Yields on gov’t debt drop
By Christine J.S. Castañeda,
Researcher
YIELDS on government securities (GS) traded in the secondary market went down last week amid Bangko Sentral ng Pilipinas’ (BSP) decision to reduce the term deposit facility (TDF) auction volume and North Korea’s missile launch over Japan.
On average, GS yields — which move opposite to prices — fell by 14.73 basis points (bps), data from the Philippine Dealing & Exchange Corp. as of Aug. 31 showed.
“Yields on government securities were down by 5-9 basis points on the short end to the belly [last] week on strong investor demand and as a result of the BSP’s decision to cut TDF auction volume from P140 billion to P110 billion on the 28-day tenor,” said Carlyn Therese X. Dulay, vice-president and head of institutional sales at Security Bank Corp.
“Other factors that influenced lower levels were lower [US Treasuries] on continued geopolitical risks,” she added.
Guian Angelo S. Dumalagan, market economist at the Land Bank of the Philippines (Landbank), said: “GS yields fell [last] week due to safe-haven buying following the launch of a North Korean missile over Japan. The drop in yields was tempered by upbeat US data on ADP employment and GDP (gross domestic product) growth.”
A bond trader interviewed last Thursday shared their view saying: “[R]ates dipped to track the move of treasuries on risk of tone on North Korea and [US President Donald J.] Trump tweets. Onshore, BSP’s tweak-easing of cutting the TDF volume prompted dealers to snatch up bonds but market trading volume remained heavy on client driven deals.”
Last Wednesday, the central bank reduced the size of the 28-day TDF that will be offered for auction this week on weak demand. Starting Sept. 6, banks can only bid for as much as P110 billion worth of term deposits.
Meanwhile, according to a Reuters report, North Korea fired a missile which passed over Japan’s northern Hokkaido island last week. Mr. Trump issued a statement in response to North Korea’s firing saying “all options are on the table.”
On the other hand, data released last week showed US second-quarter GDP grew 3%, faster than the 2.6% initial estimate.
Also, according to the ADP National Employment Report released last week, US private employers hired 237,000 workers last month, Reuters reported. This was higher than the economists’ estimates of 183,000 jobs added.
At the secondary market on Thursday, in the short end of the curve, the 91-, and 182-day Treasury bills (T-bills) went down by 4.05 bps and 41.82 bps to yield 2.1219% and 2.5189%, respectively. The 364-day paper inched up by 3.20 bps to 2.8930%.
In the belly, yields on the two-, five-, and seven-year Treasury bonds (T-bonds) increased by 4.68 bps (3.8589%), 0.03 bp (4.5907%) and 35.79 bps (4.426%). Meanwhile, yields on the three-, and four-year bonds lost 5.82 bps and 1.68 bps to 3.7479% and 4.1964%.
In the long end, the 10-, and 20-year T-bonds saw their yields increase by 31.94 bps and 34.12 bps to 4.6663% and 5.1677%, respectively.
For this week, Landbank’s Mr. Dumalagan said: “GS yields might recover [this] week due to likely upbeat US non-farm payrolls and more hawkish moves from the ECB [European Central Bank] during its September 2017 policy meeting. The ECB might announce the timeline for the reduction of its bond buying program.”
Security Bank’s Ms. Dulay said on Thursday: “Expect local currency bond yield movement to take its cue from the NFP figure due out Friday, which is expected to print at 180,000, as well as on the results of the upcoming seven-year reissuance with market expecting 4.4-4.5%.”
The US Labor Department reported on Friday that non-farm payrolls increased by 156,000 last month.
Meanwhile, the government will offer P15-billion worth of reissued seven-year Treasury bonds with a remaining life of six years and seven months at an auction tomorrow.
PSEi seen range-bound on geopolitical concerns
STOCKS will continue trading within range this week amid continued geopolitical tensions offshore.
The Philippine Stock Exchange index (PSEi) edged up 0.02% or 1.84 points to 7,958.57 on Thursday, the last day of the three-day trading week.
Week on week, however, the bellwether index was lower by 0.71% or 56.57 points from its 8,015.14 finish last Aug. 25.
The all-shares index likewise gained 0.03% or 1.27 points to 4,723.27 on Thursday, but was down 25.79 points or 0.54% week on week.
The market saw an average value turnover of P7.8 billion, while purchases by foreign investors stood at P117 million.
“Shares scored lower during the 3-day trading week, as sentiment went on a roller coaster ride from NoKor’s (North Korea) weekend missile test to Hurricane Harvey’s devastation in Texas that affected roughly 20% of US refining capacity,” online brokerage 2TradeAsia.com said in a market note.
Last week, North Korea fired a ballistic missile that passed over northern Japan’s Hokkaido island, causing investors to flock to safe-haven assets.
On Sunday, North Korea said it successfully tested an advanced hydrogen bomb, marking a dramatic escalation in the isolated state’s stand-off with the US over its nuclear weapons program.
Japanese and South Korean officials said an earthquake detected near the North’s test site was around 10 times more powerful than previous detonations, and concluded the North had conducted its sixth nuclear test.
It was the North’s first nuclear test since US President Donald J. Trump took office, and marked a direct challenge to Mr. Trump, who hours earlier had talked by phone with Japanese Prime Minister Shinzo Abe about the “escalating” nuclear crisis in the region.
North Korea said in an announcement on state television that a hydrogen bomb test ordered by leader Kim Jong Un was a “perfect success” and a “meaningful” step in completing the country’s nuclear weapons programs.
2TradeAsia.com said that for this week, investors will be looking at news that can either positively or negatively impact the economy.
Markets will likely react to Pyongyang’s latest move when trading opens today. Other potential drivers of trade this week include Philippine August inflation data due for release tomorrow and the European Central Bank’s monetary policy meeting on Thursday.
“All indicators are slightly bearish at this point and momentum has slightly weakened. The ATR (average true range) is showing an upward trend, hence, expect the market to be more volatile in the coming weeks,” Regina Capital Development Corp. Managing Director Luis A. Limlingan said in a mobile phone message.
Analysts pegged the PSEi’s immediate support within 7,870 to 7,900, while resistance is at 8,000. — A.B. Francia with Reuters
Analysts’ August inflation rate estimates
THE OVERALL HIKE in prices of widely used goods and services could have quickened in August to its fastest pace in three months, partly as measures to contain a bird flu outbreak crimped supply of some poultry products, analysts said in a BusinessWorld poll last week, even as they said this would not be enough to prod the central bank to raise interest rates anytime soon. Read the full story.
How PSEi member stocks performed — August 31, 2017
Here’s a quick glance at how PSEi stocks fared on Thursday, August 31, 2017.
Dried mangoes, Marawi fundraisers: Filipinos’ K‑Pop craze
When the second Hallyu (“Korean culture wave”) came crashing in during the late 2000s, it tossed TVXQ, BIGBANG, Girls’ Generation, 2PM, and 2NE1 (which includes former local teen star Sandara Park) to young Filipinos’ YouTube screens, and, not too long after, their hearts.
It must have been the killer combo of hypnotizing choreography, outlandish fashion styles and freakishly good looks. From breaking into international markets through social networking services, Korean pop (K‑Pop) bands managed to be noticed in the Philippines, a country whose music scene is dominated by American idols. An example: Ed Sheeran’s YouTube videos have raked in 41,187,885 total views from the Philippines as of writing, according to YouTube Music Insights. Meanwhile, the all‑male Korean quintet BIGBANG has 3,555,186 views—a number that’s millions behind that of Sheeran, but enough to place the Philippines in the top 10 countries that lap up the Korean boy group’s music videos, where it sits comfortably on rank nine.
The Filipino audience of K‑Pop is a niche—as much as K‑Pop’s global audience is still a niche—but it’s a niche that is highly profitable. Sold‑out concerts see fans camping out the night before ticket release, where VIP tickets cost as much as ₱12,500.
For much more extreme Filipino fans of K‑Pop, the devotion ends not in the music industry’s usual commodities of album sales, concert tickets, and official merchandise. It goes far beyond that in the form of grand gestures: elaborate productions that cost them hundreds of thousands of pesos.
WE LIKE 2 PARTY
Chi Manimbo, a 25‑year‑old events organizer, has been revering BIGBANG since 2008, a time of painstakingly slow internet that made her spend hours watching videos on her BlackBerry phone.
BIGBANG just celebrated its 11th Anniversary last Aug. 19—a feat in an increasingly competitive K‑Pop industry that churns out idol groups on almost monthly basis. In more than a decade in the industry, the quintet has done two world tours, in 2012 (ALIVE) and 2015 (MADE), with the 2015 tour posting a record of 1.5 million fans watching and touring 33 cities across the globe, including Manila. It is currently on hiatus though, as members are to comply with the two‑year mandatory military enlistment of the South Korean government. That hasn’t stopped its members from pursuing tours as individuals, such as the lead G‑Dragon, who is set to perform tonight at the Araneta Coliseum.
For tonight’s solo concert, VIP tickets cost ₱13,650 plus 6% surcharge. Also for tonight, Ms. Manimbo encouraged fans to donate dried mangoes for G‑Dragon and his staff, as well as some cash for a cake.
“Alam natin hindi naman ‘to kakainin ni G‑Dragon pero heto na yun eh. Makikita natin yung cake, at makikita natin face ni G‑Dragon pag nilabas ‘yung cake,” she said. (We all know he won’t actually eat the cake, but this is it. We’ll see the cake, we’ll see the face of G‑Dragon when he sees the cake.)
Before the group was launched into global fame (thanks to the extremely catchy Fantastic Baby! in 2012) Ms. Manimbo already loved BIGBANG when they sang Tell Me Goodbye, which was released in the Japanese. “I know that song by heart,” the Filipina gushed in an interview with SparkUp in mid‑August, during a gathering of BIGBANG Philippines—a fandom she now leads.
Her group’s fandom has a staggering 290,257 following on Facebook as of posting. It is currently the biggest fansite of BIGBANG in the country.
The fandom has made equally major gestures for their beloved band. So far, they’ve launched three books—containing fan signs and messages for the members of the group—which they presented as gifts to BIGBANG.
For BIGBANG’s MADE tour in 2015, they printed a four‑figure volume of banners saying “Gomawo, Bigbang” or Thank you, Bigbang. The effort didn’t end at sending the signs off to the printers. “Kailangan i&‑pack… finold namin, may instructions kung paano i‑wave, saan ire‑raise, at fan chants.” (We had to pack them… fold them up nicely, include instructions on how to wave the banner, where it should be raised, and add the fan chants.)
On a personal level, Ms. Manimbo has done something far more extreme. She traveled from Manila to Hong Kong on a whim, just to follow her favorite star. “Tatlo kami ‘noon. Nag‑aaral pa ako nun, nagka‑yayaan lang. Hindi ko rin alam how I came up with the money,” she said. (There were three of us who did that. I was a student then, and we just decided right then and there. I don’t even recall how I came up with the money.)
Flying in to that vibrant and densely populated autonomous southeastern territory of China, the wide-eyed student then gained much more than what she paid for when she made that trip. She reflected: “Yung experience na yun, priceless.” (That experience was priceless.)
Evangeline Alonzo, 27, and Sherien de Villa, 24, the fansite heads (or fansite‑nims) of BIGBANG Made Us One (BBMUO), a smaller, albeit equally enthusiastic fansite BBMUO, have also gone the extra mile for BIGBANG.
Ms. Alonzo, who helps out in the electronics family business, has no qualms spending a little extra, especially for her “bias” G‑Dragon. “I am the kind of fan who doesn’t like falling in line for concerts so I am willing to shell out extra money just to get the best ticket,” Ms. Alonzo told Spark Up in an e‑mail. That mindset led her all the way to Seoul where she attended a concert—without her parents’ consent. “They are overprotective because I am the youngest in the family so flying to Seoul without them needs a lot of convincing,” she said. “I would have needed my fangirling friends come to the house just to ask permission.”
Meanwhile, Ms. de Villa, who calls herself a “full‑time teacher, part‑time fangirl,” shared that before BBMUO started in 2015, they were already going to extreme lengths just to get their hands on official merchandise. “We even join online auctions just to get limited edition stuff,” she said.
For tonight’s concert, BBMUO is providing cookies and bottled water for concertgoers who will need refreshments as they fall in line. BBMUO was able to collect funds, from fan contributions and their own pockets, to have life‑sized standees of the BIGBANG frontman for a photo opportunity outside coliseum.
FANTASTIC BABY!
But it isn’t only the idols and the fans who benefit from the K‑Pop idolatry. BBMUO also leads charity projects, held under the name of BIGBANG, even though the group is on break. “We also had donation drives for charity here in the Philippines. First one is the rice donation for North Cotabato farmers. The second is for Marawi victims, just this year.” Ms. de Villa shared.
Funds for the projects come from the fans’ own pockets. “We ask for donations first, then if we don’t meet our target, that’s when we use our personal funds,” Ms. de Villa added. They also sell merchandise.
“In Korea, we had a Rice Wreath Project,” Ms. de Villa added, referring to a usual fan project in Korea where sacks of rice are purchased under an idol’s name, and then eventually donated to charities or poor communities. “Our rice wreaths were displayed outside the venue during concerts for MADE Final and Subway Ad Project for BIGBANG’s tenth anniversary.”
“We always try to be unique with our projects,” she said. Just an artist is only as good as his last performance, so are the fans and their grand gestures. “It’s also like, once we do something big, we’re think of something more special for the next time.”
But expressing one’s devotion isn’t limited to what a fandom decides to do. Fan chants during particular songs, or synchronized choreography of a light stick are the concert norm and other fans also do their own thing in their own capacity.
Genesse Capistrano, 28, has likewise spent tens of thousands all in the name of BIGBANG, but she refused to detail the exact figures, writing in an email: &ldqu;I don’t know how much I can spend for them, but I sure have spent A LOT already! If my mom knew how much, she’d be mad!” Ms. Capistrano, a marketing professional, flew to Hong Kong to watch the quintet’s last concert as a group.
“It was so last minute that the plane tickets I bought were worth twice than what they should be if i planned ahead,” she recalled. Still, she remains a fan. “I love BIGBANG because I like their music. You can tell by the quality of their music that each song is well thought‑out (Hi G‑Dragon!). They don’t just copy and use the same formula that sold records from ‘idols’ before them.”
LAST DANCE
While these K‑Pop fans are enjoying the moment, Ms. Manimbo reflects that some things are changing.
“Yung buying power ng K‑Pop fans, nag‑outgrow na ba, or may iba na silang gusto. Kasi nag‑peak na sya eh. May decline, kumbaga. ‘Yun yung hirap din,” she said. (The buying power of K‑Pop fans has dwindled, or perhaps they are spending on other things. It’s already reached its peak and we’re now facing a decline. That’s what’s difficult.)
“They don’t have any commitment to us,” Ms. Manimbo said. “That’s the real struggle here: continuing. And since it’s a fan club,gusto mo naman ‘yung updated pa rin kayo. Relatable pa rin ‘yung fan club mo.” (You want to your fan club to remain relevant by staying updated and relatable.) However, she assured that the fan group will continue to welcome new fans.
“Siguro kapag fan girl ka, (maybe, as a fan girl) you neglect some things,” she said. For Ms. Capistrano, being a fan girl fills them with “a feeling of pride and gratification” when the people they root for “are also recognized and appreciated by other people.” Ms. de Villa, for her part, said that the heads of BBMUO “really love travelling,” and they are “truly fangirls at heart who also love to help fellow VIPs or K‑Pop fans to avail stuff that we can’t buy here.”
After all, for these girls, she said, the best thing about being part of a fandom is “meeting new friends with the same wavelength of craziness.”
Companies advised to give back more
BOSSES of some of the country’s conglomerates believe that businesses “can do more” to improve lives as they scour the fast-growing general economy for opportunities.
Speaking in a panel discussion during the Shareholders’ Association of the Philippines’ (SharePHIL) annual summit — themed “Creating and sustaining value through principled corporate stewardship” — at the Dusit Thani Manila hotel in Makati City, Ayala Corp. (AC) President and Chief Operating Officer Fernando Zobel de Ayala said businesses “can be involved in basic services whether it’s water, whether it’s rail.”
“And I do think the private sector can play a very important role in getting many of these things to solve problems in our country. I wish we can do more, business groups can do more,” he said.
“Just by having social conscience, doing things correctly and properly and just… [bringing] these services to the larger segment of the population for profit, for a modest profit, then all of a sudden the scale with which we do things is so much larger. And I think that’s what’s important.”
He cited his group’s partnership with Metro Pacific Investments Corp. (MPIC) for the rehabilitation of the Light Rail Transit Line 1 (LRT 1).
“We’re involved with Joey (MPIC President and Chief Executive Officer Jose Ma. K. Lim) with the LRT 1… In one year there has already been a dramatic difference and I hope anyone who uses of the LRT 1 will agree,” the Ayala president said.
“What I’m saying is when you get the private sector to get involved with key problems in our country, we get to do something.”
Mr. Lim, for his part, noted that “there are people in government who listen to the private sector.”
“It is a question of getting your message across to them. You have to convince them that the solution that you have or the proposal that you have is something that benefits the people,” Mr. Lim said.
“I find that in today’s environment with this administration, the openness of the economic team has improved much compared to the previous administrations,” he added.
“So I think there is a role, that there is a way that the private sector can influence the government and change their thinking. So you have to be patient and find ways to educate them.”
AC Chairman and CEO Jaime Augusto Zobel de Ayala, meanwhile, said there are certain institutions that can especially benefit from private sector participation, particularly citing education.
“I think there’s a role for the private sector to play in the development of this country… There are really institutions in the public sphere that perhaps the private sector can contribute to,” the Ayala chairman said.
The Ayala group currently has an education arm — Ayala Education, Inc. — which controls the University of Nueva Caceres in Naga City and runs the Affordable Private Education Center (APEC) Schools.
“We started to ask ourselves, ‘What’s missing?’ ‘Why aren’t we training more people at school to be employable as soon as they leave high school?’” the Ayala president said.
“They’ll go to college at some point, but at a particular time that we were looking at that, what is it we need to do in the high school system that could train people so that more of them would get employed?” he recalled.
“That’s when we began to be involved in the APEC schools.”
This sense of giving back is an attitude the Ayalas have been ingraining in their group’s younger generation of leaders.
“Our group has also a commitment to nation-building, which strives to align our business objectives to the broader development agenda of the country,” the Ayala chairman said in his keynote speech.
“The reason here is because it has become clear to us that businesses cannot operate in a vacuum.”
The group’s new generation of leaders are also schooled on the difference between stewardship and mere ownership, as well as the importance of a strong work ethic.
Asked if the Ayala group will ever see someone from outside the family sit at the helm of the 183-year-old conglomerate, the company’s chairman replied: “There has to be a mechanism to select the next generation [of leaders in the conglomerate],” adding that their “value will be based on merit, fairness and it will be put under discussion.” — A. B. Francia
Fed likely to see little change in economy, policy course after the flood
WASHINGTON — The economic fallout from Hurricane Harvey will make the Federal Reserve’s job more difficult when it meets in three weeks, but US central bankers have looked past major storms before with little change in monetary policy and are likely to do the same this time.
In the weeks after Hurricane Katrina battered New Orleans in August 2005, the Fed confronted what staffers deemed “a thick data fog” that included short-term hits to employment and output, and concern that growth would suffer while inflation jumped because of damage to Louisiana’s energy sector.
The Fed nevertheless continued raising rates and never looked back, according to transcripts of the post-Katrina meetings. Those included a warning from then-San Francisco Fed president and now Fed chair Janet Yellen that changing policy because of the storm “could counterproductively mislead market participants” about the Fed’s direction.
Superstorm Sandy seven years later passed with barely a mention in the Fed minutes of the day.
Natural disasters can have serious local impacts, devastating families and communities, changing investment and migration patterns over time, and causing some businesses to fail in the moment while others thrive during the rebuild.
But economists generally agree that the long-term national impact of such events is modest, with short-term costs and disruptions offset — and sometimes more than that — by the boost in spending that comes during reconstruction and the surge of investment to replace damaged building and equipment.
“This unfortunate event will not likely affect the overall trajectory of the economy or monetary policy,” Deutsche Bank economists Brett Ryan and Matthew Luzzetti said in a report. “In turn, Fed officials will likely look through some of the potential near-term volatility in the growth data.”
In the short term, the United States can expect an uptick in jobless claims and perhaps slower-than-expected employment growth; muted retail sales outside of gasoline as fuel prices rise; and a drop in industrial production with between 17% and 27% of US fuel refining capacity offline as of Tuesday, and major ports closed.
Like the seasonal patterns that commonly affect economic data, a drop in one period gets made up later as federal aid and insurance checks start to flow, and businesses and households rebuild or relocate.
“As a general rule, hurricanes tend to be a short-run depressant and a medium-run boost to economic activity,” JP Morgan economists Michael Feroli and Daniel Silver wrote in an analysis of the storm’s likely impact.
Economists at Goldman Sachs put the initial property damage estimates at $30 billion, still in the top 10 of storms since World War Two, the firm said, but far short of the roughly $150-billion tab for Katrina.
Though refineries and other facilities may be off line temporarily, Tulane University Professor Eric Smith noted that the wind velocities during Harvey were below the levels that coastal energy facilities are designed to withstand.
Sensitivity to flood risk after Katrina, he said, led energy companies to elevate some pieces of equipment like pumps on scaffolds so they would not suffer permanent water damage and be back on line that much faster.
In terms of output recovering, he said, the ability to get workers back on the job, housed and fed may be more of a challenge than repairing damage, a lesson learned after Katrina.
“You had refineries setting up villages in their parking lots because it was going to take months to rebuild housing,” he said.
With a long-signaled shift of policy on the Fed’s balance sheet expected in September, and markets waiting for a sign on the next interest rate hike, those concerns are unlikely to sway Ms. Yellen and other central bankers who have carefully established their intentions with markets, analysts said. — Reuters