Big banks’ asset growth eases, loan growth rises in Q4
THE PHILIPPINES’ big banks saw slower growth in total assets in the fourth quarter of 2023, while loans grew the fastest in three quarters despite high interest rates. Read the full story.
Innovating to cure multiple sclerosis
Multiple sclerosis (MS) is a condition that occurs when the immune system attacks the brain and spinal cord. Over 1.8 million people worldwide have MS, according to the World Health Organization (WHO). The Philippines is among the countries with a reported 27.8% change in age-standardized rates of MS between 1990 and 2016, which is higher than the global prevalence change of 10.4%.
In MS, the body’s immune system attacks myelin, the fatty insulation that surrounds the nerves in the brain and spinal cord. This disrupts the electrical impulses that are sent through the nerves to the rest of the body and results in scars (plaques or sclerosis).
Symptoms of MS vary from person to person and depend on the location and severity of nerve fiber damage. These include vision problems, difficulty walking or keeping one’s balance, difficulty thinking clearly, numbness or weakness especially in the arms and legs, muscle stiffness, depression, problems with sexual function or urination, and feeling very tired. MS symptoms can come and go or get worse over time, especially with heat or during other infections such as urinary tract or respiratory infections.
There is currently no cure for MS. Specific MS disease-modifying therapies (DMTs) are started as early as possible to reduce the frequency and severity of relapses, slow the disease progression, manage symptoms, and improve quality of life.
For a very long time, it was not known what triggered the immune system to attack myelin, but experts suspected that genetic and environmental factors played a role. MS happens most commonly in young to middle-aged adults, more in females than males, and is more common in higher latitudes, possibly due to sun exposure and vitamin D, the WHO said.
In 2022, scientists identified the Epstein-Barr virus (EBV) as the reason why the immune system attacked myelin in people with MS. EBV is the cause of mononucleosis or glandular fever (also known as the “kissing disease”). This important discovery opened up new treatment options for MS, with clinical trials of antivirals and vaccines against EBV now under way.
Antiviral therapies could reduce EBV levels circulating in patients’ immune systems. A large international study published in the Annals of Neurology in December 2023 found that people living with HIV who were on antiviral drugs were less likely to be diagnosed with MS than the general population. However, full-scale clinical trials are needed to confirm this finding.
Two Phase I clinical trials are currently being conducted to assess the safety and the immune response induced by two EBV vaccines. The American biopharmaceutical company Moderna is conducting a clinical trial on an mRNA vaccine against EBV involving 422 healthy adults aged 18 to 30. On the other hand, the US National Institute of Allergy and Infectious Diseases (NIAID) is trialing a nanoparticle vaccine against EBV involving 82 healthy adults aged 18 to 30.
Both clinical trials are designed to train the body’s immune system to attack an EBV protein known as gp350, which enables the virus to invade immune cells. Strong B-cell antibody responses are an important first-line defense against acute EBV infection. A previous EBV vaccine based on gp350 successfully prevented the development of glandular fever in Phase 2 clinical trials, although it was not able to prevent infection. Ongoing research has highlighted the importance of T-cell-mediated immune responses in long-term effective EBV control. B-cells and T-cells are lymphocytes, a type of white blood cell, that are key disease-fighting components of the immune system.
A study by Australian researchers published last year in Nature Communications describes a new EBV vaccine that is highly effective in laboratory models. The researchers used several strategic design elements to create a more effective EBV vaccine, according to Multiple Sclerosis Australia.
First, they used components from several EBV viral proteins to achieve wide immune coverage across various stages of EBV infection, as well as to stimulate both B- and T-cell arms of the immune system. Aside from utilizing gp350 to stimulate a strong antibody response, the team genetically engineered a protein called “EBVpoly” to activate T-cells thereby enhancing the vaccine’s global potential. They also incorporated an adjuvant, a vaccine ingredient that helps boost immune responses, with a specific focus on directing the vaccine to the lymph nodes, a critical site for immune response activation.
The EBV vaccine induced strong responses against EBV in both arms of the immune system. It was effectively targeted to the lymph nodes by the adjuvant, and immune responses in the lymph nodes were enhanced. Both arms of the immune response to the vaccine were long-lasting and detected beyond six months. Furthermore, the vaccine effectively prevented the spread of an EBV-related cancer in a laboratory model. The study represents a major advance towards an effective EBV vaccine for human use.
Continued investment and re-investment in biopharmaceutical research and development will be crucial in finding medicine and vaccine innovations that will help improve the lives of patients with MS and their families.
Teodoro B. Padilla is the executive director of Pharmaceutical and Healthcare Association of the Philippines (PHAP). PHAP represents the biopharmaceutical medicines and vaccines industry in the country. Its members are in the forefront of research and development efforts for COVID-19 and other diseases that affect Filipinos.
PLDT shares up on earnings data, developments
SHARES in PLDT Inc. increased last week due to strong earnings, with a jump in net income and revenue prospects following significant developments.
Data from the Philippine Stock Exchange (PSE) showed the Pangilinan-led company ranking 11th in value turnover with P230.65-million worth of 179,345 shares exchanging hands from March 4 to 8.
The telco giant’s shares closed at P1,300.00 apiece on Friday, inching up by 1.1% from its P1,286.00 close on March 1. Year to date, the stock grew by 1.6%.
Manuel Antonio M. Castro, equity analyst at Regina Capital Development Corp. said that PLDT’s earnings would be the highlight for the week.
Earnings were in line with their estimates, which caused PLDT to trade sideways, Mr. Castro said in a Viber message.
“We think the recovery in prices on Friday can be traced to better earnings prospects for [PLDT] this year alongside the broad market rally,” Rastine Mackie D. Mercado, research director at China Bank Securities Corp., said in an e-mail.
He added that PLDT managed to increase on a weekly basis due to upbeat price action on Friday despite the trading in the red due to net foreign selling.
Mr. Mercado noted that the listed telco expects service revenues to grow by mid-single digit this year, faster than 2023’s low-single digit growth.
In 2023, PLDT’s attributable net income jumped to P26.61 billion from P10.49 billion in the prior year while its revenues also grew by P210.95 billion from P204.36 billion previously.
For Mr. Castro, he said that PLDT’s net income rose mostly as it came from a low-base which included one-off expenses.
“For this figure, we’re expecting PLDT to continue to register almost the same year on year growth rate it has been recording in the previous quarters, recording growth mostly from its fiber-based revenues,” Mr. Castro said.
He added that telco business right now has been rather stagnant as there are no major catalysts on the horizon.
Last week, reports showed that PLDT as obtained its first green loan at P1 billion from HSBC Philippines to fund the expansion and upgrade of its fiber network.
This said project will provide support to the company’s internet delivery platforms such as fiber fixed broadband, mobile data services, and carrier-grade Wi-Fi.
These green loans are a form of financing that allows borrowers to use the proceeds specifically for environmentally friendly initiatives.
Other reports also showed that PLDT Enterprise, the business arm of PLDT Inc. will be providing connectivity solutions to Charoen Pokphand Foods Philippines Corp. (CPF Philippines), which is a subsidiary of the Thailand-based conglomerate, Charoen Pokphand Group Company, Ltd.
The said partnership is aimed at improving CPF Philippines’ operations in delivering and distributing their aquatic and agricultural products with PLDT’s advanced technologies.
Another development for the Pangilinan-led telco is that it has established Digico, a digital entity that will leverage data assets from Manuel V. Pangilinan Companies and provide a platform for a serious digitalization effort.
The technology platform can help expand and seamlessly integrate services and capabilities. Additionally, payment and reward systems are expected to enhance the overall user experience.
The payments platform will provide an all-encompassing solution by consolidating the MVP Group’s various payment channels, resulting in a seamless, secure, and flexible experience for both customers and businesses.
These initiatives, said Mr. Mercado, is part of PLDT’s strategy of strengthening its position in the home broadband and enterprise markets given intensifying competition.
“Specifically for the green loan, this would allow PLDT to reaccelerate their fiber network rollout given nascent demand opportunities from unserved and underserved markets in the country,” he said.
Additionally, he said that Maya could benefit from the creation of Digico for this could enhance and expand its revenue base, use cases, and subscriber count given the expansive customer base of the wider MVP Group.
For Mr. Castro, the introduction of Digico is a highlight for the company as the service would add additional source of income for the group, which is welcoming news for investors.
“PLDT has, and will continue to invest heavily in their infrastructure, making their fiber services available to more areas,” he said.
Analysts said dividends may compel market players to consider PLDT.
“Dividends makes for an interesting play for investors as PLDT continues to payout 60% of its core net income to shareholders [and they] have been relatively stable and yields are in the high single digits,” Mr. Castro said.
He placed support levels at P1,275 and resistance levels at P1,315.
For Mr. Mercado, near-term price action could be bullish as investors price in the recently declared dividends.
“We think investor interest for telcos will remain lukewarm in the medium term given the lack of catalysts,” he said.
Additionally, he said that they are optimistic about PLDT’s prospects considering its legacy mobile business is expected to continue its recovery given its market-leading position in mobile subscribers.
Another consideration is the boost of revenues as its data center business is continuously growing, and lastly, PLDT’s efforts to improve free cash flow generation will have a positive impact on dividends.
“Immediate support and resistance for [PLDT] is at P1,273 and P1,315, respectively,” Mr. Mercado said.
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. — Abigail Marie P. Yraola
Philippine banks’ January bad loan ratio climbs
PHILIPPINE banks’ bad loan ratio worsened in January amid elevated interest rates, according to the central bank.
The industry’s bad loan ratio quickened to 3.44% from 3.23% in December, according to data posted on the Bangko Sentral ng Pilipinas (BSP) website.
Bad loans rose by 2.61% to P460.76 billion from a month earlier and by 13.73% a year ago.
The loan portfolio of Philippine banks fell by 3.46% to P13.38 trillion at the end of January from a month earlier and rose by 8.36% from a year ago. — BMDC
Style (03/11/24)
L’Oréal brings serum duo to PHL
L’ORÉAL is introducing its Glycolic Bright Serum duo in the Philippines. The duo consists of the Glycolic Bright Face and Eye Serums, which, according to the company, can visibly reduce dark spots by 57%. The Glycolic Bright Face Serum draws inspiration from dermatological peel procedures and is designed for daily use and is suitable for all skin tones and age groups. Infused with niacinamide, it targets dullness, roughness, dark spots, and uneven skin texture and tone. For optimal results, the use of sunscreen is recommended after application of the serum. Meanwhile, the Glycolic Bright Eye Serum, with its ratio of 3% glycolic acid, Vitamin C, and niacinamide, effectively tackles melanin build up around the eyes. The serum, featuring a patented Triple Bead Applicator, is said to reduce under-eye puffiness and boosts microcirculation for visible dark circle reduction day by day. When used together, these serums penetrate the deeper skin layers, accelerating the skin renewal process to eliminate melanin build-up cell-by-cell, resulting in a radiant and brighter complexion, according to the company. The Glycolic Bright Face and Eye Serums are available in Watsons stores nationwide and e-commerce platforms such as Shopee and Lazada.
Uniqlo collaborates with Princess tam-tam
UNIQLO has announced a collaboration with French lingerie brand Princess tam-tam for their 2024 Spring/Summer Collection. The 2024 Spring/Summer collection of loungewear includes colorful floral prints with a tropical mood and gingham patterns. Along with set-up coordinates, wearers can combine their favorite items. Released to coincide with International Women’s Day on March 8, this collection combines comfort and beautiful design. Items include pajamas (P1,490), a wireless bra (P1,499), easy pants (P990), tops (P790), and shorts (P790). The full collection will be available in select Uniqlo stores, and the uniqlo.com online store.
Treats at Robinsons Department Store for Women’s Month
ROBINSONS Department Store is joining the celebration of International Women’s Month with its “We Are Women” campaign. From March 1 to April 15, brands like Lee and JAG; beauty and skincare from Maybelline, L’Oreal, Y.O.U Cosmetics, Bobbie Cosmetics, CosRX, and more are on sale with discounts of up to 60% across all Robinsons Department Store branches nationwide. This is also available via its e-commerce channels on LazMall and Shopee Mall. Customers can also get a free Jelly Pouch (available in three colors) for a minimum purchase of P2,500 on ladies’ items. Snag deals at the one-week We Are Women Fair from March 9 to 15 at Robinsons Place Manila Midtown Atrium Activity Center. Get a chance to participate in fun activities, get freebies, and win prizes while shopping. Robinsons Department Store is also offering flexible payment options with its “Shop Now, Pay Later” plan. Enjoy 0% interest when shopping using any major credit cards, with three-month installment for P3,000 single-receipt purchases and six-month installment for P5,000 single-receipt purchases.
Ever Bilena launches EB Easy line
EVER BILENA has launched the EB Easy, with classic shades aimed for easy looks. The line includes EB Easy Compact Powder, available in Natural and Beige, for P290. This powder provides lightweight coverage and sets makeup for a flawless finish. The EB Easy Lip & Cheek Tint (P190) multitasks for the lips and cheeks, in shades of Sexy Red, Pretty Pink, and Juicy Berry. The EB Easy Eyebrow Pencil (P150) is infused with Cacao Seed Butter and Castor Oil for nourished, defined brows, in taupe or brown. To match, they also have the EB Easy Velvet Eyeliner Pencil (P150). It also has castor oil for smooth application, and is available in black. There’s also the EB Easy Matte Foundation with SPF 6, made with Glycerin and Shea Butter, which comes in shades of Sand Oriental, Radiant Beige, and Warm Vanilla. Finally, finish off with EB Easy Liquid Lipstick (P190) in shades of Deep Blush, Sweet Raspberry, Golden Brown, and Absolute Red. Ever Bilena’s new collection is available at Ever Bilena Direct Sales distributors, SM Supermarkets, Savemore, SM Hypermart, Waltermart and W Department Stores, Puregold, Robinsons Department Stores, Alfamart, the Gaisano Group of Stores, and LCC Department Stores an Supermarkets. They can also be found online at Ever Bilena’s flagship stores on Shopee, Tiktok, and Lazada.
Momzilla Fair at Rockwell
Momzilla, a company that specializes in baby goods and children’s items, invites mothers to the Fifth at Rockwell for parent-friendly offerings at up to 70% off from over 250 brands on March 16-17 at the Momzilla Fair. Beyond shopping, there will also be free-play and activities for children facilitated by Kaleidoscope Kids at the Booboo Proof Kids Village. Nursing moms are welcome to take a breather and recharge at the Milk Lounge by Milk Easy, complete with comfy seating, breastfeeding essentials, and a snug spot for little ones. There will also be talks on newborn care, breastfeeding, pregnancy, postpartum challenges, and more, in partnership with The Parenting Emporium. Reserve a seat by sending a Viber message to 0917-152-5586. Tickets cost P100 per head. For more information, follow @MomzillaPH on Instagram, Facebook, TikTok, or visit momzillaph.com.
Listed banks’ price dip in Q4 as market braces for rate cuts
By Lourdes O. Pilar, Researcher
MAJORITY of the bank stocks dropped quarter-on-quarter in the final three months of the year as investors get ready for possible interest rate cuts in the latter half of 2024.
The Philippine Stock Exchange index (PSEi) gained 2% on a quarter-on-quarter basis in the final three months of 2023, a reversal from the 2.3% decline in the third quarter. Year on year, PSEi dipped by 1.8%.
Meanwhile, the financials subindex, which included the banks, fell by 6.6% quarter on quarter at the end of the October-December period, a turnaround from the 0.8% growth recorded in the third quarter. The subindex, however, rose by 5.7% annually.
Ten banks’ stock performance declined out of 15 banks covered in the fourth quarter last year. Leading the quarter-on-quarter decliners were Security Bank Corp. (SECB, -10.6%), East West Banking Corp. (EW, -9.3%), and BDO Unibank, Inc. (BDO, -8.0%).
Five banks were able to gain with their banks’ stock performance in the fourth quarter: Philippine Trust Co. (PTC, 20%), Asia United Bank, (AUB, 6.4%), China Banking Corp. (CHIB, 1.6%), Philippine Business Bank (PBB, 1.2%), and Philippine National Bank (PNB, 0.3%).
Aggregate net income of universal and commercial banks went up by 16.3% to P334.27 billion as of end-December from P287.34 billion last year, data from the Bangko Sentral ng Pilipinas (BSP) showed.
Gross total loan portfolio of these big lenders rose by 8.8% to P12.85 trillion as of end-December from P11.80 trillion a year ago.
The big banks’ gross nonperforming loans (NPLs) ratio, however, edged up to 2.94% in December from 2.85% in December the previous year.
The big banks’ net interest margin (NIM) — a ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income to average earning asset — grew to 4.52% in the fourth quarter from 3.43% recorded in the same period in 2022.
Despite healthy earnings growth, the banks covered by Maybank Investment saw stock prices weakening in the fourth quarter was a result of some investors pricing in the impact of potential rate cuts in 2024 to the banks’ margins and the slower industry lending growth.
“We, on the other hand, remain positive on the sector, particularly on the big three (BDO, BPI, and MBT), given their scale and pricing power which gives them the advantage on the corporate lending segment, as well as the capacity to fund huge infrastructure projects,” Rachelleen A. Rodriguez, head of research for Maybank Investment Banking Group, said in an e-mail.
“The Philippine banking system remained relatively stable with strong capital and liquidity buffers and improving asset quality. Most banks kept their credit standards generally unchanged for lending to businesses and consumers in the fourth quarter of 2023,” said Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., in an e-mail.
Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in an e-mail that key drivers banks growth in the fourth quarter were interest rate movements, economic indicators such as gross domestic product (GDP) growth and unemployment rates, regulatory changes, and market sentiment towards the financial sector.
“Interest rate hikes or cuts by central banks, for instance, can impact net interest margins and profitability. Economic indicators reflect the health of borrowers and overall loan demand. Regulatory changes, especially in terms of capital requirements and compliance costs, can affect operational efficiency and profitability,” added Mr. Limlingan.
Data from the Philippine Statistics Authority (PSA) showed the Philippine economy grew by 5.6% in 2023, falling short of the government’s full-year target of 6-7%. It eased from the 7.6% expansion in 2022.
Preliminary results from the PSA’s Labor Force Survey showed the average unemployment dropped to a record low of 4.3% rate last year, it was lower than 5.4% logged in 2022.
This was the lowest jobless rate in almost two decades since the PSA revised the definition of unemployed in April 2005 to refer to Filipinos aged 15 years and older without a job and are available for work and actively seeking one.
“Continued loan growth and margin expansion drove higher revenues. This was accompanied by lower loan loss provisions for Bank of the Philippine Islands (BPI) and Metropolitan Bank & Trust Co. (MBT). As for Union Bank of the Philippines, despite its strong topline performance, its profitability was dragged down by much higher increases in operational expenses and provisions,” said PNB Research in an e-mail.
The Monetary Board hiked interest rates 450 basis points (bps) from May 2022 to October 2023, bringing the key interest rate to a 16-year high of 6.5% to control inflation.
Latest central bank data showed gross outstanding loans by big banks reached P12.85 trillion at end-December, 8.9% increase from P11.80 trillion in 2022.
BANK STOCK PICKS
In choosing bank stocks, analysts said that investors should look for banks’ loan growth and the consistency of NIM expansion.
“We continue to look to loan growth and net interest margin as the factors driving bank lending income, and thus earnings growth. For the most part, the banks who have been able to keep funding cost low and manage this well, thereby maintaining consistent NIM expansion, are the ones that outperform,” Charmaine Co, research analyst at COL Financial Group, Inc., said in an e-mail.
Mr. Limlingan said that when considering buying bank stocks in the future, investors and traders should weigh several factors.
“Firstly, they should assess the economic environment, including interest rate expectations and GDP growth projections, as these directly impact bank revenues and loan quality. Secondly, regulatory developments, especially those affecting capital adequacy ratios and lending practices, should be monitored closely. Thirdly, competitive positioning within the banking sector, including market share, product offerings, and digital capabilities, is crucial for long-term growth prospects,” he said.
For Ms. Rodriguez, she said that investors should look into the bank’s pricing power, deposit franchise, and lending appetite.
“Scale gives banks pricing power, which we believe is essential to preserve margins. Strong deposit franchise would also help contain the impact of elevated funding costs; we prefer banks with higher current and savings account ratios,” said Ms. Rodriguez.
On the lending side, she recommends going for the banks with the strongest high-yielding consumer loan growth push and the most appetite and scale to take on infrastructure loan demand given the government’s more aggressive infrastructure push this year.
INFLATION
In response to persistent inflationary pressures, the central bank is expected to maintain a hawkish stance on monetary policy in the near term, aimed at curbing inflationary forces. While this strategy may benefit banks through increased interest income, prolonged high interest rates could potentially lead to a rise in loan defaults and NPLs.
“Even if the Monetary Board decides to maintain its current stance, the stringent monetary policy is likely to exert downward pressure on economic growth,” said Mr. Arce.
It is anticipated that the central bank will prolong its pause on rate adjustments until inflation expectations are firmly anchored.
“Looking ahead, the central bank is expected to maintain its cautious approach well into 2024, with the possibility of considering rate cuts only towards the latter part of the year, contingent upon favorable economic conditions and subdued inflationary pressures,” Mr. Arce added.
“This 2024, we expect earnings to expand by 11.1% year on year against 22.5% year on year growth in 2023. The increase in earnings is expected to be driven by higher lending income as loan growth continues and net interest margin expansion tapers off,” said Ms. Co of COL Financial.
“We expect to still see growth in select names due to still healthy expected income growth to be driven by robust consumer lending, improved cost-to-income ratios from the banks’ digital push, and lower overall credit costs.” Ms. Rodriguez of Maybank said.
“For 2024, we forecast earnings growth of around 10% for index banks,” PNB said.
Pocofino Hong Kong expansion under way
By Aubrey Rose A. Inosante
PHILIPPINE coffee brand Pocofino said it has line up several store expansions this year, including one in Hong Kong store and the delayed Ninoy Aquino International Airport (NAIA) project last year.
“We’re also considering ourselves as an international company, so we’re also looking to expand in Hong Kong, which has already started,” Pocofino Director Tuesday S. Angliongto told BusinessWorld on the sidelines of an event on Friday.
Pocofino has major brands in Bonifacio Global City (BGC), Greenhills Promenade and Wack Wack Road in Mandaluyong City.
In line with its aggressive push for expansion, Ms. Angliongto said the company’s next locations will be at Ellis condominium in Makati City, Eastwood and Gateway Mall.
There are kiosk-like Pocofino branches at Greenhills and NAIA called Chiosco Pocofino.
Ms. Angliongto said Pocofino is considering setting up a branch on Boracay Island in Aklan province, but they would focus on Metro Manila in the first half while operations are still small.
“We had some inquiries already for outside Manila,” she said. “We just need to get our backend ready to support these new businesses and partnerships.”
Ms. Angliongto said last year’s performance was positive even if several expansion plans did not proceed due to “external circumstances.”
Pocofino is in partnership with restaurants such as Frankie’s New York Buffalo Wings, Raintree Hospitality, Wolfgang’s Steakhouse, Mama Lou’s Italian Kitchen and more.
Ms. Angliongto said Pocofino has considered an initial public offering but is “not yet there.”
Its first brick-and-mortar shop in BGC runs 24 hours and sees people on night shifts, students studying late and business process outsourcing workers.
She also said Pocofino is eyeing a price increase this year.
“And especially since we work with imported coffee, the shipping is up this year because of the conflicts in the area,” she said.
Pocofino is known for its espresso shots and use of authentic Italian blends.
Philippine Labor Force Situation
THE COUNTRY’s jobless rate and job quality worsened to six-month high in January due to the loss of seasonal jobs during the holidays, the Philippine Statistics Authority (PSA) reported on Friday. Read the full story.
How PSEi member stocks performed — March 8, 2024
Here’s a quick glance at how PSEi stocks fared on Friday, March 8, 2024.
PSEi may move sideways due to profit taking
PHILIPPINE STOCKS are expected to move sideways this week as investors book profits after the market’s seven-week rally.
“The bellwether index dropped by as low as 113 points after Philippine inflation heated anew in February, but fresh buying resumed near the weekend,” online brokerage 2TradeAsia.com said in a market note.
On Friday, the benchmark Philippine Stock Exchange index (PSEi) rose by 1.53% or 104.87 points to close at 6,942.21. The broader all-share index gained 0.97% or 34.92 points to 3,602.81. Week on week, the PSEi added 0.33% or 22.62 points.
Philippine inflation quickened to 3.4% in February from 2.8% a month earlier due to higher food prices.
The local bourse could move sideways this week due to profit-taking, Japhet Louis O. Tantiangco, a senior research analyst at Philstocks Financial, Inc. said in a Viber message. “With the seven-week rally, we expect profit-taking pressures to be present. Still, we expect positive sentiment toward 2023 corporate results to continue providing support to the bourse.”
Wall Street’s record performance, if it continues, is also expected to spur the local market, he added.
The local market’s movement would depend on the latest inflation figures from the United States, due on March 12, Juan Paolo E. Colet, managing director at China Bank Capital Corp., said in a Viber message.
“Our market is poised for another attempt to close above 7,000, but whether it finally succeeds in overcoming the strong resistance at that level will depend largely on the US February consumer price index,” he added.
“How US equity markets react to the inflation report will influence the direction of the local stock index,” Mr. Colet said. “If we see data that bolster bullish bets of a Federal Reserve policy rate cut in June, then our market will likely benefit from risk-on sentiment and move higher this week.”
US inflation slowed to 3.1% in January from 3.4% in December.
Meanwhile, 2TradeAsia put the market’s support this week at 6,800 and resistance at 7,000.
“The 7,000 zone has so far been elusive, with recent sessions characterized by long wicks signaling strong selling pressure up top, although Friday’s technical confirmation has brought near-term technical relief,” it said.
Mr. Tantiangco put the market’s support at 6,700 and resistance at 7,000 points. — Revin Mikhael D. Ochave
Peso may trade sideways versus dollar as markets await US data
By Aaron Michael C. Sy, Reporter
THE PHILIPPINE peso could trade sideways against the dollar this week as the market awaits US labor data that could dictate the US Federal Reserve’s next policy move.
It closed at P55.57 a dollar on Friday, strengthening by 25 centavos from Thursday, according to Bankers Association of the Philippines data posted on its website.
This was the peso’s strongest finish in more than two months. Week on week, the currency gained 44.5 centavos.
The peso appreciated on Friday as comments from Fed Chairman Jerome H. Powell stoked expectations of a rate cut, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.
Mr. Powell on Thursday said the US central bank was “not far” from gaining the confidence it needs in falling inflation to begin cutting interest rates, Reuters reported.
“I think we are in the right place,” he told a Senate banking committee hearing. “We are waiting to become more confident that inflation is moving sustainably down to 2%. When we do get that confidence, and we’re not far from it, it will be appropriate to begin to dial back the level of restriction so that we don’t drive the economy into recession.”
The Fed raised borrowing costs by 525 basis points from March 2022 to July 2023 to 5.25-5.5%.
Mr. Powell’s comments had caused the dollar to weaken to one-month lows, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
On Friday, the dollar index shed 0.52% to 102.8.
Mr. Roces expects the peso to trade sideways this week after the release of US nonfarm payroll data for January. Mr. Ricafort said this could signal when the Fed might start its easing cycle.
US job growth quickened in February, but higher unemployment moderate wage gains kept on the table an anticipated interest rate cut in June by the Fed.
Mr. Roces expects the peso to range from P55.50 to P56 as dollar this week, while Mr. Ricafort sees it moving between P55.30 and P55.80.
Xi’s focus on maritime economy hints at more intrusions into PHL waters
By Kyle Aristophere T. Atienza, Reporter
THE PHILIPPINES should brace itself for an intensified presence of China in the South China Sea that is aimed at cementing its control of resources there, analysts said, as the Xi regime calls on the Chinese military to make its maritime strategy align with economic development.
Aside from building more military outposts in the waterway, China is also likely to put up maritime buffer zones seaward, Enrico Cau, an associate researcher at the Taiwan Center for International Strategic Studies, said in a Facebook Messenger chat.
Chinese President Xi Jinping last week called on his country’s armed forces to coordinate preparations for military conflicts at sea and help in the development of the maritime economy.
Mr. Cau said China could enforce a “threefold” strategy: resource control, geographic dominance, and denial of space from the other claimants.
“This means that China is not only trying to control the resources. It means that, likely, it is trying to use the resources while at the same time denying strategic access to both resources and strategic locations that could be exploited by others,” he said.
“The purpose of occupation would not be only resource exploitation. Rather a sustainable model that entails denial to others while developing resources in occupied areas,” he added.
Mr. Xi, speaking to a delegation of the People’s Liberation Army and police force at an annual parliament meeting last week, also underscored the need to build a defense system in cyberspace and boost his country’s national security network.
Chinese legislators, meanwhile, vowed to push for a set of new laws that would modernize China’s capacity for national security and safeguard its “sovereign interests.”
Following Mr. Xi’s remarks, the Philippines Department of National Defense (DND) said on Friday it had already launched the Comprehensive Archipelagic Defense Concept which, in plain language, means “we are developing our capability to protect and secure our entire territory and exclusive economic zone.”
Filipinos “shall freely reap and enjoy the bounties of the natural resources that are rightfully ours within our domain,” it said.
POLL: MOST FILIPINOS WILLING TO FIGHT A ‘FOREIGN ENEMY’
An OCTA Research poll conducted in December, which was commissioned by the Armed Forces of the Philippines, showed 77% of Filipinos were willing to fight for the country in case of a conflict with a “foreign enemy.”
“Across major areas, at least 60% of adult Filipinos are willing to fight for the country, with the highest percentage observed in Mindanao (84%) and the lowest percentage in Visayas (62%),” OCTA said in a statement on Sunday.
The highest percentage was recorded among those aged 45 to 54, at 87%. The lowest recorded percentage was among those aged 65 to 74 at 69%.
OCTA interviewed 1,200 adult Filipinos face-to-face nationwide from Dec. 10 to 14. The poll had a ±3% margin of error at a 95% confidence level.
CHINA HIKES MILITARY BUDGET, POSES ‘CIVIL-MILITARY FUSION’
Despite the bumpy road for its economy, which is threatened by a two-million drop in the Chinese population, soaring debt and declining foreign investments, China has increased its defense budget for 2024 year by 7.2%.
Its military is expecting a big boost this year as the Xi regime seeks to lower the costs for weapons acquisition.
“The comments relating to new quality fighting forces could be read, I believe, as a push to an overall improvement of the military,” Mr. Cau said. “The statements not only seem to signal a heightened attention towards military preparedness, but it also resonates with calls for the military to focus on real combat capabilities.”
Raymond M. Powell, a fellow at the US-based Gordian Knot Center for National Security Innovation, said Mr. Xi’s call for the military to be involved in economic matters is not really new since China does not draw a hard distinction between civilian and military matters.
“In fact, they engage in what is often referred to ‘civil-military fusion,’” he said in an X message.
“Xi has aggressively brought China’s civil and economic sectors under state control, and the state under Communist Party control,” he added. “What we’re watching is China embracing an authoritarianism bordering on Stalinism.”
China may have the industrial capacity to enforce Mr. Xi’s call for the Chinese military to dovetail its maritime presence with economic development, but “it will cost them over the long term,” Mr. Powell said.
The so-called civil-military fusion — an act liberal democracies avoid in favor of free markets — “provides authoritarian governments certain advantages at least in the short term,” he said. “However, it also has its downsides, to include a temptation for military officials toward graft.”
“Xi’s recent anti-corruption moves removing certain high-ranking military officers suggest that this likely remains a serious problem in China’s system,” Mr. Powell added.
Chester B. Cabalza, founder of Manila-based International Development and Security Cooperation, said China is expected to step up its expansionist agenda in the South China Sea to divert its citizens’ attention away from the country’s economic woes.
“This is Xi Jinping’s ‘wag the dog’ moment to make Xi Jinping immune from the weak economy today,” he said in a Facebook Messenger chat.
Forecasts from the International Monetary Fund show China’s growth will slow to 4.6% in 2024 from an estimated 5.4% last year.
China’s growth last year, which experienced ups and downs, was driven by the resilience of the high-tech and services sectors, “while challenges came from declining property investment, debt risk and weak consumption growth,” according to the East Asia Forum.
“I believe that the Chinese are aware that the costs of a war for China will be very high,” Mr. Cau said.
“Therefore, President Xi will try to avoid a war at any cost,” he noted, “However, should the necessity arise, China will not hesitate to fight.”
In the South China Sea, Beijing has been conducting aggressive moves that fall short of a shooting war, which maritime experts call gray zone operations.
The year 2023 saw increased tensions between the Philippines and China, whose coast guard and maritime militia forces have been conducting dangerous maneuvers and firing water cannons to block Philippine resupply missions within Manila’s 200-nautical mile exclusive economic zone.
In the face of an increasingly belligerent China, the Philippines under President Ferdinand R. Marcos, Jr. has pursued closer ties with the US and other Indo-Pacific powers such as Japan and Australia.
Just last month, the US and its treaty ally, the Philippines, conducted the air component of their Maritime Cooperative Activity’s third iteration, which began early in February. The two forces held their first and second joint patrols last year.
Japan and Australia last year expressed willingness to take part in the Philippines’ joint maritime patrols with the US.
The Philippines allocated P285.69 billion for defense sector in 2024 compared to the P203.4-billion allocation in 2023, but Mr. Cau said the country still “lacks the financial capabilities and the time to build sufficient deterrence to keep China at bay.”
“Recurrent flares of insurgency and other issues ashore are also bound to impact Philippines capability to entirely refocus on its maritime strategy,” he said.
“The sole solution for the Philippines remains the physical occupation of the areas, while wisely navigating cooperation and competition with China and its relations with the allies,” he added, noting that allies could provide a crucial role in preventing Chinese interference in Philippine reclamation and construction activities.
Mr. Cabalza said the Philippines should continue to “widen its diplomatic networks and allies,” in line with its efforts to help promote a rules-based order in the South China Sea.
Mr. Marcos, who has veered away from his predecessor’s pivot to China, will visit Germany and Czech Republic from March 11 to 15.
In Germany, the Philippine leader is expected to seal a cooperation agreement on maritime trade.