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Overseas investors turn bearish on Japanese equities after brutal sell-off

PEOPLE walk on Shibuya crossing in Tokyo, Japan on April 23, 2021, in this photo taken by Kyodo. — KYODO/VIA REUTERS

HONG KONG – Global investors are turning bearish on once-favored Japanese stocks following last week’s turbulence as they reassess economic prospects and the viability of yen-funded trades.

Using cheap yen to buy stocks on the Nikkei was a hot trade until this month. The Nikkei index had doubled since the start of 2023, and a tumbling yen had boosted returns for investors and companies.

That trade is being turned on its head by sudden volatility in the Japanese yen, Bank of Japan (BOJ) rate rises, doubts around Japan Inc.’s earnings and worries the US economy is stalling.

The CSOP Nikkei 225 Daily Double Inverse exchange-traded fund – the only ETF outside Japan that allows bearish bets against the Nikkei index – saw a surge in its trading volume during the week ended Aug. 9.

Average daily turnover on the Hong Kong-listed product reached nearly HK$20 million ($2.57 million), a 20-fold increase from previous week’s roughly HK$1 million per day and the highest since its launch in May this year.

Investors are also exiting direct exposure to Japan.

Global hedge funds dumped Japanese equities at the fastest pace in more than five years during the Aug. 2 to Aug. 8 week, Goldman Sachs said, and even some long-term investors have started cutting exposure.

The BOJ’s quantitative tightening and a strong yen will be headwinds for Japanese stocks, said Ben Bennett, head of investment strategy for Asia at LGIM, a London-based asset management giant.

The firm’s multi-asset funds had turned underweight Japanese equities before last week, he said, adding they maintained that weighting after the volatile week.

Japanese stocks had their worst one-day sell-off since 1987 last Monday. Fears of a US recession and a surprise rate hike in Japan triggered a massive unwinding of billions of dollars of a popular yen carry trade that was financing the purchase of risk assets, including Japanese equities.

While the actual size of the unwinding remains uncertain, some analysts warn it has room to go, given expectations of yen appreciation and a spike in the CBOE Volatility Index.

The yen has surged from around 162 per dollar in mid-July to roughly 142 per dollar last Monday, its strongest level in seven months.

“One of the drivers of upside in Japanese equities is going to phase out,” said Carlos Casanova, senior economist for Asia at Swiss asset manager UBP, referring to yen carry trades.

“Now we need to see an improvement in fundamentals, meaning that you need to see upward revisions in earnings. And that’s not going to happen unless we see a recovery in the domestic economy,” he said.

UBP has recently exited some positions in Japanese equities and now holds a neutral view.

Zuhair Khan, Tokyo-based senior portfolio manager at UBP, said it was getting tougher to trade the Japanese market as the US interest rate cut path and the yen had both become harder to predict.

Markets, meanwhile, are waiting for data due this week on Japanese second-quarter economic growth and US inflation.

“No one wants to act rashly now,” said Steven Leung, a Hong Kong-based executive director at UOB-Kay Hian. “Investors need to wait for important figures this week to draw a more informed conclusion about whether the sell-off in Japanese stocks is over.” – Reuters

US, Japan keen on $15B Philippine projects as ties grow

FREDERICK GO — CECILIA YAP/BLOOMBERG

The US and Japan are very interested to help fund at least $15 billion worth of projects on the Philippines’ main island, in signs that enhanced security ties are leading to greater economic benefits, according to President Ferdinand Marcos Jr.’s investment czar.

The three nations will prioritize five major projects in the Luzon Economic Corridor plan which may well turn out to be Marcos’ flagship investment program, said Secretary Frederick Go who advises the president on the economy. The list includes a cargo rail linking Luzon’s major ports estimated at $11 billion and a renewable energy project, he said.

“We are reaping the benefits of closer defense ties with the US and other allies in terms of promoting investments,” Mr. Go said in an interview Monday. The UK is also interested in helping fund projects in the corridor, he added.

The Philippines, which lags neighbors in attracting overseas investments due to infrastructure gaps and friction costs, is seeking to leverage stronger ties with the US and its allies under Mr. Marcos to help unlock economic benefits. The push comes as competition in the region intensifies, with Washington and other Western nations aiming to diversify supply chain sources and reduce their exposure to China.

The plan to reinvigorate Luzon, the country’s main economic engine where the capital sits, was unveiled after US President Joe Biden met with leaders from Japan and the Philippines in April. The three allies are bolstering economic ties as their defense relations grow in the face of Beijing’s assertiveness in the region.

The Philippines’ alliance with the US is expected to remain strong whoever wins the presidential race in November, Mr. Go said. The goal is to start the five Luzon corridor projects during Mr. Marcos’ term which ends in 2028, he added.

Faster gross domestic product growth, possibly exceeding 7% annually is achievable in the next four years, said Mr. Go, as Mr. Marcos aspires to shift the economy from being consumption-led to one that’s driven by investment.

Catching up with neighbors in terms of investments has eluded many Philippine presidents. What’s different this time around, according to Mr. Go, is that the administration is capitalizing on Mr. Marcos’ foreign policy agenda to benefit the economy. Part of Mr. Go’s task is to provide the follow-through that’s needed to ensure that investment pledges actually materialize.

“This is why I’m focusing on improving ease of doing business and reducing the cost of doing business because they are the key pillars to realizing an investment-led growth,” said Mr. Go, who was president of Robinsons Land Corp. before taking on the government post.

Some early signs are promising. There’s $1 billion in investment commitments from American businesses during a Biden-initiated trade mission in March. The nation also recently opened up more sectors for foreigners, including renewable energy. GDP expanded 6.3% last quarter, among the highest in Southeast Asia, as investments grew by double digits.

Yet other growth drivers have been shaky, with consumption posting the slowest post-pandemic growth in the first two quarters and government spending hampered by limited fiscal space. Signs of strain in the economy are putting the onus on Mr. Marcos to lure more investments. 

One bright spot for investments is the “Create MORE” bill which seeks to reduce corporate income taxes and put policies including incentives at par with neighbors. 

Mr. Go is paying special attention to the electronics and semiconductor sector as it accounts for the country’s biggest goods exports. He’s hoping that “Create MORE” will usher in more investments in that area.

“We have to play in a field where we are good at,” he said. “At the same time, we should benchmark ourselves with the best in the world to become more competitive,” he said. — Bloomberg 

Philippines calls Chinese air force actions over Scarborough Shoal ‘coercive, aggressive, deceptive’

PHILIPPINE STAR/EDD GUMBAN

MANILA – The Philippine Navy said on Tuesday last week’s actions by the Chinese air force over the disputed Scarborough Shoal in the South China Sea were “coercive, aggressive and deceptive”.

The Philippines has been incensed by what it saw as a dangerous maneuver by two Chinese aircraft, which it said dropped flares in the path of its military aircraft while conducting a routine patrol over the contested shoal on Thursday.

The actions had no place in the international arena, which is governed by international law, Rear Admiral Roy Vincent Trinidad told a briefing, adding China’s conduct raised the risk of untoward incidents.

China, which also claims sovereignty over the shoal, has disputed that saying it acted in a professional and legal manner.

The Scarborough Shoal, a prime fishing patch with a lagoon that provides shelter for vessels during storms, is one of Asia’s most contested sites, located inside the Philippines‘ exclusive economic zone but occupied by China for more than a decade.

The incident is the latest flare-up between the Philippines and China after more than a year of heated rows over disputed areas of the South China Sea, as U.S. ally Manila infuriates Beijing by stepping up its efforts to assert itself.

In a separate briefing, the Philippine foreign ministry said a provisional agreement on resupply missions for its troops at the Second Thomas Shoal was subject to review, but did not provide a reason for the review.

The two countries came to an arrangement last month after multiple standoffs at the shoal, where the Philippines in 1999 intentionally grounded a navy vessel and maintains a small contingent of troops to prop up its claim to sovereignty. – Reuters

Government personnel to get discount from drugstore for National Heroes Day

PHILSTAR FILE PHOTO

Generika Drugstore, an Ayala Corporation subsidiary, announced on August 12 a 5% discount program for all uniformed and non-uniformed (or civilian) personnel of the Armed Forces of the Philippines (AFP), Philippine National Police (PNP), Bureau of Fire Protection (BFP), Bureau of Jail Management and Penology (BJMP), and the Philippine Coast Guard (PCG). 

More than 500,000 active employees from the AFP, PNP, BFP, BJMP, and the PCG can avail of a 5% discount on all generic medicines from all branches of Generika Drugstore from August 6, 2024 to February 28, 2025. 

“This is our way of taking care of the people who take care of us, recognizing the invaluable sacrifices they make every day in the line of duty,” said Gino D. Guinto, the drugstore’s chief commercial officer, in an August 12 press statement. 

“Supporting their health and well-being is our contribution to making our nation safer,” he added. 

This discount is in support of Ayala Corporation’s Saludo sa Serbisyo program, launched in 2016. Through its subsidiaries, the company also provides housing assistance, financial education, livelihood training, and scholarships for dependents of uniformed personnel. 

“This has an impact on the morale and welfare of all uniformed personnel,” said Police Senior Inspector – Police Captain Antonio Dela Cruz of the Police Security and Protection Group. 

“It contributes to a sense of appreciation and support from the private sector, fostering a positive environment for those serving in uniform,” he said in the same press statement. 

Qualified personnel can avail themselves of the discount by presenting their agency ID at any Generika Drugstore nationwide. 

This discount cannot be combined with other special discounts such as those for senior citizens and persons with disabilities.

National Heroes Day in the Philippines is celebrated on the last Monday of August to honor the unknown heroes who fought to free the country from Spain, the US, and Japan. – Patricia B. Mirasol

The pros and cons of Kaliwa Dam’s construction

EIA.EMB.GOV.PH

The completion of the Kaliwa Dam is expected to address Metro Manila’s annual water supply drought, according to an expert from the state weather bureau.  

“Ang nangyayari kasi ang Angat pwersadong-pwersado sila magbigay ng tubig kasi nga doon lang umaasa ang lahat… ng residente ng Metro Manila plus yung karatig-bayan natin, [What’s happening is that Angat is being forced to provide water because most residents of Metro Manila and neighboring areas relies largely on it,” Juan Elmer S. Caringal, Hydrologist of the Philippine Atmospheric, Geophysical, and Astronomical Services Administration (PAGASA) said in an interview.  

MWSS.GOV.PH

“Kung matatayo yung Kaliwa (dam), matutulungan ang Angat sa pagbibigay ng tubig sa mga residente ng Metro Manila (and nearby provinces) [If the Kaliwa Dam is completed, it will help Angat in providing water supply among residents of Metro Manila and nearby provinces].”  

The P12.2 billion Chinese-funded Kaliwa Dam is expected to provide Metro Manila and nearby provinces with 600 million liters of water per day, according to the Metropolitan Waterworks and Sewerage System (MWSS). 

It is also expected to lessen the 90% potable water share of the nearly 60-year-old Angat Dam, which encounters critical water levels annually, especially during the dry season. 

For instance, on July 18 the Angat dam’s water level dropped to a critical level of 173 meters, compared to its normal high-water level of 210 meters.  

Mr. Caringal noted that the Kaliwa dam, like any other dam, could help store and manage excess rainwater that could potentially cause flooding in flood-prone areas of Metro Manila. 

“Tsaka…mababawasan ng kaunti ang pagbabaha sa Pasig at Marikina [Also, it will slightly reduce flooding in Pasig and Marikina],” he said.  

Despite various protests and opposition due to Kaliwa Dam’s potential harm to the environment and risk of displacing indigenous people from their ancestral lands.  

Kaliwa Dam’s construction is at 30% in March, and it is expected to be completed by 2027.  

 

Environment and local communities 

The promises of the Kaliwa Dam may benefit residents of Metro Manila, but it may adversely affect the environment and lives of local communities, according to Green Peace.  

“Yes, construction can potentially have positive impacts in some aspects, such as water supply. But a cost of what? Is it at the cost of the environment, alam nating bio-sensitive yang area na ‘yan [We know that area is bio-sensitive],” Jefferson Chua, Climate Campaigner for Green Peace said in an interview.  

A MAN arrives at a shallow part of Agos River, where the Metropolitan Waterworks and Sewerage System is planning to build a dam. — PHILSTAR FILE PHOTO / EFIGENIO TOLEDO IV

“There are communities there, (who are) Indigenous people (Dumagat-Remontado Indigenous group) that have intimate ties to the land.  

One main point of opposition to the Kaliwa Dam is that it is projected to inundate 113 hectares of forest land.  

Eight to eleven villages and 39 indigenous communities, totaling 1,465 families, are also at risk of being displaced. 

However, proponents of the project claimed that only 46 families will be directly impacted by the dam. 

Mr. Chua urges people to scrutinize the Kaliwa Dam project as it may justify the harm to indigenous people for the benefit of others.  

“For us, development should be for all, and not just for all, it should be equitable,” he said.  

Mr. Chua emphasized that the concerns within the communities must be fairly addressed before the completion of the dam project.  – Edg Adrian A. Eva

US says it had no role in ousting of Bangladesh’s Hasina

By Prime Minister's Office (GODL-India), GODL-India, https://commons.wikimedia.org/w/index.php?curid=138814918
Prime Minister of Bangladesh, Ms. Sheikh Hasina, in New Delhi on September 08, 2023.

WASHINGTON – The United States had no role in ousting Bangladesh Prime Minister Sheikh Hasina, who recently quit her position and fled the South Asian nation, the White House said on Monday, calling allegations of US interference “simply false.”

“We have had no involvement at all. Any reports or rumors that the United States government was involved in these events is simply false,” White House spokesperson Karine Jean-Pierre said at a press briefing when asked about reported claims of U.S. involvement.

A report in the Economic Times newspaper in India on Sunday had cited Hasina as accusing the U.S. of playing a role in ousting her because it wanted control over Bangladesh’s Saint Martin island in the Bay of Bengal. The newspaper said Hasina had conveyed that message to it through her close associates.

Ms. Hasina’s son, Sajeeb Wazed, in a post on X on Sunday, said she never made any such statement.

“We believe that the Bangladeshi people should determine the future of the Bangladeshi government and that’s where we stand,” the White House added.

An interim government in Bangladesh, led by Nobel Peace laureate Muhammad Yunus, was sworn in on Thursday with the aim of holding elections in the Asian nation.

Bangladesh was engulfed by demonstrations and violence after student protests last month against quotas that reserved a high portion of government jobs for certain groups escalated into a campaign to oust Ms. Hasina.

She had won a fourth straight term in January in an election that the opposition boycotted and which the US State Department said was not free and fair.

Ms. Hasina went to New Delhi after leaving Bangladesh, ending her uninterrupted rule of 15 years. – Reuters

Elon Musk interview of Trump marred by technical issues

GAGE SKIDMORE- WIKIMEDIA.ORG

WASHINGTON – Republican presidential candidate Donald Trump‘s interview with billionaire entrepreneur Elon Musk finally got underway on Musk’s social media platform X on Monday evening, following a lengthy delay caused by technical problems that kept many users from accessing the live stream.

Mr. Musk, who has endorsed Mr. Trump, began the event at 8:42 p.m. (0042 GMT Tuesday), more than 40 minutes after the scheduled start time. He blamed the difficulties on a distributed denial-of-service attack, in which a server or network is flooded with traffic in an attempt to shut it down, though his claim was not confirmed.

More than 1.3 million people were listening about 45 minutes into the conversation, according to a counter on X.

Mr. Trump sought to turn the problems into a positive, congratulating Mr. Musk on the number of people trying to tune in.

The former president sounded at times as if he had a lisp, many listeners on X pointed out. Some said it made him sound like a cartoon character, others suggested it could be due to audio compression issues.

The technical issues recalled a similar event on X in May 2023, when Florida Governor Ron DeSantis suffered a chaotic start to his bid for the Republican presidential nomination due to glitches on the platform.

At the time, Mr. Trump mocked Mr. DeSantis on his own, social media platform, Truth Social. “My Red Button is bigger, better, stronger, and is working (TRUTH!)” Trump posted, “Yours does not.”

Ahead of Monday’s event, Mr. Musk had written: “Am going to do some system scaling tests tonight & tomorrow in advance of the conversation.” X did not respond to requests for details or evidence of the alleged cyberattack.

Mr. Musk spent much of the early part of the interview lauding Mr. Trump for his bravery during the attempt on his life on July 13, when his ear was struck by a bullet.

Mr. Musk, the world’s richest person, announced his support for Mr. Trump shortly after the shooting. He backed Democratic President Joe Biden in 2020 but has tacked rightward since.

Mr. Trump said he plans to return to Butler, Pennsylvania, the site of the attack, for a rally in October.

As the conversation unfolded, Mr. Trump delivered his usual mix of grievances, exaggerated claims and personal attacks, with Musk offering occasional encouragement.

Mr. Trump claimed without evidence that Russia would not have invaded Ukraine if he were still president and praised Russian President Vladimir Putin, Chinese President Xi Jinping and North Korean leader Kim Jong Un – all authoritarian strongmen – as at the “top of their game.”

He also expressed anger that Vice President Kamala Harris had been swapped in for Mr. Biden on the Democratic ticket.

“She hasn’t done an interview since this whole scam started,” Trump said, claiming falsely that Biden dropping off the ticket was a “coup.” Mr. Trump had been leading Mr. Biden in many polls of battleground states likely to be critical to the outcome of the Nov. 5 election, but is now trailing Harris in some of the same states.

In an interview that was light on policy detail, Mr. Trump also appeared to praise Mr. Musk for firing workers.

“You’re the greatest cutter. I mean, I look at what you do. You walk in, you just say: ‘You want to quit?’ They go on strike – I won’t mention the name of the company – but they go on strike. And you say: ‘That’s okay, you’re all gone.'”

 

TRUMP BACK ON X

The interview provided an opportunity for Mr. Trump to seize the limelight at a time when his campaign is facing new headwinds.

Ms. Harris has erased Mr. Trump’s lead in opinion polls and energized Democratic voters with a series of high-energy rallies since she replaced Biden as the party’s candidate three weeks ago. Her momentum could get another boost from the Democratic National Convention next week in Chicago.

Mr. Trump returned to X, formerly known as Twitter, with a series of posts on Monday for the first time in a year, reviving an account that had served as a main method of communication in previous campaigns and his four years in the White House, including his followers’ Jan. 6 2021 attack on the US Capitol.

Mr. Trump’s access to his account, @realDonaldTrump, was restored a month into Musk’s ownership of X after being suspended by the platform’s previous owners following the Jan. 6 attack, citing concerns he would incite violence.

Mr. Trump frequently posts on his Truth Social platform, which was launched in February 2022, but his posts there reach a much smaller audience than on X.

 

MUSK BACKS TRUMP

Mr. Musk, who heads electric car company Tesla, has echoed Mr. Trump’s false claims about voter fraud and Biden’s immigration policies.

Mr. Musk has started an external super PAC spending group to support Mr. Trump’s campaign. The political action committee is now under investigation in Michigan for possible violations of state laws on gathering voter information.

Mr. Trump, a longstanding critic of electric vehicles, shifted gears after Musk’s endorsement.

“I’m for electric cars. I have to be, because Elon endorsed me very strongly. So I have no choice,” Trump said at an early August rally.

United Auto Workers President Shawn Fein, campaigning in support of Ms. Harris, called Mr. Trump a “sellout.”

The Biden administration has worked to popularize electric vehicles through tax breaks and other support as part of its broader goal of reducing carbon emissions blamed for climate change.

Republicans in Congress, including Mr. Trump’s running mate Senator JD Vance, have opposed those subsidies. – Reuters

IAEA unable to determine cause of Zaporizhzhia nuclear plant fire

The International Atomic Energy Agency (IAEA) said late on Monday that its representatives inspected a damaged cooling tower at the Russia-controlled Zaporizhzhia Nuclear Plant in Ukraine but could not immediately determine the cause of a fire there at the weekend.

Moscow and Kyiv have accused each other of starting the fire at the vast dormant nuclear power plant in Ukraine, with Russia blaming a drone attack and Ukraine saying it was likely Russia’s negligence or arson.

The IAEA team found no immediate sign of drone remains and assessed that it was unlikely that the primary source of the fire began at the base of the cooling tower, the IAEA said in a statement on its website.

“The team has not been able to draw definitive conclusions (on the cause of fire) on the basis of the findings and observations so far,” the agency said.

Neither Moscow or Kyiv have reported signs of elevated radiation.

The IAEA said damage was most likely concentrated on the interior of the tower at the water nozzle distribution level, at roughly 10 meters (33 ft) high.

“The team confirmed that there were no significant signs of disturbance of the debris, ash or soot located at the base of the cooling tower,” the IAEA said.

“The nuclear safety of the plant was not affected, as the cooling towers are not currently in operation.”

Russia captured the plant from Ukraine shortly after launching a full-scale invasion of its smaller neighbor in 2022, which it calls a “special military operation”. – Reuters

Seismic data indicates huge underground reservoir of liquid water on Mars

STOCK PHOTO | Image by GooKingSword from Pixabay

WASHINGTON – An immense reservoir of liquid water may reside deep under the surface of Mars within fractured igneous rocks, holding enough to fill an ocean that would cover the entire surface of Earth’s planetary neighbor.

That is the conclusion of scientists based on seismic data obtained by NASA’s robotic InSight lander during a mission that helped decipher the interior of Mars. The water, located about 7.2 to 12.4 miles (11.5 to 20 km) below the Martian surface, potentially offers conditions favorable to sustain microbial life, either in the past or now, the researchers said.

“At these depths, the crust is warm enough for water to exist as a liquid. At more shallow depths, the water would be frozen as ice,” said planetary scientist Vashan Wright of the University of California, San Diego’s Scripps Institution of Oceanography, lead author of the study published on Monday in the journal Proceedings of the National Academy of Sciences.

“On Earth, we find microbial life deep underground where rocks are saturated with water and there is an energy source,” added planetary scientist and study co-author Michael Manga of the University of California, Berkeley.

The InSight lander touched down in 2018 to study the deep interior of Mars, gathering data on the planet’s various layers, from its liquid metal core to its mantle and its crust. The InSight mission ended in 2022.

“InSight was able to measure the speed of seismic waves and how they change with depth. The speed of seismic waves depends on what the rock is made of, where it has cracks and what fills the cracks,” Wright said. “We combined the measured seismic wave speed, gravity measurements and rock physics models. The rock physics models are the same as the ones we use to measure properties of aquifers on Earth or map oil and gas resources underground.”

The data indicated the presence of this reservoir of liquid water within fractured igneous rocks – formed in the cooling and solidification of magma or lava – in the Martian crust, the planet’s outermost layer.

“A mid-crust whose rocks are cracked and filled with liquid water best explains both seismic and gravity data,” Wright said. “The water exists within fractures. If the InSight location is representative and you extract all the water from the fractures in the mid-crust, we estimate that the water would fill a 1-2 km deep (0.6-1.2 miles) ocean on Mars globally.”

The Martian surface is cold and desolate today but once was warm and wet. That changed more than 3 billion years ago. The study suggests that much of the water that had been on the Martian surface did not escape into space, but rather filtered down into the crust.

“Early Mars had liquid water on its surface in rivers, lakes and possibly oceans. The crust on Mars could also have been full of water from very early in its history, too,” Manga said. “On Earth, groundwater underground infiltrated from the surface, and we expect this to be similar to the history of water on Mars. This must have occurred during a time when the upper crust was warmer than it is today.”

Water would be a vital resource if humankind ever is to place astronauts on the Martian surface or establish some sort of long-term settlement. Mars harbors water in the form of ice at its polar regions and in its subsurface. But the depth of the apparent underground liquid water would make it difficult to access.

“Drilling to these depths is very challenging. Looking for places where geological activity expels this water, possibly the tectonically active Cerberus Fossae (a region in the northern hemisphere of Mars), is an alternative to looking for deep liquids,” Manga said, though he noted that concerns about protecting the Martian environment would need to be addressed. – Reuters

J&J has enough support from claimants for $6.5-billion talc settlement, Bloomberg reports

NEW YORK – Johnson & Johnson has cleared a key threshold of support for its proposed $6.5-billion settlement of tens of thousands of lawsuits alleging its baby powder and other talc products caused cancer, according to a Bloomberg report.

More than 75% of claimants voted in favor of the proposal, according to Bloomberg, a hurdle J&J set for a third attempt at placing a subsidiary in bankruptcy protection to resolve the litigation.

Reuters has not independently verified the report, for which Bloomberg cited sources familiar with the negotiations. Sources who spoke with Reuters said the votes are still being tallied.

J&J spokesperson Clare Boyle said the company could not comment as the vote tally was not final. The company has previously expressed confidence that its settlement proposal would ultimately win enough support from plaintiffs to proceed.

J&J faces lawsuits from about 61,000 claimants who alleged that its baby powder and other talc products were contaminated with asbestos and caused ovarian and other cancers. J&J denies the allegations and has said that its products are safe.

The company set the 75% vote percentage, matching a provision in U.S. bankruptcy law, as the benchmark to proceed with another bankruptcy bid, which now is expected in the near future. The deadline for casting votes was July 26.

After being rebuffed twice by federal courts, the healthcare giant is attempting again to end the litigation in a so-called “Texas two-step” bankruptcy.

The “two-step” maneuver involves offloading its talc liability onto a newly created subsidiary, which then declares Chapter 11. The goal is to use the proceeding to force all plaintiffs into one settlement – without requiring J&J itself to file bankruptcy.

But the company needs the votes of 75% of claimants before the subsidiary can ask a bankruptcy judge to impose the deal on all of them.

Bankruptcy judges can enforce global settlements that permanently halt all related lawsuits and forbid new ones. Outside of bankruptcy, any settlement J&J reached with some clients would still leave holdouts or future plaintiffs with the right to sue – and leave the company exposed to potential multibillion-dollar verdicts that encouraged it to use a two-step in the first place.

The company has been engaged in a bitter fight with lawyers opposing its third attempt to settle the litigation through this maneuver.

Andy Birchfield, who represents plaintiffs opposed to the settlement, called J&J’s voting process a “fake bankruptcy election” that would not stand up in court.

“No matter what tally is announced, I expect it will be challenged and eventually rejected so that juries can decide what to do about J&J’s egregious conduct,” Birchfield said.

J&J’s third attempt at a bankruptcy settlement differs from its previous efforts in part because it focuses only on ovarian and other gynecological cancer claims, building on J&J’s previous settlements with state attorneys general and people who had sued after developing mesothelioma, a rare form of cancer linked to asbestos exposure.

J&J’s bankruptcy strategy still faces legal hurdles. The Supreme Court recently ruled in Purdue Pharma’s bankruptcy to narrow the ability of courts to stop lawsuits against people and companies like J&J that are not bankrupt without the consent of the people who have sued.

J&J has said the Purdue ruling does not affect its settlement proposal because U.S. bankruptcy law includes explicit legal protections for asbestos defendants that have not filed for bankruptcy. J&J has said it qualifies for those protections because the lawsuits generally allege that the talc used in its products was mined from underground mineral deposits that also contained asbestos.

Some legal experts have said that J&J may not qualify for those specific legal protections, which were written to encourage settlement payments by insurers with indirect liability for asbestos lawsuits.

J&J’s strategy also faces opposition from plaintiffs’ attorneys who argue that its new settlement should fail for the same reason as its first two. Courts rejected J&J’s first two talc bankruptcies because the subsidiary was not in “financial distress,” and J&J must overcome similar arguments in this bankruptcy attempt.

Congress has proposed legislation that would limit the ability of companies to shield themselves from lawsuits by putting a shell company into bankruptcy. – Reuters

BingoPlus Foundation strengthens target to promote health, resilience and sustainable livelihood

BingoPlus Foundation and volunteers provided emergency relief to 1,000 households affected by the volcanic eruption of Mt. Kanlaon.
BingoPlus Foundation, the social development arm of DigiPlus Interactive Corp. (DigiPlus), is reinforcing its commitment to contribute to the United Nations Sustainable Development Goals of addressing hunger (SDG 2) and promoting sanitation (SDG 6) in the country.
The Foundation distributed 1,000 groceries of food essentials and sanitation supplies to evacuees in the wake of the Mt. Kanlaon volcanic eruption in Negros Occidental, done in partnership with the Municipality of La Castellana, represented by Mayor Alme Rhummyla Nicor-Mangilimutan; and the Nikki Cares Foundation, Inc., represented by founder Dominique Lopez-Benitez.
In support of the “LAB For All” medical program spearheaded by First Lady Liza Araneta Marcos in Bacolod City, BingoPlus Foundation also provided volunteers and logistics support to mobilize the said medical mission, benefitting nearly 8,000 patients in the city.
In Bacolod City, the Foundation further supported the government’s LAB For All medical mission as part of its advocacy to provide accessible healthcare to Filipinos.

BingoPlus Foundation further broadened its impact in General Santos, providing flu vaccination to 500 residents in Purok Mapailubon and initiating the construction of sanitation facilities in barangays. The Foundation further launched a dressmaking training center with Barangay San Isidro, TESDA and DoLE, as part of its KabuhayanPLUS livelihood program.

Apart from efforts to promote the health and sanitation in General Santos, BingoPlus Foundation launched a dressmaking training center to enable sustainable livelihood.
These initiative forms part of the Foundation’s Barangay Bigayan program, which aims to address the most urgent and pressing needs of urban communities in terms of resilience, health and capacity-building education and infrastructure. This seeks to enrich the spirit of giving and togetherness that Filipinos are known for.
“Our Barangay Bigayan initiatives are grounded in our commitment to holistic community support. While healthcare is directly addressed through medical missions and improved sanitation facilities, our resilience efforts go beyond post-disaster presence. We focus on capacity-building programs for emergency preparedness and economic stability, ensuring that our communities are equipped to face any challenge,” said DigiPlus President and BingoPlus Foundation Chairman Andy Tsui.

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PHL likely to grow by 6% this year

A vendor waits for customers in Divisoria, Manila. — PHILIPPINE STAR/EDD GUMBAN

By Luisa Maria Jacinta C. Jocson, Reporter

PHILIPPINE gross domestic product (GDP) growth is expected to average 6% this year, at the low end of the government’s 6-7% target, according to analysts. 

Fitch Solutions’ unit BMI lowered its Philippine GDP growth forecast to 6% this year from 6.2% previously, after weaker-than-expected second-quarter data.

“The latest growth outturn clearly showed that we have overestimated the health of the Philippine economy,” it said.

The Philippine Statistics Authority (PSA) last week reported that GDP expanded by 6.3% in the second quarter, quickening from the revised 5.8% in the first quarter and beating the 6% median estimate in a BusinessWorld poll.

BMI had earlier projected 6.5% GDP growth for the second quarter.

For the first half of the year, GDP growth averaged 6%. In order to meet the low end of the government’s 6-7% target, the economy would need to expand by at least 6% in the second semester.

“To reach our previous 6.2% growth projection for 2024, the economy must expand by around 6.4% in the second half, which we think is unlikely,” BMI said.

BMI said that the Philippines’ second-quarter growth print “paints a misleading picture of the economy’s health.”

“Reinforcing our view, the 0.5% quarter-on-quarter expansion recorded was the softest pace since the second quarter of 2023. Much of this weakness stemmed from a poor performance in the external sector, as we had expected,” it said.

On a seasonally adjusted quarter-on-quarter basis, GDP grew by just 0.5%, slower than the 1.1% in the first quarter.

“Indeed, exports contributed just 1.2 percentage points (ppts) to headline growth, halving the strong 2.4-ppt contribution in the prior quarter. Along with a strong pickup in imports, net exports detracted 0.8 ppt from the headline figure,” it added.

PSA data showed that exports of goods and services grew by 4.2% in the second quarter, much slower than the 8.4% growth a quarter ago.

“Against the backdrop of a slowing global economy in the second half, external demand will prove even less supportive over the coming quarters,” it added.

Despite this, BMI noted that domestic demand continues to hold up “pretty well.”

Growth in household consumption slowed to 4.6% from 5.5% a year ago. Private consumption accounts for about three-fourths of the economy.

“Despite a dip in private consumption contribution from 3.4 ppts in the first quarter to 3.2 ppts in the second quarter, the rebound in investment activity more than made up for it,” it said.

Gross capital formation or the investment component of the economy grew by 11.5% in the second quarter, faster than the 0.5% growth in the previous quarter and 0.7% a year ago.

“Contribution from gross fixed capital formation jumped from 0.5 ppt to 2.5 ppts, the highest level in almost two years. We expect imminent rate cuts by the Bangko Sentral ng Pilipinas (BSP) to provide a further lift to domestic activity,” it said.

CITI OUTLOOK
On the other hand, Citigroup, Inc. raised its GDP growth projection to 6% this year from 5.9% previously due to expectations of improving economic conditions.

“While household consumption is likely to only gradually recover, there are supporting factors such as strong employment, as well as the expected lower inflation and interest rates in the coming months,” Citi economist for the Philippines Nalin Chutchotitham said in a report.

Inflation is also seen to continue to ease after the spike in July. “We also agree with the BSP that inflation is projected to decline from August onwards,” it said.

Headline inflation rose to 4.4% in July from 3.7% in June, its fastest pace in nine months.

In the first seven months of the year, headline inflation averaged 3.7%. The BSP expects inflation to average 3.3% this year.

For 2025, Citi sees growth steady at 6%. This would be below the 6.5-7.5% government target.

“We maintain our expectation of 2025 growth at 6%, noting increasing external headwinds from the slowdown in several advanced economies (especially the US), which are the Philippines’ key trading partners and sources of overseas workers’ remittances,” Ms. Chutchotitham said.

EASING TO START
Meanwhile, Citi said that it expects the BSP to commence its easing cycle at its meeting on Thursday.

“We continue to expect a 25-bp rate cut starting at the Aug. 15 policy meeting despite a temporarily high inflation print in July,” Ms. Chutchotitham said.

Citi also expects the Monetary Board to cut rates by 25 bps at its October and December meetings, for a total of 75 bps for the full-year 2024.

“The BSP may, with some small probability, err on the cautious side and stand pat in August, given July’s inflation print at 4.4% year on year amid volatile food and energy prices,” Ms. Chutchotitham said.

A BusinessWorld poll conducted last week showed that nine out of 16 analysts surveyed expect the Monetary Board to deliver a 25-bp rate cut at Thursday’s review. This would bring the target reverse repurchase rate to 6.25% and would be the first reduction in benchmark borrowing costs since November 2020, or during the coronavirus pandemic.

BSP Governor Eli M. Remolona, Jr. last week said they may be “a little bit less likely” to cut rates at its upcoming meeting amid the uptick in July inflation.

At the same time, ING Bank N.V. Research Head and Chief Economist for Asia and the Pacific Robert Carnell said he now expects the BSP to keep rates on hold on Thursday due to recent market volatility.

“Were it me… I probably would leave it this month and wait until the market’s a little calmer,” he said at a briefing on Monday. “The thing that I think makes it more of a coin toss is the volatility of the market backdrop. We have been through a really, pretty hectic and volatile couple of weeks.”

Stronger-than-expected GDP data in the second quarter and July inflation also don’t support the August rate cut, Mr. Carnell said.

“The GDP numbers could have supported that had they been weaker… Having said that, the inflation numbers made it slightly less likely that they’d be easing in August,” he said.

Mr. Carnell also noted that the BSP should wait for other central banks to cut rates first to see how the market reacts.

He expects the Fed to cut by 100 bps this year — a 50-bp cut in September, a 25-bp cut in November and another 25-bp cut in December.

“I just think the optics will look a little bit better in a month’s time, and there’ll also be that sort of safety in numbers at that stage, because we will have the Fed easing by then,” he said.

Aside from its scheduled policy meetings, Mr. Carnell also said that the BSP could still implement an off-cycle rate cut, but this move carries the risk of unnecessarily alarming the market.

Mr. Remolona earlier said that they are “always open” to off-cycle rate cuts.

After its August policy meeting, the BSP only has two meetings in the fourth quarter — Oct. 17 and Dec. 19. — with Aaron Michael C. Sy

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