Nation at a Glance — (03/08/18)
News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.
To achieve gender equality, we need women entrepreneurs
By Shamshad Akhtar
IN 2018, we have an opportunity to accelerate progress toward gender equality. Movements such as #MeToo have shone the spotlight on an unacceptable status quo and demonstrated how too many women the world over continue to be deprived of respect and equal opportunities. Let’s use International Women’s Day to build on this global momentum for change and suggest targeted solutions to empower women across our economies and societies. Women entrepreneurs have a key role to play.
In Asia and the Pacific, there has been some progress toward greater equality. Maternal mortality rates have dropped by over 50% between 2000 and 2015. An equal number of girls and boys are now enrolled for primary school education, and near parity exists for secondary and tertiary education. But overall progress remains much too slow. On our current trajectory, South Asia would achieve gender equality in 60 years, Central Asia in 130, and East Asia and the Pacific in 160. At this rate, most women will be dead before they are equal. We need to speed things up.
With this objective in mind, the obstacles women face to find decent work or set up a business in Asia and the Pacific deserve special attention. Female labor force participation has declined in our region over the past 30 years. Most working women are trapped in precarious, informal employment, characterized by low wages and dangerous working conditions. Women are relied on to give up to six hours unpaid care work a day: invaluable to society, but thwarting career prospects, ambitions, and political representation.
We know that setting up a business is a key means for women to empower themselves and break out of poverty. But just as becoming an employee is harder for women, so is becoming an entrepreneur. Barriers include a lack of access to education or training, and limited access to information and communication technology (ICT), market information and finance. Indeed, women-owned small and medium-sized enterprises (SMEs) with reliable funding sources are few and far between, in part because land is often required as collateral for credit in a region where women make up a small minority of landholders. Burdensome registration procedures combine with societal prejudice to frustrate women’s entrepreneurial potential.
The good news is that despite these constraints, the number of women entrepreneurs has been increasing in the Asia-Pacific region. Women entrepreneurs in ASEAN countries have been particularly successful. The proportion of firms with women owners stands at nearly 70% in the Philippines, over 60% in Thailand, and over 50% in Vietnam. This has been achieved through gender responsive budgeting, programs to support SMEs, and strong civil society advocacy to ensure women’s entrepreneurship is prioritized in national policy making. At the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) we want to build on this success and work with countries across policy areas to develop a gender responsive entrepreneurial ecosystem. Four areas are critical to do so.
First, we need to improve women’s access to diverse sources of financing. Women entrepreneurship bonds, impact investment funds, and gender responsive financial technology (fintech) solutions are needed to quicken the pace of change. Combined with measures to improve financial literacy, these solutions should improve access to finance but also reduce transaction costs and support broader growth.
Second, we must improve women’s access to ICT and innovative technologies. Dedicated support is needed for women SME owners wishing to adopt the latest technology to improve business processes, product promotion, and sell into bigger markets. This should be accompanied by lifelong education and training opportunities to enable women to ride successive waves of ICT innovation.
Third, we need to promote a gender responsive policy environment. Public and private institutions should increase the number of women entrepreneurs on advisory boards and the banking sector should be incentivized to serve women better. Streamlined business registration procedures and proactive outreach to potential and existing women entrepreneurs can make a real difference. Women entrepreneur networks, ensuring women’s voices are heard clearly in chambers of commerce, business associations, or civil service commissions, must be part of the picture.
Making life easier for women entrepreneurs is to support women’s empowerment. It can help eliminate gender inequality, protect a fundamental human right, and bring considerable economic benefits. Gender equality in Asia would increase per capita income by 70% over 60 years. This would make a huge contribution to achieving sustainable development and reducing poverty. On International Women’s Day, my hope is that governments across Asia and the Pacific will be entrepreneurial about achieving equality and give women the support and opportunities they deserve.
Shamshad Akhtar is the Undersecretary-General of the United Nations and Executive Secretary of Economic and Social Commission for Asia and the Pacific (ESCAP).
How ‘pro-labor’ policies work against labor
“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”
— American economist, political philosopher,
and author Thomas Sowell
There are many legislative and executive proposals now that are meant to protect workers but have the long-term effect of discouraging the hiring of more workers. These five measures seem to stand out.
1. MORE HOLIDAYS WITH PAY
Currently there are 15 national non-working holidays with pay. Then there are city/municipal non-working holidays proclaimed by local governments. Plus paid leaves provided for by special laws like solo parent leave and maternity leave. Plus work suspension with pay during strong typhoons, floods, and other calamities. Plus work suspensions due to politics like nationwide jeepney strikes.
Now there are legislative proposals to create new holidays with pay. Among these are: the last Monday of January as National Bible Day; and, July 27 as Iglesia ni Cristo anniversary day.
2. PAID MATERNITY LEAVE FROM 60 TO 120 DAYS
A bill called the “Expanded Maternity Leave Law” proposes to raise the maternity leave period to 120 days or four months. This will cover all female workers regardless of civil status or legitimacy of the child. Solo parents would be granted a total of 150 days maternity leave with pay. Fathers will also enjoy a 30-day leave with pay versus the current seven days of paid leave as provided for under RA 7322. Penalties for violations are high — fines up to P20,000, imprisonment for six to 12 years, or both.
3. SECURITY OF TENURE, ENDING ENDO
This is removing the employers’ and contractors’ flexibility to hire workers when demand for work is high. Like catering and malls, demand for business and labor is high during November and December due to the Christmas holidays and reunions, then tapers off by January.
4. EVER-RISING MANDATORY MINIMUM WAGE
Even the unskilled should be paid the mandated minimum wage. The danger of this policy is that the less-skilled or skilled but less industrious workers will not be hired, raising the unemployment situation in the country.
5. EXPANDED MATERNAL AND CHILD HEALTH CARE PROGRAMS
Also known as the “Healthy and Bulilit Act” bill, it seeks to expand the health programs during the child’s first 1,000 days of life. It would also strengthen the implementation of RA 10028 or the “Expanded Breastfeeding Promotion Act of 2009.”
These populist and welfarist proposals are based on the premise that: our employment rate is high and workers can easily find other jobs, and the health of Filipino mothers and workers are deteriorating. Both are wrong. Our unemployment rate is the highest in the ASEAN, and Filipinos’ maternal mortality is decreasing although not as low as that of Singapore and Brunei (see table).
The danger of these proposals is that they make the hiring of workers, especially female workers and managers, become more expensive. If this trend continues, less workers will be hired — only the very talented, very efficient ones will be hired and the rest will be working in the informal, less well-paid sector or will be begging for more subsidies and cash transfers from the government.
And more workers doing repetitive jobs will be replaced by machines, robots, and artificial intelligence (AI). Machines do not ask for holidays with pay or maternity/paternity leaves with pay, and consumers want cheaper goods and services from shops and manufacturing plants.
Employment is not a right or entitlement. It is a privilege for those who have clear ambitions, personal responsibility, and equip themselves with certain skills. Entrepreneurship and being in business is also not a right or entitlement. It is a privilege for those who have deep patience and efficiency to understand both the consumers and suppliers of various production inputs, plus some luck. And the patience to deal with bureaucracies and politicians with very fickle and populist mind-sets.
Employment is a private contract between employers and would-be employees. If the terms are bad for job seekers, they should have more options for other employers. Better yet, employ themselves via micro-entrepreneurship or small start-up businesses.
Government should step back from setting and dictating the terms of employment and focus on enforcement of contracts. Government should also de-bureaucratize business and entrepreneurship so that more workers can migrate to become employers someday more easily.
Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.
Goodman Richard
Last Monday morning, I had the privilege and the pleasure to board the US Navy amphibious ship USS Bonhomme Richard, which was anchored in Manila Bay for a goodwill visit. The ship, I believe, leaves today for its homeport of Sasebo, Japan, prior to returning to the United States for mid-life servicing.
The ship is also commonly referred to as the “BHR” or LHD-6. It is the sixth out of eight so-called Wasp-class “Landing Helicopter Dock” ships currently active with the US Navy in different parts of the world. Interestingly, BHR or LHD-6 came after LHD-5, which is the USS Bataan. Yes, that’s right. There is a US Navy ship in service today named after a province in the Philippines.
The USS Bataan Amphibious Ready Group (ARG) were reportedly the first ships to respond after the Sept. 11, 2001 attacks, sailing immediately to New York Harbor from their port in Norfolk, Virginia. Materials available online also noted that later on, during Operation Enduring Freedom, the USS Bataan ARG stayed on station off the coast of Pakistan and completed the longest sustained amphibious assault in US history with sailors not touching ground for over four months.
Listed as USS Bataan’s involvements are the Iraq war; providing relief to the victims of hurricane Katrina; assisting in the humanitarian relief efforts following the 2010 Haiti earthquake; it was deployed to Italy to assist in enforcing the no-fly zone over Libya in 2011; and, it was part of the 2014 air campaign against the Islamic State in Iraq and Syria, among others.
As for the BHR, it has an equally interesting history of involvement in both military and civilian operations, particularly disaster relief and humanitarian efforts. Its primary mission, of course, is to embark, deploy, and land elements of a Marine landing force in amphibious assault operations by helicopter, landing craft, and amphibious vehicle. Thus, it carries in its belly over 1,000 Marine troops and their equipment at any given time.
It reportedly had secured Pacific waters as part of Operation Southern Watch. And, like the USS Bataan, it was also deployed as part of Operation Enduring Freedom. Later, it also supported Operation Iraqi Freedom by offloading more than 1,000 Marines and gear into Kuwait, after which it operated miles off the coast of Kuwait and became one of two “Harrier Carriers” along with the USS Bataan in the Persian Gulf.
Information available online indicated that it then detached in 2004 to provide relief efforts in Sri Lanka following the 2004 Indian Ocean earthquake and its subsequent tsunamis. In 2005, the ship helped airlift relief supplies to the coast of Sumatra, Indonesia. Since then, it had been part of various military exercises around the world. In 2009-2010, its ports of call included East Timor; Phuket, Thailand; Kuala Lumpur, Malaysia; and Oahu, Hawaii.
It was in 2012 that the BHR reportedly took the place of USS Essex as the command ship for Expeditionary Strike Group Seven and switched its homeport from San Diego, California to Sasebo, Japan. From Japan, it sailed to assist in the air-sea rescue operation of the capsized South Korean ferry in April 2014. Now on its 20th year since commissioning, it is heading home for servicing.
To get an idea of what the BHR is all about, the US Embassy invited a small group of journalists to board the ship along with some distinguished visitors from the Diplomatic Corps as well as Philippine Defense and military officials. It was a very interesting tour of a ship that one US Marine official described as a “floating airport.”
For that is what the BHR is, really. Sized about two-thirds of a regular aircraft carrier, the BHR secures the Asian region with its load of helicopters, fixed-wing aircraft, amphibious as well as armored vehicles, heavy equipment, and about 2,500 Navy crew members and a Marine expeditionary force.
Unlike an aircraft carrier, the BHR does not have a catapult. Thus, it carries mainly aircraft that can take off and land on their own power. But, also unlike an aircraft carrier, the BHR can lower its rear into the water to load or deploy amphibious vehicles for beach landings. In times of emergency, it can sail to the Philippines from its Japan port in about three to four days.
If you ask me, between a ship that can take the fight to the sea, and a ship like the BHR, the Philippines can be better served by investing even in just one LHD-type naval vessel. BHR, for instance, has a 15-bed Intensive Care Unit and a 44-bed hospital ward. But, in time of emergency, the ship space for bunks can be converted into a 600-bed hospital if necessary.
Moreover, the BHR is accustomed to feeding about 2,500 people with four meals daily. It runs on steam, with boilers running on the same jet fuel used for the aircraft on board. The ship also has its own ability recycle the condensations from its propulsion system and at the same time generate potable water for drinking and cooking and for sanitation use, among others.
Ship officials told journalists that just before reaching Manila, two appendectomies were done on board, with one patient having resumed duties, and another in recuperation. The BHR is a city in itself, which can easily be supplied through airlift even while on duty. And given its capabilities, ship captain US Navy Captain Larry McCullen, Jr. aptly described it as a sort of “Swiss Army Knife.”
While offshore, BHR directs air traffic and flight operations. It caters to helicopters and fixed-wing aircraft in need of servicing and refueling. In short, it is a floating airport that can be easily deployed to where there are deep enough waters, and from its belly it can deploy amphibious vehicles and landing crafts for beach landings.
As a civilian, I look at BHR’s capabilities in relation more to peace time than in war. And with typhoon disasters fairly common here, we could be served well by such a vessel if we had one. During Yolanda, the US actually sent over the USS George Washington Carrier Group. However, how often can a foreign government deploy an entire carrier group to the Philippines for disaster relief operations? Yolanda’s case was unprecedented.
Moving forward and planning ahead, rather than a submarine, for instance, which I hear is what the Philippine military prefers to buy, a vessel like the BHR will be most suitable given our archipelagic nation. If and when necessary, such a vessel can be completed by a small fleet of sea planes and heavy-lift helicopters to further boost its capability to assist in disasters.
Yes, a ship like the BHR can cost upwards of $1.5 billion. And it will take a lot of money to maintain and operate it. In this regard, aid, grant, support, or donation from foreign governments will help in procuring such a vessel for the Philippines. This is where diplomacy comes into the picture. That is, if there is the Philippine political will to get something like this done.
Marvin A. Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council.
Why do consumers buy?
I love rock and roll. As Mick Jagger and Keith Richards of the Rolling Stones wrote, “I can’t get no satisfaction, I can’t get no satisfaction. ’Cause I try and I try…” The Rolling Stones probably contributed to making Abraham Maslow’s hierarchy of needs popular.
A lot of marketing research has been devoted to answering the million-dollar question: “Why do consumers buy what they buy?” Most economists argue that consumers are economic buyers; that is, they compare choices to get the greatest satisfaction from their purchases. Whether they are people or organizations, economic buyers want more value for their time and money. Thus, marketing managers must understand their needs and find new ways to meet them.
A big challenge for marketing professionals is to understand that consumers decide on their wants and needs based on other variables besides economic influence. These are psychological variables (motivation, learning, attitude, and culture), social influences (family, social class, and reference groups), and purchase situations (purchase reasons, time, and environment).
A great marketer can turn any want into a need.
Everyone is motivated by needs and wants. Needs are the basic motivating forces that shape decision making. Wants are learned needs. In my basic marketing classes, we analyze needs and wants. When I was in graduate school, we were trained to use frameworks. I vividly remember my strategic management professor passionately correcting us during our presentations for not using frameworks.
Psychologists often argue that a person may have several reasons for buying. In basic marketing, one framework we use to understand needs and wants is Maslow’s five-level hierarchy of needs. Maslow suggested that physiological needs are at the bottom and self-actualization needs are at the top. In his 1943 paper titled “A Theory of Human Motivation,” he wrote:
“It is quite true that man lives by bread alone — when there is no bread. But what happens to man’s desires when there is plenty of bread and when his belly is chronically filled?
“At once other (and ‘higher’) needs emerge and these, rather than physiological hungers, dominate the organism. And when these in turn are satisfied, again new needs emerge and so on.”
Physiological needs are concerned with survival food, water, sleep, and sex. Safety needs are concerned with protection and physical safety, and involve health, financial security, and exercise. Social needs include love, friendship, acceptance, and concern for others. Self-esteem needs are concerned with fun, accomplishments, respect, freedom, and relaxation. Self-actualization includes passions, creativity, morality, lack of prejudice, and acceptance of facts.
When I teach marketing topics on needs and wants, I identify types of goods with Maslow’s framework.
Physiological or basic goods are day-to-day consumer convenience goods. These are our staples and impulse items, the goods we buy without laboring over whether or not to buy them: rice on our dinner table, our education, and cellphone load.
Safety needs are unsought goods; these are goods that we will need in the future. Common examples are life insurance, fire extinguishers, gym memberships, and tombstones.
Social needs are things we spend more time thinking about before purchasing them. Any item or activity that will provide an identity, acceptance, or give us friends and love meets a social need. Examples are joining fraternities and sororities, being actively involved in social networking sites, and attending concerts and speed-dating events.
Personal needs or self-esteem goods can be specialty goods and luxury items things that we crave and go out of our way to obtain. Most often, they are non-essential but highly desired. Examples can be philanthropy activities, jewelry, travel, signature goods, bespoke items, and gadgets.
The topmost level in the hierarchy is the need for self-actualization. In my opinion, no product falls under this category. No good is enough to forever satisfy a consumer.
I read somewhere that the birth of a baby is self-actualizing for a husband and a wife because they become parents. My beautiful wife Jen is four months pregnant with our first child. Our baby’s birth will be the start of a different rock ’n’ roll. I should know by late August if the occasion will indeed satisfy my need for self-actualization.
Jose Luis C. Legaspi is a part-time professorial lecturer at the Marketing and Advertising Management Department of the Ramon V. Del Rosario College of Business of De La Salle University.
Peso climbs on Trump comments
THE PESO strengthened slightly against the dollar on Wednesday as the foreign currency traded weaker overnight due to President Donald J. Trump’s rhetoric on slapping trade tariffs.
The local currency ended yesterday’s session at P51.98 versus the greenback, two centavos stronger than the P52 finish on Tuesday. The peso opened the session weaker at P52.08 per dollar, while its worst showing was at P52.12. Its best showing, meanwhile, stood at P51.96 against the US currency.
Dollars traded dropped to $692.25 million from the $808 million traded in the previous session.
Traders interviewed yesterday said the pair traded quietly yesterday as volume thinned even as the local currency traded strong in the morning session.
“We’re still stuck within the range. We tried to trade [stronger] during the morning session following the weak dollar overnight due to Trump’s rhetoric on trade tariffs,” a trader said in a phone interview.
Last week, Mr. Trump said he will impose a 25% tariff on steel and 10% tariff on aluminum. The European Union retaliated by slapping tariffs on American-made goods such as Harley-Davidson motorcycles and Kentucky bourbon.
During a visit to the White House on Tuesday, Swedish Prime Minister Stefan Lˆfven expressed concern about the consequences of the tariffs.
“Swedish prosperity is based on corporation competitiveness and free trade, and I’m convinced that increased tariffs will hurt us all in the long run,” Mr. Lˆfven said.
In response, Mr. Trump said he will impose the tariffs “in a very loving way.”
“The peso moved [lower] at the start due to risk off. But the market was there to sell. Well, [the peso-dollar] traded fairly quiet [yesterday],” another trader said.
For today, the first trader said the peso is seen to trade between P51.90 and P52.10 versus the dollar, while the other trader gave a lower range of P51.95 to P52.15. — Karl Angelo N. Vidal
PAL to increase flights to Melbourne
Flagship carrier Philippine Airlines has increased the number of flights from Manila to Melbourne weekly to address the “surge in passenger traffic” along such route.
In a statement released late Wednesday, March 7, PAL said beginning June 1, it will increase its Manila-Melbourne flights to five weekly from the current three-flights weekly.
PAL Vice President for Sales Ryan Uy said the increased frequencies to Melbourne will mean more customers from Australia enjoying the reconfigured Airbus A330s.
“We continue to received positive reviews about our new business class seats. Passenger loads between Melbourne and Manila have been consistently in the high 80s, while Sydney-Manila has been in the high 80s to 90s since we utilized the A330 tri-class for the equally popular route,” he added.
The increased number of flights is one of the many operational improvements after PAL was awarded a four-star rating from Skytrax last February.
At present PAL has 77 destinations across the globe. — Anna Gabriel A. Mogato
More land for planting hybrid rice will speed up rice self-sufficiency — DA official
The Department of Agriculture (DA) is planning to reach 100% rice self-sufficiency rate through the increase of allotted land for planting hybrid rice.
Agriculture Undersecretary for Operations Ariel T. Cayanan on Tuesday, March 7, said that as the rice self-sufficiency rate reaches 96%, the country would have to wean off its dependence on importation very soon.
“Secretary Piñol said that the truth is we cannot depend on other countries. We do not know if they are hit by calamities. If that happens, they will prioritize their own needs rather than importing to us,” he added.
While the Philippine government is set to sign an agreement to outsource its rice planting to Papua New Guinea, Mr. Cayanan said what is more crucial is the improved irrigation and use of technology in agriculture.
“Hybrid rice is no less than 10% of the 4 million hectares (of agricultural lands in the Philippines). If we can increase it to 30% basing from SL (Agritech) and experts, we can be overly self sufficient,” he added.
“Without the program the country risks the problem of rice shortage.”
On Tuesday, SL Agritech corp. held its first SL-8H Super Hybrid Rice grand harvest festival in the municipality of San Pedro Palcarangan, Lubao, Pampanga.
The SL-8H rice, planted on 250 hectares in the municipality, is under the the rice hybridization program of the DA.
SL Agritech is aiming to cover 1 million hectares nationwide for hybrid rice. — Anna Gabriel A. Mogato
A trade-war road map for FX markets: Take cover, find your niche
In foreign-exchange markets, investors aren’t waiting to find out if all the tariff threats being thrown around lead to a full-blown trade war.
Some money managers have begun piling into traditional havens like the yen; others are trimming currency exposure altogether; and even those who’re betting not much will come from the row are hedging just in case.
The concern is that President Donald Trump’s plan to impose steel and aluminum tariffs will trigger a wave of retaliatory levies that derail the worldwide economic expansion. The European Union has already responded, preparing punitive steps on iconic U.S. goods should Trump go through with his threats. Gary Cohn’s resignation Tuesday drove home investors’ skittishness: the yen surged, while the peso and Canadian dollar sank.
“Currencies can be very small but sharp objects, where a little exposure can have a large impact,” said Gene Tannuzzo, a portfolio manager at Columbia Threadneedle Investments. “So you could see more and more managers just not really stick their neck out as it relates to FX exposure.”
Traders’ initial reaction has been to boost the yen and to a lesser extent the Swiss franc, the foreign-exchange market’s time-honored oases. The Japanese currency climbed on Wednesday, after reaching the strongest level last week since 2016 following Trump’s tariffs announcement. The dollar is proving vulnerable, extending last year’s tumble. Cohn’s exit saw Asian equities slide on Wednesday alongside U.S. stock futures. Treasuries advanced, driving the yield lower as markets gravitated toward less risky assets.
Pull Back
For Tannuzzo, the answer to the looming trade skirmishes has been to pare currency risk.
He acted on that concern last year, anticipating that North America Free Trade Agreement negotiations could turn acrimonious. He cut exposure to the Mexican peso and Canadian dollar in the $4.2 billion Columbia Strategic Income Fund. The fund had roughly 4 percent of currency exposure divided between the two currencies before he sold his peso positions in mid-2017 and reduced the loonie late last year.
“It’s probably the first time in a while that we haven’t had Canadian dollar or Mexican peso exposure at all, and one of the reasons at the top of the list is negotiations on the trade side,” he said.
The move proved prescient. Trump has used tariffs as a bargaining chip in Nafta talks, saying the U.S. won’t lower levies on Mexican and Canadian steel and aluminum unless the countries agreed to a Nafta revamp. The Canadian dollar slumped to its weakest since July this week.
The administration is also considering tariffs on a broad range of Chinese imports, according to people familiar with the matter. For some investors, U.S. action versus China would signal a mounting danger of tit-for-tat measures.
Look Micro
Some investors see a way to bet the global economic expansion survives the trade row.
Adrian Owens, a money manager at GAM (U.K.) Ltd., isn’t ignoring the rhetoric on trade. For him, the best way to navigate it is through currencies that have strong country-specific drivers that will endure what he sees as temporary volatility. He’s focusing on Norway and Sweden, the former because it looks cheap and data point to economic strength.
“We like the sort of more idiosyncratic plays,” said Owens, whose firm manages about $170 billion. “We acknowledge that one of the risks is if things deteriorate with Trump in terms of a trade war.”
To protect against the risk of krone declines should spiraling trade tensions undermine global growth and demand for Norway’s oil, he’s hedging through positions such as those that profit on yen gains, he said.
Losers Loom
Reduced global output and diminished risk appetite would also threaten currencies of emerging nations, said Mike Moran, head of economic research for the Americas at Standard Chartered.
“These kind of trade wars haven’t provided a positive environment for emerging markets, ever,” Moran said. These countries are “more sensitive to global trade, so anything that hurts that has had an adverse impact on them.”
There’s also a risk, given Trump’s comments, that autos may move into the president’s crosshairs, Moran said. South Korea’s currency would be among those that suffer in that case, given the nation’s status as an auto producer.
Dollar Dilemma
And what does it all mean for the dollar?
A global trade war could spell trouble. Barclays Plc analysts have predicted that U.S. growth would cool as much as 0.2 percentage point in the wake of steel and aluminum tariffs, a trend that could be magnified depending on how America’s trading partners respond.
That would be a worrisome development for the U.S., with swelling trade and budget shortfalls leaving it more dependent than ever on international demand for its debt.
“It’s a bit of a double-edged sword,” said Tannuzzo at Columbia Threadneedle. “The dollar should ultimately strengthen in the short-term against the currencies affected by the tariffs; in the long-run, it could stay under pressure overall because it has to fund large and growing current-account deficits.” — Bloomberg
Global stocks drop on trade gloom; bonds, yen Gain
The prospect of escalating protectionism depressed European and Asian stock markets on Wednesday, March 7, as President Donald Trump’s plans to punish foreign imports appeared to gather force. U.S. equity futures slumped, while most government bonds climbed.
The Stoxx Europe 600 Index headed for the first drop in three days as most of its 17 industry sectors retreated. Gauges in Asia also slid as investors mulled the implications of a stronger influence for protectionists in Trump’s administration after the resignation of economic adviser Gary Cohn, a free-trade proponent. News that the White House is considering clamping down on Chinese investments and imposing broader tariffs added to the gloom.
Bonds gained across Europe and the yen rose to its strongest level in almost 16 months. Oil fell as the trade-war fears sapped most commodities, and before industry data that’s expected to show U.S. stockpiles expanded.
Cohn’s resignation “shows that within the Trump administration the pendulum is swinging toward anti-trade,” said James Cheo, an investment strategist at Bank of Singapore. “What we should be watching out for is how other countries react in response to the tariffs.”
The prospect of U.S. trading partners retaliating with their own duties overshadowed a kind of detente with North Korea that helped underpin gains on Tuesday. Trump signaled that he’s open to talks with the country after Kim Jong Un’s regime told South Korean envoys he’s willing to consider denuclearization under certain conditions. South Korea’s won rallied.
Elsewhere, a benchmark contract for aluminum traded in London fell on Wednesday and held below its 2018 average closing price as traders weigh how a jump in U.S. tariffs on the metal would affect global prices. Gold and Bitcoin both slipped.
Here are some key events coming up this week:
The Chinese People’s Political Consultative Conference runs through March 15 and overlaps with the National People’s Congress meetings in Beijing, through March 20. The ECB isn’t expected to change policy on Thursday, but the Governing Council may discuss a change to pave the way for the end of quantitative easing. BOJ monetary policy decision and briefing on Friday. U.S. monthly payrolls data come Friday.
And these are the main moves in markets:
Stocks
The Stoxx Europe 600 Index declined 0.2 percent as of 9:33 a.m. London time. Futures on the S&P 500 Index sank 1 percent. The MSCI Asia Pacific Index dipped 0.6 percent. The MSCI Emerging Market Index fell 0.5 percent.
Currencies
The Bloomberg Dollar Spot Index gained less than 0.05 percent to 1,126.16. The euro advanced 0.1 percent to $1.2417, hitting the strongest in almost three weeks with its fifth straight advance. The British pound decreased 0.3 percent, the first retreat in a week. The Japanese yen advanced 0.5 percent to the strongest in 16 months on the largest gain in a week.
Bonds
The yield on 10-year Treasuries decreased three basis points to 2.86 percent. Germany’s 10-year yield declined one basis point to 0.67 percent. Britain’s 10-year yield fell two basis points to 1.521 percent.
Commodities
West Texas Intermediate crude fell 1.1 percent to $61.93 a barrel, the largest decline in a week. Gold declined 0.2 percent to $1,332.18 an ounce. LME aluminum sank 0.8 percent to $2,129.50 per metric ton, the lowest in more than three weeks. — Bloomberg
Where are the winners from Philippines’ peso plunge? Look abroad
One bright spot from the Philippine peso’s slump to an 11-year low against the dollar can be found among the nation’s more than 10 million overseas workers.
The currency’s slide is spurring Filipinos to send more money home, fueling consumption and economic growth in the Southeast Asian nation. At 10% of gross domestic product, remittances are also a key source of foreign income in the Philippines, helping to finance a widening current-account gap.
Aileen Almazan, 37, who works as an information technology professional in Singapore, says it’s an opportune time to lock in more pesos into her Philippine savings account so she has more money to spend when she visits Manila. Marlyn de la Cruz, 51, a domestic helper in Hong Kong, says the decline in the peso is helping defray her family’s household expenses, while Irene Lim, 36, a compliance analyst at a regional bank in the island state, is being goaded by the weaker peso to invest more back home in terms of property and mutual funds.
“My Manila-based family gets to enjoy higher remittance, while I have more investment options given the extra cash generated by the favorable exchange rate,” said Lim, who has been working in Singapore for more than a decade . “It has definitely encouraged me to invest more back home given the slight improvement and the positive outlook on the country’s economy.”
The peso is the worst performer among Asia’s major currencies this year as the government’s aggressive infrastructure drive fuels imports and widens the current-account deficit. Remittances from Filipinos living overseas have been steadily rising for more than a decade to reach a record in 2017, and the nation’s central bank expects them to rise by 3.6 percent to $29.1 billion this year.
Remittance Dependent
In value terms, the Philippines was the world’s largest remittance recipient after India and China in 2016, according to the World Bank. The inflows are the largest source of foreign income for the Philippines after exports.
Still, the benefits of a weaker currency is being eroded by rising living costs in their homeland, the three Filipino workers said.
“Yes, the exchange rate is higher when you covert into pesos, but the money will also buy you less goods,” said de la Cruz, who was on her way back to Hong Kong from Manila after spending a week in her hometown of Laoag City in northern Philippines. “The weaker peso helps only to a certain extent.”
Inflation accelerated to 3.9 percent in February under a new series using a 2012 base year, threatening to breach the central bank’s 2 percent to 4 percent target band. Putting pressure on prices are increased levies, higher oil prices, and a depreciating peso, Finance Secretary Carlos Dominguez said in an interview with Bloomberg TV.
Central bank Governor Nestor Espenilla said the pick-up in inflation last month remains within target and most likely in 2018 as well, signaling that the monetary authority will likely keep policy rates unchanged this month. The peso has weakened 4 percent this year to 52 per dollar as of 10:30 a.m. in Manila on Wednesday.
“The peso should weaken” with less support from the central bank, helping keep the value of remittances inflated, said Joey Cuyegkeng, an economist in Manila at ING Groep NV, who revised his year-end forecast for the currency to 52 from 51.30. “Dollar earners, including overseas Filipino worker families, benefit from the recent significant weakness of the peso.” — Bloomberg
DM Wenceslao targets PSE listing by June
D.M. Wenceslao & Associates Inc. (DMWAI) looks to take the company public by June, after filing for a P15.6-billion initial public offering with the Securities and Exchange Commission.
In a prospectus posted on the company’s website, DMWAI said it plans to offer up to 670.17 million shares to the public, with an over-allotment option of up to 101.876 million shares, priced at P22.90 each. This is equivalent to around 20% of the company’s total issued shares.
The tentative timeline of the IPO is as follows: the shares will be offered to investors from May 21 to 25, with listing at the PSE set for June 1. The final dates will depend on the approval of the SEC and the Philippine Stock Exchange. — Arra B. Francia