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Xi shouldn’t be the only one to keep working

By Adam Minter

XI JINPING can hold off on retirement planning for a few more years, now that China’s Communist Party has announced a proposal to eliminate a 10-year, two-term limit for China’s presidency. That sets up the powerful 64-year-old Xi to remain in office well into his golden years. He shouldn’t be the only one.

Set aside for a moment the question of whether China is wise to usher in one-man rule — a worrisome development that breaks with decades of institutional norms designed to prevent dangerous, Mao-like consolidations of power. The fact is that retirement age limits for other Chinese — some of the world’s earliest — are a drag on China’s economy and the government’s ability to function effectively.

Those rules might have made sense in a China where life expectancies and employment opportunities were short. In 1978, China enacted laws requiring men in any field to retire at 60 and women to retire at 55 if they were public servants, or 50 if they were engaged in blue-collar labor. At the time, more than 80% of China’s population was focused on agriculture and life expectancy was a few months shy of 66 years.

The inspiration was largely pragmatic. Forcing workers into retirement opened up opportunities for young and ambitious Chinese who might otherwise be idle. Meanwhile, China’s economy and governance benefited from young minds with fresh ideas and youthful bodies capable of doing physical labor. Short life expectancies ensured that China’s pension taxes were more than sufficient to meet the country’s obligations.

Today’s economy is quite different. Most workers live in cities, doing jobs that don’t involve back-breaking labor, and they are living longer. At the same time, China’s labor pool has begun to shrink: As of 2015, each Chinese pensioner was supported by fewer than three workers; in some provinces, the ratio is 1.5 workers per retiree. As China ages — and it’s one of the fastest-aging countries in the world — those ratios will become smaller and more expensive. One estimate says China’s pension shortfall could reach $190 billion by 2019.

retirement
Expanding the pool of workers is the only way to help address China’s looming pension shortfall.

The requirement that women retire five to 10 years earlier than men is particularly discriminatory. In recent years, it’s become a key factor contributing to China’s persistent gender pay gap. It’s also one among many reasons that female labor participation rates in China have declined for several years, depriving employers of some of their most skilled and experienced workers.

The consequences of early retirement on Chinese governance are just as severe. In China, power derives from complex patronage networks that don’t simply collapse when an official is forced into retirement. In many cases, those officials gain even more power once out of office, when they’re no longer subject to official responsibilities and oversight. This can have disruptive consequences. Former president Jiang Zemin, who stepped down as China’s top leader in 2002, has continued to exert a significant and — depending upon how he’s viewed — disruptive influence upon Chinese politics for two decades. In 2015, China’s top communist party newspaper even ran an editorial warning high-ranking retired officials not to emulate such figures.

But the problem’s most corrupting manifestation may arise lower down the hierarchy, where bureaucrats forced to retire often slide into quasi-public trade association jobs or private-sector positions, from which they can influence regulators via their still-intact patronage networks. Unsurprisingly, Xi’s corruption crackdown has aggressively targeted retired as well as serving officials.

Raising or eliminating the mandatory retirement age won’t solve all of these problems, of course. Cadres determined to abuse power will still do so. Within the system, though, especially after Xi’s anti-corruption crackdown, they can be monitored more closely. Likewise, China’s pay gap won’t vanish if men and women are allowed to retire at the same age. But at least employers will have one fewer reason to perpetuate it. And expanding the pool of workers is the only way to help address China’s looming pension shortfall.

Recent efforts to revise retirement limits have faltered because of a lack of political will in Beijing. Now that Xi has achieved more power than any Chinese leader in decades, here’s an opportunity to use it.

 

BLOOMBERG

Infrastructure spending jumps 15.4% in 2017 — Budget chief

Infrastructure spending surged in 2017 to beat the government’s target as work led by the Department of Public Works and Highways (DPWH) picked up, the Budget chief said, placing the country on track with its aggressive spending push.

Budget Secretary Benjamin E. Diokno said the government spent P568.8 billion for infrastructure last year, jumping by 15.4% from the P493 billion released in 2016. The figure likewise shot beyond the P549.4 billion programmed under the 2017 budget.

Mr. Diokno said this placed infrastructure investments for the year at roughly 5.6% of gross domestic product (GDP), higher than the planned 5.4% share and from the previous year’s 5.1%.

In a report, the Budget department attributed the spending surge to the “acceleration” of infrastructure projects implemented by the DPWH.

“The agency also cited the prompt and regular submission of progress billings from contractors; faster and simplified process of approval of plans and programs; and strict implementation of project planning, monitoring and scheduling as among the factors which resulted to their higher-than-programmed disbursements,” the report read. — Melissa Luz T. Lopez

PXP Energy net loss widens to P39 million in 2017

PXP Energy Corp. reported a consolidated net loss of P39.1 million in 2017, bigger than the P22.4 million a year earlier, the company told the stock exchange on Wednesday, Feb. 28.

Including one-off items, reported net loss hit P57.1 million, an expansion over the the P36.4 million previously.

It said the slight higher petroleum revenues at P104.4 million resulting from the 24% improvement in crude oil prices had been offset by the 18% drop in crude production.

Cost and expenses during the period declined by 7.4% to P158.2 million from P170.8 million brought about by lower petroleum production cost and depletion, and continuous cost containment of group overhead, the company said. — Victor V. Saulon

N. Korea leaders used Brazilian passports to apply for visas

LONDON — North Korean leader Kim Jong Un and his late father Kim Jong Il used fraudulently obtained Brazilian passports to apply for visas to visit Western countries in the 1990s, five senior Western European security sources told Reuters.

While North Korea’s ruling family is known to have used travel documents obtained under false pretenses, there are few specific examples. The photocopies of the Brazilian passports seen by Reuters have not been published before.

“They used these Brazilian passports, which clearly show the photographs of Kim Jong Un and Kim Jong Il, to attempt to obtain visas from foreign embassies,” one senior Western security source said on condition of anonymity.

“This shows the desire for travel and points to the ruling family’s attempts to build a possible escape route,” the security source said.

The North Korean embassy in Brazil declined to comment.

Brazil’s foreign ministry said it was investigating.

A Brazilian source, who spoke on condition of anonymity, said the two passports in question were legitimate documents when sent out as blanks for consulates to issue.

Four other senior Western European security sources confirmed that the two Brazilian passports with photos of the Kims in the names of Josef Pwag and Ijong Tchoi were used to apply for visas in at least two Western countries.

It was unclear whether any visas were issued.

The passports may also have been used to travel to Brazil, Japan and Hong Kong, the security sources said.

Japanese newspaper Yomiuri Shimbun reported in 2011 that Jong Un visited Tokyo as a child using a Brazilian passport in 1991 — before the issue date on the two Brazilian passports.

JOSEF PWAG
Both 10-year passports carry a stamp saying “Embassy of Brazil in Prague” with a Feb. 26, 1996, issue date. The security sources said facial recognition technology confirmed the photographs were those of Kim Jong Un and his father.

The passport with Jong Un’s photo was issued in the name of Josef Pwag with a date of birth of Feb. 1, 1983.

So little is known about Jong Un that even his birth date is disputed. He would have been 12 to 14 years old when the Brazilian passport was issued.

Jong Un is known to have been educated at an international school in Berne, Switzerland, where he pretended to be the son of an embassy chauffeur.

Jong Il’s passport was issued in the name Ijong Tchoi with a birth date of April 4, 1940. Jong Il died in 2011. His true birth date was in 1941.

Both passports list the holders’ birthplaces as Sao Paulo, Brazil.

The first security source declined to describe how the passport copies had been obtained, citing secrecy rules.

Reuters has only seen photocopies of the passports so was unable to discern if they had been tampered with. — Reuters

World braces for blowback from Xi lifetime power play

BEIJING — President Xi Jinping’s leap toward lifelong rule has largely been met by guarded silence in world capitals as governments try to predict how China’s formidable leader will wield his newfound power on the global stage.

The Communist Party’s move to lift presidential term limits will allow Mr. Xi to reign supreme as he pushes through an ambitious agenda to turn China into a military and economic superpower by mid-century.

“Xi has all this power. But we don’t really know what he wants to use it for,” said Kerry Brown, the director of the Lau China Institute at King’s College London.

“If it’s to address the challenges that need sorting out in China then that will be a good thing. If not, then it will be deeply problematic.”

China is already causing global jitters with its growing assertiveness, from its territorial claims in the South China Sea to the opening of its first overseas military base in the Horn of Africa and its influence in capitals across the Western world.

Mr. Xi has championed one of the largest international infrastructure projects in history, the $1-trillion Belt and Road initiative, which has drawn both interest and suspicion about China’s intentions.

At the same time, it is teetering on the brink of a trade war with the world’s largest economy, the US.

At home, the move has been hailed by state media as a necessary measure to usher in an era of “stability” that will provide a reassuring beacon of hope to countries spooked by the turmoil of American politics.

“In the future, with Xi leading the country for a very long time, it’s guaranteed that foreign relations will be stable and predictable,” Wu Xinbo, a US politics expert at Fudan University, told AFP.

AUTOCRAT FOR LIFE
The Communist Party’s constitutional amendment is certain to be approved by the rubber-stamp National People’s Congress when it begins its annual session next week, which will enable Mr. Xi to remain president beyond 2023.

Where countries stand on the move largely depends on where they sit.

In Russia, whose President Vladimir Putin’s unyielding grasp on power is often cited as a model for Mr. Xi’s rule, the reaction to the abolition was largely positive, according to Alexander Gabuev, a senior fellow at the Carnegie Moscow Center.

Although some China-watchers expressed concern that China could slip back into Mao-style authoritarianism, the government thinks that Mr. Xi “staying in power beyond 2023 is a good thing,” especially as “relations with the West are hitting new lows every month.”

But Mr. Xi’s power play is likely to fuel growing suspicions about China in Western countries.

After the election of Donald J. Trump in the US, China tried to step into the vacuum created by his rapid withdrawal from international trade pacts and environmental agreements.

Mr. Xi’s speech at Davos last year emphasizing the importance of globalization earned rapturous reviews from liberal politicians.

But “getting permission from a rubber stamp legislative branch to become autocrat-for-life only undermines the ability of democratic leaders to afford such respect,” said Orville Schell, director of the Center on US-China Relations at the Asia Society in New York.

It will look particularly bad in Australia, New Zealand and the United States, where concerns about China’s growing power and how it chooses to exercise it have increasingly preoccupied lawmakers.

The White House has avoided criticism of the move, saying the decision was “up to China.”

But “there’s been a lot more concern about China and what it wants abroad,” said Eric Hundman, an international relations expert at NYU Shanghai.

“Everybody’s going to read this as he’s going to become a dictator, which makes China look much more threatening.”

SURROUNDED BY SYCOPHANTS
Mr. Xi’s consolidation of power means that China’s own foreign policy will likely become more assertive, said Bonnie Glaser, a China expert at the Washington-based Center for Strategic and International Studies.

If the term limit repeal is a sign of strength, that could mean that Mr. Xi will increasingly be surrounded by sycophants and yes-men.

“Xi is unlikely to get balanced, objective input and advice. He may be overconfident about what he can achieve,” Mr. Glaser said.

That could mean a China that is “even more aggressive” in its use of economic coercion and its assertion of its territorial rights in places like the East and South China Sea, where it has long-standing disputes with its neighbors.

NYU’s Mr. Hundman warned that if Mr. Xi’s apparent power grab is a sign of weakness, then that “may lead to actions on China’s part that look irrational… but are directed at domestic audiences.”

He could do things such as threatening Taiwan that are aimed at “whipping up popular support. They would look very provocative to us, from a foreign perspective, but they may not be intended that way.” — AFP

Trump son-in-law Kushner loses top security clearance

WASHINGTON — Donald J. Trump’s son-in-law and senior aide Jared Kushner has lost his top-level security clearance, sources familiar with the matter said Tuesday, a decision with potentially profound implications for the US administration.

Two sources, who could not speak on the record because the status of security clearances is classified, confirmed US media reports that the 37-year-old White House aide will no longer be able to access America’s most closely guarded secrets.

The White House — up to and including the president himself — refused to comment on the record, but officials insisted that the decision would not impact Mr. Kushner’s role.

Still, Mr. Kushner’s loss of access to “Top Secret/SCI (Sensitive Compartmented Information)” data casts serious doubt on his status as a powerbroker inside the White House and his ability to negotiate Middle East peace.

Mr. Kushner had been an integral part of Mr. Trump’s election campaign and, among White House advisors, is seen as something like a first among equals.

The soft-spoken aide is married to the president’s daughter Ivanka and has been a leading figure in efforts to reach a peace deal between Israelis and Palestinians.

He has also been a strong proponent of Washington’s intensified support for the government of embattled Israeli Prime Minister Benjamin Netanyahu.

Politico and CNN first reported that his clearance may have been rescinded late last week.

The decision comes just days before Mr. Netanyahu visits the White House.

RISK OF ‘LOSING CREDIBILITY’
Former US negotiator Aaron David Miller said Mr. Kushner now risks losing “credibility” with interlocutors in the Middle East.

“They know you can’t be reading about them,” he said, and “you can’t possibly know what you don’t know.”

Mr. Kushner’s lawyer had earlier admitted that he has not yet completed the formal clearance procedure, despite reportedly getting access to the most secret material contained in the president’s daily briefing — the crown jewels of US intelligence.

White House Chief of Staff John Kelly ordered changes to the clearance system after a top aide — Rob Porter — worked for months without full clearance because of allegations he abused both his former wives.

“I will not comment on anybody’s specific security clearance,” Mr. Kelly said in a statement.

Mr. Kelly has told Mr. Kushner he had “full confidence in his ability to continue performing his duties in his foreign policy portfolio, including overseeing our Israeli-Palestinian peace effort and serving as an integral part of our relationship with Mexico.”

“Everyone in the White House is grateful for these valuable contributions to furthering the president’s agenda. There is no truth to any suggestion otherwise,” Mr. Kelly added.

Ivanka Trump’s level of security clearance has also been in question. She recently visited South Korea and briefed that country’s president Moon Jae-in on new North Korea sanctions.

For almost any staffer other than Mr. Kushner, his future in the White House would now be under serious doubt.

He had already been forced to repeatedly revise statements to US intelligence and law enforcement about his contacts with foreign officials and his business interests.

He put himself firmly in the sights of special prosecutor Robert Mueller after secretly meeting Russian ambassador Sergey Kislyak and Sergei Gorkov, a banker with ties to Vladimir Putin, as well as attending a notorious Trump Tower meeting with a Kremlin-connected lawyer.

BOY WONDER
Even before the security clearance news broke, close Kushner advisor Josh Raffel announced he was leaving the White House and Mr. Kushner was accused of breaking the “Hatch Act,” which forbids, among other things, White House aides from using their official titles in campaign statements.

Later, The Washington Post reported that at least four foreign governments — China, Israel, Mexico and the United Arab Emirates — had considered how to leverage Mr. Kushner’s business and political vulnerabilities.

That sparked several calls from lawmakers for Mr. Kushner to step down.

Congressman Ruben Gallego asked: “what does Jared have to do to get fired?”

The answer to that question remains unclear.

Mr. Kushner’s clearance downgrade “gives new meaning to the term ‘overdue,’” Senator Richard Blumenthal said on Twitter.

The move “raises questions about his entanglements with countries like China and potential conflicts of interests while he holds significant foreign policy responsibilities at the White House,” Mr. Blumenthal said.

Since the first days of this administration, Mr. Trump has hinted there was no challenge too confounding, no conflict too intractable for his son-in-law to tackle.

Beyond resolving the Israeli-Palestinian conflict, Mr. Kushner was handed a to-do list that included solving America’s opioid epidemic, prison reform and injecting the nation’s bureaucracy with entrepreneurial spirit.

In person, Mr. Kushner is polite and self-deprecating, offering little of the hubris the president has shown about his abilities.

“Jared’s done an outstanding job. I think he’s been treated very unfairly,” Mr. Trump said Friday.

But Mr. Trump also indicated the decision on Mr. Kushner’s security clearance would be up to Mr. Kelly, saying: “I have no doubt he’ll make the right decision.” — AFP

Judge dissed by Trump won’t block proposed border wall in California

SAN DIEGO — A federal court judge once accused by President Donald J. Trump of being biased against him because he’s “Mexican” and a “hater” paved the way for construction of a section of Mr. Trump’s proposed wall along the US southern border.

US District Judge Gonzalo Curiel in San Diego sided Tuesday with the Homeland Security department, which asserted authority under federal immigration law to waive compliance with environmental protection statutes because 14 miles of existing fencing near San Diego is “no longer optimal for border patrol operations.”

The government argued in court papers that the law allowing it to sidestep environmental reviews “has been repeatedly upheld in the face of legal challenges.”

California and environmental advocacy groups claimed in court filings that the 1996 immigration law is unconstitutional. They also alleged the lack of environmental reviews would imperil endangered species including the Quino checkerspot butterfly and the Mexican flannel bush and that federal officials failed to consult, as required, with the state and other affected agencies and parties.

MEDIEVAL WALL
California Attorney General Xavier Becerra responded to the ruling by saying “a medieval wall along the US-Mexico border simply does not belong in the 21st century.”

“The administration has violated the rules and we will move forward and proceed with the case as quickly as possible,” he said in an interview while attending a round-table discussion of environmental issues at a meeting of state attorneys general in Washington. “We don’t want the health of the people who would be living by the wall to be affected.”

Mr. Trump, who made border security one of the cornerstones of his presidential campaign, has continued to insist that a border wall be constructed. A Justice department spokesman said the government is pleased the ruling will allow it to move ahead “without delay.”

“Border security is paramount to stemming the flow of illegal immigration that contributes to rising violent crime and to the drug crisis, and undermines national security,” spokesman Devin O’Malley said in an e-mail.

Late Tuesday, Mr. Trump tweeted about a “big legal win today.”

“US judge sided with the Trump administration and rejected the attempt to stop the government from building a great Border Wall on the Southern Border,” Mr. Trump wrote. “Now this important project can go forward!”

Mr. Curiel is the judge in San Diego who presided in 2016 over a $25-million settlement to thousands of students who sued the then-candidate and his Trump University over what they said were false claims and misleading advertising about the benefits of the school, which was not accredited.

During the Trump University litigation Mr. Trump criticized Mr. Curiel’s handling of the case and described him as a “hater” whose Mexican heritage — he was born in Indiana to Mexican immigrants — would prevent a fair outcome. The judge hasn’t responded publicly to the president’s comments.

In Tuesday’s ruling, Mr. Curiel noted his US roots while referring to the wisdom of US Supreme Court Chief Justice John Roberts, a “fellow Indiana native,” in handling cases “surrounded by political disagreement.”

“Court[s] are vested with the authority to interpret the law; we possess neither the expertise nor the prerogative to make policy judgments,” Mr. Curiel quoted Mr. Roberts saying in a 2012 ruling. “Those decisions are entrusted to our nation’s elected leaders, who can be thrown out of office if the people disagree with them. It is not our job to protect the people from the consequences of their political choices.”

Mr. Curiel had allowed 24 members of the Congressional Hispanic Caucus to file a brief in support of the court order sought by California and the environmental groups against the federal government.

Mr. Curiel’s approval of the Trump University settlement was upheld this month by the 9th US Circuit Court of Appeals, which unanimously rejected a challenge to the agreement. Nearly 3,700 class-action plaintiffs will be paid about 90 cents on the dollar of their claims.

The case is Center for Biological Diversity v. U.S. Department of Homeland Security, 17-cv-1215, U.S. District Court, Southern District of California (San Diego). — Bloomberg

PSE removes inactive trading participants

The Philippine Stock Exchange, Inc. (PSE) has removed inactive trading participants as it works on complying with the single-industry cap on exchange ownership.

In a statement issued Wednesday, Feb. 28, the PSE said it has revoked the status of inactive trading participants who also hold about 2.34% of the total outstanding capital stock in the company. The bourse operator has also declared as vacant the trading rights of the dormant brokers. — Arra B. Francia

Discovery World hikes stake in Boracay firm

Discovery World Corp. (DWC) has hiked its stake in one of its subsidiaries, as the company targets to expand its resorts business.

In a disclosure to the stock exchange on Wednesday, Feb. 28, the company said it will subscribe to a total of 26.2 million shares of 100% of the total outstanding shares in Balay Holdings, Inc. With a par value of P1 per share, the subscription was priced at P26.2 million.

“This acquisition is in line with DWC’s business and will create opportunities for expansion of the corporation’s resort business,” the company said. — Arra B. Francia

SMIC net income up by 6% in 2017

The holding firm of country’s richest man Henry Sy, Sr. clocked in a 6% growth in earnings in 2017, fueled by the continued expansion of its property, retail, and banking units.

In a statement issued Wednesday, Feb. 28, SM Investments Corp. (SMIC) said net income grew to P32.9 billion last year, higher than the P31.2 billion it posted in 2016. The earnings growth comes amid a 9% increase in consolidated revenues to P396.1 billion.

“Our core businesses continued to deliver strong results in 2017 with recurring net income growth of 9%, driven by overall growth in the economy and our nationwide expansion plans. Our property and specialty retail businesses delivered particularly strong results,” SMIC President Frederic C. Dybuncio was quoted as saying in a statement.

SMIC has three core business interests, namely property, banking, and retail, which contributed 40%, 38%, and 22% to its total earnings, respectively. — Arra B. Francia

PCC approves Chinese firm’s acquisition of Takata Corp

The Philippine Competition Commission (PCC) has approved the acquisition of Chinese firm Ningbo Joyson Electronics Corp. (Joyson Electronics) of Takata Corp., a Japanese firm with facilities in the country.

In a decision posted on its website Wednesday, Feb. 28, the country’s anti-trust body said it has given the go-signal for Joyson Electronics to proceed its purchase of Takata’s assets, after seeing no substantial lessening of competition in the firms’ relevant market once the transaction is completed.

With the approval from the PCC, Joyson Electronics will now be the owner of Takata’s assets, which includes a plant in Biñan, Laguna. Here, the company manufactures airbag fabric and cushion, and seatbelt webbing, which are then exported to related parties under the Takata group.

“There are no product overlaps between the parties in the domestic market (Philippines),” the PCC said in its decision. — Arra B. Francia

Growth amidst volatility

BusinessWorld hosts Stock Market Roundtable 2018

By Bjorn Biel M. Beltran, Special Features Writer

The Philippine economy is undergoing great changes. The Duterte administration has begun to roll out a tax reform that promises to put more money back into consumers’ pockets and raising taxes on goods like gasoline and coal, all while funding its ambitious multi-trillion “Build, Build, Build” infrastructure plan. This has flooded the market with a bullish sentiment that caused the bellwether Philippine Stock Exchange Index (PSEi) to close 2017 at a record 8,558.42 points, earning 25.1% for the year. The rally pushed onward to break the 9,000-point barrier in the first month of 2018.

The stellar climb proved to be too high and too fast to be sustainable, however, and profit-taking, along with external factors such as the rising rates of the United States Treasury yields, sent the market plunging back down to the 8,500-level. Amidst this backdrop of market volatility did the country’s investing community gather to hear the insights of four respected stock market professionals at the Makati Shangri-La Manila for the 2nd annual BusinessWorld Stock Market Roundtable held last Feb. 20.

The esteemed panel consisted of Augusto M. Cosio, Jr., president at First Metro Asset Management, Inc.; April Lynn L. Tan, vice-president and head of research at COL Financial Group, Inc.; Justino B. Calaycay, Jr., head of research and engagement at Philstocks Financial, Inc.; and Michael Gerard D. Enriquez, chief investments officer at Sun Life of Canada (Philippines), Inc. They discussed and explored the underlying causes of the recent equities bull run and eventual crash, the effects of the tax reform, as well as all the significant events and developments that led the country to where it is today.

At the roundtable, which was moderated by Regina Lay of Bloomberg TV Philippines, each panelist spoke in succession about various topics, and a few members of the audience got to ask their questions and receive answers.

The main question on everyone’s minds had been if the market could weather such volatility, can it return to a sentiment of optimism, or further fall into bearish territory due to the mounting pressures of inflation, a depreciating peso, and higher interest rates?

To this, the panel unanimously agreed that Philippine equities are unlikely to see any new lows as the country’s long-term economic growth prospects remain intact. But there are a few key factors that need to be monitored to ensure the growth and stability of the market, such as inflation.

“One of the key risks we were really worried about was inflation,” Ms. Tan said. “First of all, tax reform is highly inflationary because of higher oil prices, excise taxes on sugary drinks, and the secondary effects of higher oil, etc. Then you have a weaker peso. A weaker peso is of course inflationary because we import a lot of things and they are going to become expensive.”

As the Philippine economy becomes more competitive in the global market, it could also see higher commodity prices due to higher demand for goods like steel and oil.

“That’s just the price you pay for development. Everything just becomes expensive. A strong economy is inflationary,” Ms. Tan said.

Inflation hit a three-year high of 4% in January, hitting the upper band of the government expectations. The potential effect of higher prices is that it could lead to a decrease in consumer spending and higher interest rates.

The panel unanimously agreed that Philippine equities are unlikely to see any new lows as the country’s long-term economic growth prospects remain intact. But there are a few key factors that need to be monitored to ensure the growth and stability of the market, such as inflation.

“We expect the Bangko Sentral [ng Pilipinas] (BSP) to raise interest rates probably one or two times this year, in line with the U.S. Federal Reserve as well as the weakness of the peso,” Mr. Calaycay said.

Nevertheless, such factors will only serve to hinder the Philippines’ unswerving development, as long-term prospects remain positive due to strong macroeconomic fundamentals.

“This too will pass. It is not a runaway inflation,” Ms. Tan said. “The BSP has the tools to control inflation. It is not a long-term problem. It is a short-term issue.”

Addressing the recent market correction, Mr. Enriquez said, “I think that was a quick reality check on what may happen in the market if it’s not backed by fundamentals. The market can move up, but it should always be backed by fundamentals. There should always be a reason why the market should move higher.”

[WATCH: INTERVIEW WITH SUN LIFE FINANCIAL CIO MICHAEL GERARD D. ENRIQUEZ]

The correction marked a change in the market sentiment that dampened expectations for the Philippines’ growth. Ms. Tan said COL Financial downgraded its 2018 forecast for the PSEi to 8,750 from 9,300 after factoring in the impact of higher borrowing costs.

Mr. Calaycay, meanwhile, also hinted that a revision of its base-case forecast of 7,900-8,200 and best-case projection of 10,700-11,000 is in the cards after the release of the first-quarter corporate earnings.

Ms. Tan expects the PSEi to bottom out at the 7,881 and 8,062 levels around March and May.

All in all, the market correction should be seen as an opportunity to buy equities for cheap, according to the panel, as the probability for long-term loss in such a market remains minimal, and opportunities are plentiful for informed investors.

“I feel constructive about the market. I feel that there are opportunities in there,” Mr. Cosio said, noting that the banking sector stands to gain much from the recently implemented tax reform package.

He said that as low-income workers become exempt from income taxes as a result of the tax reform, this would directly increase the average balance of CASA (current account, savings account) in banks.

“As a whole, CASA in the banking sector will definitely grow without the banks doing anything,” Mr. Cosio said. “Secondly, higher short-term rates will increase net interest margins for banks.”

Mr. Enriquez even went as far as to say that the Philippines deserves to trade at a premium over other Asian markets on the back of the strong domestic economy and impressive infrastructure development.

“As a long-term investor, we are excited about how infrastructure will play a role in the GDP. Right now, it’s 70% consumption, but if the government starts to spend and investments come into play, we can see our (gross domestic product) growth breaching seven percent,” Mr. Enriquez said.

“Those waiting for a bear market, I’m sorry, I think you will be disappointed,” Ms. Tan said.

The BusinessWorld Stock Market Roundtable 2018 was presented by BusinessWorld Publishing Corporation; supported by Globe Telecom, Sun Life Financial, and Shell Philippines; with event partner Fiera De Manila; and media partners The Philippine Star and Bloomberg TV Philippines.

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