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T-bills, T-bonds to track US rates amid Fed bets

YIELDS on government securities on offer this week will likely end mixed as investors track the movement of US bonds and wait for the Treasury’s bond swap.
The Bureau of the Treasury plans to raise a total of P25 billion from both Treasury bonds (T-bonds) and Treasury bills (T-bills) this week.
Broken down, for the T-bills, the government will auction off P5 billion in three-month, P4 billion in six-month, and P6 billion worth of one-year papers today.
The Treasury will also raise P10 billion via reissued-year 10-year T-bonds tomorrow with a remaining life of nine years and 11 months.
A bond trader told BusinessWorld on Friday that the yield on the three-month T-bills is expected to climb by around five basis points, while the rates of the six-month and one-year papers will likely move higher by 10 basis points.
“For the 10-year [bonds], possibly the coupon rate will land within the 6-6.1% range,” the trader added.
At the secondary market on Friday, the three-month T-bill fetched a yield of 3.3716%, while the six-month and one-year papers were quoted at 3.9196% and 4.1893%, respectively.
Meanwhile, the 10-year bonds were last offered on March 20 at a 6.25% coupon rate. The yield on the 10-year bonds closed 6.05% at the secondary market on Friday.
The bond trader said the movement of US Treasuries will be a “major factor” investors will consider.
On Friday, Reuters reported that the US Treasury yield curve hit its lowest level in more than a decade as short-dated yields rose faster than the longer tenors following the expectations of further interest rate hikes from the Federal Reserve this year.
The yield gap between the five-year and the 30-year securities flattened 1.1 basis points to 36.30 basis points after hitting 35.30 basis points, its flattest level since September 2007.
Expectations for the Fed to hike its interest rates this year heightened after Boston Fed President Eric S. Rosengen suggested that the Fed could end up hiking its benchmark rates more than three times this year on the back of the robust US economy.
Meanwhile, ANZ Research said in a report that the 10-year bonds on offer tomorrow, as well as the 20-year papers to be placed on the auction block next week, “will be challenging after a partial award again” during the seven-year bond auction last week.
Last Wednesday, the Treasury bureau only awarded P7.932 billion out of the planned borrowing of P10 billion as yields spiked amid concerns over rate hikes here and in the US.
“The smaller issue size of P10 billion next Tuesday will help but the market could be focusing on the bond switch where the auction will provide pricing guidance to the switch,” ANZ said, adding that the swap is “imminent.”
“Typically, a bond switch could raise P150-200 billion. As we expected, [the Treasury] is looking for a bond switch to help fund a bond redemption of P130.5 billion, due on May 23,” ANZ Research noted.
Last Wednesday, National Treasurer Rosalia V. De Leon told reporters that the government will have an opportunity to finance the redemption requirement if there is a good window.
This quarter, the government is holding two auctions per week — one for Treasury bonds and another for Treasury bills — to reflect increased borrowing requirements for the quarter.
The government is set to raise P325 billion via the domestic market this quarter through auctions of securities.
It plans to borrow P888.23 billion from local and foreign sources this year to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal

Philippine Airlines to fly to New Delhi, Mumbai, Sapporo by fourth quarter

PHILIPPINE Airlines (PAL) is planning to mount nonstop flights from Manila to New Delhi and Mumbai in India and to Sapporo in Japan by the fourth quarter, as the flag carrier expects 15 new aircraft to be delivered this year.
PAL said in a statement it is accepting delivery of six new Airbus A321neos starting May. These A321neos will be used for flights to Asia-Pacific destinations, including India and Japan.
PAL said it will introduce new routes to India after Tourism Secretary Wanda Corazon T. Teo called for direct links to the Asian country which is seen as a possible source of tourists.
The airline is also studying Ms. Teo’s request to launch international routes from Davao International Airport to Bangkok, Thailand or any point in Japan.
PAL said it is also expecting delivery of five Next-Generation Bombardier Q400s and four Airbus A350-900 trans-oceanic aircraft starting June 2018.
The Bombardier Q400s are for domestic flights, while the A350-900s are for the polar route between Manila and New York.
PAL is planning to increase frequencies in the following routes: Cebu-Siargao (twice daily by end-April); Cebu-Busuanga (Coron) (thrice daily by April 26); and Cebu-Clark, (10 weekly flights by April 28).
It is also looking to boost flights from Clark to Davao and Cagayan de Oro to daily later this year.
PAL is also increasing frequencies between Manila and Dumaguete, Cagayan de Oro, Iloilo, Cebu, Puerto Princesa and Bacolod through May.
The airline is planning to upgrade to the wide-body Airbus A330 or A340 aircraft on selected Manila-Cebu and Manila-Davao flights.
PAL is set to fly the polar route from Manila nonstop to New York (John F. Kennedy Airport) starting Oct. 28.
BORACAY CLOSURE
Meanwhile, PAL said it is presently working with local and international authorities to secure approval for new or additional chartered flights from China, South Korea and Taiwan to Puerto Princesa and Cebu.
This after the cancellation of international flights to Kalibo and Caticlan, during the six-month closure of Boracay island.
PAL said it will scale down its services to Caticlan and Kalibo airports, and will operate weekly flights between Manila and Kalibo and seven weekly flights between Manila and Caticlan until October.
“The additional China-Cebu and Korea-Cebu flights are intended to feed more tourism travel to Camiguin, Siargao, Coron, Bohol and likewise to Butuan, rather than exclusively to Cebu. This is one positive multiplier effect of a thriving PAL hub network centered on Cebu Mactan,” PAL said in a statement.
PAL currently flies to 16 domestic and seven international locations from Cebu; 14 domestic and one international from Clark; six domestic points from Davao; and one international destination (Seoul, Korea) from Tagbilaran.
PAL Holdings, Inc. reported a P7.3-billion net loss in 2017, due to higher fuel prices and ballooning aircraft and passenger expenses.
The company eyes to close a deal with a strategic investor this year. — Patrizia Paola C. Marcelo

Yields on gov’t debt rise on inflation expectations

MARKET EXPECTATIONS of faster inflation at home and developments abroad caused yields on local government securities (GS) to move upwards last week.
GS yields rose by an average of 11.79 basis points (bps) week-on-week, data from the Philippine Dealing and Exchange Corp. as of April 13 showed.
In the secondary market, only the four- and seven-year Treasury bonds (T-bonds) rallied, with almost all other tenors recording upward yield movements. In the short-end of the yield curve, the 91-, 182- and 364-day Treasury bills (T-bills) saw their rates go up by 24.46 bps (3.3716%); 33.21 bps (3.9196%); 87.07 bps (4.1893%), respectively.
In the belly, yields on the two-, three-, and five-year T-bonds increased 8.98 bps, 4.88 bps, and 6.90 bps, fetching 4.2411%, 4.5867%, and 5.2298%, respectively. Meanwhile,rates of the four- and seven-year debt papers saw their yields go down 43.73 bps and 71.28 bps, yielding 4.9556% and 5.7443%.
In the long-end, yields on the 10- and 20-year papers increased by 10 bps (6.05%) and 57.44 bps (7.0964%), respectively.
“There has been a general upward pressure on yields [last] week. Trading started slow from the break, but has picked up towards the end of the week,” said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines.
The economist attributed the upward pressure on yields to higher “inflation expectations” by the market with price levels seen to “remain elevated” in the coming months until the first half of 2018 which will “consequently keep upward pressure on yields.”
A bond trader concurred, saying: “Upward pressure was seen for most of the session on expectations for faster inflation onshore and Treasury yield increases.”
The bond trader added that the borrowing program by the Bureau of the Treasury (BTr) “also forced upward momentum,” although partial awards seen at recent auctions “offered some counter” as dealers had to flock to the secondary market.
Meanwhile, Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK), pointed to a flurry of developments abroad that largely influenced yield movements.
Early last week, Mr. Dumalagan noted yields receiving some boost from the “constructive speech” of Chinese President Xi Jinping at the Boao Forum for Asia. “Instead of matching US President Donald J. Trump’s protectionist tone, the Chinese leader talked about plans to further open up China’s economy to the rest of the world… [underscoring] China’s intention to reduce tariffs for autos and enforce the legal intellectual property of foreign firms,” he said.
While overall yields went northward, Mr. Dumalagan noted, volatility was elevated following the escalating tensions between the US and the Russia-Syria coalition with US President Trump issuing threats of a possible military action in Syria following the latter’s alleged involvement in chemical weapon attacks.
“This unexpected political development temporarily reduced yields on Thursday, despite firm US inflation data and hawkish FOMC (Federal Open Market Committee) minutes,” the LANDBANK economist said referring to the US Federal Reserve’s monetary policy making body.
“The drop in yields, however, was short-lived, as interest rates bounced back on Friday after US President Trump tempered his missile threat against Syria… Moreover, yields also recovered on the last day of the week amid lingering expectations of further US rate hikes ahead,” he said.
Minutes of the Federal Reserve’s March meeting showed members of the FOMC unanimously approving a rate hike amid expectations of higher economic growth and inflation in the US with further hikes expected by the market sometime in June and September.
At home, market expectations are leaning towards the Bangko Sentral ng Pilipinas increasing interest rates after inflation data for March recorded a 4.3% reading year-on-year, bringing the January-March result to 3.8%, which is at the upper-end of the government’s 2-4% inflation target this year. This prompted the central bank to signal a “measured” policy response. The BSP’s Monetary Board will next review its policy stance on May 10.
Meanwhile, the BTr made a partial award of seven-year T-bonds it auctioned off last Wednesday, raising P7.932 billion with bids by banks reaching P20.668 billion, double the planned P10 billion.
Looking forward, analysts expect a continued upward movement in yields.
“[Y]ields will be on an uptrend due to inflation pressures that are expected to be on the top end of the government’s current inflation target,” UnionBank’s Mr. Asuncion said.
For LANDBANK’s Mr. Dumalagan: “[Y]ields could drop, as safe-haven demand could increase amid on-going tensions involving the alleged chemical weapons attack in Syria…and might be accompanied by a re-escalation of the US-China trade dispute.”
“These geopolitical concerns might more than offset the impact of potentially upbeat US reports on retail sales and housing. These geopolitical developments could also act in tandem with likely weaker Chinese GDP growth in exerting downward pressure on yields,” Mr. Dumalagan added. — Denise A. Valdez

Oscar-winning Cuckoo’s Nest director Milos Forman, 86

OSCAR-WINNING Czech-born film director Milos Forman, celebrated for One Flew Over the Cuckoo’s Nest and Amadeus, has died aged 86, his agents told AFP on Saturday.
“I heard from (Forman’s wife) Martina Forman very early this morning letting me know Milos passed away at Danbury Hospital near his home in Warren, Connecticut,” his friend and agent Dennis Aspland said. “I can confirm the news,” added the director’s Czech agent Radka Kadlecova, as Forman’s official Facebook page displayed a black square in the place of his profile picture, complete with the dates of birth and death.
The Czech news agency CTK quoted Martina Forman as saying her husband died suddenly on Friday after a short illness.
“He passed away quietly, surrounded by his family and his closest people,” she said.
In an obituary on Twitter, Hollywood actor Antonio Banderas labelled the cigar-smoking director a “genius of cinematography.”
“Milos Forman has left us. Genius of cinematography and master in the portrayal of the human condition. RIP,” the Desperado star said.
Jim Carrey, who played comedian Andy Kaufman in Forman’s Man on the Moon (1999) — a film that inspired Forman to name his twins James and Andrew — hailed Forman as “a force” and a lovely man. “I’m glad we got to play together. It was a monumental experience,” he tweeted.
Born in the town of Caslav east of Prague on Feb. 18, 1932, Forman lost both parents in Nazi concentration camps.
In the 1960s, he joined the New Wave of filmmakers standing up to the Communist regime in what was then Czechoslovakia, making himself famous with Black Peter, Loves of a Blonde, and The Firemen’s Ball.
Shortly before the 1968 Soviet-led occupation of Czechoslovakia, which put an end to a liberal period known as the Prague Spring, Forman moved to the United States via France.
‘I’LL MISS HIS LAUGHTER’
His career overseas started with Taking Off in 1971, followed by One Flew Over the Cuckoo’s Nest four years later, which brought him his first “best director” Oscar.
An American citizen since 1977, the father-of-four returned to still-Communist Prague in 1983 to film Amadeus, which earned him a second Oscar for best director and won eight out of 11 nominations.
“Milos Forman was… a master filmmaker — no one better at capturing small unrepeatable moments of human behavior,” tweeted Forman’s screenwriter Larry Karaszewski.
“We made two movies together and every day spent with him was a unique adventure,” said Karaszewski, who wrote the screenplays for Forman’s The People vs Larry Flynt (1996) and Man on the Moon together with Scott Alexander.
“Milos loved life. I will miss his laughter,” he added.
Larry Flynt, the publisher of sexually graphic magazines, said he would miss Forman’s “presence on this Earth.”
“I will always be grateful to him for telling my story in The People vs Larry Flynt. He was a remarkable man with extraordinary talent,” Flynt tweeted.
‘FABULOUS STORY-TELLER’
“He was my dad’s best friend and we both looked up to him,” Czech director David Ondricek, the son of Forman’s cameraman Miroslav Ondricek, told the website of the Czech broadsheet daily DNES.
“He had a beautiful character and fantastic energy. People wanted to be near him, he was a fabulous story-teller and a kind man,” Ondricek added.
Cuckoo’s Nest star Danny DeVito offered an obituary in a blend of Czech and English.
“Milos the magnificent! cest k jeho pamatce (honor to his memory) light a good cigar, raise a drink, and shout ‘HOVNO HOVNO HOVNO! (SHIT SHIT SHIT!)’,” he tweeted.
Forman’s other films include Hair (1979), Ragtime (1981), Valmont (1989), and Goya’s Ghosts (2006).
Valmont star Meg Tilly also tweeted a tribute to Forman. “RIP#MilosForman. Working with you in Prague and France were highlights of my acting life. I feel so blessed to have been gifted with those experiences,” she said. — AFP

Chocolate forests: Can cocoa help restore the Amazon?

NEW YORK/MEDICILÂNDIA, Brazil — For years, Valdomiro Facchi has made a living ranching on land carved from the Amazon rainforest. He’s a small player in one of the world’s biggest environmental disasters.
But now that his cattle have trampled the pastures to dust — and new laws prevent him from clearing fresh land — he has to find new income.
“I want to diversify,” said the 68-year-old rancher, outlining plans to plant cocoa trees on his 300 hectare plot in Brazil’s Para State. “I want to have the cocoa income when profit from cattle ranching fails.”
Facchi illustrates a trend that is turning damaged parts of the Amazon basin green again and creating an usual alliance between the agriculture industry and conservationists. Brazil’s cattle ranchers are planting cocoa on their used-up pasture, with financial support from international environmental groups.
That’s a big change. For decades, ranchers have been the engine of clear-cutting in the Amazon rainforest that has rendered an area nearly the size of Spain treeless. Environmentalists have argued the practice destroys wildlife habitat and undermines the planet’s ability to absorb carbon dioxide that causes global warming.
“Besides being a means of avoiding deforestation, cocoa plantations favor the local, regional and national economy,” the international environmental group The Nature Conservancy said on its website.
The young trees will also bring change to global cocoa markets. Brazil’s National Association of the Cocoa Processing Industry (AIPC) expects the surge in planting to help double the country’s output of the raw material in chocolate by 2028 to 400,000 tons a year. That increase would raise global output by about 5%.
The renewed planting could make Brazil one of the world’s top three cocoa growers again after the sector was decimated in the 1990s by a crop fungus called witches’ broom.
Conservationists and cocoa industry representatives expect the trend to help mitigate the effects of clear-cutting that has ripped some 430,000 square kilometers (sq.km.) from the Amazon rain forest since the 1980s.
Fifty percent of cocoa production growth will come from the Amazon, said Eduardo Bastos, executive director of the AIPC, calling the cocoa farms there “chocolate forests.”
Green groups like The Nature Conservancy and the Amazon Fund have helped finance new cocoa plantations. The Amazon Fund — which was set up by Brazil’s government and takes international donations to combat deforestation — has poured 17 million reais ($5.09 million) in grants into the crop.
Nearly 1,700 square kilometers of degraded cattle pasture in Brazil has been transformed into cocoa plantations already, according to AIPC’s Bastos.
Cocoa planting is driven mainly by new limits on the cattle industry that have changed the financial incentives for ranchers. In the Amazon, pasture can become degraded in as little as three years if not managed properly, making it hard to raise a thriving herd without new acreage.
Brazil in 2014 passed a law that allows landowners to clear only 20 percent of their property in the Amazon and requires some landowners to replant depleted areas.
That law aims to curb deforestation, which peaked in 2004 at a pace of 27,000 sq.km. per year. In 2017, Brazilian Amazon lost 6,624 sq.km. of rainforest.
Compared to ranching, cocoa can provide income from a relatively small plot with no need for constant expansion. The profits can be up to five times better, said Eduardo Trevisan Gonçalves, project manager at Brazil’s Imaflora, an environmental group that did a study comparing income from cattle and cocoa in the region.
The benefits extend to the environment. Cocoa plantations can imitate natural forests, helping to restore native plant and wildlife species, boosting water resources and absorbing carbon dioxide, Gonçalves said.
“It is a perennial crop,” he said. “It will stay there for decades.”
Funding from environmental groups comes with guidelines intended to boost the ecological benefits of the plantations, according to José Garcia, a farmer in the central Pará state who is receiving a grant from the Amazon Fund.
Under the terms, he said, he will have to plant cocoa alongside other taller native species, such as mahogany and ipê.
“It is recommended that cocoa be planted with other trees — taller ones — to benefit from the shade,” he said at his farm in Medicilândia in Para State.
Evidence of the shift is everywhere in the Medicilândia region, where barren pastures have given way to shady plantations of cocoa trees bearing yellow and ruby pods, the fibrous protective coverings for the cocoa beans.
In the city of Medicilândia, a low-lying town lined with dirt roads in Para state, farmers truck bags full of dried cocoa beans to warehouses bearing signs that read “we buy cocoa.”
Shops nearby offer ice-cold cocoa juice, a thick — sweet drink prepared with the fruit’s pulp.
Brazil is an agricultural heavyweight, among the world’s top growers of soybeans, corn, sugar, coffee, and oranges. But it dropped from being no. 2 in cocoa in the early 1990s after witches’ broom slashed its production.
In Para State, however, witches’ broom rarely survives long enough to damage trees. The fungus requires moist conditions and largely dies off during the annual dry season. As a result, cocoa tree yields in Para are nearly double the global average, said Bastos.
There is some evidence Brazil could absorb some of this extra production: Euromonitor International pegs per capita chocolate consumption in Brazil at just 1.2 kilograms (kg.) a year, compared with 8.8 kg. in Switzerland, suggesting Brazil’s domestic chocolate market has room to grow.
Brazil’s processing companies — which transform cocoa beans into butter, powder and chocolate — welcome the prospect of increased domestic supply to feed their factories and lower their imports, but inject a note of skepticism.
Olam International’s Cocoa Vice-President in Brazil, Kidambi Srinivasan, for example, called the 400,000-ton per year target “an unlikely possibility” without higher market prices and more assistance to planters in areas including financing, training and supplies.
Benchmark cocoa prices in New York CCc2 are currently running at about $2,500 a ton, having bounced off a 10-year low of $1,756 hit in 2017 on worries of global oversupply.
Other big processors in Brazil include Cargill, which has an 85,000 ton plant in Ilhéus, and Barry Callebaut, the world’s biggest maker of industrial chocolate, which opened its first South American chocolate facility in Brazil in 2010.
For some of the ranchers-turned-planters, the chance to undo some of the damage to the Amazon caused by ranching is as important as the money they can earn from cocoa.
“There was a time when I thought: We shouldn’t have come here,” said Elido Trevisan, who arrived in Para to ranch in 1972 and cleared nearly 100% of his land.
“But now,” he said, “we can do something to compensate.” — Reuters

Another trade war looming with US over Spanish olives

THE US FLAG still flutters next to others in front of the AgroSevilla factory, the world’s biggest exporter of black olives based in southern Spain.
But the cooperative in Andalusia may soon have to take down the Stars and Stripes if a rise of more than 20% in duties on black table olives recently imposed by the United States, its number one client, becomes permanent.
Far from just concerning Spain, the decision could snowball into the US imposing duties on other European products such as French cheese or Italian wine.
Since the winter and the sudden rise in levies, “we have lost many contracts and we have had to let people go for the first time ever,” says Gabriel Redondo, president of a grouping of 4,000 farmers who all own a small share of the factory, the world’s biggest for black olives.
Set at the heart of huge olive plantations between Seville and Granada in the south, the factory treats, cures and slices olives, which are picked green.
They are then put in jars and cans and dispatched to 72 countries where they are sold to pizzerias, sandwich shops and salad bars — all expanding markets, particularly in the United States.
AgroSevilla exports 25% of its annual production to the US.
But within the space of a few months, the clouds have gathered for the cooperative and the entire sector, which employs 8,000 people on full-time contracts and ensures the survival of 16,000 farms in Andalusia.
In 2017, two Californian companies filed a complaint against their Spanish competitors to the US commerce department, accusing them of dumping, or selling their products too cheaply in the United States by profiting from EU subsidies.
The department opened a probe, as did the International Trade Commission, an independent federal agency that investigates trade-related issues.
The final decision is due on mid-July, but the United States has already slapped temporary duties of more than 20% this winter on Spanish olives.
The conflict comes amid fears of a wider trade war after US President Donald Trump’s administration raised customs duties on steel and aluminum, even if Europe is for the moment exempt from these.
For farmers in Andalusia, the move to raise levies came as a total surprise.
The sector as a whole exports 40% of its production to the United States for some €70 million ($86 million) a year.
Even before the final decision, some US buyers have suspended their contracts, which are now too expensive thanks to the temporary duties.
In the factory, “we’re re-organizing everything,” says Redondo, who fears they will lose market share to Morocco or Egypt.
Out of 450 employees at the factory, 30 have already lost their jobs. If the situation drags on, this could rise to 80.
Paradoxically, the Californian complaint only targets finished products and not imports of untreated olives that have just been picked.
The United States, which only produces 20% of the olives it consumes, will therefore continue buying the unprocessed olive fruit from Spain.
And that’s a concern for Spanish farmers.
“We don’t want to deliver olives without transforming them” as the untreated fruit is sold half the price of the finished product, says Juan de Dios Segura, who farms 100 hectares of olive trees nearby.
He’s waiting anxiously for the July decision in the US, as he has already bought all the necessary fertilizer and machines for this year.
The sector says it has already spent five million euros in lawyers’ fees in the United States, and it feels forgotten by the European Union (EU).
“Europe deployed all its diplomatic energy (on steel duties) but left us by the wayside. It’s condescending as the sector is small,” says Redondo.
By arguing that European subsidies are creating unfair competition, the US complaint “is calling into question the legality of the entire European agriculture policy,” says Antonio de Mora, head of Asemesa, the association of table olive producers.
The European parliament is concerned too.
Fearing a “spiral of defence investigations” on agricultural products, it voted last month on a resolution asking the European Commission “to study the possibility of challenging any final US decision before the WTO (World Trade Organization).”
The commission, meanwhile, says it will “take action” when necessary and considers “there is no base for anti-subsidy measures.” — AFP

BSP looks to ease loan pricing rules

THE CENTRAL BANK is looking to allow banks more leeway in setting loan rates for retail clients in order to provide cheaper credit for borrowers in good standing.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said the regulator is working to ease current rules on loan pricing towards a risk-based approach, which could spell lower interest rates for Filipinos with good credit scores while also allowing wider margins for those with history of default.
“To differentiate risks among bank borrowers, we are currently studying adoption of the risk-based pricing framework for bank loans. This will encourage good borrowers to avail of more loans because of the lower interest on account of their good credit standing,” Mr. Espenilla said in a recent speech.
In turn, this arrangement will allow lenders to be more decisive in setting rates for customers with “poor credit quality” despite the pressure to reduce loan costs due to competition, as such practice exposes financial firms to potential systemic risks, the BSP chief said.
Currently, regulators attach a standard 75% risk weight for banks’ retail exposures. The Bank of International Settlements has cited the need to tweak this rule by factoring in the risks drawn from a certain loan.
The proposed changes come ahead of the rollout of a local credit scoring system under the watch of the Credit Information Corp.
The central bank has been actively crafting “principle-based” and “risk-based” policies instead of imposing a one-size-fits-all standard, with the latter seen to leave smaller firms under too much regulation and may curtail innovation in offering new financial products and services.
BSP Circular 971 published in August 2017 requires all financial players to adopt policies that would allow risk identification, aggregation, mitigation, and monitoring among its ranks. Under the new guidelines, any firm should be able to put into writing its risk appetite, which would spell out the risks which it is “willing to assume” to achieve its business objectives.
The BSP has also eased rules on lending to micro- and small-scale firms by assigning a lower risk premium to loans granted by banks via credit surety fund (CSF) cooperatives, with the goal of prodding increased lending to this sector.
Loans extended to CSF-member businesses will be assigned a 20% risk weight, a substantial decline from a 75% weight assigned to all retail credit lines.
Retail clients and small-scale firms are deemed riskier segments due to bigger chances of default compared to corporate clients which are more likely to settle their loans. As a result, banks impose wider margins for individual borrowers. — Melissa Luz T. Lopez

Top 10 Supermarkets (Parent Companies) By Gross Revenue

More misery: H&M now faces online taunts after delivery system falters

HENNES & MAURITZ AB has another headache: not being able to deliver online goods as fast as it wants.
The struggling Swedish fashion retailer is being inundated with complaints on its Facebook page from customers who haven’t received their products on time. One says that her baby will soon be “too big for the items” she ordered 26 days ago, while another worries that clothes ordered three weeks ago will “go out-of-fashion.”
And H&M acknowledges it has problems. Construction at its online distribution center in Boras, Sweden, is resulting in delays in Sweden and Norway, which account for about 7% of the company’s online and physical store sales, according to spokeswoman Katarina Gustafsson.
“We hope for our customers’ understanding and regret any inconvenience caused,” she said in an e-mail.
The delays may complicate the company’s efforts to boost sales. Operating profit fell to its lowest level in more than a decade in the first quarter as markdowns failed to reduce a pile-up of inventory.
The delivery problems hit at the heart of the company’s strategy shift to focus more on online sales and new store formats. The restructuring of the online distribution center aims to speed up delivery times from H&M’s current standard of five to seven days, Gustafsson said.
Customers are imploring H&M to be more transparent.
“Your website states 5-7 days for delivery… If the info is wrong, please change it so that customers know about the lengthy delivery time rather than misrepresentation of the delivery timeline,” one says. — Bloomberg

How PSEi member stocks performed — April 13, 2018

Here’s a quick glance at how PSEi stocks fared on Friday, April 13, 2018.

The High Prices Of ‘Sin’ — Fastest Since 2013

Firms see robust sales despite TRAIN

By Krista Angela M. Montealegre
National Correspondent

FILIPINOS did not hold back on spending despite higher prices of goods in the first quarter of the year, but elevated input costs would continue to put pressure on the profitability of consumer companies.
COL Financial Group, Inc. Vice-President and Head of Research April Lynn L. Tan said in a phone interview that the impact of the strong remittances, weak peso and the personal income tax cuts likely contributed to robust sales of consumer companies such as retailers, restaurant operators and food manufacturers in the first quarter of 2018.
“We were bracing for that (slower consumption), but surprisingly sales continue to be strong based on January and February numbers,” Ms. Tan said.
Overall inflation rose by 4.3% year-on-year in March, the fastest pace in more than five years on the back of increased prices in food and beverage, data from the Philippine Statistics Authority showed.
This puts the year-to-date figure inflation at 3.8%, near the upper end of the 2-4% target range set by the Bangko Sentral ng Pilipinas (BSP) for the year.
The impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law that took effect at the start of the year pushed up certain indirect taxes, including for soft drinks, as well as increasing the oil excise tax in stages over a three-year period.
Consumer spending is the major driver of the Philippine economy, accounting for about two-thirds of gross domestic product.
SUSTAINED GROWTH
A survey of listed consumer companies showed sustained strength in sales despite these headwinds.
Puregold Price Club, Inc. registered “good” sales in the first couple of months, John T. Hao, vice-president for investor relations of the listed retailer, said in a mobile phone message.
Max’s Group, Inc., the country’s largest casual dining operator, expects consumption to remain “a chief economic driver,” Paul C. Cheah, investor relations officer of Max’s, said in a separate message.
The impact of the tax reform program on sales is “favorable,” Philippine Seven Corp. (PSC) Head of Finance and Accounting Division Lawrence M. de Leon said.
A food manufacturing company, however, warned that unabated inflation could stifle demand for non-staple and discretionary goods.
“I would suppose consumer companies that tap the middle income market still have good revenues but when you look at profits baka mas mahina because of the higher cost that they are not able to pass on fully,” COL’s Ms. Tan said.
The trend of elevated input prices seen in the latter part of 2017 may continue in the first three months of the year given the higher excise taxes as a result of TRAIN and the continuous depreciation of the peso, she added.
Another factor that contributed to the strong sales is that companies have not really jacked up prices significantly despite the higher cost of raw materials.
“They are doing it very moderately. They don’t want a pullback on demand. They are gauging the waters, how the consumers will react,” First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said in an interview.
“We may see a lag before TRAIN affects these companies. If there is a lag on the impact, input costs should have gone down by the time they implement the price increases,” Ms. Ulang said.