Factory activity growth eases, still ‘solid’

January 3, 2018 | 12:34 am

By Elijah Joseph C. Tubayan
Reporter

IMPROVEMENT of operating conditions of factories in the country eased in December but remained “solid,” setting the stage for “stronger growth” this year, according to a monthly survey IHS Markit conducts for Nikkei, Inc.

The seasonally adjusted Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) stood at 54.2 in December, down from November’s 54.8 and the year-ago’s 55.7.

A PMI reading above 50 suggests improvement in business conditions from the preceding month, while a score below that signals deterioration.

The manufacturing PMI is composed of five sub-indices, with new orders having the biggest weight at 30%, followed by output (25%), employment (20%), suppliers’ delivery times (15%) and stocks of purchases (10%).

ENDING 2017 ON A ‘STRONG NOTE’
“The Philippines manufacturing economy rounded off the year on a strong note, with the headline PMI showing a further improvement in operating conditions in December, buoyed by marked growth in both output and new orders,” the report read.

“While output and new orders both grew at slower rates in December compared to November, growth remained marked and above 2017 averages,” it added, noting that the fourth-quarter average was the fastest for 2017.

Employment and input inventories also improved last month as companies had a “more confident” business outlook, the report added.

At the same time, the survey noted “further signs of strain on supply chains, in part due to greater demand for manufacturing inputs,” and inflation pressures “remained elevated.”

Moreover, “[f]oreign sales barely increased in December, with survey data showing the weakest expansion in new export orders for four months,” the report read further.

Sought for comment, Security Bank economist Angelo B. Taningco in an e-mail attributed supply chain constraints to “a slowdown in suppliers’ delivery of manufactured goods amid increased traffic and port congestion.”

Overall, Bernard Aw, principal economist at IHS Markit, said in the report: “The Philippines manufacturing economy finished the year with its best quarter for 2017, setting the scene for stronger growth as the country moves into next year.”

“Output and new orders maintained marked growth rates in December. Domestic demand stood out as a key driver for manufacturing activity as export growth remained subdued,” he added.

OFF TO A STRONG START FOR 2018
Mr. Aw said that increased purchasing by manufacturers last month should provide further momentum as the new year begins.

“Other survey indicators point towards a strong start to 2018 for the sector. Business expectations about output in the year ahead strengthened to a four-month high while firms increased labor capacity and purchasing activity further during December,” he noted.

Security Bank’s Mr. Taningco said manufacturing should remain a key growth driver for the Philippine economy in 2018.

“My expectation of the sector’s sustained growth for the year is on the back of continued robust economic momentum in both the domestic economy and rest of the world that will enable local and foreign demand for Philippine manufactured items to stay buoyant,” he said.

The report also noted that respondents in December were more optimistic about the 12-month outlook, with the Future Output Index improving to a four-month high.

PMI readings of other Southeast Asian economies were not available as of early last night.

Top 1000 firms show PHL growth story intact

January 3, 2018 | 12:33 am

By Leo Jaymar G. Uy
Research Head

THE NARRATIVE on the Philippines’ robust economic growth remains intact, judging from the strong earnings performance of the country’s top 1,000 firms.

Now on its 31^styear, BusinessWorld’s Top 1000 Corporations in the Philippines ranks stock entities — both private and public — according to gross revenue for the latest available full-year audited financial statements, which for most companies on the list pertain to their 2016 performance.

Companies that made it to the list earned a cumulative P9.88 trillion in gross revenue and P1.24 trillion in net income in 2016, 9.7% and 14.6% more than in the preceding year.

The Top 1000 firms’ performance in 2016 is reflective of the overall economic performance that year with gross domestic product growth of 6.9% being the fastest in three years as well as the second fastest among its Asian neighbors.

Manila Electric Co. (Meralco) retained the top spot on the latest list. The power distributor raked in gross earnings of P250.71 billion in 2016, 0.3% more than in 2015, and grew net income by 11.7% to P20.57 billion. Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.

Petron Corp. stayed put in second place. The subsidiary of San Miguel Corp. saw a 4.3% decline in gross revenue to P230.99 billion and a 3.6% increase in net income to P5.7 billion.

Toyota Motor Philippines Corp. leaped four places to grab the third spot, growing gross revenue by 36.9% to P154.87 billion on account of a record 27% increase in vehicle sales, according to parent GT Capital Holdings, Inc.’s 2016 annual report.

Rounding the rest of the top 10 were Pilipinas Shell Petroleum Corp. with a P137.84 billion gross revenue; Toshiba Information Equipment (Philippines), Inc. (P130.84 billion); Nestlé Philippines, Inc. (P125.50 billion); Mercury Drug Corp. (P123.19 billion); TI (Philippines), Inc. (P122.16 billion); Philippine Airlines, Inc. (P117.62 billion) and PMFTC, Inc. (P113.67 billion).

BusinessWorld‘s Top 1000 Corporations in the Philippines can be purchased at Fully Booked and National Bookstore outlets. You may also purchase it by calling BusinessWorld at Tel. (632) 535-902 extension 102.

Companies on the prowl expected to fuel M&A activity this year

January 3, 2018 | 12:31 am

By Krista A. M. Montealegre
National Correspondent

THE strong wave of mergers and acquisitions (M&A) will continue this year, as companies remain on the hunt for deals to satisfy their insatiable appetite for growth.

Citing data from Mergermarket, Mary Jade Roxas-Divinagracia, managing partner for deals and corporate finance at PwC Philippines, said 48 deals worth $11.5 billion were closed as of Dec. 25 last year, more than the 44 deals worth $8.4 billion in 2016 when political uncertainty due to the national elections in May that year dented appetite for M&As.

The value of the deals is based only on transactions that have been reported.

Ms. Divinagracia attributed the increase in deal-making activity to business confidence, strong economic growth, low interest rates and high liquidity.

This year’s M&A pipeline will focus on energy and infrastructure, financial services and consumer goods — the same sectors that dominated transaction volumes last year — with the addition of leisure and hospitality as well as logistics given the growth in trade and e-commerce, she said.

“We expect the sectors of renewable energy and infrastructure to be most active,” RCBC Capital Corp. President Jose Luis F. Gomez said in a mobile phone message.

The deal-making environment will remain “strong” this year given high optimism, consumption growth and increased public infrastructure spending, Ms. Divinagracia said, with PwC itself working on “a number” of deals that are expected to be completed this year.

“We hope to see more inbound deals as well given the cheaper currency. However, valuations will still be the show stoppers as some business owners have high expectations,” she said.

BDO Capital and Investment Corp Eduardo V. Francisco concurred, saying in a mobile phone message that “there will be a few sellers unless the price is really high or a multiple of a listed peer.”

The Philippine Competition Commission (PCC) will also make it “challenging” to do deals, Mr. Francisco said. The PCC has been tagged as one of the causes of delays for closing M&A transactions. Several deals submitted last year, including SM Investments Corp.’s purchase of Goldilocks Bakeshop, await approval of the competition watchdog.

“We’ll also see some more outbound investments as local companies remain very liquid and are regularly looking for business opportunities elsewhere,” PwC’s Ms. Divinagracia said.

Local companies will be scouting for opportunities overseas in the areas of food service, new technology and utilities. Last year, they were engaged in eight outbound deals in various countries including the United States, Germany, Indonesia, and Spain.

“As has been the case for many years, there are more interested buyers than interested sellers… However, I think we’ll see more collaborations, strategic partnerships and joint ventures than divestments,” Ms. Divinagracia said.

China girds for ‘critical battles’

January 3, 2018 | 12:30 am

BEIJING — China’s economy begins 2018 facing what its own leaders call three years of “critical battles.”

Those fights to tackle domestic debt, poverty and pollution pose a hat-trick of risks to the world’s second-biggest economy even before higher interest rates and trade war threats from the US are taken into account.

While the nation is starting from a position of strength, with full-year growth in 2017 poised for its first acceleration since 2010, the expansion is seen slowing in 2018.

As a result, the government of Xi Jinping is signaling that it’s sanguine about more modest economic performance, if progress on the top risk — financial fragility — can be made.

“Significant economic imbalances continue to create downside risk to the outlook for 2018,” said Rajiv Biswas, chief Asia-Pacific economist at IHS Markit in Singapore.

“Risks to the Chinese economy will remain among the key risks to the global growth outlook in 2018, with the Asia-Pacific region particularly vulnerable to the shock waves from a slowdown.”

Those waves haven’t materialized, and in fact economic activity is holding up. The official manufacturing purchasing managers index was at 51.6 in December, signaling improving conditions. New export manufacturing orders also climbed to a six month high, according to a sub-index.

The Caixin manufacturing purchasing managers index, which is more representative of smaller firms, also showed strong momentum with a reading of 51.5 in December, beating all estimates.

However, figures “likely are overstating momentum, particularly in construction,” according to a report by Freya Beamish, chief Asia economist at Pantheon Macroeconomics Ltd in Newcastle, UK.

“The profit story appears to be deteriorating, as input price rises continue to slow.”

Forecasters see expansion slowing to 6.5% — the slowest pace since 1990 — this year, the following are among areas they flag as having the potential to trip up economic growth or spur market turbulence.

FINANCIAL RISKS
The Communist Party recently renewed its pledge to prevent and control financial risk, calling it a pivotal challenge for the next three years.

As the financial system opens further to foreign firms, a debt-to-gross domestic product ratio that’s heading toward more than 320% by 2022 stands as the main danger.

“Even its own propaganda machine admits that this is such a serious problem that Beijing doesn’t expect there to be any solution in anything less than three years,” said Pauline Loong, managing director at research firm Asia-Analytica in Hong Kong.

“Financial instability is the core problem. Solve that and you ease pressure on capital outflows, complications from deleveraging, weaknesses in smaller banks.”

CONSTRUCTION SLOWDOWN
The tightening of financial and environmental regulations to help curb debt may cause tremors in 2018 that slow housing and infrastructure construction, according to Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong.

“A sharper-than-expected slowdown in construction could thus weigh on broader activity with emerging sectors not yet vigorous enough to provide a sufficient cushion,” Mr. Neumann said. “The biggest fault line running through the Chinese economy is the construction sector.”

TRADE BRAWL, FED AND TAX
US President Donald Trump’s recent national security strategy speech was a “tee up” for a turn toward protectionism, says David Loevinger, former China specialist at the US Treasury department.

“On the menu for 2018: lots of red meat for the base, and that means bashing imports,” said Mr. Loevinger, now an analyst at TCW Group, Inc. in Los Angeles.

“Since nationalistic populism is as irresistible in China, Chinese politicians will feel compelled to retaliate.”

If the US Federal Reserve raises interest rates more than markets expect and tax cuts build on underlying 3.2% growth, the dollar may get a second wind that puts the yuan and capital outflows under pressure again, according to George Magnus, an associate at Oxford University’s China Centre and former adviser at UBS Group AG.

“If the Fed starts hiking and the dollar goes on a bull run, that would cause big problems,” says Christopher Balding, an associate professor at the HSBC School of Business at Peking University in Shenzhen.

NORTH KOREA
Should tension between the US and North Korea escalate into a more significant confrontation, there will be profound and far-reaching consequences not just for China’s economy but that of the entire Asia-Pacific region, says Zhu Ning, deputy director of the National Institute of Financial Research at Tsinghua University in Beijing. — Bloomberg

BSP eyes third tenor for term deposit offerings

January 3, 2018 | 12:15 am

THE CENTRAL BANK is looking to introduce a new tenor for its weekly term deposit auctions, a senior official said, at a time of tepid demand for month-long instruments.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said the monetary authority is in talks with banks as it considers adding a new maturity for the term deposit facility (TDF), which would likely be longer than a week but shorter than a month.

“Based on our initial discussion with the banks — these are initial, preliminary discussions — they prefer a third tenor, probably a cross between seven and 28 days,” Mr. Guinigundo told reporters in December.

The weekly term deposit auctions are currently the central bank’s primary tool to capture excess funds in the financial system by allowing banks to park the extra cash they hold under the window, in exchange for a small margin.

The central bank has not offered 28-day term deposits at the weekly auctions since Dec. 20, citing shrinking excess liquidity held by financial firms which they can park under the window.

The month-long tenor was last offered on Dec. 13, during which the P40-billion auction volume was met by just P33.005 billion in total demand.

The central bank will place just P40 billion on the auction block today, which will mature in seven days. This is the third straight week of the reduced offerings.

“[T]he BSP decided to zero out the TDF for 28 days because we know that banks have alternative use for their money instead of just putting it there with BSP,” Mr. Guinigundo said, explaining that expected demand for cold cash among depositors prompted banks to hold on to more funds rather than have them locked away for a month.

There is a seasonal spike in demand for cash during the holidays as families spend for celebrations and gift-giving activities. Apart from the Christmas rush, Mr. Guinigundo said the recent retail Treasury bonds offering which yielded P255 billion for the government in December also trimmed excess money supply in the financial system.

Banks also continued with their lending and investment activities, which are considered high-yielding compared to the margins paid by the central bank for term deposits. Yields for the TDF range within the 2.5-3.5% benchmark set by the BSP.

The seven-day deposits fetched a rate of 3.3995% during the Dec. 27 auction, lower than the 3.4004% posted the previous week.

Traders previously interviewed by BusinessWorld said 14-day and 21-day instruments may be viable options amid ample market liquidity, as well as a length between the 28-day and the 91-day Treasury bills.

DoubleDragon bets big on countryside growth

January 3, 2018 | 12:15 am

By Krista A. M. Montealegre,
National Correspondent

DOUBLEDRAGON Properties Corp. is pushing through with its follow-on offering, as the property developer bets big on the growth in the countryside.

DoubleDragon is awaiting the go signal of the Securities and Exchange Commission (SEC) to launch the P7.3-billion share sale originally slated late last year.

“We are looking at launching the deal first half of this year,” DoubleDragon Chief Investment Officer Hannah M. Yulo said in a mobile phone message.

A newcomer in the property sector, DoubleDragon is focusing its expansion on second- and third-tier cities, with plans to build a network of industrial leasing hubs in 40 provinces and community malls in 100 cities.

“Everybody has to go there in the next two to five years so we’re getting there ahead,” DoubleDragon Co-Chairman Edgar “Injap” Sia II said in an interview.

“For a new player, we have to position just in time before everybody else will. Kung mahuli ka lang nang konti, wala ka na rin because we have less resources, less everything,” he added.

DoubleDragon plans to capitalize on the synergies between Central Hub and CityMalls since most of the latter’s tenants will need a commissary, cold storage, warehouse, distribution center and manufacturing facility to support their operations.

The venture into industrial leasing and hotels prompted DoubleDragon to upgrade its 2020 target for its leasable portfolio to 1.2 million square meters (sq.m.) from 1 million sq.m. and revise its net income goal to P5.5 billion from P4.8 billion.

Unable to compete in shopping mall and township development, DoubleDragon has found gaps in the fragmented property sector which have been overlooked by the industry behemoths.

“If we focus on areas that are already dominated by big players, it is difficult. Even if they stop growing in five years and we don’t sleep in five years, they are too far,” Mr. Sia said.

DoubleDragon courted investors in 2014 when it embarked on a P1-billion initial public offering with nothing to show except for a piece of land and a vision to make the company one of the country’s biggest property developers.

Three years after its debut, DoubleDragon has made progress on that promise and is coming back to the equities market with a follow-on offering that will cement the foundation of the company and move it a step closer towards joining the big league — the Philippine Stock Exchange index.

“This is the best time to provide that window for investors to start taking a position in the company if they think we can deliver and make the company really grow beyond 2020,” Mr. Sia said.

“Confidence will be far higher because it looks so far impossible then three years later it happened. It will strengthen the company in all aspects especially in terms of its credibility and that will translate to opening up to extraordinary opportunities to further grow exponentially beyond 2020,” he added.

Consumer lending to be banks’ new battleground

January 3, 2018 | 12:14 am

By Melissa Luz T. Lopez,
Senior Reporter

CONSUMER LENDING will serve as the main battleground for banks in the Philippines over the next few years, a central bank official said, depending on how fast and efficient players can adopt digital channels to enhance financial services.

“I think the battle would really be on the retail banking. Given advances in technology right now, it’s really more on the digitization — that’s where the battle will be in the next couple of years,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said in a recent interview.

“The name of the game would really be digital over the next couple of years.”

Ms. Fonacier, who heads the central bank’s Supervision and Examination Sector, said lenders are now seeing the retail segment as the new space for competition as corporate lending grows concentrated.

The country’s young population — with a median age of 24, according to the Philippine Statistics Authority — proves that the Philippines is a “very conducive” market to introduce digital banking products, she added.

The same openness to new technology would also help local players maintain comparative advantage despite the entry of more foreign banks looking to capture a slice of the Philippine market, amid growing interest from offshore lenders to cash in on robust economic growth here.

“I think they (local banks) are well-positioned when it comes to competition, but what’s critical is for domestic banks as well to embrace digital transformation because that’s where the future is leading us when it comes to banking,” Ms. Fonacier said.

“For as long as a domestic bank would embrace such kind of advancement and development in that space, then they are well-positioned to compete.”

Ms. Fonacier said she sees more foreign banks expanding in the Philippines in search of better yields and strong growth, taking stock of a strong middle class market in the country.

She recently said that six Asian lenders are in talks with the BSP to set up branches here, which would add to 11 foreign players who have entered the country over the last three years.

Domestic banks have been increasingly tapping digital platforms to complement over-the-counter transactions, especially with e-commerce on the rise. The central bank is likewise embracing electronic channels as it leads the National Retail Payment System, which seeks to shift more transactions to online means in this cash-heavy economy.

The BSP targets to lift the share of digital payments to 20% of total transactions by 2020, coming from the 1% share recorded in 2013.

PLDT forges $28.5-M partnership with Huawei to overhaul services

January 3, 2018 | 12:14 am

PLDT, Inc. on Tuesday said it sealed a $28.5-million (P1.5-billion) partnership with China’s Huawei Technologies Co., Ltd. to overhaul its wireless service delivery platforms.

In a statement, PLDT said its partnership with Huawei is part of its efforts to improve its fixed and wireless infrastructure, and information technology systems. The company is earmarking a record P50-billion capital expenditure (capex) for this year.

“This partnership will enable PLDT Group’s wireless services under the brands PLDT, Smart, Sun and TNT to become much more agile, efficient and resilient in developing and delivering a growing array of digital services,” PLDT Chairman, President and CEO Manuel V. Pangilinan was quoted as saying in the statement.

PLDT Group Chief Corporate Services Officer Ray C. Espinosa said under the 15-month agreement, Huawei will “improve Smart’s online charging platforms and electronic loading for prepaid subscribers.”

“This involves consolidating similar applications for different brands under one system and streamlining business processes through a unified platform and simplified processes,” Mr. Espinosa said, noting it would allow the company’s units to provide personalized offers and bundled services to its customers more efficiently.

Wilson Zang, president of Huawei Revenue Management product line, said the company is proposing the use of its OCS and eLoad Solutions to “accelerate PLDT’s evolution in the Digital Market through this Transformation Program.

“Huawei is confident we can successfully deliver this critical program in a timely way together with PLDT,” Mr. Zang said.

Huawei Revenue Management is a unit of Huawei Technologies.

PLDT’s deal with Huawei comes after President Rodrigo R. Duterte last December said he wants a third telecommunications provider to start operating by the first quarter in order to challenge the duopoly of PLDT and Globe Telecom, Inc. in the country.

“We’ll make sure that we’ll future-proof our network,” Mr. Pangilinan had said in December.

He said PLDT is “trying to get ready in case it happens as early as the first quarter,” referring to the entry of China Telecommunications Corp. (China Telecom), the third player chosen by the Chinese government to invest in the Philippines.

In February 2017, PLDT partnered with Huawei for the research and development on fifth-generation (5G) wireless broadband, which promises lightning fast Internet connectivity.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

ALI tightens grip on Malaysian developer

January 3, 2018 | 12:13 am

REAL ESTATE giant Ayala Land, Inc. (ALI) signed a deal to cement its control over Malaysian developer MCT Bhd. that could set the stage for a mandatory takeover offer for the remaining shares held by minority investors.

The property arm of Ayala Corp. said in a disclosure on Tuesday its wholly-owned subsidiary Regent Wise Investments Limited (RWIL) inked a conditional share purchase agreement to buy an additional 17.24% stake in MCT Bhd.

In a filing with Bursa Malaysia, MCT disclosed that Ayala Land will acquire 230.16 million ordinary shares from Tan Sri Dato’ Sri Goh Ming for a cash consideration of RM 202.50 million.

The transaction will jack up ALI’s interest in MCT to 50.19% from 32.95%, breaching the 33% trigger point for extending a mandatory takeover offer, according to the Capital Markets and Services Act and the Malaysian Code on Take-Overs & Mergers.

This will force RWIL to launch a mandatory takeover offer in accordance with the laws of Malaysia once the agreement becomes unconditional, Ayala Land said.

The precedent involves obtaining a waiver from Bursa Malaysia Securities Clearing Sdn Bhd to allow for 51% of the cash consideration to be settled in tranches to the selling party, MCT said.

“This increase in ownership will strengthen ALI’s commitment to enhance MCT’s operations and expand its business further,” the real estate firm said, citing its “solid track record in developing large-scale, integrated, mixed-use and sustainable estates across the Philippines and in growing its diversified product lines.”

“This will also provide ALI with a greater opportunity to take advantage of the growth potential and long-term prospects of the real estate sector in Malaysia and will affirm ALI’s role as a key player in the ASEAN property sector.”

Ayala Land bought a 9.16% interest in MCT in April 2015, marking its first investment in Southeast Asia. Eight months later, it exercised its option to buy additional shares and boost its stake to 32.95%.

Founded in 1999 as a construction company, MCT is a property development company specializing in mixed-use projects that include retail, office, hotel, and mid-range to affordable residential properties.

Ayala Land President Bernard Vincent O. Dy previously said it continues to scout for opportunities in Southeast Asia, identifying Vietnam, Myanmar and Indonesia as potential investment destinations.

Under its 2020 Vision, Ayala Land is targeting a 20% annual growth rate to hit a net income of P40 billion.

For the first nine months of 2017, ALI saw an 18% increase in earnings to P17.8 billion, on the back of a 16% growth in revenues to P98.9 billion. — Krista Angela M. Montealegre

Peso expected to start the year on a strong note on remittances

January 3, 2018 | 12:13 am

THE PESO is seen to start the new year stronger against the dollar as it is boosted by the continued influx of remittances.

On Friday, the trading day of 2017, the local currency closed at P49.93 against the greenback, gaining five centavos from its P49.98-to-a-dollar finish the previous session.

The last trading week of 2017 saw the local unit rally as it returned to the P49 level for the first time in over six months.

The peso’s ascent was attributable to the reduction of long dollar positions, continuous remittance flows, and some concerns over the US tax revamp.

Traders interviewed over the weekend said the peso will likely sustain its rally against the greenback this week as overseas Filipinos continue to send home money even after the holidays.

“We’re still expecting a surge of remittance inflows, so this will continue to drive the peso,” a trader said over the phone, noting that there would be a backlog following the two-day holiday break.

Aside from this, Ruben Carlo O. Asuncion, chief economist of UnionBank of the Philippines, said the peso will be boosted by upbeat views on the country’s economic growth.

“[Another driver] will be the lingering optimism on Philippine economic growth, both for [fourth quarter] and 2017 as a whole,” Mr. Asuncion said in a text message.

In mid-December, the World Bank hiked its 2017 growth forecast for the Philippines to 6.7% from 6.6% previously on the back of the stronger-than-expected gross domestic product (GDP) growth rate for the third quarter, as well as the upward revision of the second-quarter print.

Asian Development Bank also raised its economic growth projection in the Philippines for 2017 to 6.7% from 6.5%, citing robust growth and accelerated infrastructure spending.

However, Mr. Asuncion noted that: “[I]nvestors would be cautious based on expected future monetary policy tweaks.”

Market players in the US are looking at the Federal Reserve to hike their rates four or more times this year, more than their forecast of three rate hikes, as they might be compelled to normalize their policies quicker following the Republican tax overhaul.

Meanwhile, Asian currencies firmed on Tuesday, marking a strong start for the new year as sentiment was boosted by gains in the euro, while a weaker US dollar prompted further interest in Asia.

The Taiwan dollar was the biggest percentage gainer, rising 0.8% against the dollar to a more than four-year high.

The Chinese yuan was also firmer, gaining 0.1% to a near four-month high against the greenback. Growth in China’s manufacturing sector unexpectedly picked up to a four-month high in December, a private business survey showed, highlighting unexpected resilience in the world’s second-largest economy.

The South Korean won was also stronger against the dollar, edging up after North Korean leader Kim Jong Un offered an olive branch to South Korea, saying he was open to dialogue. Increased tensions in the Korean peninsula had served as a major detriment to the won. — K.A.N. Vidal with Reuters

Supreme Court challenge to tax reform looms

January 3, 2018 | 12:10 am

OPPOSITION legislators said they may seek to block in the Supreme Court the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, citing procedural defects in the approval of the law, such as the absence of a quorum.

“We will challenge the legality of this run-away TRAIN as it was railroaded in the House without the required quorum and distribution of approved copies to the members,” Bayan Muna party-list Rep. Carlos Isagani T. Zarate, member of the Makabayan bloc, said in a statement.

Mr. Zarate said that the poor do not stand to benefit since they are already tax-exempt under the old rules but will have to spend more on transportation, among others, due to higher taxes on fuel.

“Majority of our poor people will suffer more and would be mired further in poverty with the expected spike in the prices of major basic commodities and services beginning this month,” he said, estimating that about 15.2 million poor families will suffer because of tax reform.

“These would have a severe domino effect on the prices of other products and services which is further aggravated by the VAT increases on these said products themselves. The effect of this ‘price shock’ can be crippling to the 15.2 million poor families and even to the whole economy,” Mr. Zarate said.

The Makabayan bloc earlier cited the lack of a quorum during the ratification of the TRAIN bicameral report last month before Congress went on a one-month holiday break.

The TRAIN Act was signed into law by President Rodrigo R. Duterte on Dec. 19. The law exempts from income tax those with annual salaries of less than P250,000.

The first package of the tax reform program also charges P1 per liter of excise tax on liquefied petroleum gas starting this month, rising to P2 in 2019, and P3 in 2020 onwards. The new tax on diesel fuel is P2.50, rising to P4.50 in 2019 and P6 in 2020.

The tax on regular and unleaded premium gasoline will rise to P7 in 2018 from P4.35 in 2017 and will rise further to P9 in 2019 and P10 in 2020. — Minde Nyl R. dela Cruz

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