and Skills Development Authority) and start reorienting their program to more jobs with high demand.”

The current administration plans to spend more than P8 trillion on infrastructure in a bid to boost overall economic growth to 7-8% from this year to 2022, when President Rodrigo R. Duterte ends his six-year term, from 6.7% last year, 6.9% in 2016 and a 6.2% average in 2010-2015.

Such sustained faster growth, in turn, is expected to cut unemployment rate to 3-5% from 5.5% in 2016 and slash poverty rate to 14% from 21.6% in 2015. — Elijah Joseph C. Tubayan

Asia bites tongue on soft dollar as Washington rattles its saber on trade

SEOUL/TOKYO — A year after US President Donald Trump took office, heightened rhetoric out of Washington about unfair trade has kept Asian policy makers reluctant to openly talk down their currencies despite the dollar’s slump to multi-year lows.

Instead, central banks are looking at subtler ways to rein in their currencies as sustained weakness in the dollar erodes the competitiveness of many exporting nations.

Thailand’s central bank, for example, said last week it was relaxing rules to allow retail investors to directly buy foreign securities. That seemed aimed at encouraging capital outflows to cap the baht, which is at four-year highs.

While firm demand for Asian exports is seen as creating legitimate support for regional currencies, something central banks tacitly accept, analysts say Mr. Trump’s aggressive posture on trade has redrawn the battle lines in foreign exchange markets.

“US President Donald Trump carries the bigger stick: the threat of protectionism,” writes Joachim Fels, global economic advisor at bond fund PIMCO. “And so Europe and Japan have acquiesced; neither has stemmed their currencies’ appreciation with words or actions.”

Recent trade barbs include the US administration’s proposals to impose tariffs on steel imports, Korean washing machines and Chinese solar panels.

They come alongside the dollar’s steady depreciation since the beginning of 2017, although it has ticked up since late last week after the fastest US employment growth in eight-and-a-half years fanned expectations of more aggressive policy tightening by the Federal Reserve and caused global equities to sell off.

A key moment in the dollar’s long run lower was US Treasury Secretary Steve Mnuchin’s comments in late January that America prefers a weak currency.

For its part, US Treasury says its semi-annual reports that identify what it sees as currency manipulating governments have been effective in boosting investment and stabilizing foreign exchange.

“The ultimate goal is for the world financial system to be stable and growth to accelerate. We’re pleased with the results that are underway,” US Treasury Undersecretary for International Affairs David Malpass told Reuters last week.

“We’ve seen a pickup both in the US and in global growth, in part because the financial system has been stable.”

While many Asian central banks have been intervening in currency markets as the dollar declined, they have also been quick to affirm their reasons were not based on trade-competitiveness.

Bank of Thailand Assistant Governor Chantavarn Sucharitakul told Reuters it was natural for the baht to appreciate, given the country’s massive current account surplus, but the movements should not be too abrupt and “the exchange rate of small open economies cannot be left to benign neglect.”

A senior Japanese government official told Reuters its “stance is to avoid competitive devaluation as agreed by G7 and G20. There’s no change to this.”

This contrasts with explicit threats from Japanese Finance Minister Taro Aso in May 2016 that the government would intervene if “one-sided” moves in the yen hurt the economy.

China’s central bank last month tweaked its currency policy to better align the yuan with exchange rates of its trading partners and reduce its correlation with the dollar. Its policy makers have publicly vowed not to get too much in the way of market forces.

But while the new trade landscape has made Asian policy makers more cautious in their words and actions, many of the region’s exporters have been more explicit about the pain of a stronger currency.

South Korean companies, including major auto and electronics manufactures, have lamented the won’s surge against both the dollar and the yen in 2017.

SK Hynix, the world’s second-largest memory chip maker, had record earnings in 2017 but foreign exchange-related losses comprised the bulk of its non-operating expenses. Apple supplier LG Display is bracing for exchange rates to be a negative factor for the company this year.

Car maker Hyundai Motor Co., already grappling with falling prices and stiff competition in the international market for sedans had its worst earnings in seven years in 2017. The won’s 12.8% rise against the dollar wiped out a substantial chunk of those meagre profits.

“Please let me know if there are good ways to minimise the currency impact,” a Hyundai Motor Group source said to Reuters. “We are having a tough time.” — Reuters

Deposits attract demand

By Melissa Luz T. Lopez,
Senior Reporter

BANKS swarmed yesterday’s auction of term deposits following the return of the month-long tenor, driving yields lower amid overwhelming demand.

The Bangko Sentral ng Pilipinas (BSP) received bids cumulatively worth P140.003 billion during Wednesday’s offering under the term deposit facility (TDF), more than double the P60 billion it placed on the auction block and surging from the P116.634 billion dangled the previous week.

The seven-day tenor saw tenders reach P88.573 billion, slipping from the previous week’s level but still well above the P40 billion which the central bank wanted to sell.

Still, the average yield dropped to 2.7278% from the 2.7785% fetched a week ago.

On the other hand, market players actively vied for the 28-day term deposits as the window was reopened after seven weeks. Demand reached P51.43 billion against a P20-billion offering, with banks asking for returns ranging from 2.75-3.125%.

This led to a 3.0183% yield, sliding from the 3.4954% average fetched when the month-long term was last offered on Dec. 13.

The TDF is currently the central bank’s main tool to capture excess liquidity in the financial system. The window allows banks to park the idle cash they hold under the BSP in exchange for a small margin, which in turn will prompt market rates to inch closer to the three percent benchmark set by the central bank.

Any excess cash that have not been deployed for loans, foreign exchange and debt payments are parked under the central bank window in order to make small gains, rather than leave these idle inside vaults.

Meanwhile, the central bank has eased rules to allow banks to place more funds under the TDF.

“[F]unds inwardly remitted by a foreign bank intended as capital of its branch or subsidiary in the Philippines shall be eligible for placement in the TDF and the ODF (overnight deposit facility) of the Bangko Sentral,” BSP Circular 995 read, as signed by Governor Nestor A. Espenilla, Jr.

As a rule, banks cannot park deposits and investments from foreigners under the central bank’s termed facilities, as these are primarily meant to manage domestic liquidity.

The exception has been made for capital infusions for a bank’s actual operations.

For next week, the BSP will again offer P60 billion worth of term deposits, split into P40 billion for the week-long tenor and P20 billion for a month-long term.

ING Bank N.V. Manila senior economist Jose Mario I. Cuyegkeng said yesterday that liquidity growth has returned to a non-inflationary pace at 11.9% in December, allaying concerns on overheating.

BSP Deputy Governor Diwa C. Guinigundo has said that there is renewed interest for the month-long instruments as money supply returns to the banks after the holiday season.

San Miguel to spend P700 billion in next 5-7 years

By Arra B. Francia, Reporter

DIVERSIFIED conglomerate San Miguel Corp. (SMC) is spending around P700 billion in the next five to seven years to further grow its infrastructure, fuel and oil, food and beverage, and power businesses.

“Roughly about P700 billion in the next five to seven years. That does not include the new airport project that is being evaluated by the government today along Manila Bay in Bulacan province,” SMC Chief Financial Officer and Senior Vice-President Fernando K. Constantino said during an institutional investors’ briefing for its P30-billion bond offering in Makati City late Tuesday.

This capex program has been in place since 2015, Mr. Constantino told reporters after the briefing.

Included in the capex program is an allocation of P56 billion to P60 billion for the food business in the next three years. The beer segment will also corner a large pie of the spending program as it builds two new breweries in the next two to three years.

The construction of big ticket projects such as Boracay airport, the Stage 3 connector road, C-6 expressway that will connect Taguig City to Quezon City, the Metro Rail Transit Line-7, and bulk water project in Bulacan, will be accounted for in the capital spending budget.

For its power business, Mr. Constantino said 300 megawatts (MW) is now on stream, while 700 MW will be completed in the following years.

SMC Senior Vice-President and Head of Treasury Sergio G. Edeza cited various strategies when asked how the company looks to raise funds for the capex.

“It can be in different forms, it can be bonds, it can be notes. All the avenues available to us,” Mr. Edeza said, with Mr. Constantino adding it can be internally generated, given SMC’s healthy cash flow.

In a presentation to investors, Mr. Constantino said the company will grow the food business so that it will account for 21% of revenues by 2020, from a 16% contribution in 2016.

Petron Corp. is expected to continue to contribute bulk of revenues at 44%, although lower than the 49% recorded in 2016.

The beverage segment will remain at a level of 17%, same as power with 11%. The infrastructure business will contribute 4% by 2020 from 3% in 2016, while packaging will account for 3%, against its previous level of 4%.

Meanwhile, the company is currently raising P20 billion in a fixed rate bond offering this March, with an overallotment option of up to P10 billion to repay its existing obligations. The company has tapped seven large banks to manage the offer, namely Standard Chartered Bank, BDO Capital and Investment Corp., BPI Capital Corp., China Bank Capital Corp., First Metro Investments Corp., ING Bank, and SB Capital Investment Corp.

The conglomerate recorded a net income attributable to the parent of P20.9 billion in the January to September 2017 period, 19% lower than the same period in 2016, amid a 19% uptick in revenues to P596.9 billion.

Shares in SMC picked up 2.72% or P3.90 to finish at P147.40 apiece at the Philippine Stock Exchange on Wednesday.