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Oil edges up as rising Mideast tensions offset demand fears

MODELS of oil barrels and a pump jack are displayed in this illustration photo taken on Feb. 24, 2022. — REUTERS

TOKYO – Oil prices nudged higher on Monday as heightened tensions in the Middle East following the overthrow of Syrian President Bashar al-Assad by rebels offset concerns over weak Chinese demand that was highlighted by Saudi Aramco’s price cuts to Asian buyers.

Brent crude futures rose 22 cents, or 0.3%, to $71.34 per barrel by 0140 GMT. U.S. West Texas Intermediate crude futures CLc1 gained 22 cents, or 0.3%, to $67.42 per barrel.

Brent lost more than 2.5% last week and WTI fell 1.2% as analysts projected a supply surplus next year on weak demand despite an OPEC+ decision to delay output hikes and extend deep production cuts to the end of 2026.

Saudi Aramco, the world’s biggest crude oil exporter, has reduced its January 2025 prices for Asian buyers to the lowest level since early 2021, it said on Sunday, as weak demand from top importer China weighs on the market.

Meanwhile, Syrian rebels announced on state television on Sunday they had ousted President al-Assad, eliminating a 50-year family dynasty in a lightning offensive that raised fears of a new wave of instability in the Middle East that is already gripped by war.

“The development in Syria has added a new layer of political uncertainty in the Middle East, providing some support to the market,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.

“But Saudi Arabia’s price reductions and OPEC+’s production cut extension last week underscored weak demand from China, indicating the market may soften toward year-end,” he added, noting that investors are closely watching the potential impact of U.S. President-elect Donald Trump’s energy and Middle East policies.

On Thursday, the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, pushed back the start of oil output rises by three months until April and extended the full unwinding of cuts by a year until the end of 2026.

OPEC+, which is responsible for about half of the world’s oil output, was planning to start unwinding cuts from October 2024, but a slowdown in global demand – especially from top crude importer China – and rising output elsewhere have forced it to postpone the plan several times.

The number of oil and gas rigs deployed in the United States last week hit the highest since mid-September, pointing to rising output from the world’s biggest crude producer. — Reuters

Trump says he will not try to replace Fed’s Powell

US Federal Reserve Chair Jerome H. Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” on Capitol Hill in Washington, US, July 9, 2024. — REUTERS

U.S. President-elect Donald Trump said in an interview aired on Sunday he will not try to replace Federal Reserve Chair Jerome Powell upon taking office in January.

“No, I don’t think so. I don’t see it,” Trump said on NBC News’ Meet the Press with Kristen Welker” when asked if he would seek to remove Powell, whose term ends in 2026.

Trump added that he didn’t think Powell, who he has sparred with in the past over interest rate levels, would go quietly.

“I think if I told him to [go], he would. But if I asked him to, he probably wouldn’t,” Trump told Welker.

Trump campaigned on a promise to lower mortgage rates and other borrowing costs for U.S. households, raising the prospect that he could clash with Powell – as he did in his first term – over interest rate policy. Trump’s vow to implement across-the-board tariffs could also complicate the Fed’s efforts to keep inflation in check.

Last month, Powell said he would refuse to leave office early if Trump tried to oust him, arguing that removing him, or any of the other Fed governors, ahead of the end of their terms is “not permitted under the law.”

Trump named Powell, a former private equity executive and a Republican, to Fed chair in early 2018 to replace Janet Yellen, who later became President Joe Biden’s Treasury Secretary. Biden reappointed Powell to his current term.

But the relationship between Trump and Powell turned sour, with Trump frequently attacking the Fed and its chief during his first term in office. Trump privately discussed trying to dismiss Powell in late 2018, upset over the Fed’s move to raise interest rates, and publicly argued against rate hikes.

Trump also criticized Powell in early 2020 at the start of the COVID-19 pandemic, saying Powell had made several bad decisions and arguing he had a right to remove him.

Trump’s attacks on the Fed during his first term broke from decades of presidents steering clear of direct criticism of the central bank, which operates with legal independence subject to the oversight of Congress.

Earlier this year, Trump said he felt he should have a say in the Fed’s decisions, an indication of his interest in infringing on its independence.

Traders are expecting the Fed to cut interest rates at its upcoming Dec. 17-18 policy meeting, after recent data showed the U.S. labor market was continuing to cool. A quarter-percentage-point reduction would bring the Fed’s policy rate to the 4.25%-4.50% range, a full percentage point below where it was in September when the central bank began its easing cycle. — Reuters

With Assad ousted, a new era starts in Syria as the world watches

STOCK PHOTO | Image by Koen One Stop Map from Pixabay

DAMASCUS – Syrians awakened on Monday to a hopeful if uncertain future, after rebels seized the capital Damascus and President Bashar al-Assad fled to Russia, ending a 13-year civil war and more than 50 years of his family’s brutal rule.

The lightning advance of a militia alliance spearheaded by Hayat al-Tahrir al-Sham (HTS), a former al-Qaeda affiliate, marked one of the biggest turning points for the Middle East in generations. Assad’s fall wiped out a bastion from which Iran and Russia exercised influence across the Arab world.

Moscow gave asylum to Assad and his family, Russian media reported and Mikhail Ulyanov, Russia’s ambassador to international organizations in Vienna, said on his Telegram channel on Sunday.

International governments welcomed the end of the Assads’ autocratic government, as they sought to take stock of a new-look Middle East.

U.S. President Joe Biden said Syria is in a period of risk and uncertainty, and it is the first time in years that neither Russia, Iran nor the Hezbollah militant organization held an influential role there.

HTS is still designated as a terrorist group by the U.S., Turkey and the United Nations, although it has spent years trying to soften its image to reassure international governments and minority groups within Syria.

Japan’s chief cabinet secretary, Yoshimasa Hayashi, said on Monday Tokyo was paying close attention to developments in Syria.

Assad’s overthrow limits Iran’s ability to spread weapons to its allies and could cost Russia its Mediterranean naval base. It could also allow millions of refugees scattered for more than a decade in camps across Turkey, Lebanon and Jordan to finally return home.

 

NOW TO REBUILD

The rebels face a monumental task of rebuilding and running a country after a war that left hundreds of thousands dead, cities pounded to dust and an economy hollowed by global sanctions. Syria will need billions of dollars in aid.

“A new history, my brothers, is being written in the entire region after this great victory,” said Ahmed al-Sharaa, better known as Abu Mohammed al-Golani, the head of HTS.

Speaking to a huge crowd on Sunday at Damascus’ Umayyad Mosque, a place of enormous religious significance, Golani said with hard work Syria would be “a beacon for the Islamic nation.”

The Assad police state was known as one of the harshest in the Middle East with hundreds of thousands of political prisoners held in horrifying conditions.

On Sunday, elated but often confused inmates poured out of jails. Reunited families wept in joy. Newly freed prisoners were filmed running through the Damascus streets holding up their hands to show how many years they had been in prison.

The White Helmets rescue organization said it had dispatched emergency teams to search for hidden underground cells still believed to hold detainees.

With a curfew declared by the rebels, Damascus was calm overnight, with roads leading into the city mostly empty. One shopping center had been looted on Sunday, and some people rampaged inside Assad’s presidential place, leaving carrying furniture.

The rebel coalition said it was working to complete the transfer of power to a transitional governing body with executive powers, referring to building “a Syria together.”

Golani is a Sunni Muslim, which is the majority in Syria, but the country is home to a wide range of religious sects, including Christians and Assad’s fellow Alawites, an offshoot of Shi’ite Islam.

 

WORLD STUNNED

The pace of events stunned world capitals and raised concerns about more regional instability on top of the Gaza war, Israel’s attacks on Lebanon and tensions between Israel and Iran.

The U.S. Central Command said its forces conducted dozens of airstrikes targeting known Islamic State camps and operatives in central Syria on Sunday.

Secretary of Defense Lloyd Austin said on Sunday he spoke with Turkish Minister of National Defense Yasar Guler, emphasizing the importance of protecting civilians and that the United States is watching closely.

During Syria’s civil war, which erupted in 2011 as an uprising against Assad, his forces and their Russian allies bombed cities to rubble. The refugee crisis across the Middle East was one of the biggest of modern times and caused a political reckoning in Europe when a million people arrived in 2015.

In recent years, Turkey had backed some rebels in a small redoubt in the northwest and along its border. The United States, which has about 900 troops in Syria, backed a Kurdish-led alliance that fought Islamic State jihadists from 2014-2017. – Reuters

Japan revises Q3 GDP higher, keeps alive BOJ rate-hike expectations

STOCK PHOTO | Image by Josh Soto from Unsplash

TOKYO – Japan’s economy expanded in July-September at a faster pace than initially reported thanks to upward revisions in capital investment and exports, keeping alive market expectations for a near-term interest rate hike by the central bank.

But a downward revision on consumption underscores the fragile nature of the economic recovery, and leaves uncertainty on how soon the central bank could raise interest rates again, with a December hike not guaranteed either, some analysts say.

The data will be among factors the BOJ will scrutinize at its next policy meeting on Dec. 18-19, when some analysts expect a hike in short-term interest rates from the current 0.25%.

“It does support the case for a December rate hike, though the weakness in consumption is a concern,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Gross domestic product (GDP) rose an annualized 1.2% in the three months to September, the Cabinet Office’s revised data showed on Monday, higher than economists’ median forecast and the initial estimate of 0.9% growth.

The revised numbers translate into a quarter-on-quarter expansion of 0.3% in price-adjusted terms, compared with a 0.2% growth in preliminary data released on Nov. 15.

The upgrade was caused in part by a smaller-than-expected decline in capital expenditure, which fell 0.1% in the third quarter compared with a preliminary reading of a 0.2% drop. It compared with economists’ estimate for a 0.1% rise.

External demand, or exports minus imports, knocked 0.2 percentage point off growth, less than a 0.4 point drop in the preliminary reading, the revised GDP data showed.

Private consumption, which accounts for more than half of the Japanese economy, rose 0.7%, less than the preliminary reading of 0.9% growth.

“While the data isn’t something that gives a huge boost to rate hike expectations, it won’t be a hindrance to raising rates either,” said Uichiro Nozaki, an economist at Nomura Securities.

The upward revision still leaves third-quarter GDP growth much slower than an annualized 2.2% expansion in the April-June period, which was largely in reaction to a contraction in the first quarter caused by output disruptions in some auto plants.

The BOJ phased out a decade-long, radical stimulus in March and raised short-term interest rates to 0.25% in July on the view Japan was progressing towards sustainably achieving its 2% inflation target.

Governor Kazuo Ueda has signaled readiness to raise rates again if the BOJ becomes more convinced that inflation will durably stay around 2% backed by rising wages and robust domestic demand.

Nozaki at Nomura Securities expects consumption to have slowed in the current quarter, but to rebound in the January-March quarter on prospects of firm wage growth.

But others are less optimistic about Japan’s economy with overseas uncertainties, such as threats of higher tariffs by U.S. President-elect Donald Trump, clouding the outlook.

“While improvements in real wages will underpin consumption, the recovery in external demand will be muted as overseas growth stagnates,” said Masato Koike, senior economist at Sompo Institute Plus.

“Japan’s economy will continue recovering but the pace will be modest,” he added.

Many market players expect the BOJ to hike rates again by the March end of the current fiscal year, though they are divided on whether it would come in December or early next year.

The BOJ is staying guarded on the timing of the next rate hike with December hardly a done deal given soft consumption, its governor’s cautious decision-making style and anxiety over U.S. economic policy in a second Trump presidency, sources have told Reuters. – Reuters

Haiti gang massacres at least 110 people in Cite Soleil, rights group says

By Bruno Le Bansais - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=12865233

MEXICO CITY – At least 110 people were killed over the weekend in Haiti’s Cite Soleil slum when a gang leader targeted elderly people he suspected of causing his child’s illness through witchcraft, the National Human Right Defense Network said on Sunday.

The gang leader, known as Monel “Mikano” Felix, along with his Viv Ansanm group, were responsible of the massacre.

RNDDH said that after Mr. Felix’s child became sick, he sought advice from a voudou priest who accused elderly people in the area of harming the child through witchcraft, triggering Felix to order the massacre.

Gang members killed at least 60 people on Friday and 50 on Saturday using machetes and knives, all of them aged over 60, it said.

Cite Soleil, a densely populated slum by the port of the capital Port-au-Prince, is among the poorest and most violent areas of Haiti.

Tight gang control, including the restriction of mobile phone use, limited residents’ ability to share information about the massacre.

Mr. Felix, who heads the Wharf Jeremie gang, was in 2022 banned from entering neighboring Dominican Republic. – Reuters

South Korea special forces officer says he had orders to block lawmakers

SOUTH KOREAN soldiers salute in front of a huge national flag in Pohang, South Korea, Sept. 30, 2021. — LEE JIN-MAN/POOL VIA REUTERS

SEOUL – The commander of South Korea’s special forces that stormed parliament last week after a martial law declaration said on Monday he was ordered to block lawmakers from entering the chamber to prevent a vote to lift the emergency measure.

Colonel Kim Hyun-tae, the commanding officer of the 707th Special Missions Group, told reporters he took all responsibility for his troops’ raid on parliament but said he was acting under orders from the defense minister.

South Korean President Yoon Suk Yeol, who is now a subject of a criminal investigation, declared martial law on Dec. 3 only to rescind the order within hours after parliament met in defiance of a security cordon to vote it invalid.

Mr. Yoon survived an impeachment vote in a opposition-led parliament on Saturday which plunged South Korea into a constitutional crisis.

Mr. Yoon said ahead of the vote he was entrusting his fate to the ruling party, but he did not offer to resign.

Mr. Kim said his unit landed on the grounds of parliament with orders to cordon off the main building to prevent lawmakers from entering but was met with legislative staff members inside who blocked their entrance.

“We were all victims who were used by the former defense minister, Kim Yong-hyun,” the commander told reporters outside the defense ministry in Seoul.

“The members of the Group are not guilty. Their only guilt is that they followed the orders of their commander,” he said, fighting back tears.

The former defense minister was arrested on Sunday over his role in declaring martial law and ordering the deployment of troops to parliament.

The leader of Yoon’s People Power Party, Han Dong-hoon, said on Sunday that Yoon would be excluded from foreign and other state affairs, and the party and Prime Minister Han Duck-soo would manage government affairs.

National Assembly speaker Woo Won-shik said it was unconstitutional to delegate presidential authority unless the president is impeached.

The main opposition Democratic Party, which led the failed impeachment motion on Saturday, said it would raise the motion again. – Reuters

Extreme heat puts garment factory workers at risk, study shows

RIO LECATOMPESSY-UNSPLASH

LONDON – Workers in some of the world’s biggest garment manufacturing hubs in Bangladesh, Vietnam, and Pakistan are increasingly exposed to extreme heat as climate change pushes temperatures up, a report found on Sunday, a problem multinational retailers and brands will have to help address.

New European Union regulations make retailers selling in the bloc, like Inditex, H&M and Nike, legally liable for conditions at their suppliers, putting pressure on them to help fund improvements to cool factories they source from.

In Dhaka, Hanoi, Ho Chi Minh City, Phnom Penh and Karachi, the number of days with “wet-bulb” temperatures – a measurement that accounts for air temperature as well as humidity – above 30.5 degrees Celsius jumped by 42% in 2020-2024 compared to 2005-2009, researchers at Cornell University’s Global Labor Institute found.

Above that threshold, the International Labor Organization recommends as much rest as work in any given hour to maintain safe core body temperature levels.

The report identified only three retailers – Nike, Levi’s, and VF Corp – which specifically include protocols to protect workers from heat exhaustion in their supplier codes of conduct.

 

COMPANIES WARNED

“We’ve been talking to brands for ages now about this issue, and they’re only now starting to turn their attention to it,” Jason Judd, executive director at Cornell University’s Global Labor Institute, told Reuters.

“If a brand or retailer knows that temperatures in a production area are excessively high or doing damage to worker health, then they’re obligated under this new set of rules to do something about it,” he added.

The EU Corporate Sustainability Due Diligence Directive came into force in July and will start applying to large companies from mid-2027.

Fixes to cool factories could include better ventilation and water evaporative cooling systems, instead of energy-intensive and expensive air conditioning that would increase manufacturers’ carbon emissions.

Some factory owners would likely be willing to make such investments themselves, given how heat stress significantly impacts productivity, Judd said, but the EU rules highlight brands’ responsibility to address the issue too.

The report also urged retailers and brands to invest in higher wages and health protections so that workers can manage the risk of missing work days due to heatwaves.

Extreme heat and flooding could erase $65 billion in apparel export earnings from Bangladesh, Cambodia, Pakistan and Vietnam by 2030, research from asset manager Schroders and the Global Labor Institute found last year. – Reuters

Dollar reserves slip 2% at end-Nov.

United States one-dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington in this Nov. 14, 2014 file photo. Dollar reserves stood at $108.5 billion as of end-November, the Philippine central bank said. — REUTERS

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES’ gross international reserves (GIR) dipped at the end of November as the government settled some of its foreign currency-denominated debt, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Preliminary data showed dollar reserves slipped by 2.4% to $108.5 billion at the end of November from $111.1 billion at the end of October.

Year on year, gross international reserves rose by 5.6% from $102.7 billion.

“The month-on-month decrease in the GIR level reflected mainly the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the central bank said.

The level of dollar reserves was enough to cover about 4.3 times the country’s short-term external debt based on residual maturity.

The GIR as of end-November was also equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income.

“By convention, GIR is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income,” the BSP said.

Ample foreign exchange buffers protect an economy from market volatility and ensure that a country can pay its debts in the event of an economic downturn.

Net foreign currency deposits dropped by 18% to $1.75 billion at end-November from $2.14 billion a month ago. It likewise fell by 8.1% from $1.91 billion a year ago.

The central bank also attributed the decline in dollar reserves to its “net foreign exchange operations and downward valuation adjustments in the BSP’s gold holdings due to the decrease in the price of gold in the international market.”

Reserves in the form of gold were valued at $11.03 billion, down by 2.9% from $11.35 billion at end-October. However, it was up by 1.9% from $10.82 billion in the same period a year earlier.

November saw gold’s first monthly price drop since June due to a post-US election sell-off driven by Donald J. Trump’s win, Reuters reported.

Spot prices for the precious metal are down 5% since hitting a record high of $2,790.15 an ounce on Oct. 31 but are still up 28% so far this year.

BSP data showed foreign investments stood at $91.2 billion as of end-November. This was 2% lower than $93.1 billion in the previous month but higher by 6.8% from $85.4 billion last year.

“Similarly, the net international reserves (NIR) declined by $2.6 billion to $108.4 billion as of end-November 2024 from the end-October 2024 level of $111 billion,” the BSP said.

Net international reserves are the difference between the BSP’s reserve assets or GIR and reserve liabilities, such as short-term foreign debt and credit and loans from the International Monetary Fund (IMF).

The country’s reserve position in the IMF dipped by 2.3% to $668.2 million from $683.9 million a month earlier. Year on year, it slumped by 15.1% from $787.2 million.

Special drawing rights — the amount the country can tap from the IMF — inched up month on month to $3.81 billion from $3.8 billion.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the lower GIR level was due to the net payment of the National Government’s foreign debt maturities and other US-denominated obligations.

He also cited the BSP’s net foreign exchange operations in view of the US dollar-peso volatility during the month.

In November, the peso fell to the P59-per-dollar level twice, hitting the record low on Nov. 21 and 26.

“For the coming months, the country’s GIR could still be supported by the continued growth in the country’s structural inflows from overseas Filipino worker (OFW) remittances, BPO (business process outsourcing) revenues, exports, relatively fast recovery in foreign tourism revenues,” Mr. Ricafort said.

Remittances typically see a boost in December as OFWs send more money for their families amid the holiday season.

Latest data from the BSP showed cash remittances rose by 3.3% to $3.01 billion in September. This brought the total to $25.23 billion in the January-September period, up by 3% year on year.

The central bank expects remittances to grow by 3% this year.

However, Mr. Ricafort also noted the government’s plan to reduce foreign borrowings to manage foreign exchange risks.

The government’s borrowing plan this year is set at a 75:25 mix, in favor of domestic sources.

For 2025 to 2027, the NG plans to source at least 80% of its borrowing program from domestic sources, and 20% from foreign lenders.

Finance Secretary Ralph G. Recto has said they are aiming to reduce the share of external borrowings in its borrowing program.

The BSP expects the country’s GIR to settle at $106 billion by end-2024.

Central bank likely to continue easing despite inflation uptick, say analysts

Inflation picked up to 2.5% in November, from 2.3% in October, as food prices rose. — PHILIPPINE STAR/EDD GUMBAN

THE BANGKO SENTRAL ng Pilipinas (BSP) will likely continue its rate-cutting cycle despite the slight uptick in November inflation, analysts said.

However, risks such as the weakening of the peso could prompt the central bank to be more cautious about further easing.

“Overall, the inflationary pressures were not broad-based, and the near-term outlook remains benign. Therefore, we think the BSP will lower its policy rate by 25 basis points (bps) at its next meeting in December,” ANZ Research said.

Headline inflation quickened to 2.5% year on year in November from 2.3% in October, mainly driven by higher food prices due to typhoon damage.

This brought average inflation to 3.2% in the 11-month period, well within the 2-4% target band.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said that it is “all clear” for a third straight rate cut later this month.

“Crucially, the result was also well within the BSP’s forecast range, 2.2% to 3%, which means the bank will almost certainly make another 25-bp cut to the target reverse repo rate later this month, to 5.75%,” he said.

The Monetary Board is set to have its final policy-setting meeting for the year on Dec. 19.

The central bank could opt to pause its easing cycle or deliver another 25-bp rate cut later this month, BSP Governor Eli M. Remolona, Jr. earlier said.

He said inflationary pressures may prompt them to keep rates steady, while a cut is likely if economic growth remains weak.

Since August, the Monetary Board has delivered a total of 50 bps worth of rate cuts, bringing the key rate to 6%.

“The soft inflation print supports our view of a rate cut in the Dec. 19 meeting, on top of the third-quarter 2024 growth which surprised to the downside,” HSBC economist for ASEAN Aris D. Dacanay said.

Mr. Chanco noted the “disappointing” third-quarter gross domestic product (GDP) print, which would make room for more rate reductions.

The Philippine economy grew by a weaker-than-expected 5.2% in the July-to-September period, slower than the 6.4% growth in the second quarter and 6% a year ago.

This was also the weakest growth since the 4.3% expansion in the second quarter of 2023.

“The Board’s rate-cutting cycle is far from over though, despite the apparent global recalibration of policy rate expectations upwards since the US election,” Mr. Chanco said.

“The BSP, in its response to the latest inflation data, affirmed that it will ‘continue to maintain a measured approach in its easing cycle,’ echoing the same language used in October, when it last reduced rates, by 25 bps.”

Inflation is also seen to remain within the 2-4% target band moving forward.

“On balance, inflation should soon stabilize comfortably below the 3% midpoint of the BSP’s target range — barring any shocks — clearing the way for the 100 bps in further easing we expect next year,” Mr. Chanco said.

The BSP expects inflation to settle within the target band from this year until 2026. It projects inflation to average 3.1% this year, 3.2% in 2025 and 3.4% in 2026.

However, the central bank also warned that the balance of risks to the inflation outlook for next year until 2026 has shifted to the upside.

The BSP’s risk-adjusted forecasts see inflation at 3.3% next year and 3.7% in 2026.

“At the same time, the risks to our end-2025 benchmark rate baseline of 4.75% are skewed markedly to the downside, as policy will remain excessively tight in real terms, even after 125 bp in additional cuts,” Mr. Chanco said.

For 2025, ANZ Research expects a total 75 bps worth of cuts to “help bolster domestic demand.”

Mr. Remolona has signaled the possibility of up to 100 bps worth of rate cuts next year.

PESO WEAKNESS
Meanwhile, Mr. Dacanay said that the recent peso depreciation could pose a risk to the BSP’s easing cycle.

“The only upside risk to monetary policy is the currency. The USD-PHP (US dollar-Philippine peso) ranged between P58.5 and P59 over the course of November. It was even millimeters away from breaching its historic highs on Nov. 26.”

The peso fell to the all-time low of P59 against the dollar twice during the month — on Nov. 21 and Nov. 26.

“But things got better since then. The PHP has now appreciated to P58.23 against the USD and, according to HSBC FX, further support should come in due to the seasonality of remittances,” he added.

The peso has since strengthened after sinking to the record low last month. The local unit appreciated to P57.735 per dollar on Friday, up by 14.5 centavos from its P57.88 finish on Thursday.

Mr. Dacanay also said the tone of the US Federal Reserve “will be crucial.”

“However, it will be key to monitor the tone of the Fed in the next two weeks. Any shift to a more hawkish rhetoric may introduce volatility in the currency and prompt the BSP to pause its easing cycle,” he added.

Reuters reported US rate futures were pricing in roughly a 90% chance the Fed will lower interest rates by 25 basis points at its Dec. 17-18 policy meeting, according to LSEG calculations which previously saw just a 72% chance.

The Fed has lowered rates by 75 bps since September, when it launched its easing cycle. — Luisa Maria Jacinta C. Jocson

Big banks post double-digit growth in loans, assets in Q3

A woman withdraws money at the Automated Teller Machine (ATM) of the Banco de Oro (BDO) Unibank, Inc. building in Makati City, Metro Manila, Philippines, June 23, 2016. — REUTERS

THE COMBINED ASSETS and loans of the Philippines’ biggest banks rose by double digits in the third quarter, amid increased economic activity.

The latest edition of BusinessWorld’s quarterly banking report showed that the aggregate assets of 44 universal and commercial banks (U/KBs) grew by 11.17% year on year to P25.98 trillion in the July-to-September period from P23.37 trillion a year ago.

The third-quarter asset growth was faster than the 10.7% logged in the second quarter, and the 8.78% in the same period in 2023. It was also the quickest in six quarters or since the 11.25% in the first quarter of 2023.

Asset and loan growth of Philippines’ biggest banks surges in Q3

Meanwhile, total loans of these big banks surged by 15.07% to P13.16 trillion in the third quarter, faster than 7.01% a year ago.

In the July-to-September period, lending growth was the fastest in 23 quarters or since the 15.13% posted in the fourth quarter of 2018.

Heightened lending activity in the third quarter may have reflected improving credit demand as the central bank began its easing cycle in August.

At its Aug. 15 meeting, the Bangko Sentral ng Pilipinas (BSP) reduced policy rates by 25 basis points (bps), the first rate cut in nearly four years. This brought the benchmark rate to 6.25% from the over 17-year high of 6.5%.

The BSP followed it up with another 25-bp cut at its October meeting, bringing the key rate to 6%.

However, gross domestic product (GDP) growth slowed to 5.2% in the third quarter from 6.4% in the second quarter. This was the weakest growth in five quarters or since the 4.3% expansion in the second quarter of 2023.

Data also showed the share of bad loans to the total loan portfolio, also known as the nonperforming loan (NPL) ratio, rose to 3.28% from 3.25% in the previous quarter but fell from 3.62% a year ago.

Loans are considered nonperforming if any principal and/or interest are left unpaid for over 90 days from the contractual due date or accrued interests for more than 90 days have been capitalized, refinanced, or delayed by agreement. 

On the other hand, the net NPL ratio went up to 1.63% from 1.49% in the second quarter.

The banks’ median return on equity (RoE), which is an indicator of profitability, slipped to 8.15% in the third quarter from 9.42% in the same period a year ago.

The RoE, the ratio of net profit to average capital, measures the amount that shareholders make on every peso they invest in a company.

Additionally, the big banks’ median capital adequacy ratio (CAR) — which reflects their ability to absorb losses from risk-weighted assets — stood at 19.65% during the period. This was lower than the 21.54% a year earlier and the 18.8% in the second quarter.

The ratio remained well above the regulatory minimum of 10% set by the BSP as well as the international minimum standard of 8% under the Basel III framework.

The leverage ratio — which gauges the institution’s ability to absorb shocks by measuring the bank’s capital relative to total exposure — stood at a median of 11.53% during the period. This exceeded the central bank’s 5% guideline as well as the international standard of 3%.

Meanwhile, the net interest margin (NIM) of these big banks slipped to 3.91% from 3.62% in the previous quarter.

NIM is an indicator of banks’ investing efficiency by dividing annualized net interest income by average earning assets.

In the third quarter, the return of assets (RoA), which measures the profit generated per peso of an asset, grew to 1.69% from 1.46% in the second quarter.

BDO Unibank, Inc. (BDO) remained the largest bank in terms of total assets with P4.73 trillion as of the third quarter. It was followed by Land Bank of the Philippines (LANDBANK) with P3.43 trillion and Metropolitan Bank & Trust Co. (Metrobank) with P3.42 trillion.

The Sy-led bank also led the industry in lending with P3.06 trillion in loans issued, followed by Bank of the Philippine Islands (BPI) with P2.12 trillion and Metrobank with P1.68 trillion.

In terms of deposits, BDO topped the list with P3.74 trillion, followed by LANDBANK with P3.04 trillion and BPI with P2.49 trillion.

Among banks with at least P100 billion assets, Security Bank Corp., recorded the fastest year-on-year asset growth with 40.73%, followed by The Hongkong & Shanghai Banking Corp. Ltd. (26.63%) and Citibank NA (21.94%).

Meanwhile, Philippine Trust Co. was the most aggressive lender, with loan growth at 33.10%, followed by Maybank Philippines, Inc. with 30.57% and Security Bank Corp. with 27.20%.

BusinessWorld Research has been tracking the financial performance of the country’s large banks quarterly since the late 1980s using banks’ published statements. — Abigail Marie P. Yraola

Investment banks eye 2025 income boom as Trump drives deal rebound

The Wall Street sign is pictured at the New York Stock exchange (NYSE) in the Manhattan borough of New York City, March 9, 2020. — REUTERS/CARLO ALLEGRI/FILE PHOTO

LONDON — President-elect Donald J. Trump’s return to the White House is seen fueling a dealmaking revival that could bolster investment banking income to $316 billion globally next year, a jump of about 5.7% on 2024, data seen by Reuters show.

Mergers and acquisitions (M&A) bankers are forecast to rake in about $27.6 billion in fees, according to previously unreported figures from analytics and insight provider Coalition Greenwich, in what could be their second-best year in at least two decades.

Global investment banking income has only topped $300 billion five times in the last 20 years, the data show, with earnings power in recent years stifled by the pandemic, inflation and global political unease.

Mr. Trump’s pro-business leanings should help an already thriving US economy, which could in turn encourage greater volumes of cross-border dealmaking and investment from European firms chasing growth, bankers said.

“I know it’s that time of year where bankers love to be bullish, but we actually do think that the current climate — political clarity and macro stability — will help drive M&A,” Richard King, head of corporate banking, EMEA, at Bank of America said.

“There’s a lot of pent-up demand that will likely come through in 2025,” he said, pointing to private equity as well as acquisitive trade buyers across a range of sectors including healthcare, tech and energy.

Mr. Trump’s administration could be particularly conducive to M&A because he is seen as likely to wave more deals through that had been blocked under the previous administration over competition or US strategic importance concerns, bankers said.

While rainmakers are getting busier, bankers managing debt sales for companies and governments could also see a jump in activity, bringing in as much as $49 billion, a new record, according to Coalition.

Revenue from the trading of securities — the biggest contributor to investment bank income — forecast at $220 billion for 2025 would be the highest since 2022.

Credit and emerging markets macro-related products are likely to see the biggest jump on 2024 figures next year, with a 6% increase each while trading in interest rate-related products could shrink as much as 3.5%.

“We have healthy corporate balance sheets, but we have a rate environment that has increased cost of capital… so businesses cannot be lazy,” said Taylor Wright, co-head of global banking at Barclays, predicting private equity firms will be active as both buyers and sellers of businesses.

“Geopolitical risk, in our view, is the wild card. It’s hard to plan for that but absent that, we see a lot of factors that suggest that the next 12 to 24 months should be very good for investment banking.”

RETURN OF THE FAT CATS?
With revenue on the increase, banker payouts look destined to follow suit, although bonuses will remain below bumper 2021 levels for now.

New York-based pay consultancy Johnson Associates said last month it expected banker salaries to rise in almost every business unit, with the exception of real estate investing.

Headhunters are also reporting new hiring mandates from some banks following Mr. Trump’s re-election, and a focus on adding staff in the first quarter, traditionally a time when most banks look to reduce headcount.

Hiring has increased across securities trading and from junior through to senior positions, said Natalie Nicolaou, senior manager, Distribution & Front Office, at Robert Walters UK. — Reuters

Jonathan Esmerio takes reins of Loxon group of companies

The Loxon Group of Companies would like to announce that Jonathan A. Esmerio has been elected by the Board of Directors as its new President and Chief Operating Officer. He also steps up as President of Loxon Wandset, Inc. (LWI), a subsidiary that specializes in building envelop systems such as the design of aluminum glass for facade systems, engineering, testing, fabrication and installation of aluminum and glass systems, after being promoted from Vice President. Jon remains to be President of the other subsidiaries namely, Loxon Philippines, Inc. (LPI), which is a globally recognized specialty contractor of fully integrated building management systems for the protection of life and property; and ECE Prime Holdings, Inc., which has interests in the property sector. Jon also sits as a Director of the Group’s international logistics and procurement arm, Loxon Limited Hong Kong.

LPI and LWI have both achieved ISO-certification for their Risk Based Quality Management System and are Triple A-licensed specialty contractors as certified by the Philippine Contractors Accreditation Board (PCAB).

In both of his new roles, Jon replaced company founder Ed C. Esmerio who will continue to serve as Chairman of Loxon Group of Companies and the Chief Executive Officer of LWI. Jon has been tasked to oversee project management operations and business development while Ed will focus his energies on engineering and design, logistics, plant expansion and the forging of joint-venture partnerships for building facades with leading foreign companies.

“I would like to thank the Board for their vote of confidence and trust. I look forward to steering Loxon Group towards further growth and expansion by capitalizing on technological innovation and making sustainability a core part of our business strategy,” said Jonathan A. Esmerio, President and COO of Loxon Group of Companies.

Jon brings with him a wealth of experience having served in a variety of roles within the Group over the last 21 years. He has undergone extensive leadership and technical training here and abroad, and his track record of accomplishments has prepared him well for this new challenge. Jon graduated with a degree in BS Industrial Engineering from De La Salle University and completed the Corporate Finance Diploma Course in Ateneo de Manila Graduate School of Business and the Eliminate Obstacles to Growth by Recognizing and Overcoming Challenges Course of Harvard Business School.

 

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