INFLATION likely picked up further in February as prices of food, fuel and electricity rose faster on higher taxes, analysts said in a BusinessWorld poll that also bared mounting bets on a central bank rate hike. Read the full story.
THE Department of Environment and Natural Resources (DENR) ordered the Boracay Island Water Corp. (BIWC) to repair and a rehabilitate a part of its wastewater treatment plants (WTP) after it was discovered that 195 establishments were not connected to its system.
In a statement released over the weekend, Environment Secretary Roy A. Cimatu said he directed BIWC, a joint venture of the Manila Water Company, Inc. and the Tourism Infrastructure and Enterprise Zone Authority, to repair its WTPs in barangays Manoc-Manoc and Balabag.
The Balabag WTP was discovered to have exceeded capacity and caused wastewater leakage in some areas.
According to the DENR, only 383 out of 578 establishments it inspected are connected to a proper wastewater treatment facility.
The DENR’s National Task Force also discovered water pollution came from around a hundred informal settlers living in five out of nine wetlands on the island.
DENR chief of staff Rodolfo C. Garcia in a separate event said these informal settlers are employed by various resorts in Boracay.
“We continue to track down the discharges of waste that may be polluting the waters that many of our tourists enjoy in going to Boracay to spend their vacation,” he added.
“We want to keep Boracay in its pristine condition so whatever it takes to clean Boracay and restore it to as near is its original state, we are going to do it.”
The DENR will be prosecuting the parties that have encroached on the wetlands, which serve as one of the most productive ecosystems and maintain environmental stability in the surrounding areas.
“[The wetlands] need to be restored because they act as catchment during the rainy days and they prevent flooding [so] we have advised them (informal settlers) to self-demolish. We will reclaim all nine wetlands ” Mr. Cimatu said on Friday during the public hearing.
So far, the DENR has issued notices of violation to 207 establishments on the island that were found to have illegally dumped untreated waste water, and built too close to the shorelines or forested areas. — Anna Gabriela A. Mogato
YIELDS ON government securities (GS) continued to rise last week as traders remained cautious on growing expectations of rate hikes from the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).
On average, GS yields went up by 29.28 basis points (bps) week-on-week on Friday as bond prices dipped from a week ago levels, data from the Philippine Dealing & Exchange Corp. showed.
“Yields rose week on week by an average 8-12 bps across the board as market reacted to [Fed Chairman Jerome] Powell’s comments on the possibility of more than expected rate hikes in the US,” said Carlyn Therese X. Dulay, head of Institutional Sales at Security Bank Corp.
“The increase in yields is widely expected, especially since investors are starting to price in more fully the possibility of another US rate hike in March. [Mr. Powell’s] speech bolstered speculations of four US rate hikes this year, instead of just three rate adjustments,” said Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines.
Last Tuesday, the head of the US central bank vowed before the House of Representatives’ Financial Services Committee to balance the impact of an excessive inflation by affirming to “gradually raise interest rates.”
For local investment manager First Metro Asset Management, Inc. (FAMI), investors have also factored in “pending” rate hikes by the BSP.
“Traders are cautious ahead of the pending interest rate hike, both by the Fed and the BSP. We expect BSP will adjust its policy rates in March based on a rising inflation,” it said.
Bond traders have noted that market players have preferred short- over long-tenured securities.
“Traders just want to be at the short-end of the yield, especially at the 3-year and 5-year Treasury bonds (T-bonds). Investors prefer not to lock their funds in GS with longer maturities,” FAMI said.
“The greatest movements were observed in tenors up to three years primarily because short-term notes are more reactive to changes in policy expectations,” said Mr. Dumalagan.
At the secondary market, Treasury bills (T-bills) ended with the highest yields week-on-week. The 364-day T-bills climbed the most by 90.77 bps to 3.94%. Meanwhile, the 91-day and 182-day T-bills jumped 51.02 and 62.21 bps to 3.41% and 3.68%, respectively.
Bonds at the belly of the curve also surged, led by the 3-year and 5-year securities up by 35.50 bps and 14.44 bps, respectively. The 20-year notes also lifted the long-end of the curve, which yielded 7.03% or 46.93 bps higher than a week ago.
This week, analysts said yields will continue to rise.
“Pressure remains for higher yields as market participants remain defensive and cautious ahead of the new 5-year issuance scheduled Tuesday with indications between 5.375-5.625 and of Philippine CPI (consumer price index) print,” Ms. Dulay said.
For FAMI, traders will speculate “as they wait for further announcements from the BSP and Fed on rate hikes. We expect the BSP will increase its policy rates 2-3 times for the whole year.”
Mr. Dumalagan agreed on the upward pressure, but for his part said, “volatility might be elevated amid likely mixed data from major foreign economies.”
“There might also be more rumors about further tightening moves from the European Central Bank (ECB) this year after this month’s ECB monetary policy meeting. Some investors are expecting the ECB to start hiking its policy rates towards the end of the year,” he explained.
“Volatility, however, could possibly escalate, especially if the growth data [in Europe] and Japan are revised downwards, and if China’s trade report comes out weaker-than-expected. These potentially soft reports could partly offset the projected increase in yields by fueling demand for safer assets such as government bonds,” he added.
On Tuesday, the Bureau of the Treasury will auction 5-year fixed rate bonds amounting to P20 billion. On the same day, the February inflation data rebased on 2012 prices will be released, which analysts expect will be normalized given the new methodology used for computation. — Carmina Angelica V. Olano
A BRAND that has touched the faces of English royalty and countless celebrities has finally found its way to Manila as Heaven by Deborah Mitchell was launched at the ground floor of Shangri-La East Wing, Mandaluyong City.
“People come in [for treatment] and come out with a glow and then because there are immediate results, they are very happy,” Kristine Chung, the brand’s franchise owner in the Philippines, told BusinessWorld during the launch on Feb. 20.
Known for her signature bee venom facial, UK-born Deborah Mitchell counts Catherine, Duchess of Cambridge; Camilla, Duchess of Cornwall; Victoria Beckham, Michelle Obama, and even Simon Cowell as among her customers.
In an interview with The Sun in 2017, Ms. Mitchell credited her discovery of the beneficial effects of bee venom on skin to her sister who is a beekeeper. After some experimentation, she developed “a non-invasive, intense anti-aging treatment best described as a natural alternative to botox,” according to a company press release. The treatment uses bee venom, honey, and botulinum — a natural form of toxin used in Botox that can be harvested from a beehive.
Aside from the concoction — called Abeetoxin — what imparts the “immediate glow” to a customer are the facial strokes that remove puffiness from the skin and lifts it to make it look younger and healthier, said Ms. Chung.
The venom is sourced from New Zealand and Kenya and Ms. Chung assured that no bees are harmed during the harvest.
The treatment, which uses more than a dozen products, also includes a foot massage — this follows Ms. Mitchell’s philosophy of treating the whole body from head to toe in order to get maximum results, explained Ms. Chung.
Located on a floor peppered with other facial centers, Ms. Chung said that Heaven by Deborah Mitchell doesn’t necessarily count them as competitors as the brand is focused on holistic skin treatments.
“All of the other facial centers are all about medical, which we are not. We are all about all-natural treatments and going back to basics and all our treatments are non-machine assisted,” she said, adding that only the therapists’ hands will touch the customer.
A single session costs P3,800. This is the introductory price but Ms. Chung assured that the prices will be lower than those in other markets such as Hong Kong and Taiwan as she acknowledges that Filipinos are a bit more price sensitive.
Having opened in early January, she has noted that many of their customers are on the mature side — some of them long-time fans of the brand who used to source their products and treatments abroad — although there are those in their 20s who also undergo the treatment, as well as brides-to-be.
“They may be in their 20s but they love the beach so much so they’ve had a considerable amount of sun damage. They find that the treatment really helps their skin recover,” she said.
Ms. Chung said the treatment is safe to use several times a month and advises brides-to-be to get their treatments at least once a week in the run-up to the wedding to get optimum results.
Heaven by Deborah Mitchell is located at the ground floor of Shangri-La Plaza East Wing, Mandaluyong City. — Zsarlene B. Chua
By Victor V. Saulon, Sub-Editor
MEGAWATT Solutions, Inc. is targeting to install within the year utility-scale battery storage projects with a total capacity of 198 megawatts (MW) after closing a deal to put up a stored power facility for Boracay island, company officials said.
Theresa “Tetchi” C. Capellan, president and chief executive officer of SunAsia Energy, Inc., the parent firm of MegaWatt, said the subsidiary’s target capacity translates to 792 MW-hours (MWh) of power.
“Basically, its technology is lithium ion phosphate,” she told reporters, referring to the chemistry for the rechargeable battery that is same as the one used for electric vehicles.
Ms. Capellan said using the technology used for electric vehicles allows lithium ion phosphate batteries to draw more following than the other technologies, making its advance faster than the rest.
Ms. Capellan said the source of power to charge the battery is “technology agnostic.” SunAsia is a developer of solar farms, but its output is not necessarily tied to the projects under MegaWatt Solutions, she said.
“That’s why we created a company, which is MegaWatt,” she said.
In February, MegaWatt Solutions installed a 10-MW or 40-MWh battery within the service area of Aklan Electric Cooperative (Akelco) to replace the capacity of the diesel-peaking plant of the province. Akelco serves customers in Boracay.
Ms. Capellan said the utility-scale battery storage project is the first in the country and intends to address the island’s fluctuating and volatile power demand.
She said Boracay, a party place at night, has a different behavior in power demand as its capacity requirements are dictated by time. Larger capacity needs to be delivered to the island when visitor arrivals peak during summer or December.
MegaWatt Solutions was contracted by Akelco to supply and install the 10-MW battery, half the capacity of which is dedicated for Boracay.
In a statement distributed to reporters, MegaWatt Solutions quoted Akelco President Wayne T. Malilay as saying that the electric cooperative is in a better position to manage its supply by storing excess power during lean months and dispatching the stored electricity for use in the Aklan mainland.
“So, even when consumption drops significantly in Boracay during the lean months, [Akelco] doesn’t have to pass on to the consumers the wasted contracted energy. Excess energy can be transmitted to replace expensive diesel plants,” he said.
FOR Summer 2018, Tod’s focuses on the luxury of lightness for its men’s collection. There are items made with leather that is something more akin to fabric. Lightweight denim and refined canvas coming from Tod’s ongoing fabric research and experimentation are used this season, with new textures and finishes. The gommino has a double T on all “fabrics.” The envelope bag sports supple new handles and the ergonomic design of the new sneaker, with its four signature “pebbles” behind the heel, has an urban design focus. Ocean blue and sand beige are the colors of the safari and field jackets, which come in a lightweight material making it the perfect travelling companion in Italy. In the Philippines, Tod’s is exclusively distributed by Stores Specialists, Inc., and has shops at Greenbelt 4 and Rustan’s Shangri-La, Shangri-La Plaza.
By Karl Angelo N. Vidal
TREASURY BONDS (T-bonds) on offer tomorrow are seen to fetch higher yields as investors factor in market jitters caused by expectations of interest rate hikes here and abroad.
The Bureau of the Treasury (BTr) plans to raise as much as P20 billion at Tuesday’s auction of fresh five-year T-bonds set to mature on March 3, 2023.
A bond trader said in a phone interview that banks will likely request for higher returns from the government, tracking the yield movement during the last auction.
“For yields, it will go higher around 5.35-5.5% [as yields jumped] from the last auction,” the trader said.
Another trader is “thinking of 5.25-3.375% range” as the Treasury may be forced to award at the 5.375% coupon rate.
Last week, the Treasury saw bids for the three-month, six-month and one-year Treasury bills rise to 2.989%, 3.265% and 3.428%, respectively, prompting BTr to reject all bids.
The first trader said that banks will likely raise ask for higher yields due to “market jitters.”
“The last inflation print put pressure for BSP (Bangko Sentral ng Pilipinas) to hike rates,” the trader noted, adding that economists are also expecting four rate hikes from the US Federal Reserve this year.
The effects of the tax reform pushed January inflation to a three-year high of 4%, landing in the upper band of the government’s 2-4% target and spurring market expectations of a rate hike from the local central bank.
BSP Governor Nestor A. Espenilla, Jr. attributed the spike in inflation to the implementation of the first tranche of the tax reform as well as to the rising fuel and food prices. He added that the inflationary effects of tax reform are likely temporary.
Meanwhile, analysts from First Metro Investment Corp. (FMIC) and the University of Asia & the Pacific (UA&P) expect March and April inflation to accelerate to 4.5%, adding that the BSP will likely raise its rates at its March 22 meeting.
“With breaching of the upper limit of the BSP’s inflation target and consistent with its desire to avoid overheating (especially manifested in asset prices), we think BSP will raise its policy rate by 25 bps (basis points) to 3.25% in Q1,” the FMIC said.
In the US, Fed Chair Jerome H. Powell vowed to stick with its plan to gradually hike their interest rates, prompting investors to increase their bets of a four rate increases this year.
“In the [Federal Open Market Committee’s] view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives,” Mr. Powell said in a testimony before the US Congress as the new central banker last week.
On the other hand, traders added that there would be demand in tomorrow’s auction, but at a higher yield.
“With that rate hike fear, it took a toll on the market so bids have the tendency to pull back [and ask for higher returns],” the trader said.
“We would rather wait for the next few months [while they hike their rates] before getting into the bond market.”
The Treasury said it plans to auction off P120 billion worth of Treasury bills and another P120 billion worth of Treasury bonds in the January to March period.
The total amount the government intends to borrow from the local market is higher than the P200 billion it offered in the last quarter of 2017.
The government borrows from local and foreign sources to fund its budget deficit, which for this year is capped at 3% of the country’s gross domestic product.
The government targets a P888.23 billion gross borrowing plan this year.
THE design of crop insurance policies is geared towards reducing the risk to farm lenders rather than protecting farmers from risk, the Philippine Institute for Development Studies (PIDS), a government think tank, said in a Policy Note.
In a note, “Design issues of the Philippine agricultural insurance programs,” authors Celia M. Reyes and Christian D. Mina said insurance cover for farmers is typically tied of the size of their loans, which is often less than the total cost of inputs.
“As such, insurance (provided by the) PCIC (Philippine Crop Insurance Corp.) appears to be serving more as a credit risk reduction tool by design than a risk mitigation tool.”
Lending institutions, as a matter of credit policy, typically set the size of their loans at less than the value of the underlying asset, in order to protect the institution against sudden swings in asset value while ensuring that the borrower puts in some capital of his own, which serves as an incentive to servicing the loan properly, because a loan default also means the borrower loses the capital he put into the asset.
The policy note said PCIC is also focused on covering rice and corn farmers while coconut and banana farmers, in a survey, said coverage was inadequate. It said in 2015, rice farmers with insurance cover inadequate to compensate for per-hectare production costs was 84%.
It said in the case of government insurance programs like the Department of Agriculture (DA) Weather-Adverse Rice Areas (WARA), the DA-National Irrigation Administration (NIA) Third Cropping initiative, and the Registry System for Basic Sectors in Agriculture (RSBSA)-Agriculture Awards Program (AIP), coverage is as low as P10,000 per hectare in the case of the first two and P20,000 for RSBSA.
It said government programs set lower coverage amounts to cover more beneficiaries with limited budgets.
It added that claims on insurance are also an issue, with coconut farmers in the Southern Tagalog provinces able to make a claim only when trees are felled, not when yields drop.
“Even without tree felling, natural calamities often cause heavy damage to coconut trees, leaving trees unproductive for over a year,” it said.
It said PCIC does not currently cover risks from wind not caused by typhoon, accidents and livestock or poultry diseases, and pests.
The authors recommended that coverage limits be raised to compensate farmers for their production costs “at the very least,” while engaging local governments to shoulder some premiums.
They also recommended changes to the premium structure to charge different rates to subsistence farmers and more commercial operations, adding that the PCIC should remove its bias towards rice and corn, with premium subsidies extending to growers of high-value crops.
Here’s a quick glance at how PSEi stocks fared on Friday, March 2, 2018.
BEIJING — Animal feed makers in China, the world’s top soybean buyer, will find ways to cope if a deepening trade dispute with the United States hurts imports of US oilseed, the chairman of the nation’s top feed maker New Hope Group said on Saturday.
US President Donald Trump announced plans on Friday to impose hefty tariffs on imported steel and aluminum, stirring concerns of retaliation from major trade partners such as China, the world’s top agricultural market.
Last month, Beijing fired a salvo across its top trading partner’s bow when it launched an investigation into US imports of sorghum, a grain used in livestock feed, and the fiery Chinese liquor baijiu after Washington slapped import penalties on washing machines and solar panels.
Business executives say Beijing could now target more critical agricultural commodities, such as soybeans, the United States’ biggest agricultural export by value, worth more than $12 billion last year.
Liu Yonghao said he hopes the world’s top two economies avoid a trade war, but “we will be able to find ways” to cope if soybeans are drawn into the spat.
He is the first senior executive from a major Chinese agricultural company to speak publicly about the impact of a trade war on the country’s vast farming and livestock sector.
Analysts have warned that curbing US bean imports or imposing tariffs on them would likely increase prices of the oilseed, which is used to make animal feed, hurting China’s crushers, feedmakers and pig farmers.
The country doesn’t grow enough soy to feed its vast livestock industry.
“We will produce feed as usual. We will produce pigs as usual. And Chinese people will eat meat as usual,” Liu said at a company briefing ahead of China’s annual parliament meeting which kicks off on Monday.
Earlier in the briefing, he signaled Chinese buyers would likely find alternative supplies to the United States.
“The market is huge. There are other countries other than the United States,” he said.
He didn’t comment any further, but farmers, traders and analysts have said that Brazil, the world’s largest exporter of agricultural goods including soybeans, beef and sugar, could benefit if the spat escalates.
The South American country has already grabbed a bigger share of the lucrative Chinese market over the past year from the United States, helped by competitive prices as well as the high protein content of its beans.
China is the globe’s largest soy importer and last year bought 95.5 million tons of the oilseeds, more than half from the South American nation.
New Hope has the capacity to produce 25 million tons of feed a year. — Reuters
THE Department of Information and Communications Technology (DICT) plans to draft a framework for equitable frequency allocation by the end of the year.
“We are creating a road map, a concept for the equitable allocation of frequency, by the end of this year,” DICT acting secretary Eliseo M. Rio, Jr. said in a phone interview.
Mr. Rio said last year that the agency will study best practices worldwide for allocating frequencies, the bulk of which are currently controlled by incumbents PLDT, Inc. and Globe Telecom, Inc. The DICT estimates that 30.32% of all available radio frequencies are allocated to PLDT, Inc. while Globe holds around 24.9%.
What the department will include in the road map would be refarming of frequencies based on the usage by those awarded the frequencies.
“For example, broadcast frequencies can be repurposed for telcos, if the broadcast users are not using the frequencies in a certain location, just like what they do in other countries,” Mr. Rio said.
While the DICT said that the remaining unallocated frequencies are enough for the third player, it is still looking at reallocation to even out the competition.
He added that refarming would prevent companies from purchasing frequencies from those who previously held them, the costs of which would then be probably passed on to the consumer.
Mr. Rio, however emphasized that a law is still needed to allow the NTC to recall and reassign frequencies.
“Right now there needs to be a quasi-judicial process, and there might be cases if the NTC will recall and refarm,” Mr. Rio said.
He added that the department has met with Sen. Grace Poe regarding a draft bill to allow the NTC to recall and refarm frequencies.
The government expects to choose a third player by June, and is in the process of revising its selection criteria.
DICT is leaning towards requiring wider coverage and faster Internet connections, rather than a previous draft that requires having the highest committed financial investment and having a net worth of P10 billion.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Patrizia Paola C. Marcelo
