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Pence says US stands by allies, goal is to denuclearize N. Korea

TOKYO — US Vice President Mike Pence said on Wednesday Washington stands “shoulder to shoulder” with Japan and other allies as it seeks to achieve the goal of denuclearizing North Korea.

Mr. Pence, in Tokyo on his way to the Winter Olympics in South Korea, was speaking at the start of talks with Prime Minister Shinzo Abe that were expected to showcase the US-Japan security alliance in the face of the North Korean threat.

“We will continue to stand shoulder to shoulder with the people of Japan, the people of South Korea and our allies and partners across the region until we achieve the global objective of the denuclearization of the Korean peninsula,” Mr. Pence said.

Earlier, Mr. Pence visited a Japanese Patriot PAC-3 missile battery, Japan’s last line of defense against any possible North Korean missile strike.

Mr. Pence watched the battery raised to a firing position and got a briefing before shaking hands with members of the Self-Defense Forces, as Japan’s military is known. He was accompanied by Japanese Defense Minister Itsunori Onodera and Japan’s highest ranking military officer, Admiral Katsutoshi Kawano. His trip to South Korea from Thursday will coincide with a visit to the Games by North Korea’s ceremonial leader, Kim Yong Nam, the most senior North Korean official to enter the South since the 1950-53 Korean War ended with a truce.

Mr. Pence has stopped short of ruling out the prospect of meeting senior North Korean officials but President Donald J. Trump has cast doubt on US negotiations with Pyongyang any time soon. The White House has also cautioned against reading too much into remarks Mr. Pence made en route to Japan.

CLEAR MESSAGE
Mr. Pence said, before arriving, his message to the North was clear: Washington and its allies would keep pressing Pyongyang to give up its missile and nuclear programs.

“… my message — whatever the setting, whoever is present — will be the same. And that is that North Korea must once and for all abandon its nuclear weapons program and ballistic missile ambitions,” he told reporters during the flight to Japan.

Mr. Abe’s close aide, Chief Cabinet Secretary Yoshihide Suga, reiterated Japan’s tough stance. “We must not be fooled by North Korea’s ‘smile diplomacy,’” Mr. Suga said.

North Korea test-fired ballistic missiles over Japan last year, as well as a new type of intercontinental ballistic missile that climbed to an altitude of more than 4,000 km (2,485 miles) before splashing into the sea within Japan’s exclusive economic zone.

Concern about North Korea is pushing Japan to update its missile defense. Besides extending the range and increasing the accuracy of its Patriot system, it will add two US-made ground-based Aegis radar stations and interceptors and plans to add to its arsenal air-fired cruise missiles that can strike North Korean missile sites.

Mr. Pence was likely to stress the need for close coordination among the US, Japan and South Korea over the North’s threat at a time when ties between Seoul and Tokyo have been frayed by the bitter legacy of a history that includes Japan’s 1910-1945 colonization of the Korean peninsula.

He will also meet Japanese Finance Minister Taro Aso, who doubles as deputy premier and is Mr. Pence’s counterpart in economic talks, although trade friction is expected to take a backseat to security during his visit. — Reuters

Trump eyes military parade to showcase US might

WASHINGTON — US President Donald J. Trump has asked for a large-scale military parade, the White House said Tuesday, an unconventional move that would showcase American muscle and underscore his role as commander-in-chief.

Mr. Trump — who has toyed with the idea of a parade in Washington since before being sworn in — has made the request to top officers, who are looking for a date.

“President Trump is incredibly supportive of America’s great service members who risk their lives every day to keep our country safe,” White House spokeswoman Sarah Sanders said.

“He has asked the Department of Defense to explore a celebration at which all Americans can show their appreciation.”

The Pentagon confirmed it was “in the process of determining specific details.”

Mr. Trump’s new request, first reported by The Washington Post, immediately fueled comparisons to similar events in more autocratic countries.

“What an absurd waste of money! Trump acts more like dictator than president. Americans deserve better,” said Democratic Congressman Jim McGovern.

The idea has had a long gestation period. When Mr. Trump visited Paris last July for Bastille Day, he made no secret of his awe for the pomp and ceremony of the occasion.

Sitting on the Champs-Elysees, the American president marveled at the Republican Guard on horseback and jets flying overhead, and greeted President Emmanuel Macron, who arrived in an open-topped camouflaged military jeep.

Months after that meeting, Mr. Trump publicly remarked: “So we’re actually thinking about Fourth of July, Pennsylvania Avenue, having a really great parade to show our military strength.”

But even before becoming president, aides reported that Mr. Trump had considered a military parade to mark his inauguration. The idea was eventually scrapped.

‘HAIL TO THE CHIEF’
Mr. Trump has already prompted fears about his respect for democratic freedoms once this week by suggesting Democrats were “un-American” and “treasonous” for not applauding his State of the Union address.

The White House claimed Mr. Trump was joking.

“The president was clearly joking with his comments, but what isn’t a joke is that Democrats refuse to celebrate the accomplishments of last year that have helped all Americans,” Ms. Sanders said.

But the quip did not go down well with lawmakers, both Republicans and Democrats.

“I have seen the president’s most ardent defenders use the now-weary argument that the president’s comments were meant as a joke, just sarcasm, only tongue in cheek,” said Republican Senator Jeff Flake.

“But treason is not a punchline, Mr. President.”

Military veteran and Democratic Senator Tammy Duckworth also fired back at Mr. Trump, while lampooning his deferments from medical military service during the Vietnam War.

“We don’t live in a dictatorship or a monarchy,” she said.

“I swore an oath — in the military and in the Senate — to preserve, protect and defend the Constitution of the United States, not to mindlessly cater to the whims of Cadet Bone Spurs and clap when he demands I clap.” — AFP

Kim’s sister to become first dynasty member to enter SoKor

TOKYO — Kim Jong-Un’s younger sister is set to become the first member of North Korea’s ruling bloodline to step on South Korean soil.

Kim Yo Jong, who was promoted by her brother last year to the ruling party’s political wing, will attend the opening of this month’s Winter Olympics in the South Korean alpine town of PyeongChang, according to South Korea’s Unification Ministry.

The visit by a potential future leader of North Korea could be seen as a symbolic gesture by Kim Jong-Un to show he’s keen to maintain the current detente. But it’s possible she’s also being used as a propaganda tool to take the spotlight away from the celebrations in South Korea, and drive a deeper wedge between the governments in Seoul and Washington.

The North Korean leader has already tapped Kim Yong Nam, the isolated regime’s ceremonial head of state, to lead the country’s delegation at the Olympics and attend the opening ceremony on Friday evening.

Believed to be in her late 20s, Kim Yo Jong shares the same mother as Kim Jong-Un. Their half-brother, Kim Jong Nam, was murdered in February at a Malaysian airport with the chemical weapon VX. North Korea denies it played a role in the attack.

Kim Yo Jong’s promotion brought her closer to the center of power in the isolated state. She’s appeared prominently in public and is seen as the most influential woman along with Kim Jong-Un’s wife, Ri Sol Ju, in a country where family ties mean more than any title or rank.

Kim Jong-Un and Kim Yo Jong were born to Ko Yong Hui, the fourth partner of Kim Jong Il. They grew up together in the capital of Pyongyang and attended the same Swiss boarding school, Yonhap News Agency has reported. — Bloomberg

Shares rebound as rout eases valuation concerns

LOCAL SHARES bounced back on Wednesday along with the recovery of international markets, as the index’s steep decline from the 9,000 level brought back valuations to an acceptable level.

The 30-company Philippine Stock Exchange index (PSEi) ended its three-day losing streak yesterday, firming up 1.37% or 117.14 points to 8,667.56. The broader all-shares index also closed 1.15% or 58.17 points higher at 5,086.08.

“The local market took cue from the rebound of US stocks overnight coupled with the overdone decline of the local market over the past six days that brought down the leading relative valuation levels to more reasonable levels,” PCCI Securities Brokers Corp. Research Head Joseph James F. Lago said in an e-mail.

After losing more than a thousand points on Monday, the Dow Jones Industrial Average regained its losses by jumping 2.33% or 567.02 points to close at 24,912.77. The S&P 500 index saw a 1.74% uptick to 2,695.14 as well, with the Nasdaq Composite Index rising 2.13% to 7,115.88.

Meanwhile, Regina Development Corp. Managing Director Luis A. Limlingan said he expects the Bangko Sentral ng Pilipinas (BSP) to increase rates soon as the economy starts to feel the effects of the Tax Reform for Acceleration and Inclusion law, as January headline inflation coming in at 4%. 

“Significant drivers were the surge in prices of alcoholic beverage and tobacco from 6.4% in December to 12.3% in January, food and non-alcoholic beverage from 3.5% to 4.5% in January, and restaurants and miscellaneous goods/services from 3% to 3.7%,” Mr. Limlingan said in a mobile phone message.

“Should the next month see no signs of cooling off, we’re inclined to expect the BSP to begin hiking rates in March, not even ruling out the possibility of one this Thursday,” he added.

Sectoral indices moved to positive territory, led by the industrials counter, which advanced 2.11% or 243.68 points to 11,757.26. Services followed, going up 1.71% or 28.89 points to 1,714.65; financials climbed 1.49% or 32.55 points to 2,212.46; property rose 1.36% or 52.83 points to 3,912.43; mining and oil added 1.25% or 144.40 points to 11,653.78; and holding firms increased 0.75% or 65.51 points to 8,755.12.

PCCI Securities’ Mr. Lago noted that the start of the release of earnings reports also contributed to the market’s rise on Wednesday. 

“The initial stream of full year 2017 earnings reports while mixed were also encouraging. The slowing down of foreign portfolio selling today also was a factor which also helped the peso recover vis-à-vis the dollar,” he said.

The market saw some 1.28 billion issues switch hands, valued at P9.08 billion, lower than Tuesday’s P10.42-billion value turnover.

Advancers trumped decliners, 127 to 82, while 47 issues ended flat. 

Foreigners remained sellers for the ninth day, as net foreign selling stood at P598.98 million, although lower than the P1.44-billion net outflow recorded on Tuesday. — Arra B. Francia

BSP keeps watch as inflation spikes

By Mark T. Amoguis
Researcher
with Melissa Luz T. Lopez
Senior Reporter

THE OVERALL INCREASE in prices of widely used goods and services surged in January by its fastest clip in more than three years, topping market consensus on the back of the impact of higher taxes.

The Bangko Sentral ng Pilipinas (BSP) said that while the actual pace was the ceiling of its estimate range for the month, it would “closely” monitor the situation and was “ready to take timely action” should policy intervention be needed to bring inflation to heel.

Preliminary Philippine Statistics Authority (PSA) data showed inflation picking up to four percent, faster than December’s 3.3% and the 2.7% recorded in January 2017.

Inflation Rates

January’s pace was faster than the 3.5% median in a BusinessWorld poll of 14 economists and hit the top end of BSP’s 3.5-4% range and the Finance department’s (DoF) 3.3% estimate for that month.

It was also the fastest reading since October 2014’s 4.3%.

Core inflation, which excludes volatile food and energy items, was also faster during the period at 3.9% compared to 3% in December and 2.5% in January last year.

BSP expects full-year inflation to average 3.4% this year, higher than the 3.2% finish in 2017 but still within an official 2-4% target range.

“The faster overall price increase of goods can be attributed mainly to the 4.5% increase in the food and non-alcoholic beverages segment,” the National Economic and Development Authority (NEDA) said in a statement.

“The push in inflation is partly due to TRAIN, considering particularly the excise on fuel and additional ‘sin’ taxes,” NEDA quoted its director-general, Socioeconomic Planning Secretary Ernesto M. Pernia, as saying, referring to Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act enacted in December and which took effect last month.

At the same time, Mr. Pernia said effects of tax reform would be “minimal and temporary.”

In a separate statement, the DoF said “[t]he rise in inflation in January may be partly traced to the excessive price adjustment for the ‘sin’ tax, the sugar-sweetened beverages (SSB) tax in the TRAIN law in the case of non-alcoholic beverages, and weather disturbances in the case of vegetables.”

BSP Governor Nestor A. Espenilla, Jr. told reporters that January’s inflation spike remained within expectation, even as it hit the ceiling of both its estimate for that month and a 2-4% full-year target for 2018.

“The higher January 2018 reading was expected by the BSP although it is at the top end of our forecast for the month,” Mr. Espenilla said in a WhatsApp message.

“We think these are temporary drivers of inflation and would eventually stabilize,” he said of TRAIN’s impact on prices of widely used consumer items.

RA 10963 imposed an additional P2.50 per liter excise tax on diesel and P3/liter on kerosene at a time world crude prices have been hitting their highest levels in nearly three years. The new law also either hiked or imposed additional taxes on cars, coal, sugar-sweetened drinks and a host of other items.

The central bank, Mr. Espenilla said, “will be closely monitoring the situation and stand ready to take timely action based on our evaluation of all relevant data.”

The DoF said in an economic bulletin that “Of the four percent inflation, 2.1 percentage points was accounted for by ‘sin’ products and sugar-sweetened beverages”.

The food and non-alcoholic beverages index, which account for nearly 38.98% of the consumer price index (CPI), rose 4.5%, faster than the 3.5% logged in December 2017 and 3.4% in the same period last year.

Meanwhile, alcoholic beverages and tobacco more than doubled year-on-year with the index growing 12.3% last month compared to 5.6% in January 2017 and 6.4% in December 2017. Broken down, inflation for tobacco increased 17.4% from 6.9% a year prior while that of alcoholic beverages went up 4.8% from 3.7%.

For food alone, the index went up 4.5% in January compared to 3.7% a month earlier and 3.6% in January 2017.

Non-food inflation, meanwhile, was 3.1%, faster than two percent a year ago.

Other sub-indices that contributed to inflation were: furnishing, household equipment and routine maintenance of the house (two percent); health (2.6%); transport (3.2%); and restaurant and miscellaneous goods and services (3.7%).

“Although electricity prices last month were noted to be lower, the momentum of the first tranche of the tax reform program is undeniable,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank).

RATE HIKE TIMING ANYONE’S GUESS
“I will still stick to my expectation that the BSP will not tweak its monetary policy any time soon. I see that the BSP has already included this high January inflation level in its forecasts,” Mr. Asuncion said.

“So far, I think they still have enough elbow room since the impact of the TRAIN law is expected in the first two or three months… I’m also sticking to my forecast of a mid-year and end-year tweaks by the BSP, a total of 50 basis points (bps).”

ANZ Research economists Eugenia Fabon Victorino and Sanjay Mathur said they see the central bank raising benchmark rates by 25 bps at its March 22 meeting.

“In our view, firm domestic demand will keep inflationary pressures strong, as opposed to the central bank’s stance that price drivers are temporary,” the ANZ analysts said, pointing out that full-year inflation will likely breach four percent.

Nomura analysts likewise see inflation settling at 4.3% for 2018, a steep jump from last year’s 3.2%.

This builds up expectations of a more hawkish tone from the BSP at its monetary policy review on Thursday. “The likelihood of a tightening move at Thursday’s meeting has increased significantly,” Jose Mario I. Cuyegkeng, senior economist at ING Bank N.V. Manila, said separately. “We are now looking at advancing the timing of our rate hikes and are reviewing our two-rate hike forecast for 2018.”

For his part, Angelo B. Taningco, Security Bank Corp. economist, said that it would be worthwhile for the central bank to monitor future inflation trends before adjusting its monetary policy stance. “Against this backdrop, I expect the central bank to raise its key interest rates modestly, i.e. by 25 bps, in its second monetary policy meeting scheduled in March,” he said.

For Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines: “The possibility of a rate hike from the BSP this Thursday has increased as a result of January’s strong inflation figures, both headline and core.”

He added that the BSP might take a proactive approach by hiking rates sooner rather than later, considering the natural time lag of monetary policy.

“While a rate hike from the BSP is on the table for this year amid rising inflationary pressures, any decision to hike policy rates on Thursday might be a close call, especially since majority of the BSP’s communications so far are leaning towards steady policy settings,” he said.

“It is also important to note that January’s inflation has been affected by transitory weather disturbances. Hence, it might be overstating the impact of the TRAIN law.”

Rajiv Biswas, chief economist at IHS Markit, shares this view, saying: “With headline CPI inflation hitting the top of the central bank’s inflation target range, the BSP is expected to tighten monetary policy at least twice in 2018” with the first hike implemented this week and the next one in the second quarter.

“Surging CPI inflation, strong GDP (gross domestic product) growth and rapid credit expansion are all combining to put the BSP on a more hawkish stance with monetary policy tightening expected soon.”

Del Monte’s Philippine unit to raise up to P16.7B in IPO

By Arra B. Francia
Reporter

DEL MONTE Pacific Limited (DMPL) is taking its Philippine unit public, with plans to raise up to P16.7 billion to repay debts.

In a disclosure to the stock exchange on Tuesday, the listed canned fruit manufacturer said Del Monte Philippines, Inc. (DMPI) will be offering a total of 559.464 million shares to the public, or about 20% of its outstanding shares, for up to P29.88 apiece.

DMPI’s planned sale of a fifth of its shares would be the country’s biggest initial public offering (IPO) in 15 months and Southeast Asia’s largest for a food and beverage firm in nearly six years, Reuters said. The announcement comes as domestic demand for consumer goods remains strong despite the prospect of rising prices due to higher taxes on fuel.

DMPL said net proceeds of the offer will be used to partially prepay or repay debt, as well as for general corporate purposes.

“The prepayment of such loans will allow the DMPL Group to deleverage and strengthen its balance sheet. Such prepayment is allowed under the current loan facility agreements without any fee or penalty,” DMPL said in its disclosure.

The company said it submitted the IPO registration statement last Monday to the Securities and Exchange Commission. It will also have to get the approval of the Philippine Stock Exchange (PSE).

BDO Capital and Investment Corp. has been tapped as issue manager, sole global coordinator and sole book runner.

It would be the Philippines’ largest IPO since Pilipinas Shell Petroleum Corp.’s $380.79-million share sale in October 2016.

For the food and beverage sector, it would be the Philippines’ biggest on record and the largest in Southeast Asia since Felda Global Ventures Holdings Bhd’s $3.27 billion IPO in June 2012, Thomson Reuters data showed.

Sought for comment, Regina Capital Development Corp. Managing Director Luis A. Limlingan said DMPI’s IPO would be a welcome start for 2018.

“The market is starving for its first IPO of the year and Del Monte could be a welcome addition. Depending on the pricing and the growth prospects of the company then it would be attractive enough for both retail and institutional clients since they will be raising possibly more than $300 million,” Mr. Limlingan said in a mobile phone message.

“The company could readily use the proceeds since the agricultural sector has exhibited weak growth compared to the other constituents of GDP (gross domestic product).”

DMPL, which is listed on both the PSE and the Singapore Stock Exchange, said it will seek the approval of its shareholders for the IPO through an extraordinary general meeting. Following the maiden share sale, DMPL will keep around 67% of its shareholdings in DMPI.

DMPI is an indirect subsidiary of DMPL through Del Monte Pacific Resources Limited’s Central American Resources, Inc. It sells canned pineapple juice and juice drinks, canned pineapple and tropical mixed fruits, tomato sauce, spaghetti sauce and tomato ketchup.

Around two-thirds of its sales are from Philippine operations, while the remaining one-third is from export markets under the S&W brand.

DMPL recorded a net loss attributable to controlling stakeholders of $2.8 million in the three months ending October, against an attributable profit of $19.97 million in the same period in 2016.

For DMPI alone, sales grew by four percent in peso terms, as the company increased penetration of its products in the market, but was down 2.9% in US dollar terms due to the weakening peso.

DMPL has been crafting ways to turn around the business. Last December, the company raised $100 million from the sale of Series A-2 preferred shares in order to pay its outstanding bridge loan from BDO Unibank, Inc. that is scheduled to mature in February 2019.

Shares in DMPL climbed 6.67% to close P11.20 apiece at the Philippine Stock Exchange on Tuesday, one of the biggest gainers amid losses for much of the bourse. — with inputs from Reuters

Mining compelling despite policy hurdles — BMI

THE PHILIPPINES remains a compelling proposition for foreign miners, even as the current administration — which ends its six-year term in 2022 — continues its predecessor’s tack of tightening the state’s hold on the industry, according to an assessment of BMI Research.

“Environmental regulations, high taxes and resource nationalism will continue to plague the mining industry of the Philippines,” the Fitch Group unit said in a summary of findings — e-mailed to journalists on Tuesday — of its Philippines Mining Report that was published in January.

“However, we maintain that the industry is well-positioned for longer-term growth as foreign miners look to take advantage of the country’s sizeable and relatively untapped deposits and low operating costs.”

The country’s mining sector has been reeling from an unfriendly policy environment since former president Benigno S.C. Aquino III issued Executive Order No. 79 in July 2012 that imposed a moratorium on new mining projects until a new mine revenue sharing scheme is enacted.

President Rodrigo R. Duterte’s assumption of power has not lifted pressure on the industry, and while a harsh crackdown in February 2017 by staunch environmentalist-turned-Environment secretary Regina Paz L. Lopez relaxed somewhat when she was booted out of office in May after failing to bag lawmakers’ fiat for her appointment, her ban on open-pit mining — widely used by miners — remains in effect.

The current government is also moving to increase its share in industry revenues by including higher mining levies in a tax reform package that the Finance department will submit to Congress within the year.

Adding to uncertainty is an ongoing review by the multi-agency Mining Industry Coordinating Council of sanctions Ms. Lopez had imposed — for various infractions of environment laws — on 28 of 41 operational metal mines in the country and 75 other projects in pre-production stage.

Despite nagging policy constraints, BMI Research now expects value of the country’s mining output to rise annually — though by progressively smaller increments — until Mr. Duterte ends his six-year term in 2022: by six percent to $3.98 billion this year, five percent to $4.18 billion next year, four percent to $4.34 billion in 2020, three percent to $4.47 billion in 2021 and by two percent to $4.56 billion in 2022.

Latest available data from the Mines and Geosciences Bureau showed that total mining production rose in value by 6.06% to P81.475 billion as of September from the P76.82 billion recorded in 2016’s comparable nine months, but mainly because of better world prices.

The same comparative nine months saw production of most metallic minerals fall in volume terms despite increases in value: gold by three percent to 16,999 kilograms (kg), silver by 11% to 23,951 kg, copper concentrate by 19% to 210,428 dry metric tons (DMT), nickel direct shipping ore by 11% to 19.01 million DMT and chromite by 47% to 13,694 DMT.

As of end-2016, the Philippines was estimated to have reserves consisting of 1.854 billion MT of gold, 1.696 billion MT of silver, 1.761 billion MT of copper, 116.136 million MT of nickel, 116.001 million MT of iron and 47.264 million MT of chromite.

BMI Research said it sees average annual copper production growth easing to 4.6% in the 2018-2027 period from 18.0% over 2008-2017.

Performance of gold production, however, should rebound to 5.7% over 2018-2027 from a 2.6% drop in 2008-2017. “Growth will be boosted by a pipeline of new projects coming online and higher prices of gold in the coming years,” BMI Research said, adding that it projects average world price of the yellow metal to improve to $1,525 per ounce (/oz) by 2021 from $1,300/oz last year.

Nickel ore production growth will slow to an annual average of 2.7% over 2018-2027 from 22% in the preceding 10 years “because of the introduction of more stringent regulations and depleting ore grades”.

“Environmental regulations will remain a top concern for mining firms operating in the Philippines, especially since a ban on open-pit mining was put in place in April 2017,” BMI Research said, citing other challenges as “proposals to increase taxes and resource nationalism”.

Gov’t rejects all bids for T-bonds

THE GOVERNMENT rejected all bids for fresh seven-year Treasury bonds (T-bond) on offer yesterday as banks factored into their bids the faster January inflation print and the expected rate hike by the Bangko Sentral ng Pilipinas (BSP).

The Bureau of the Treasury did not award seven-year papers at its auction yesterday, which was met with demand worth P25.82 billion, slightly bigger than the P20 billion it wanted to borrow.

Had the government proceeded with a full award, the debt papers, which will mature on Feb. 8, 2025, could have fetched an average rate of 5.273% and a coupon rate of 5.5%, higher than the 4.39% average quoted when these papers were last sold.

Still, yesterday’s would have been lower than the 5.9432% yield on the seven-year papers in the secondary market before the auction.

At the close of trading, the seven-year T-bond closed flat.

After the auction, National Treasurer Rosalia V. De Leon told reporters that the government rejected the bids because they were unreasonable.

“We see that the rates are really beyond our estimates of the reasonable rates that we expected for this new seven-year issuance,” Ms. De Leon said.

She said banks likely factored into their bids the faster January inflation figure, as well as the expectations of a rate hike from BSP.

“It’s also a calibration of [the banks’] expectations on the Feb. 8 policy rate setting of the monetary board given the inflation of 4%,” she noted.

Data released yesterday by the Philippine Statistics Authority showed headline inflation last month accelerated to 4%, faster than the 3.3% reading in December and the 2.7% print posted in the comparable year-ago period.

The January print was also faster than the 3.5% consensus from 14 analysts in a BusinessWorld poll conducted late last week.

In a commentary sent to reporters, ING Bank N.V. senior economist Jose Mario I. Cuyegkeng said the faster-than-expected inflation last month makes it more likely that the BSP will tweak its interest rates in its meeting tomorrow.

“The likelihood of a tightening move at Thursday’s meeting has increased significantly,” Mr. Cuyegkeng said.

“We are now looking at advancing the timing of our rate hikes and are reviewing our two-rate hike forecast for 2018.”

Meanwhile, a trader shared the sentiments of Ms. De Leon, adding that market players “can’t help” but make unreasonable bids.

“[M]arket players can’t help it. We know that [the government] would like to issue more given the ‘Build Build Build’ program. And now you have higher inflation [and the] probability of BSP acting to address this concern,” the trader said in a mobile phone message. — Karl Angelo N. Vidal

Globe net profit drops in 2017

GLOBE TELECOM, Inc. reported its net profit fell 5% to P15.08 billion in 2017 despite record revenues, as “increased investments in data network pushed non-operating expenses and depreciation charges higher.”

In a statement, Globe said it recorded a 2% increase in non-operating expenses to P4.27 billion, “largely due to the increase in interest expenses and spectrum amortization related to the San Miguel Corp. (SMC) telco asset acquisition.”

“This, however, was partly offset by the recognition of a one-time gain last September, related to the increase in fair value of the retained equity interest of Globe in Globe Fintech Innovations, Inc. (Mynt),” the company said.

Core net income, which excludes the impact of non-recurring charges and foreign exchange and mark-to-market charges, dropped by an annual 15% to P13.5 billion, with the full impact of the SMC acquisition.

For the fourth quarter, net profit plunged 57% to P2.1 billion, while core profit declined 28% to P2.33 billion.

Consolidated service revenues rose 6% to P127.9 billion in 2017, which the telecommunications giant says is its highest ever for the full year. Revenues for the October to December period went up 2% year on year to P32.8 billion.

“The sustained revenue momentum was driven by the solid growth in data-related products brought about by the increasing popularity of streaming and on demand video content,” Globe said.

Mobile revenues increased 7% to P98.5 billion in 2017, fueled by robust growth in mobile data revenues. Mobile data, which accounted for 44% of the total revenues, saw a 23% rise in revenues to P43.1 billion in 2017. On the other hand, SMS revenues were flat, while mobile voice dipped by 5% year on year.

As of end-December, Globe’s mobile subscriber base stood at 60.7 million, 3% lower than the 62.8 million subscribers reported a year ago. This after the company in 2017 started excluding from its reporting prepaid subscribers who do not reload within 90 days of the second expiry period, versus the previous cut-off of 120 days.

Revenues from its home broadband business went up 7% to P15.6 billion, as its total number of subscribers grew by 15% to 1.3 million. Corporate data business revenues jumped 4% to P10.3 billion.

However, traditional fixed-line voice revenues fell 8% to P3.49 billion in 2017.

“We are confident that our continued investments in our network’s data capacity and coverage, will allow us to continue to provide superior customer experience and improve the over-all connectivity in the country, while building a solid foundation to deliver sustainable long-term growth and shareholder value,” Globe President and CEO Ernest L. Cu was quoted as saying in a statement.

SLOWER REVENUE GROWTH
The Ayala-led telecom is expecting slower revenue growth for this year, in the “low single digits.”

“In 2017, revenues grew by 6% and obviously, 2018, we’re coming off higher base from that 6% growth. While we do expect our corporate and broadband businesses to grow faster, there will be growth in mobile. Growth in 2017 was also not that large due to base. So, the guidance we have for this year is 4%. Last year, our guidance was mid-single digit, that’s 5%,” Globe Chief Financial Officer Rizza Maniego-Eala said during a briefing on Tuesday.

Mr. Cu said during the same briefing the company still sees growth, particularly in mobile data users.

“There’s still potential of growth… given 56% of customers use mobile data even if 70% have smartphones,” he said.

Meanwhile, Globe may keep its $850-million capital expenditure (capex) for the next two years.

“Historically, if you look at the spending trends, you can project. You see business and data growth. Logical for us but we don’t know the number. That is depending on what we see market needs. We do spend as necessary. If you look at the numbers, we went $750 million in ’15, $1 billion in ’16, $850 million in ’17 and projecting over $850 million to $900 million in ’18,” Mr. Cu said.

As of end-2017, Globe said it spent around P42.5 billion in capital expenditures “to support the growing subscriber base and its demand for date.”

Mr. Cu also said they are focusing on tapping the market for prepaid broadband, rather than rolling out an expansive fiber network, which is the strategy of PLDT.

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. — P.P.C. Marcelo

SMC sets timetable for P30-B bond offer

DIVERSIFIED conglomerate San Miguel Corp. (SMC) has set the listing of its P30-billion fixed rate bond issuance this March. 

In an investors’ briefing in Mandaluyong on Tuesday, China Bank Capital Corp. President Ryan Martin L. Tapia said the issuance will run from March 2 to 8, with listing at the Philippine Dealing and Exchange Corp. on March 15. The offer will have a base size of P20 billion and over-allotment option of up to P10 billion, 

Prior to this, the company will announce the interest rate for the bonds on March 1, with final allocation to be disclosed on the same date.

Included in the offer are five-year series E bonds due 2023, seven-year series F bonds due 2025, and 10-year series G bonds due 2028.

China Bank Capital Corp. is one of seven banks that SMC has engaged to arrange the offer. The others are BDO Capital and Investment Corp., BPI Capital Corp., First Metro Investments Corp., ING Bank, SB Capital Investment Corp., and Standard Chartered Bank.

Local debt watcher Philippine Ratings Services Corp. assigned a Prs AAA rating for the issue — the highest on its credit rating scale — which indicates the issuer has the capacity to meet its financial obligations. The company also gave the issue a stable outlook, meaning the rating is unlikely to change in the next 12 months.

The bond offer is the third tranche of SMC’s shelf registration program registered at the Securities and Exchange Commission worth P60 billion. The company raised P20 billion during the first tranche’s listing last March 1, 2017, and P10 billion from the second tranche last April 7.

The company has been conducting refinancing activities as a hedging mechanism against foreign exchange losses, given expectations on the Philippine peso’s continued depreciation. On Tuesday, the peso was valued at P51.46 against the dollar.

SMC’s attributable profit stood at P20.9 billion in the first nine months of 2017, 19% lower year on year. Revenues, meanwhile, stood at P596.9 billion for the period.

Shares in SMC lost 2.71% or P4 to finish at P143.50 each at the Philippine Stock Exchange on Tuesday. — Arra B. Francia

PDIC repeals rule excluding outstanding dues from closed banks’ insured deposits

THE Philippine Deposit Insurance Corp. (PDIC) has repealed a rule requiring closed banks to deduct outstanding dues of an account holder before computing insured deposits.

In a regulatory bulletin, the state-run firm said they have revoked a seven-year-old rule that requires banks under liquidation to deduct outstanding obligations of a depositor before identifying the amount covered by deposit insurance.

This follows changes introduced in the PDIC Charter which was signed into law as Republic Act 10846 signed on June 11, 2016.

“[T]he obligations of a depositor are no longer netted out from his/her total deposits in the closed bank for purposes of computing insured deposit,” PDIC Bulletin 2018-01 reads, as signed by President Roberto B. Tan on Feb. 2.

Under the PDIC charter, the state insurer steps in as receiver of problem banks and acquires the lender’s assets in order to pay outstanding liabilities to depositors.

The new rule invalidates Regulatory Issuance No. 2011-04, which sets the rules to net out outstanding loans, penalties and charges due from an account holder before finalizing the amount which they will receive as insured deposits.

Bank deposits are insured up to P500,000 per account, according to the law.

The BSP has shut down six rural banks and one thrift bank in 2017, after they were found to be incapable of remaining in business. In 2016, the regulator closed 22 lenders.

Also yesterday, the PDIC said it will auction off at least P157 million worth of properties this February in three separate auctions in Metro Manila and Davao. Among the assets to be sold are residential, commercial and agricultural lots.

Last year, the deposit insurer said it generated a total of P259.16 million from the sale of assets incurred from closed banks as well as corporate properties. Properties worth P201.08 million raised premiums worth P58.08 million.

“The disposal of these assets increases the chances of recovery of uninsured depositors and creditors of their trapped funds. Meanwhile, gains from the sale of corporate assets are added to the Deposit Insurance Fund, PDIC’s main fund source for payment of valid deposit insurance claims.” — Melissa Luz T. Lopez

8990 Holdings posts P10B revenues in 2017

REVENUES of mass housing developer 8990 Holdings, Inc. slipped 7% in 2017, amid delays in securing permits for its projects.

In a statement issued Tuesday, 8990 Holdings said its unaudited revenues reached P10.09 billion in 2017, lower than the P10.87 billion it generated in the same period a year ago. The company, however, said it reached its full-year revenue target of P10 billion.

“2017 unaudited revenue of the company was reported at P10.09 billion as the strong fourth quarter performance was able to reverse the negative growth trajectory seen during the first nine months of the year,” the company said.

8990 Holdings has yet to submit its full-year financial report to regulators.

Delays in securing project permits weighed down the company’s financials last year. In the first three quarters alone, 8990’s net income dropped by 22% to P2.47 billion. Company officials, however, noted that it would be able to recover once construction picks up and buyers see projects being completed.

Contributing to 8990 Holdings’ revenues for the year was the sale of a total of 7,348 homes. Units in Luzon accounted for 54% of this number, while Visayas and Mindanao booked 34% and 12%, respectively.

In terms of sales value, Luzon cornered the largest chunk at 58%, followed by Visayas at 33% and Mindanao at 9%.

The company further noted that medium-rise and high-rise buildings are now contributing more to housing revenues, up 47% from 26%.

This year, the listed property developer has committed to launch five more developments worth P60 billion, as it aims to expand its footprint across the country.

“2018 will be even more exciting for us as we will launch more large-scale projects that will make 8990 poised to capture the Metro Manila affordable housing market,” 8990 Holdings President and Chief Executive Officer Willibaldo J. Uy was quoted as saying in the statement.

With this, the company targets to book at least P12 billion in revenues for 2018.

Shares in 8990 gained six centavos or 0.96% to close at P6.33 each at the stock exchange on Tuesday. — Arra B. Francia

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