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Money mistakes millennials make

Welcome to the adult world. As you enter this new chapter, you have long‑term goals to figure out: personal goals, career goals, and even financial goals, and we cannot stress enough how important it is to start planning for your financial goals most especially. After all, nobody really gets very far in life if one’s finances are not properly managed.

We’ve listed the common mistakes of millennials in managing their finances and we hope that you won’t ever find yourself saying:

Art Samantha Gonzales

Most millennials think that budgeting your money is only a strong suggestion. Wrong! Budgeting is a must if you want to manage your finances properly. And we’re not just talking about saving enough money for the next travel or weekend sale. We’re talking about thinking way beyond your next paycheck.

Budget your money and allot certain amounts or percentages that you are willing to spend for each need and want. By assigning these caps or limitations, you’ll be able to say which expenses really are your non‑negotiables and which aren’t. But more importantly, make sure you stick to your budget!

Art Samantha Gonzales

Credit cards are your best friend and worst enemy. Never put yourself in a situation that you’ll get wild swiping that plastic left and right. With the emergence of tons of online stores that pop on your screen every few minutes, self‑mastery and self‑control will definitely be a challenge, but one that can be done with the correct mindset. Remember, the key here is moderation. It’s okay to use your credit card once in a while, but just make sure you don’t overdo it or else you’ll be feeling much regret once that bill arrives.

Art Samantha Gonzales

Most of us prefer to not think about these things or at least postpone thinking about them for a few years. While medical and life insurance may not always be a priority, it’s wiser if you start them early. After all, nobody really gets faulted for being prepared way too early, right? Check out our previous column on life insurance here.

Art Samantha Gonzales

Sure, you won’t be retiring in the next five to 10 years, but it’s never really too soon to prepare for it, isn’t it? Imagine, if you live until 80 and will be retiring by age 60, that’s 20 years of your life without a job! And 20 years—that’s roughly your age now. Most young adults postpone planning for their retirement plan because they think that it’s decades away anyway, but what they’re not taking into consideration is the power of compounding interest. Compounding interest could be your ally especially if you’re about to start planning for your retirement. The earlier you think about your retirement, the better.

These are just the common traps that we hope you never find yourself saying. After all, if you really want to do a good job at this #adulting thing, you really have to start acting like a responsible one.

Show of force

Liberian anti-riot policemen take part in an exercise in Monrovia on October 9, 2017, on the eve of the country’s presidential elections. — AFP

Moody’s sees more factory contraction

FACTORY OUTPUT likely contracted for a second straight month in August as high base effects kicked in, Moody’s Analytics said, even as it clarified that it expects expansion to resume shortly.

The unit of Moody’s Corp. and sister firm of global debt watcher Moody’s Investors Service said it expects volume of industrial production to have contracted by two percent in August, a reversal from the year-ago 13.3% increase and steeper than the 1.1% decline recorded in July.

“The Philippines’ industrial production likely remained downbeat in August and fell by 2.0% year-on-year following a 1.1% drop in July,” Moody’s analysts said in a report released over the weekend.

“High base effects are at play, as domestic demand is doing well and global manufacturing demand is upbeat,” it explained, adding that “[t]he near-term outlook is for continued expansion.”

The Philippine Statistics Authority is scheduled to report official August manufacturing data on Tuesday.

Last year’s third quarter saw three consecutive months of double-digit increase in volume of production: 12.1%, 13.3% and 11.2% in July, August and September, respectively.

Moody’s Analytics said production decline may be temporary, as current indicators point to sustained growth in the industrial sector.

The monthly survey on business conditions in manufacturing which IHS Markit conducts for Nikkei, Inc. bared a similar picture.

The Nikkei Philippines Manufacturing Purchasing Managers’ Index (PMI) logged 50.6 in August, marking the fourth straight month of a slowdown. Still, the figure remained above the 50 mark, meaning business for factories continued to expand.

Vietnam, Singapore and Indonesia took the lead among Southeast Asian countries that month.

The Philippines’ PMI reading recovered to 50.8 in September, making the local manufacturing sector second to Vietnam in Southeast Asia.

Moody’s said the latest manufacturing data show the sector has not benefited from the weaker peso, which should have translated to bigger production and sales abroad.

Manufactured items contribute more than 80% to total shipment abroad of Philippine goods in any given month.

“The weak peso hasn’t provided the expected lift to exports and manufacturing yet, but rather has undesirably raised the import bill,” the global analytics unit said.

The peso averaged at P50.8747 against the dollar in August, already beyond the P48-50 assumption set by the central bank earlier this year. — Melissa Luz T. Lopez

‘Mentor of thousands’ runs his course

By Krista A. M. Montealegre
National Correspondent

PHILIPPINE business icon and philanthropist Washington Z. SyCip passed away on Saturday night, people close to his family confirmed, leaving behind a legacy of excellence and integrity.

He was 96.

Mr. SyCip — one of the most revered industrialists in the Philippines and in Asia — turned a one-man organization built after the war into SyCip, Gorres, Velayo & Co. (SGV), the country’s biggest professional services firm and now a unit of global accounting giant Ernst & Young. He was also one of the pioneers of the Asian Institute of Management, one of the most prestigious business schools in Asia.

“My mentor, the mentor of thousands, Wash SyCip passed away last night…Wash was 96 years old and lived a very full and meaningful life. We will miss you WS!” former Finance Secretary Cesar V. Purisima said in a social media post early Sunday.

SGV separately confirmed the passing of its legendary founder.

“Mr. SyCip went quietly while on a flight to Vancouver from Manila,” SGV said.

“The SyCip family requests for some private time at this moment. Information on memorial services to follow. Please pray for the eternal repose of his soul.”

Long retired from SGV, he sat on the advisory board of many Philippine and international companies and was still regarded as “the man to see” for businesses keen on expanding in this part of the world.

Small in stature and slightly stooped, Mr. SyCip referred to himself as “only a bookkeeper” despite being a titan in the Philippine business landscape.

“His wisdom is sought after by global and regional businessmen, politicians, civil societies, educators and even the religious. His knowledge is expansive and he continues to be curious about anything and everything that is new. He is always on the lookout for what is good in the Filipino, be it a talent, a product, a song or a dream,” former SGV Chairman David L. Balangue wrote in the foreword of Mr. SyCip’s memoir, Wash: Only a Bookkeeper.

“He was generous not only in sharing his wealth but also with his wisdom, advising captains of industry, Philippine presidents and many others who sought his counsel,” Edgar O. Chua, chairman of Makati Business Club (MBC), said in a statement.

“Wash has fulfilled his journey of his life. I know that he was contented and happy with his quality and meaningful life knowing he had left a legacy of admiration and respect,” SM Investments Corp. Chairman Jose T. Sio, who used to work at SGV before Henry Sy, Sr. hired him to work for SM in 1991, said in a mobile phone message.

“Personally, I lost a boss, mentor and fatherly care. He always aimed high and fulfilled it. His perspective is wide and far-reaching. Wash, I bow and salute you.”

Belle Corp. Vice-Chairman Willy Ocier will remember Mr. SyCip for his hard work and integrity. “At Belle Corp., we always set our board meetings according to his availability. We will miss him,” Mr. Ocier said in a separate text message.

The esteemed accounting guru was the recipient of the 1992 Ramon Magsaysay Award for Peace and International Understanding for his efforts on “fostering economic growth and mutual understanding in Asia through professionalism, public-spirited enterprise, and his own esteemed example.”

Despite his US citizenship, Mr. SyCip has been one of the Philippines’ “most effective private ambassadors and institution builders,” according to the Ramon Magsaysay Award Foundation.

GIVING BACK
Mr. SyCip’s retirement from SGV in 1996 allowed him to actively engage the business community in meaningful acts of social responsibility, focusing his energies on pressing social needs such as basic public education, micro finance and rural health to help fight poverty in the country.

He conceptualized the Zero Dropout Education Scheme, which is implemented by an audit client of SGV, the Center for Agriculture and Rural Development-Mutually Reinforcing Institutions, a social foundation that aims to send the poorest Filipino children to school.

He was also involved in Synergeia, the foundation led by former Finance Undersecretary Milwida M. Guevara that seeks to transform basic education in collaboration with local government units, parents and the private sector.

Mr. SyCip was a product of the Philippine public school system, graduating from Padre Burgos Elementary School and Mapa High School before enrolling at the University of Santo Tomas and completing a bachelor’s degree in commerce, summa cum laude, at the age of 17.

“Being a public school graduate, I have always maintained that education is the greatest of equalizers. We all can help in improving the lives of our people through better basic education,” Mr. SyCip said in a 2013 interview with BusinessWorld.

He became a certified public accountant at the age of 19.

Believing he was too young to receive a professional license to practice, he pursued a doctorate degree in the United States at Columbia University.

He returned to Manila at the end of the World War II to be reunited with his family.

He set up his own accounting firm W. SyCip & Co. in Manila’s Binondo district and took in new partners — his childhood friend Alfredo M. Velayo and accountant Ramon J. Gorres — then renamed the firm SyCip, Gorres, Velayo & Co.

‘NOTHING LESS THAN HARD WORK’
“Values such as excellence and integrity are intangible assets that define a person or company,” Mr. SyCip said in a 2011 column published in BusinessWorld.

“Breathing such values into life is nothing less than hard work.”

Tributes poured in for Mr. SyCip shortly after his death.

“He was a man who radiated intelligence and inspired respect, and while he was of slight physical stature, he towered over all of his contemporaries. He was the ‘Sage of our Age,’ and was one of the persons I greatly admired,” Senator Grace Poe said in a statement.

“Mr. SyCip was a leader, advisor and guiding force behind many other Filipino businesses and philanthropic organizations, and an advocate for poverty alleviation, public education and economic freedom,” said Philippine Airlines, where he sat as a director.

“For those of us who had the privilege of working with him and under his guidance, Mr. SyCip was a legendary mentor who inspired us to strive for the highest measure of excellence and integrity in the conduct of our business, and in serving the Filipino public. We feel his loss keenly, and will greatly miss his wise counsel and commanding presence.”

For BDO Unibank, Inc. Chairperson Teresita Sy-Coson, Mr. Sycip “has been a highly valued adviser to the board of directors of BDO Unibank.”

“We will always remember him for his guidance over the years.”

‘Mentor of thousands’ runs his course

Economic execs seek to assure US investors

STATE economic managers head for the United States this week in a bid to convince companies there that the Philippines is good for business, the Finance department said in a statement yesterday.

On Oct. 11 in New York City, the team — led by Finance Secretary Carlos G. Dominguez III, Budget Secretary Benjamin E. Diokno, Socioeconomic Planning Secretary Ernesto M. Pernia, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo, Executive Secretary Salvador C. Medialdea and Foreign Affairs Secretary Alan Peter S. Cayetano — will “hold the fourth overseas Philippine Economic Briefing with leaders of the American business community to provide them a better-rounded picture on key developments in the Philippines’ fast-growing economy.”

Ayala Corp. Chairman and Chief Executive Officer Jaime Augusto Zobel de Ayala will take part in the briefing, the department added.

Participants at the briefing, themed: “The Rising Philippine Economy: Powering Gains with Global Partners through Shared Goals”, will be updated on Philippines’ economic performance, as well as government policy thrusts and progress of its infrastructure program and tax reform initiatives.

The New York briefing will be jointly hosted by Deutsche Bank, Citi Group, Standard Chartered Bank and Morgan Stanley.

“We will highlight our comparative advantage: young population, with a median age of 23, in an aging world; mostly English speaking,” Mr. Diokno said in a mobile phone message yesterday when asked for details.

“We will highlight the budget priorities which are the golden age of infrastructure and investment in human capital development, the latter to develop the country’s young pop[ulation] into a competent, agile work force.”

Economic managers conducted similar briefings since last year in Singapore, China and Japan.

BSP Governor Nestor A. Espenilla, Jr. and Mr. Dominguez then head for Washington D.C. on Oct. 13 for the World Bank and International Monetary Fund Annual Meetings.

In Washington D.C., Mr. Dominguez will also speak before the Center for Strategic and International Studies. The Finance department quoted him as saying the event “is an opportunity for us to present a better-rounded picture of where our country is and where we intend to go.”

Early last month, the US Chamber of Commerce and the American chambers of commerce in Southeast Asia released findings of their 2018 ASEAN Business Outlook Survey that, among others, showed many respondents in the Philippines believing the current government has not been effective “in boosting business confidence and promoting investment in the country”. Four percent said the current administration has been “very effective” and 11% said it has been “slightly effective” in doing so. But 26% said the government was “slightly ineffective” and the same percentage said it was “very ineffective” in doing so.

Still, the Philippines had the highest proportion of respondents saying they expect profit growth this year from 2016 at 85%, followed by Vietnam (84%).

The survey showed the Philippines and Malaysia (both with 22%) trailing behind Vietnam (34%), Myanmar and Indonesia (both with 29%), Thailand (26%) and Cambodia (23%) as a site for expansion outside host countries.

Indonesia (73%), Vietnam (72%), Myanmar (71%) and the Philippines (70%) showed “exceptionally high percentages of respondents with expansion expectations” in their host countries, while Brunei (75%), Vietnam and Cambodia (each with 70%), the Philippines (63%) and Singapore (57%) “have the highest proportion of companies planning to increase their work force.” — EJCT

Cushioning adversity with determination

The Entrepreneur Of The Year Philippines 2017 has concluded its search for the country’s most inspiring entrepreneurs. Entrepreneur Of The Year Philippines is a program of the SGV Foundation, Inc., with the participation of co-presenters Department of Trade and Industry, the Philippine Business for Social Progress, and the Philippine Stock Exchange. In the next few weeks, BusinessWorld will feature each finalist for the Entrepreneur Of The Year Philippines 2017.

The Entrepreneur Of The Year Philippines 2017

Natividad Cheng
Chairman and CEO,
Multiflex RNC Philippines, Inc.

BUILDING a business is always challenging and developing a homegrown brand into a trusted, industry-defining company with a 50-year track record has not been a walk in the park.

For Natividad Cheng, 71, chairman and chief executive officer (CEO) of Multiflex RNC Philippines, Inc. (Uratex), establishing the company required decades of hard work, prudence, frugality, business sense and no little measure of luck.

Ms. Cheng’s entrepreneurial journey began out of her and her late husband Robert Cheng’s dream of getting out of poverty. With seed money of only P4,000 and some prior knowledge about upholstery, the Chengs set up their business, formerly Polyfoam Chemical Corp.

While other producers concentrated on cheap, low-quality foam, the Chengs focused on quality, value-for-money products with longer warranties that, today, has lasted some 15 years.

Ms. Cheng recounts, “At the time, customers just wanted cheap foam because it’s what they could afford.”

“But they would later complain because cheap foam doesn’t last. That’s why we decided to make good-quality foam.”

However, the company was thrown into turmoil early on when its first manufacturing plant was gutted in a fire in 1970.

Unfazed by the accident, the Chengs began anew by appealing to their creditors and suppliers.

After only a year, they managed to pay off all their suppliers, importers and creditors. This turning point made them realize the importance of integrity and reputation.

Their pioneering efforts in the foam industry allowed the Chengs to eventually diversify their products and offer them to other industries such as automotive, electronics, footwear, garments and construction.

Today, the Uratex Group of Companies (UGC) is a leading provider of industrial foam, mattresses, food containers, textiles, monoblock furniture and automotive original equipment parts, including car seats, radiators, and mufflers.

The group established factories, warehouse, showrooms in 20 locations nationwide and over 1,000 retail establishments.

Besides direct exports to Guam, Australia and Asia, the company also supplies industrial foam to various export industries.

When Mr. Cheng passed away in 2003, Ms. Cheng seamlessly took over the business to steer the company past various challenges to further strengthen its dominant position in the market.

Even as the Uratex brand has remained strong for almost 50 years, the company continues to lead product innovation, investing in highly advanced machines and building world-class facilities that would help meet the increasing demand of both its local and international customers. All machines deployed in its five major foam manufacturing plants are original equipment from the best suppliers in Germany and Norway.

“We constantly innovate by looking at different industry trends in Europe, US and Japan, as well as investing in research and development,” Ms. Cheng said.

The company has the only complete certified foam testing laboratory in the country.

Its research and development team undergoes rigorous training under global foam manufacturing experts and is exposed to up-to-date manufacturing technologies to help the company develop new foam products.

In addition to being endorsed by the Philippine Orthopedic Association, Uratex foam is also certified by Certi-PUR, a voluntary standard that ensures safe, environment-friendly products.

Ms. Cheng says she owes much of her success to luck, though she clarified that swerte (good luck) is the product of hard work and goodwill.

She has been called ninang ng bayan (godmother of the community) because of her kindness and willingness to help other people.

Her charitable work includes donations to schools and communities, as well as nongovernment organizations such as Gawad Kalinga for deprived communities in Sulu and rehabilitation projects in Marawi City, and the AGAPP Foundation for the construction of public school classrooms.

Ms. Cheng is also a founding donor of the Mind Museum.

As she herself never finished college due to financial difficulties, Ms. Cheng believes greatly in the power of education.

She provides scholarships to children of the company’s employees and of golf caddies, a favorite beneficiary of her late husband.

The company’s fire trucks are also frequent first responders when fires break out in nearby locations. The company has also contributed tens of thousands of sleeping mats to evacuation centers during times of need.

For her entrepreneurial leadership, which has made Uratex one of the leading foam-makers in Southeast Asia, Ms. Cheng has received awards such as the PLDT Bossing Award, the Go Negosyo Filipina “Starpreneurs” award, the Reader’s Digest most trusted brand awards for eight straight years, global product and systems quality certifications, automotive industry recognitions, as well as national productivity and quality awards.

Having leveraged on business sense, thriftiness and hard work to achieve her dream, Ms. Cheng’s advice for would-be entrepreneurs is to “know the business you’re getting into.”

“Be thrifty and always reinvest your earnings into the business.”

The official airline of the Entrepreneur of the Year Philippines 2017 is Philippine Airlines.

Media sponsors are BusinessWorld and the ABS-CBN News Channel. Banquet sponsors are Bench; Bounty Fresh Food, Inc.; CDO Foodsphere; Fiori Di Marghi; First Metro Investment Corp.; Global Ferronickel Holdings, Inc.; Hyundai Asia Resources, Inc.; Intermed Marketing Phils. Inc.; Jollibee Foods Corp.; LBC; SteelAsia and Universal Harvester, Inc.

The winners of the Entrepreneur Of The Year Philippines 2017 will be announced in an Oct. 18 awards banquet at the Makati Shangri-La hotel.

The Entrepreneur Of The Year Philippines will represent the country in the World Entrepreneur Of The Year 2018 in Monte Carlo, Monaco in June 2018.

The Entrepreneur Of The Year program is produced globally by Ernst & Young.

Treasury bill rates seen sideways

YIELDS on Treasury bills (T-bills) to be auctioned off today will likely move sideways amid consolidation as they track US rates and with demand expected to be strong on the short tenors ahead of a likely Federal Reserve hike.

The Bureau of the Treasury will offer today P15 billion in shorter-dated securities, aiming to borrow P6 billion via the three-month papers, P5 billion in six-month papers, and P4 billion in the one-year tenor.

Bond traders interviewed separately on Friday said the Treasury’s offer will likely be twice oversubscribed, with demand for the shorter-tenored papers likely to be strong.

A trader said the auction may see yields rise by five basis points (bps) across the board from rates fetched at the last auction to track US debt notes.

“Rates will move sideways, but may already increase to about five basis points higher, but tenders will still be more or less times two because the market will still tend to go into shorter papers,” the trader said in a phone interview.

“There’s still demand, but the yields may go higher because US treasuries are also higher, given the chances of a interest rate hike come December in the US. Now, there’s about a 74% chance of a rate hike because of the strong economic numbers recently,” the trader added, noting hawkish comments from Fed officials in separate speaking engagements.

At the Sept. 25 auction, the 91-day T-bills fetched an average rate of 2.032%, while the 182-day and 364-day papers were quoted at 2.522% and 2.861%, respectively.

Meanwhile, at the secondary market on Friday, the 91-day and 182-day T-bills were respectively quoted at 2.8286% and 2.9175% at the close of trading, while the one-year papers yielded 2.853%.

A second trader said that although there will be an eventual rise in rates, today’s yields may be mostly flat given the lesser number of T-bill offerings in the fourth quarter due to the holidays.

“Investors are watching closely the availability of the T-bills, because they want to invest in shorter-tenored papers,” the second trader said in a phone interview.

“I think there’s still strong demand on short-dated tenors, so we can expect another drop on five basis points on the three months, but not so much coming to the one-year. Yields are maybe going to be flat and the volume offer won’t be too big,” the second trader added.

The trader also noted that the higher-than-expected 3.4% headline inflation in September could boost demand for the government securities on offer.

The government is planning to raise P150 billion from domestic lenders in the fourth quarter — lower than the P195 billion programmed in the third quarter — offering P75 billion each in T-bills and Treasury bonds. — E.J.C. Tubayan

AirAsia asks gov’t to scrap travel tax, airport fees

PHILIPPINES AIRASIA, Inc. is asking the government to scrap the travel tax and airport fees imposed on departing travelers, saying this move would spur outbound traffic.

AirAsia Philippines Chief Executive Officer Dexter M. Comendador said the budget carrier submitted a proposal last month to the departments of finance, tourism, trade and industry, and transportation, seeking the removal of the travel tax collected by the Tourism Infrastructure and Enterprise Authority (TIEZA), as well as airport fees

“We kept on asking the government that they give us incentives… One is airport fees. We are talking to CAAP [Civil Aviation Authority of the Philippines], could you please waive airport fees for about three to five years? It will lessen our operational costs,” Mr. Comendador told reporters in a recent interview.

“We asked also the DoT (Department of Tourism) to remove first the TIEZA fee of [about] P1,600 so that we can stir outbound traffic,” he added.

Airline passengers leaving the Philippines are charged a full travel tax of P1,620 for those in economy class, and P2,700 for those in first class. Overseas Filipino workers and Filipino permanent residents abroad, among others are exempted from paying travel tax.

However, scrapping the travel tax would need legislative action. Under Republic Act No. 9593 or the Tourism Act of 2009, 50% of the travel tax collection will be given to TIEZA while 40% is allotted for the Commission on Higher Education for tourism-related educational programs, and the remainder will be given to the National Commission for Culture and the Arts.

“Inbound traffic is easy, but travel is two-way…. I have to stir up the domestic tourists to go out. One way is to remove the P1,620, and hopefully the airport fees. That will total roughly P2,000 per passenger, because airport fee is P500… If a family of five goes to Hong Kong, [they will spend] P10,000, and they haven’t left the Philippines yet,” Mr. Comendador said.

Airport terminal fees, also known as Philippine passenger service charge, range from P50 to P200 for domestic flights, and P550 to P700 for international flights.

“We have a study that says if you take away the travel tax and the airport fee, you will lose roughly P4 billion in five years. But, you will gain P299 billion in terms of tourists coming in, [from] direct revenues and induced [revenues],” Mr. Comendador said.

The AirAsia Philippines CEO said waiving fees will encourage more Filipinos, particularly those in the provinces, to travel.

So far, Mr. Comendador said they have received positive feedback, particularly from Bohol Governor Edgardo M. Chatto who was open to waiving fees at the Panglao Airport.

Earlier, AirAsia Group CEO Tony Fernandes had raised the issue of lowering airport taxes, particularly in small airports, during a meeting with Department of Finance (DoF) Secretary Carlos G. Dominguez III.

LCCT IN CLARK?
Meanwhile, Mr. Comendador said Philippines AirAsia is also in talks with the government for a proposal to build low-cost carrier terminals (LCCT) or budget terminals, similar to the  Kuala Lumpur International Airport 2.

“In fact, we’re willing to offer our engineer, we have an engineer in AirAsia Group, who helps in designing low-cost carrier terminals,” he said.

Mr. Comendador said LCCT will allow 25 minutes turnaround time, as it uses stairways instead of tubes which will allow passengers to deplane in five to ten minutes.

AirAsia is proposing to convert Clark International Airport Terminal 1 into an LCCT, with the upcoming construction of new terminals for the expansion of the airport.

“We’re requesting that they convert Terminal 1 into a low-cost carrier terminal if they want (terminals) 2, 3, and 4 to be world class,” Mr. Comendador said.

AirAsia Philippines is planning to raise up to $250 million from an initial public offering (IPO) by mid-2018. Proceeds will be used primarily to expand its facilities. — Patrizia Paola C. Marcelo

Gov’t eyes to roll out repurchase market for banks next month to deepen market

THE GOVERNMENT is looking to roll out a repurchase market for banks next month, the country’s central bank chief said, forming part of an industry-wide initiative to deepen the debt market and get more funds moving in the financial system.

“By November of this year, we also look forward to the first trade in the repo market,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said in a speech last week as he discussed various capital market reforms in the pipeline.

The BSP, the Bureau of the Treasury and the Securities and Exchange Commission (SEC) are working to set up a repo market which would allow more financial players to buy and sell securities and generate fresh liquidity.

Under a repo agreement, one party trades debt papers — such as Treasury bills and bonds — to another with the promise to buy them back at a specified price and a future date, in the process providing the seller with short-term liquidity which it can use to hand out fresh loans and service client withdrawals.

This forms part of a six-pronged industry road map unveiled in August by the BSP, SEC, Treasury, and the Department of Finance, which will be finalized and implemented over the next 18 months.

“The initial phase will focus on improving benchmark markets as this is critical in pricing risk assets and other capital market instruments,” Mr. Espenilla said.

Apart from setting up the repo market, the reforms would entail increasing the volume of Treasury bills being auctioned, providing a “transparent” mechanism in issuing government debt securities, establishing a reliable yield curve, identifying and developing duties and incentives of so-called “market makers,” and greater regulatory oversight over the repo and fixed income markets.

The BSP chief said they have so far seen “improved” performance among banks who participate in the regular Treasury auctions, as they now see a narrower spread in yields which they submit as bids.

In a separate statement, the BSP’s Monetary Board announced simpler rules for banks and quasi-banks in floating debt papers to stoke more bond issuances.

The changes include the removal of minimum bond features including the requirement on eligible collaterals.

“The new regulation aims to provide greater flexibility to banks and quasi-banks in tapping the capital market as an alternative funding source.  This is also consistent with the initiatives of the BSP, together with other financial regulators, to spur the development of the domestic bond market,” the central bank said. — Melissa Luz T. Lopez

SM considers ‘clicks-to-bricks’ strategy to stay competitive

By Arra B. Francia, Reporter

SM PRIME Holdings, Inc. is looking to adopt a “clicks-to-bricks” strategy by the end of the year, as the country’s largest mall operator tries to get a piece of the growing e-commerce market.

“We’re doing efforts on e-commerce, ‘clicks-to-bricks,’ that’s in the works kasi. Yung ‘clicks-to-bricks,’ yung bricks ay yung mall… We are currently working on that, hopefully we can come up with something before the year ends,” SM Prime Chief Finance Officer John Nai Peng C. Ong told reporters after COL Financial’s property briefing in Pasig City on Saturday.

The “clicks-to-bricks” strategy is usually employed by online retailers who open physical stores, in an effort to build brand awareness, and to engage with customers.

In SM’s case, Mr. Ong said the strategy would support its brick-and-mortar business, as buyers can go online to pick items they want to purchase from any mall tenants, and later pick up their orders from an SM mall.

“It would be on a phase by phase. It could be from the same store, or look for potentially delivering store to store. For example, you’re based here, pero meron kang family relatives sa Baguio, in which they, pwedeng (you pick up from Baguio). There’s a Baguio mall anyway. Pwede ring click here in Metro Manila, but you will get the pick-up in the Baguio mall,” Mr. Ong said.

SM’s adoption of a “clicks-and-bricks” strategy comes as shopping malls and retailers around the world are facing intense pressure from e-commerce players. In the United States, around 25% of existing malls are expected to cease operations by 2022.

However, Mr. Ong noted that Filipinos are still generally mall-goers. 

“When you go there, it’s not basically now to shop, it’s again a destination… We would like to bring them in, and it will bring them in and the tendency is you will shop more, and that will bring more value to us,” he said.

The SM Prime executive said there is a deliberate effort to shift the tenants mix in its malls, hoping to increase the number of food tenants to up to 35%, as opposed to the current 10-15% under their portfolio.

“It’s a deliberate effort… Given it’s a lifestyle approach, a destination where we go it’s not basically to shop. We would like to experience food, leisure, entertainment… There’s a lot of offerings,” Mr. Ong said, specifying SM Megamall as one of the malls where the company is testing out this new concept. 

SM Prime is the holding firm for the SM group’s investments in the property sector, handling the shopping mall, retail, and residential developments businesses of the group. This year, the company targeted to open a total of five malls, to bring their total store count in the country to 65.

Mr. Ong said they are opening SM Tuguegarao this week, making it the fifth mall to be opened this year. With around three more months before the year ends, he said they are ramping up construction for a mall in Batangas in order to open another mall.

Should the company open SM Lemery before year end, this would bring them nine stores closer to their target of 75 stores in 2018. 

SM Prime delivered a net income of P14.39 billion in the first half of 2017, 14% year on year on the back of more higher contributions from its provincial operations which pushed revenues 10% higher to P43.25 billion during the period.

Lapid in talks to export chicharon to South Korea, Thailand, Vietnam

R. Lapid’s Chicharon may soon be available in other Asian markets. — RLAPIDS.COM.PH

RL FOODS Corp. is planning to bring its popular R. Lapid’s Chicharon or pork rinds to other Asian markets.

Rey C. Lapid, president and owner of RL Foods, said the company is currently in talks with firms in South Korea, Thailand and Vietnam for the export of its chicharon products.

“I’m planning here in Asia,” he told reporters, when asked about the company’s expansion plans.

Mr. Lapid, who created the R. Lapid’s Chicharon & Barbecue brand,  said the company, as early as 2015, began exporting its chicharon products to some parts of the Middle East.

He noted the chicharon products mainly caters to overseas Filipino workers who crave for pork products, which are scarce in Middle Eastern countries.

“I have a distributor, siya naging exporter ko in Dubai, Abu Dhabi, which is for Muslim pero marami (Filipinos) naghahanap ng R. Lapid’s Chicharon. So doon ako naka-concentrate,” Mr. Lapid said.

R. Lapid’s is said to be the first chicharon manufacturer to use pork skin raw materials from the United States, Europe, Canada, and South Korea. The company continues to import pork skin due to the lack of sufficient local sources.

“So my challenge now [is] how to export. Kasi kaya bumababa ang peso compared sa US dollar because of import, import, import. That’s not good. So the best [solution is], if you import, you can also export,” he added.

Two years ago, RL Foods began using metalized film packaging as a way to extend the shelf life of its chicharon product to up to 90 days and meet export standards.

However, a main hindrance to RL Foods’ export ambitions is the lack of capacity to increase production of chicharon products.

“I want it automated high-tech. I [had] to invest another P15 million just for expansion,” he said, adding the ongoing upgrade of its facilities will be completed by year end or in the first quarter next year.

Started in 1974, RL Foods is one of the largest manufacturer of chicharon in the Philippines. — Janina C. Lim

Peso likely to rise on weak US data

THE PESO could appreciate this week as the dollar loses steam on the back of disappointing jobs data in the United States, which could dampen expectations of economic recovery and a looming rate hike from the Federal Reserve.

The local unit closed at P51.15 versus the greenback on Friday, down 14 centavos from Thursday’s P51.05 finish. Week on week, the dollar traded weaker from the P50.815 rate logged on Sept. 29.

Traders interviewed over the weekend said the peso could see some lift this week as market players react to weak jobs data in the US, which saw 33,000 workers displaced in September.

“In the first few days of the week, the dollar might depreciate, after the US economy subtracted jobs in September 2017 as a result of the two hurricanes that hit the US, Irma and Harvey,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines.

The US Labor Department said non-farm payrolls dropped by 33,000 jobs last month, posting the first decline in seven years as twin hurricanes that hit the country led to temporary unemployment or delayed hiring, particularly in the leisure and hospitality sector.

The department said Harvey and Irma, which wreaked havoc in Texas and Florida in late August and early September, reduced employment last month. But underlying details of the closely watched employment report were upbeat. The unemployment rate hit a more than 16-1/2-year low of 4.2% and annual wage growth accelerated to 2.9%.

Mr. Dumalagan noted that a potential acceleration in Philippine manufacturing could also “boost the peso’s appeal,” but noted that improving joblessness rate and wage growth in the US could clip the dollar’s losses.

Back home, the Philippine Statistics Authority will report factory output for August on Tuesday.

A second trader said that the dollar will likely drop on the back of disappointing non-farm payrolls data last Friday, which came despite good figures on private employment and non-manufacturing data released last week.

“The non-farm payrolls report will dictate the movement of the foreign exchange market–the dollar in particular. If it’s super weak, we will see a sell-off,” the trader said.

Friday’s session remained relatively quiet with dollars traded at just $498.8 million, which reflected a wait-and-see stance taken by market players ahead of the crucial jobs report.

Strong labor figures would bolster the decision of the US Fed to raise interest rates for a third time this year, while a disappointing turnout may halt such plans.

Mr. Dumalagan expects the peso to range between P50.90 and P51.30 per dollar by Monday, noting that potentially upbeat inflation data in the US coupled with a “likely hawkish tone” of the Fed minutes to be released within the week to lend some strength to the foreign currency.

On the other hand, the second trader sees the peso trading between P50.90 and P51.25.  — Melissa Luz T. Lopez with Reuters

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