PSEi member stocks performed — July 1, 2024
Here’s a quick glance at how PSEi stocks fared on Monday, July 1, 2024.
Peso weakens ahead of June CPI
THE PESO weakened slightly against the dollar on Monday as market players turned cautious ahead of the release of June consumer price index (CPI) data this week.
The local unit closed at P58.65 per dollar on Monday, down by four centavos from its P58.61 finish on Friday, Bankers Association of the Philippines data showed.
The peso opened Monday’s session stronger at P58.55. Its weakest showing was at P58.695, while it climbed to as high as P58.47 versus the greenback.
Dollars traded went down to $920.83 million on Monday from $1.17 billion on Friday.
“The peso weakened as local participants turned cautious ahead of the Philippine inflation report on Friday,” a trader said in an e-mail.
A BusinessWorld poll of 14 analysts conducted last week yielded a median estimate of 3.9% for June headline inflation, within the Bangko Sentral ng Pilipinas’ (BSP) 3.4-4.2% forecast for the month.
If realized, the June CPI would be steady from the May print but slower than the 5.4% pace logged in the same month a year ago.
It would also mark the seventh straight month that inflation was within the BSP’s 2-4% annual target.
Higher global crude oil prices and elevated US Treasury yields also dragged the peso lower, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In commodities, oil prices edged higher, with Brent futures 0.73% higher at $85.62 per barrel and US West Texas Intermediate crude futures up 0.76% at $82.16, Reuters reported.
Meanwhile, yields on benchmark US 10-year Treasuries, which move inversely to bond prices, have bounced between about 4.2% and 4.35% since mid-June, as the market digested data showing slowing inflation and signs of cooling economic growth in some indicators. The 10-year yield stood at 4.33% on Friday.
For Tuesday, the trader said the peso could weaken further against the dollar due to likely strong US manufacturing data set for release overnight.
The trader expects the peso to move between P58.55 and P58.80 per dollar, while Mr. Ricafort sees it ranging from P58.55 to P58.75. — A.M.C. Sy with Reuters
PSEi drops in cautious trade before inflation data
PHILIPPINE SHARES dropped on Monday to snap their five-day winning run as investors stayed on the sidelines before the release of key data later this week.
The benchmark Philippine Stock Exchange index (PSEi) went down by 0.2% or 13.14 points to close at 6,398.77 on Monday, while the broader all shares index declined by 0.2% or 7.19 points to finish at 3,479.47.
Stocks were “flattish” as investors took a wait and see stance ahead of the release of June Philippine inflation data, First Metro Investment Corp. Head of Research Cristina S. Ulang said in a Viber message.
“Philippine shares started the second half of 2024 softly, slipping to fall just below the 6,400 mark as investors brace themselves for a new batch of economic data,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.
The Philippine Statistics Authority will release June consumer price index (CPI) data on Friday, July 5.
Headline inflation was likely steady in June and settled within the central bank’s 2-4% annual target for a seventh straight month, analysts said.
A BusinessWorld poll of 14 analysts conducted last week yielded a median estimate of 3.9% for the June CPI, within the central bank’s 3.4-4.2% forecast for the month.
If realized, June inflation would match the 3.9% recorded in May. It will also be slower than the 5.4% print in the same month a year ago.
Investors are also awaiting a speech by US Federal Reserve Chair Jerome H. Powell as well as the release of US jobs data and minutes of the Fed’s June meeting this week, Mr. Limlingan added.
The market closed lower amid “healthy” profit-taking and after the release of the latest manufacturing purchasing managers’ index (PMI) data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.
The S&P Global Philippines manufacturing PMI dropped to a three-month low of 51.3 in June from 51.9 in May, data released on Monday showed. A PMI reading above 50 signals better operating conditions from the previous month, while a reading below 50 shows otherwise.
Almost all sectoral indices ended lower on Monday. Holding firms dropped by 0.56% or 31.28 points to 5,521.43; services went down by 0.47% or 9.43 points to 1,986.86; mining and oil retreated by 0.24% or 20.46 points to 8,461.09; property declined by 0.17% or 4.37 points to 2,513.05; and industrials decreased by 0.06% or 5.39 points to 8,980.96.
Meanwhile, financials rose by 0.12% or 2.32 points to 1,926.91.
Value turnover fell to P3.34 billion on Monday with 417.96 million shares changing hands from the P6.5 billion with 1.16 billion issues traded on Friday.
Decliners outnumbered advancers, 103 versus 83, while 53 names closed unchanged.
Net foreign buying went down to P88.92 million on Monday from P393.53 million on Friday. — R.M.D. Ochave
PHL tariff cuts could pressure global rice supply, prices — BMI
THE REDUCTION in Philippine rice import tariffs could have a knock-on effect on global rice prices by inducing its major suppliers Vietnam and Thailand to commit greater volumes to the world’s largest rice importer, thereby causing overall global supply to tighten, Fitch Solutions unit BMI said.
“We believe that reduced rice import duties in the Philippines will see import volumes increase, to the probable benefit of traders in Vietnam, the largest exporter of rice to the Philippines, and to a lesser extent Thailand,” BMI said in a report.
“Which, in turn, will — all other things being equal — stimulate upward price pressures in the international rice market,” it added.
President Ferdinand R. Marcos, Jr. last month signed Executive Order (EO) No. 62, which slashed tariffs on rice imports to 15% from 35% previously, until 2028. This is part of a reduced tariff regime for other agricultural products such as pork and corn, intended as inflation-containment measures.
The EO calls for a review of the tariff schedule every four months.
“We note, however, that international rice prices remain elevated and that — with India’s rice export restrictions still in place and the negative impact of the recent El Niño event on rice production in Southeast Asia via below-average rainfall in mind — the international rice market remains tight, which could, therefore, see an increase in Philippine import demand stimulate upward international price pressures,” BMI said.
The US Department of Agriculture (USDA) expects Philippine rice imports to hit 4.7 million metric tons (MMT), upgrading its earlier forecast of 4.2 MMT.
As of June 6, the Philippines imported 2.17 MMT of rice. Vietnam accounted for almost three-fourths of overall shipments.
The Philippines imports about 20% of its rice requirement annually.
BMI sees Philippine rice prices easing eventually after the tariff cut but this will not have any impact in the immediate term.
“In the near term, we expect that the reduction in rice import tariffs could see domestic rice price pressures in the Philippines ease — notwithstanding the widening in the Philippine domestic rice production deficit between 2023/24 and 2024/25 that the USDA forecasts.”
“In the immediate term, however, the reduction will not have a noticeable impact on domestic prices due to the feedthrough time lag.”
The Department of Agriculture (DA) said the average retail price of domestically grown well-milled rice averaged P48-55 per kilogram as of June 29, up from P39-46 a year earlier.
Regular milled rice cost P45-52 from P35-42 per kilogram a year earlier.
The tariff cut is expected to cut rice prices by P6 to P7, the DA has said.
The National Economic and Development Authority has indicated its readiness to adjust tariffs if prices decline. — Luisa Maria Jacinta C. Jocson
OSAPIEA calls bureaucracy in healthcare approval process deterrent to investment
BUREAUCRACY in the approvals process for healthcare products is hindering the entry of investments, according to the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA).
In a keynote address on Monday delivered by OSAPIEA Undersecretary Jose Edwiniel C. Guilas on behalf of Secretary Frederick D. Go, OSAPIEA identified “pain points” most cited by the industry.
“Pain point number one: the bureaucratic nature of some of the existing processes of the regulatory agencies, as we all have experienced, is very structured with its complex rules and systems causing unnecessary delays,” Mr. Go was quoted as saying.
To address this, Mr. Go said that there is a need for a streamlined bureaucracy, which will require a review of the processes and requirements set by various agencies.
In particular, he said that companies, despite being compliant in countries with higher certified standards, still have to comply with Philippine standards.
“Industry stakeholders who have touched base with my office have often raised concerns about importing and most especially exporting drugs and food products,” he said.
This issue, Mr. Go said, can be addressed through streamlining the approval of export registration certificates for pharmaceutical products by exploring schemes of recognition and reliance.
“This way, applications that have already satisfactorily complied with the requirements of ASEAN and other markets, such as those already approved by the US Food and Drug Administration, will no longer have to undergo local reassessment,” he added.
A further pain point for investors is the difficulty faced by big international pharmaceutical companies in operating in the Philippines.
To address this, he said that OSAPIEA, together with the Philippine Economic Zone Authority and the Food and Drug Administration, has formed a technical working group to make it easier for pharmaceutical companies to set up operations in the economic zones.
“By having their companies here, we can create an ecosystem where research and development clinical trials in manufacturing are conducted in the country,” he said.
“Apart from technology transfer, there would be an uptick in production, which would lower the cost of medicine and medical devices due to increased supply,” he added. — Justine Irish D. Tabile
Japan medical device maker registers with PEZA
JAPANESE medical instrument manufacturer Kaneko Medix, Inc. has registered with the Philippine Economic Zone Authority (PEZA) to operate at an economic zone in Batangas, PEZA said.
In a statement, the investment promotion agency (IPA) said it signed a registration agreement with the Kaneko group’s Philippine unit, which intends to manufacture microcatheters at the First Philippine Industrial Park (FPIP) in Sto. Tomas, Batangas.
“This agreement marks a significant step forward in the country’s industrial and economic growth, particularly in the medical instrument manufacturing industry,” it added.
The Kaneko project is one of the pledges secured by Director General Tereso O. Panga during the IPA’s investment mission to Tokyo in September 2023.
“The inclusion of Kaneko as one of the locator companies in FPIP emphasizes our commitment to attracting high-tech manufacturing investments and fostering a conducive environment for technological advancement,” PEZA said.
“The establishment of the manufacturing plant in FPIP is expected to significantly contribute to the global supply chain,” it added.
Japanese registered business enterprises (RBEs) overseen by PEZA account for 28% of all approved economic zone investments.
Last year, the IPA’s Japanese RBEs generated more than P500 billion in investments, $16 billion worth of exports, and 300,000 direct jobs. — Justine Irish D. Tabile
MUP pensions, ‘pork’ seen as top targets for reducing deficit
By Beatriz Marie D. Cruz, Reporter
THE GOVERNMENT must rationalize spending to meet its deficit and growth targets in the coming years, with military and uniformed personnel (MUP) pensions and excess spending by politicians singled out for cuts, analysts said.
“(The government should) address the fiscal problem by pursuing the reform of the MUP system, stripping from politicians large budgets that will be used for electioneering, while increasing revenues,” Filomeno S. Sta. Ana III, coordinator of Action for Economic Reforms (AER), said via Viber.
They said the government should also inject a dose of reality in its deficit projections.
“I would’ve liked to see a more realistic assessment of this year’s deficit target; 5.3% of GDP (gross domestic product) would still be a stretch,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said in an e-mail.
In a briefing last week, the Development Budget Coordination Committee (DBCC) raised the deficit ceiling for 2025 to P1.537 trillion from P1.490 trillion, pushing the deficit-to-GDP projection to 5.3% from 5.2% in April.
For this year, the DBCC maintained its deficit projection at P1.48 trillion, or 5.6% of GDP.
“Our current (deficit) forecast is unchanged at 6%, with the pace of fiscal consolidation having slowed materially in recent quarters,” Mr. Chanco added.
At the end of March, the deficit-to-GDP ratio stood at 4.46%, against 4.82% a year earlier and 6.2% at the end of 2023, the Bureau of the Treasury (BTr) said.
The National Government’s budget deficit widened to 43.1% to P174.9 billion in May from P122.2 billion a year earlier.
Government spending jumped 22% to P557 billion, offsetting the 14.59% revenue expansion, the BTr said last week.
Last week, the DBCC raised its revenue targets to P4.644 trillion (from P4.583 trillion previously) for 2025; to P5.063 trillion (from P4.956 trillion) for 2026; to P5.627 trillion (from P5.487 trillion) for 2027; and to P6.25 trillion (from P6.078 trillion) for 2028.
During the briefing, the Finance department said increased collections by the Bureau of Internal Revenue and Bureau of Customs (BoC) would offset its “no new taxes” agenda.
BIR revenue rose 2.79% to P219.2 billion in May, while BoC collections rose 4% to P81.753 billion.
However, Finance Undersecretary and Chief Economist Domini S. Velasquez said that pending tax measures in Congress are expected to generate P42 billion in revenues yearly.
These bills include the value-added tax on digital service providers, the excise tax on single-use plastics and pickup trucks, the new mining fiscal regime, the motor vehicle road user’s tax, and Package 4 of the Comprehensive Tax Reform Program.
To meet its deficit goals, the government must curb overspending and all forms of tax evasion, Mr. Chanco said.
“Collection could still be enhanced if the government cracks down hard on evasion, but this is a long-standing problem in the Philippines for a reason. Ultimately, it will have to come down to a difficult choice of rationalizing — i.e., cutting — government spending, which is obviously politically difficult.”
Meanwhile, the unchanged growth targets through 2028 were unrealistic, Mr. Chanco said, citing the weak financial health of individual consumers.
The overall consumer confidence index for the next quarter fell to -0.4% from 2.7% previously, according to the Bangko Sentral ng Pilipinas (BSP) Consumer Expectations Survey.
The DBCC retained its GDP growth targets for this year at 6-7% amid external headwinds. It also kept its growth targets for 2025 at 6.5-7.5% and 6.5-8% until 2028.
“Inflation should start to slow materially in the second half of the year, but this will provide only minimal relief to growth, especially with the BSP likely to keep policy relatively tight, in real (inflation-adjusted) terms,” Mr. Chanco said.
In its policy meeting last week, the central bank lowered its risk-adjusted inflation forecast to 3.1% this year from 3.8% previously, citing the impact of lower import tariffs on rice under Executive Order No. 62.
To achieve the country’s growth prospects, AER’s Mr. Sta. Ana cited the need to balance imports to lower food prices while enhancing the productivity of farmers and producers through consolidation and adoption of new farming technologies.
PHL competitiveness to depend on pace of infra upgrades — think tank
By Justine Irish D. Tabile, Reporter
THE Philippines’ ambitions for attracting investment will hinge on improvements to its digital and physical infrastructure, according to the Asian Institute of Management’s (AIM) competitiveness policy center.
Jamil Paolo S. Francisco, executive director of the AIM Rizalino S. Navarro Policy Center for Competitiveness, told BusinessWorld that the Philippines will have to do better in indicators like annual global competitiveness rankings, parts of which measure infrastructure quality.
Asked for his recommendations, he said: “I guess the most basic one is really infrastructure. Not just physical infrastructure, but also digital and human infrastructure.”
“We are lagging there. So, we have to make it faster, and we have to do more,” he added.
Citing the 2024 World Competitiveness Ranking (WCR) by Switzerland’s International Institute for Management Development, he said infrastructure can be classified into four parts: basic, human, scientific, and social.
The index placed the Philippines 52nd out of 67 economies, retaining its spot from last year. In terms of the components of the rankings, the country ranked the lowest in infrastructure at 61st, down from 58th last year.
“10 or 15 years ago, there was already a long list of things we had to check in the infrastructure pillar,” said Mr. Francisco. “Now, it not only involves hardware but also software.”
He said that previously, the Philippines had to deal with basic infrastructure like roads and bridges, but now the country has to also build the digital infrastructure needed to facilitate e-commerce, among others.
“So, the list that we have to fulfill just keeps getting longer. Unfortunately, we’re still lagging on that long list,” he added.
In the 2024 WCR, the Philippines ranked 62nd in basic infrastructure, 55th in technological infrastructure, and 60th in scientific infrastructure.
“If we fare low in these indicators, then we are not as competitive. Because increasingly, remember, it’s a perception game.”
He said that investors will also weigh these factors when choosing the countries they will be investing in.
Citing cybersecurity as an example, he said that it is a component of the technological infrastructure pillar, in which the Philippines ranked 58th.
“Unfortunately, maybe in the Philippines, we haven’t been able to prioritize cybersecurity, and we are just still trying to address it,” Mr. Franscisco said.
“In other countries, they are more advanced in terms of their awareness and their appreciation of the need to address it, and investors will expect that of countries where they invest, and so if we fare low there, then we are perceived as less competitive,” he added.
Besides improving infrastructure, he said that the Philippines will also have to work on the “right messaging.”
“We keep saying that competitiveness rankings are partly based on perception surveys, and that’s important because, as an investor, you make a decision based on data. But you also make a decision based on gut feel and your perception of a country,” he said.
“So, we need to do an even better job of communicating clearly why it makes sense to do this in the Philippines. Communicating our commitment to reform, to the promises that we’ve made, to investments in basic infrastructure, and whatnot,” he added.
World Bank appoints new country director overseeing Philippines, Malaysia, Brunei
THE World Bank said it has appointed Turkish economist Zafer Mustafaoglu as its new country director for the Philippines, Malaysia, and Brunei Darussalam, with his term beginning July 1.
He replaced Ndiamé Diop, who served as the country director for the Philippines, Malaysia, Brunei, and Thailand for four years.
“I am deeply honored to assume the role of country director for the Philippines, Malaysia, and Brunei — countries that stand out as some of the most vibrant economies in the East Asia region, with significant achievements in economic transformation and poverty alleviation,” Mr. Mustafaoglu was quoted as saying in a statement.
“I look forward to meeting our partners across government, the private sector, civil society, and academic institutions to deepen my understanding of the unique development challenges these countries face and to explore how the World Bank can further contribute to their progress,” he added.
The bank has extended support in the form of loans and technical assistance in key sectors like infrastructure, agriculture, the environment, social protection, water resources, disaster risk management, and climate change.
Other forms of help include support for the government’s major economic policy and governance reforms, enhancement of private sector participation, and the promotion of peace in Mindanao.
The World Bank was the Philippines’ third biggest source of official development assistance in 2022, according to the National Economic and Development Authority. Around $6.86 billion worth of loans it provided were spent on 29 programs and projects.
Mr. Mustafaoglu joined the World Bank in 2005 and has contributed to the lender’s operations and research projects, ranging from macroeconomic to microeconomic policy issues.
He previously served as the practice manager for Finance, Competitiveness, and Innovation in the East Asia and Pacific, overseeing operations in China, Mongolia, South Korea, Laos, Cambodia, Myanmar, and Vietnam.
He also occupied the same position in Latin America and the Caribbean, and was the lead economist and program leader for Argentina, Paraguay, and Uruguay.
Before joining the bank, Mr. Mustafaoglu worked for the Turkish government’s State Planning Organization as the head of the Modeling and Economic Analysis.
The new country director earned his doctorate in International Economics from the Middle East Technical University in Turkey. — Beatriz Marie D. Cruz
SM Prime enlisted for MSME resiliency training
THE Department of Trade and Industry (DTI) said it signed a partnership with SM Prime Holdings, Inc. to train 6,000 micro, small and medium enterprises (MSMEs) in business continuity.
Trade Secretary Alfredo E. Pascual said that the memorandum of understanding with SM Prime will allow it to also partner with ARISE-Philippines, the network of the Private Sector Alliance for Disaster Resilient Societies.
“This partnership underscores our collective effort to empower MSMEs — the backbone of our economy. We are building a more robust, more resilient business landscape by equipping them with disaster preparedness knowledge and tools,” Mr. Pascual said.
“Aligned with one of our strategic priorities, we are elevating enterprises and entrepreneurs, particularly MSMEs, to ensure their inclusive, innovative, and sustainable development,” he added.
Citing the 2023 World Risk Index, Mr. Pascual said that the Philippines remains the most at-risk country in the world among 193 United Nations member countries.
“With this pressing reality, our partnership with ARISE-Philippines, through SM Prime Holdings, exemplifies the power of public and private partnerships to address our hazardous vulnerabilities,” he said.
“Hence, I commend SM Prime Holdings for its leadership and commitment to operationalizing a disaster risk reduction and resiliency program, engaging in multi-sectoral partnerships for this purpose,” he added.
Last year, around 376 participants joined a training session on business resilience for SMEs with SM Supermalls, which the department plans to replicate.
“Looking ahead, we aim to train 6,000 MSMEs nationwide on business continuity plans from 2024 to 2027. This broader target underscores our dedication to fostering cultural preparedness and resilience across the country,” he added. — Justine Irish D. Tabile
PHL remittance growth seen at 3%, WB says
REMITTANCES from overseas Filipinos are expected to grow by about 3% in 2024 and 2025, the World Bank (WB) said.
In a report, the bank said remittances to the Philippines, which account for nearly half of the money sent to the East Asia and the Pacific excluding China, are projected at $40 billion in 2024 and $41 billion in 2025.
The growth is expected to be driven by overseas workers in Kuwait, Malaysia, and the United Arab Emirates, where fees are among the lowest of the major deployment countries, the bank added.
The Philippines was the third largest recipient of remittances in 2023 at $39 billion, behind Mexico ($66 billion) and China ($50 billion).
The World Bank described the Philippines’ 2.8% remittance growth as of April as “muted” compared to the 3.7% posted in 2022.
“Tourism recovered to pre-pandemic levels in the Philippines, giving Filipinos domestic employment opportunities as an alternative to emigration, which dampened remittance growth,” it said.
The World Bank said remittance flows to East Asia and the Pacific grew 1.8% in 2023, supported by the Philippines, the largest recipient in the region after China.
“The sustained growth in remittance flows to the Philippines was an outcome of a well-diversified set of host destinations across the world,” it said.
In the four months to April, cash remittances rose 2.8% to $10.782 billion, the Bangko Sentral ng Pilipinas said.
“Dissipating inflationary pressures and interest rates, and enduring strength in the labor markets of the OECD (Organization for Economic Cooperation and Development) countries, are expected to sustain remittance flows to the East Asia and Pacific region,” the bank said.
“The positive outlook for oil prices will support remittance growth from the GCC (Gulf Cooperation Council) countries,” it added.
Downside risks to remittance flows to the region include uncertainty surrounding China’s property market, which could slow economic growth and demand for workers from other East Asian countries, the World Bank said.
Industrial and trade-restrictive policies across Asia and the Group of Twenty countries could weaken demand for manufactured exports, it also said. The attacks on Red Sea shipping may also increase the cost of East Asian exports to Europe.
“Any factor that disrupts global supply chains can dampen demand for East Asian migrant workers and impact remittances,” the World Bank said. — Beatriz Marie D. Cruz
ERC sees more consumers adopting net-metering systems
THE Energy Regulatory Commission (ERC) said more power consumers are adopting net-metering systems due to the easier registration process.
“We see this growing more especially as the cost of panels go down and as we make registration easier,” ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said via Viber.
The ERC recorded 13,189 qualified end-users with a total capacity of 116,292.14 kilowatt-peak (kWp) as of May 31, up from 200 qualified end-users with a total capacity of 1,109.33 kWp in 2015.
The Luzon grid had the biggest such contingent of end-users representing 82,321.40 kWp or 70.79% of the total. This was followed by the Visayas grid with 27,935.33 kWp or 24.02% and the Mindanao grid with 6,035.41 kWp or 5.19%.
The ERC said the number of net-metering qualified end-users totaled 4,125 in 2023, up 121%.
Net metering allows power users that generate their own electricity via renewable energy to sell some of their excess power to the grid, with the proceeds credited against their power bills.
The ERC entered into partnerships through tripartite agreements with local government units, such as Pasig City and Manila Electric Co.; Iloilo City and MORE Electric and Power Corp.
The partnerships seek to establish one-stop shops for net-metering inquiries, consultations, and applications.
The commission also offers regulatory guidance and expedites the certificate of compliance application process, which is essential for the operation of generation facilities.
“Consumers do not need to travel to our offices to process their applications,” Ms. Dimalanta said. — Sheldeen Joy Talavera