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China’s Xi in US for high-stakes Biden summit, APEC

REUTERS

SAN FRANCISCO – Chinese President Xi Jinping began his first visit to the United States in six years on Tuesday, after President Joe Biden said he aimed to restore normal communications with Beijing and his top diplomat stressed the need for freedoms that Washington says Beijing is undermining in the Asia-Pacific region.

Mr. Xi is on his first visit to the US since 2017. He is due to meet Biden at an undisclosed location in the San Francisco Bay Area on Wednesday morning and then attend the annual summit of the Asia Pacific Economic Cooperation (APEC) forum.

Mr. Xi’s summit with Biden will be the first face-to-face meeting between the US and Chinese leaders in a year and has been billed by US officials as an opportunity to reduce friction in what many see as the world’s most dangerous rivalry.

Mr. Xi waved from the steps of his Air China plane upon arrival and descended to meet US officials on the tarmac, including Treasury Secretary Janet Yellen and US Ambassador to China Nicholas Burns.

He then got into his Chinese Hongqi, or “Red Flag,” limousine and departed the airport into San Francisco, where demonstrations are expected both for and against his visit.

Less than two hours earlier, US Secretary of State Antony Blinken addressed ministers of the 21-member APEC and stressed the US believed in “a region where economies are free to choose their own path … where goods, ideas, people flow lawfully and freely.”

Mr. Blinken did not mention China by name, but his language echoed US rhetoric in recent years in which Washington has accused China of bullying smaller countries in the Indo-Pacific and trying to undermine what the US and its allies call the “rules-based” order.

US Trade Representative Katherine Tai, who with Mr. Blinken opened the APEC ministerial session, said the San Francisco meeting came at a time of “great uncertainty and challenges” for the region. She noted increasing geopolitical tensions, fragile supply chains and a worsening climate crisis.

Earlier, Mr. Biden said he aimed to improve the relationship with China after a period of strained ties and would seek to resume normal communications between the two superpowers, including military-to-military contacts.

White House national security spokesperson John Kirby told reporters that Mr. Biden and Mr. Xi would also talk about the Israel-Hamas conflict in Gaza as well as US efforts to support Ukraine in its fight against the Russian military.

Economic issues will be high on the agenda.

Mr. Biden said the US does not want to decouple from China, but wants to change the economic relationship for the better.

His administration has made a push to “de-risk” some critical US supply chains from China as the two countries’ economic and military competition has grown.

 

CONCERNS ABOUT A SHOWDOWN

Mr. Biden has been careful to assure countries in the region, including China, that the US does not seek complete economic separation, a notion that has fueled concerns among Washington’s partners and allies of a superpower showdown that would upend the global economy.

China severed military-to-military contacts with the US after then-House of Representatives Speaker Nancy Pelosi visited democratically governed but Chinese-claimed Taiwan in August 2022.

Restoring the contacts is a top US goal to avoid miscalculations between the two militaries.

Washington also hopes for more cooperation from Beijing in combating production of the potent synthetic opioid drug fentanyl, which has become a scourge in the United States and particularly in San Francisco.

Sino-US relations worsened after Mr. Biden ordered the shooting down in February of a suspected Chinese spy balloon that flew over the United States.

Top Biden administration officials have since visited Beijing and met with their counterparts in an effort to rebuild communications and trust.

Several hundred mostly pro-China demonstrators carrying Chinese flags gathered outside the Chinese delegation’s hotel ahead of Xi’s arrival in the US.

Larger protests, including by rights groups critical of Mr. Xi’s policies in Tibet, Hong Kong and toward Muslim Uyghurs, are expected near the summit venue on Wednesday.

As Mr. Biden arrived in San Francisco, shortly before Mr. Xi was due to land, dueling demonstrators greeted the US president’s motorcade from the airport. Some waved Chinese flags and held banners calling for “kindly” and “warm” US-Sino ties. Others held signs condemning the Chinese Communist Party.

Earlier on Tuesday, a small aircraft flew circles over the APEC summit venue in downtown San Francisco, trailing a banner that read, “END CCP FREE CHINA FREE HK FREE TIBET FREE UIGHUR,” referring to China’s treatment of Uyghurs, which the Biden administration calls “genocide.” – Reuters

Thailand’s $14 billion digital handout an antidote to economic ‘crisis’ – PM’s advisor

WIKIMEDIA COMMONS

BANGKOK – Thailand’s new government will use its controversial digital handout plan to spend its way out of what it calls an economic “crisis” without making any major cutbacks or hitting its credit ratings, a senior government advisor said.

Prime Minister Srettha Thavisin’s signature 500 billion baht ($13.87 billion) stimulus policy has faced criticism over fears it could stoke inflation and adversely impact the fiscal position of Southeast Asia’s second-largest economy.

But Prommin Lertsuridej, Srettha’s chief of staff, said the package was essential to fire up a sluggish economy that has lagged regional peers since the pandemic, and reach average growth of 5% annually.

“We are not just imagining this. I can give you the numbers,” Prommin told Reuters, pointing to lacklustre economic data and repeatedly describing the economy as being in a state of “crisis”.

Thailand’s economy grew just 1.8% year-on-year in the second quarter, sharply slowing from the previous quarter, hit by weak exports that undercut a recovery in its crucial tourism sector.

“If you look at this as a crisis then you have to propose the law,” he said, referring to the government’s plan to submit a bill to parliament to borrow money to finance the scheme.

The populist program will provide digital payments of 10,000 baht ($279) to about 50 million of Thailand’s more than 70 million people to spend in their localities within six months, starting in May 2024.

Those who earn more than 70,000 baht ($1,941) per month or have net saving of less than 500,000 baht are excluded.

Srettha’s administration expects about 40% of recipients to combine the handout with other family members to start a new businesses or build a house, according to a government presentation seen by Reuters.

The government will not make any major cutbacks to its budgetary spending plans to accommodate the handout, and look to pay back about 100 billion baht every year aided by an increase in state revenue as the economy expands, said Prommin.

The scheme had also been discussed with the central bank, which suggested some tweaks, and would not have an impact on the country’s fiscal position or credit ratings, he said.

But some analysts are skeptical, as are some opposition lawmakers who have attacked the ruling Pheu Thai party for risking breaching Thailand’s fiscal regulations.

“We expect Thailand’s fiscal outlook to remain uncertain for the rest of this year,” said Tim Leelahaphan, an economist at Standard Chartered Bank in Thailand.

“Also, the Pheu Thai-led government’s ability to implement its pledged economic policies including the handout scheme has yet to be assessed, adding to fiscal uncertainty.” – Reuters

Australia says state-sponsored cyber groups targeting critical infrastructure amid spike in hacks

REUTERS

SYDNEY – State-sponsored cyber groups and hackers have stepped up their assault on Australia’s critical infrastructure, businesses and homes, a government report released on Wednesday showed, with one attack happening every six minutes.

Australia has seen a spike in cyber intrusions, prompting the government in February to set up an agency to help coordinate responses to hacks. Earlier this week, the government released some details of its proposed cyber laws that would force companies to report all ransomware incidents.

The Australian Cyber Security Centre (ACSC) received over 94,000 reports of cybercrime over the financial year to June, up 23% from the previous period, ACSC’s annual threat report said.

“The cyber threat continues to grow … we’re also seeing a greater interest from state actors in Australia’s critical infrastructure,” Defense Minister Richard Marles told ABC Radio.

In May, the Five Eyes intelligence alliance and Microsoft said a state-sponsored Chinese hacking group has been spying on a wide range of US critical infrastructure organizations. United States, Canada, New Zealand, Australia and the UK make up the Five Eyes intelligence sharing network.

The techniques used by the China hacking group could be used against Australia’s critical infrastructure sectors from telecommunications, energy to transportation hubs, the ACSC report said.

Mr. Marles said Australia’s relationship with China, its largest trading partner, was “complex” and the government had never pretended the relationship would be easy. The diplomatic and trade ties between the two countries have stabilized recently after several disputes since 2020.

“We value, clearly, a productive relationship with China … but China has been a source of security anxiety for our country and we prepare for that as well,” Mr. Marles said.

The ACSC report comes after a cyber incident at DP World Australia, one of the country’s largest ports operators, forced it to suspend operations for three days.

Cyber attacks against Australia will continue to rise until organizations started putting more effort into security and the risk management of their information assets, said Nigel Phair, cybersecurity professor at Monash University. – Reuters

What makes a successful leader

MicroSourcing and Beepo CEO Haidee C. Enriquez is hailed by the Asia CEO Awards as the Woman Leader of the Year for 2023.

By Bjorn Biel M. Beltran, Special Features and Content Assistant Editor

A Swedish proverb states, “Rough waters are truer tests of leadership. In calm water, every ship has a good captain.”

True enough, in times such as the present where the business landscape shifts like the changing tides, the value of true leadership becomes clear to all. Coming from the COVID-19 pandemic, everyone in the world has had to adjust in some way, whether it is working from home or taking classes online.

Such unexpected alterations to our way of life have had an impact on our principles and values. There has never been a more important time to consider what it means to be a leader and an aid to others than now.

This is the driving purpose of the Asia CEO Awards, held last Oct. 24 at the Manila Marriott Grand Ballroom in Pasay City. Each of the 15 categories in the awards ceremony hails notable organizations and leaders that have made important contributions to their industries and the country’s development. These organizations and leaders are selected to be part of Asia CEO’s distinguished Circle of Excellence in their respective categories. One of these Circle of Excellence awardees was hailed as the grand winner during the awarding ceremony.

The categories cover a wide range of categories and spans many different industries, recognizing the best companies in terms of innovation, sustainability, service excellence, corporate social responsibility, employment, and many more.

The Asia CEO Awards attempts to give answers to questions that are certain on every business leaders’ mind: In the wake of hurdles like the pandemic, the emergence of disruptive technologies like artificial intelligence, and socioeconomic challenges, what does it take to lead effectively in the new world? What qualities are necessary to thrive in the face of such daunting global and social challenges as climate change, the annihilation of our natural environment, and pervasive inequality?

When asked these questions, Asia CEO Awards Woman Leader of the Year Haidee Enriquez, the chief executive of business process outsourcing companies MicroSourcing and Beepo, responded with her own guideline for leadership: the acronym D.A.R.E.

“D stands for Dream. A stands for Act. R stands for Renew or Reinvent, and then E stands for Enjoy,” she said in an interview with BusinessWorld.

In the face of difficult challenges, Ms. Enriquez pointed out that a leader, first and foremost, should be the person in charge of creating a vision for a company to rally towards.

“The second one is act. Of course, we can dream all we want. But if we’re not willing to put in the action that’s necessary to be closer and closer to the realization of that dream then it’s just pointless, right?” she said, adding that it is essential for leaders to be the central role models for such actions to take place.

“Team members who have worked with me, including those who are in MicroSourcing, would often describe me as mangbubudol,” she shared with a laugh.

“According to them, I have a unique ability to make people do things that otherwise they would not have done or would not have even thought possible. I’d like to believe that it probably had something to do with the fact that they see me do it first. That they know and they see that I would not ask them to do something that I myself would not do. And because of that, it either inspires them or forces them to at least try.”

Ms. Enriquez admitted that she would not have gotten as far as she has in her field if not for her tenacity in reinventing and renewing her principles with regards to her work. She shared that she constantly had to ask more experienced members of the management team questions about how things were done in order for her to understand the landscape she was operating in.

Under her leadership, MicroSourcing and Beepo’s expansion pivoted to regions outside of Metro Manila, and have grown from 3,500 professionals to more than 8,000 in almost three years. More than half, or about 54% of them are now located in provincial locations. In addition, the companies’ Balik Eskwela program has benefitted more than 7,400 learners from far-flung public elementary schools across the country since their launch.

As one of 15 award categories, the Woman Leader of the Year prize recognizes the successful careers of Filipino women who have contributed to the country’s economy and social status. Ms. Enriquez, as one of the awardees, also paid tribute to other women leaders.

“While it is a great recognition, at the end of the day, what is more important is not what the public thinks of me. What is more important to me is what the people who really work with me on a day-to-day basis, what they think of me and what I think of myself in relation to the standards that I have set for myself,” she said.

For women and any individuals looking to follow in her footsteps, Ms. Enriquez also had some advice.

“I wouldn’t exactly want to inspire everyone or every woman out there to follow in my footsteps because I am a product of the unique circumstances of my life. But what I would like to dare them to do is to define success in their own terms, and to be the best version they could ever be of themselves.”

Ms. Enriquez said that one of the biggest fallacies and myths women believe is that they can only be successful if they have a great career, or if they are a C-level executive, or if they are earning a certain amount of money. While that may be true for some people, that is not necessarily true for all.

“A mother who has raised very successful children, while being a housewife all her life, I think, is a very successful woman in her own right and a very successful leader in her own right. Every individual I would dare, especially women, to really think through and discern: How do I define success in my case? Define what success looks like for you, and aim for that. Work for that. Dare to be that.”

Foreign investment pledges surge in Q3

Approved foreign investments hit P27.3 billion in the third quarter of 2023. — PHILIPPINE STAR/EDD GUMBAN

FOREIGN INVESTMENT pledges approved by investment promotion agencies (IPAs) more than doubled in the third quarter from the same period a year ago, the Philippine Statistics Authority (PSA) reported on Tuesday.

Total foreign investment commitments surged by 109% to P27.3 billion in the July-to-September period from the P13.05-billion haul a year ago.

The growth in foreign investment pledges was the fastest in two quarters or since the 4,455.6% surge in the first quarter of 2023.

Quarter on quarter, foreign investment commitments slumped by 54% from P59.09 billion in the second quarter.

Singapore was the biggest source of approved investment commitments, contributing nearly half at P13.04 billion. This was followed by Taiwan and the United Kingdom with pledges amounting to P3.63 billion (13.3% share) and P3.06 billion (11.2% share), respectively.

Analysts said the annual increase in pledges in the third quarter reflected the government’s efforts to attract more foreign investors.

“This may have come from the push of the government to continue to attract foreign capital into the country. The plan is for more foreign pledges to come in and the hope is for this to come into full fruition,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a Viber message.

China Banking Corp. Chief Economist Domini S. Velasquez said recent economic reforms and trade deals may have helped boost the country’s attractiveness to foreign businesses.

“The year-on-year increase in approved foreign investments likely reflected the impact of the government’s liberalization reforms and trade agreements which have opened up the country to more foreign participation,” she said in a Viber message.

On the other hand, Ms. Velasquez attributed the 54% quarter-on-quarter drop in pledges to the “challenging macroeconomic conditions” here and abroad.

“The weaker-than-expected second-quarter gross domestic product (GDP) performance may have also had a negative impact on investor sentiment,” she said.

Philippine GDP grew by a weaker-than-expected 4.3% in the second quarter, slowing from 6.4% in the first quarter and 7.5% in the same period in 2022. This was the weakest growth print since 2011.

“It’s good that foreign investment pledges grew in the third quarter year on year. Nonetheless, we still saw a decline in real investment from the last third-quarter GDP print release. We still are on the lookout for actualization of these pledges in the immediate future and help contribute to GDP growth soon,” Mr. Asuncion said.

Only seven out of 13 IPAs reported foreign investment pledges for the third quarter. IPAs are authorized by law to provide tax and nontax benefits to investors building new enterprises or expanding current ones in priority sectors.

The Philippine Economic Zone Authority accounted for 67.1% of total approved foreign investment commitments in the third quarter with P18.33 billion.

Other IPAs that recorded pledges include Subic Bay Metropolitan Authority (P4.11 billion), Board of Investments (P3.74 billion), Clark Development Corp. (P968.17 million), Zamboanga City Special Economic Zone Authority (P112.31 million), Authority of the Freeport Area of Bataan (P35.25 million), and Cagayan Economic Zone Authority (P4.97 million).

More than half (60%) or P16.43 billion of the approved foreign pledges will go to the manufacturing industry, while P4.28 billion will be allotted for administrative and support service activities, and P4.22 billion for real estate activities.

Meanwhile, Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) cornered the bulk of foreign investment commitments in the third quarter with P14.56 billion.

Central Luzon accounted for 22.4% with P6.13 billion, while Central Visayas made up 14.2% with P3.87 billion.

Meanwhile, total combined investment pledges of foreign and Filipino nationals fell by 47.6% to P83.5 billion in the third quarter from P159.38 billion last year.

Investment commitments by Filipinos accounted for 67% of the total with P56.19 billion.

Should the commitments of both foreign and local investors materialize, these projects are expected to generate a total of 22,571 jobs. This is 20.7% lower than the 28,485 expected employment from investment pledges seen in the third quarter of 2022.

Ms. Velasquez said there is a potential for foreign investments to improve in the next few months, as third-quarter GDP growth showed the economy’s resilience.

The Philippine economy grew by 5.9% in the third quarter, bringing the year-to-date average to 5.5%. The government is targeting 6% to 7% GDP growth this year.

“We also expect economic conditions to become more favorable for investments, especially next year. The jump in public infrastructure this year, and planned infrastructure spending in the medium term, will likely provide a ‘crowding in’ environment for investors,” she said.

PSA data on foreign investment commitments, which have yet to materialize, differ from actual foreign direct investments tracked by the Bangko Sentral ng Pilipinas for the balance of payments. The central bank’s monitoring goes beyond the projects and includes other items such as reinvested earnings and lending to Philippine units via their debt instruments. — A.C. Abestano

ADB approves $400-M loan to improve PHL tax system

PHILIPPINE STAR/RUSSELL PALMA

THE ASIAN Development Bank (ADB) has approved a $400-million loan for the Philippines to reform tax policies and ramp up revenue collection.

In a statement on Tuesday, the ADB said the loan will “help the Philippines achieve its medium-term fiscal strategy and finance its post-pandemic economic recovery through a stronger focus on revenue mobilization, including modernizing tax administration, systems, and processes,”

The Domestic Resource Mobilization (DRM) Program Subprogram 1 is the ADB’s first policy-based loan focused on revenue mobilization reform.

This reform would address the discrepancies in Philippine tax policy frameworks to improve tax compliance, reduce tax avoidance, and raise additional revenues from activities and products that impact the environment or contribute to climate change.

“The program recognizes that DRM reforms necessitate not only raising revenue, but also designing a revenue system that fosters inclusiveness, encourages good governance, promotes investments and job creation, reduces inequality, and tackles climate change,” ADB Senior Economist for Public Finance Aekapol Chongvilaivan was quoted as saying in a statement.

Mr. Chongvilaivan added that this reform program will also support the government’s effort to achieve a higher tax-to-gross domestic product (GDP) ratio.

Under the Philippine Development Plan, the government aims to bring its tax-to-GDP ratio to 15.4% by 2025, 15.9% by 2026 and up to 17.1% by 2028.

The government’s revenue program is set to increase to 16.6% of GDP by 2026. Of this, tax revenues will account for 16.1% of GDP.

The loan will support initiatives such as digitalization efforts of the Bureau of Internal Revenue (BIR).

“The project aims to modernize key taxpayers’ services, including online tax registration, return filing, and payment. This can potentially increase the ratio of actual tax revenues to tax potential, from 75% in 2020 to at least 85% by 2026,” the ADB said.

The multilateral lender said that it has been working with the Philippines to enhance domestic revenue mobilization, noting its support for the Real Property Valuation and Assessment Reform and Comprehensive Tax Reform Program packages.

It also noted the country’s recent membership in the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base-Erosion and Profit Shifting (BEPS).

The ADB said the Philippines’ membership in this framework will “make (it) more conducive to private sector development and foreign investment.”

The BEPS initiative seeks to deter multinational companies from recognizing an outsized share of profit in low-tax countries, depriving high-tax jurisdictions of a fair share of revenue.

The lender is earmarking up to $4 billion worth of loan financing for the Philippines this year, focused on eight projects and programs.

Last year, the ADB was the country’s top provider of active official development assistance (ODA). This accounted for 33.47% of the total ODA portfolio, equivalent to $10.85 billion. — Luisa Maria Jacinta C. Jocson

Banking industry’s net income climbs by 10% as of end-September

By Keisha B. Ta-asan, Reporter

THE PHILIPPINE BANKING industry’s profits climbed by 10.4% as of end-September, driven by higher interest income and lower losses on financial assets, according to central bank data.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed banks’ cumulative net income rose to P270.352 billion in the January-to-September period from P244.876 billion last year.

As of end-September, banks’ net interest income jumped by 20.4% to P663.240 billion from P550.666 billion last year.

The Philippine banking industry wrote off P457.88 million worth of bad debts in the nine- month period, plunging by 80.1% from P2.3 billion a year ago.

Meanwhile, non-interest income declined by 21.3% to P165.406 billion as of end-September from P210.21 billion in the same period in 2022.

“The banking sector has shown remarkable resilience in the face of a high interest rate environment, supported by the strong demand from businesses and consumers,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message. 

The Monetary Board has kept the benchmark interest rate at a near 16-year high of 6.25% from March until October this year. It raised the policy rate by 25 basis points to 6.5% in an off-cycle move on Oct. 26.

The banking industry’s continued double-digit income growth can also be attributed to the pickup in economic activities, which supported loan demand, higher interest income, and better asset quality, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The BSP earlier said that outstanding loans by big banks grew by 6.5% year on year to P11.17 trillion in September. However, this was slower than the 7.2% growth logged in August.

The pace in September was the slowest in 21 months or since the 4.8% expansion recorded in December 2021. September also marked the sixth straight month of easing loan growth.

On the other hand, the banking industry’s nonperforming loan (NPL) ratio eased for the fourth straight month in September. The NPL ratio stood at a six-month low of 3.4%, easing from 3.42% seen in both August 2023 and September 2022.

The sustained recovery in many pandemic-hit industries also spurred more financial transactions, which led to higher earnings for banks, Mr. Ricafort said.

BSP data showed the total operating income of Philippine lenders grew by 8.9% to P828.647 billion from P760.877 billion in the comparable year-ago period.

Earnings from fees and commissions increased by 15.7% to P103.396 billion as of September, from P89.36 billion in the same period in 2022.

The industry’s trading income inched up by 0.8% to P17.23 billion in the first nine months from P17.09 billion a year prior.

Non-interest expenses of banks, including compensation and fringe benefits, taxes and licenses, fees and commissions, and administrative expenses rose by an annual 12.2% to P462.601 billion.

The industry’s losses on financial assets dropped by 6.49% to P58.92 billion as of end-September.

Provisions for credit losses fell by 15.1% to P66.19 billion.

Meanwhile, banks’ total loan portfolio grew by 7.6% to P13.05 trillion as of end-September from P12.12 trillion a year earlier.

Deposit liabilities stood at P18.28 trillion, up by 9.3% year on year.

The industry’s total assets rose by 8.9% to P23.99 trillion as of September.

Despite high interest rates, Ms. Velasquez said the businesses and consumers have benefited from sustained economic growth.

“However, it is important to note that a prolonged period of high interest rates may eventually lead to a slowdown in loan demand, which could impact the performance of the banking system in the upcoming year,” she added.

The BSP is scheduled to have a policy meeting on Thursday. Most analysts expect the Monetary Board to hold policy rates steady due to the slower-than-expected October inflation print.

Headline inflation eased to 4.9% in October from 6.1% a month prior. This brought the year-to-date average to 6.4%, still above the BSP’s 5.8% baseline forecast.

However, easing inflation and possible interest rate cuts in 2024 could lead to more trading and other investment gains for banks and other financial institutions, Mr. Ricafort said.

“Further economic reopening and recovery would continue to sustain the growth in the loans/credit, investments, and in other banking products and services,” he added.

High interest rates pose  risk to PHL growth in 2024

The Philippines grew by 5.9% in the third quarter, picking up from 4.3% in the second quarter. — PHILIPPINE STAR/MIGUEL DE GUZMAN

THE PHILIPPINES may find it challenging to achieve the government’s growth target of 6.5-8% next year, as tighter-for-longer policy rates may continue to dampen investment activity.

BMI Country Risk & Industry Research, a unit of Fitch Solutions, said the Bangko Sentral ng Pilipinas (BSP) may deliver one more rate hike this year before it starts cutting borrowing costs in the second half of 2024.

“Our current expectation is for the benchmark policy rate to be raised by an additional 25 basis points (bps) in the upcoming November meeting due to concerns over price stability,” BMI said.

The research firm said the robust third-quarter growth provided room for the BSP to continue tightening.

The Philippines grew by 5.9% in the third quarter from 4.3% in the second quarter. However, this was slower than 7.7% a year earlier. For the first nine months, economic growth averaged 5.5%, still below the government’s 6-7% full-year target.

After the better-than-expected third-quarter print, BMI raised its Philippine growth forecast to 5.7% this year from 5.3% previously. It sees the Philippines expanding by 6.2% in 2024, which is below the government’s 6.5-8% target.

“Subsequently, we think that the BSP will only cut rates in the second half of 2024, in line with our expectations for the US Federal Reserve,” BMI said, adding that the monetary cycles of the BSP and the US Fed have been closely linked since 2001.

The US central bank kept borrowing costs unchanged at 5.25-5.5% for the second straight meeting earlier this month. This was after it hiked policy rates by 525 bps from March 2022 to July 2023.

“A quick return to loosening before the Fed could not only de-anchor inflation expectations but exacerbate weakness in the peso. This means that restrictive financial conditions will continue to weigh on domestic activity for at least the first half of the year,” BMI said.

The Monetary Board is widely expected to keep the key interest rate steady at 6.5% at its policy meeting on Thursday, according to 15 of 18 analysts in a BusinessWorld poll conducted last week.

The BSP raised borrowing costs by 25 bps in an off-cycle move last month, bringing the key rate to a fresh 16-year high of 6.5%. The BSP has raised interest rates by 450 bps since May 2022 to fight inflation.

Meanwhile, Jean Olivia De Castro, head of fixed income at Manulife Investment Management and Trust Corp., said the BSP will keep rates steady for the rest of 2023.

However, high inflation and elevated interest rates may continue to be challenging for growth, she added.

“Despite a rebound in the third quarter, growth in household consumption has been steadily declining every quarter since last year as high inflation erodes households’ purchasing power,” she said in a note.

Household consumption grew by 5% in the third quarter, slowing from 5.5% in the previous quarter and 8% a year ago.

Meanwhile, gross capital formation declined by 1.6% in the third quarter, ending nine straight quarters of growth. This was a reversal of the 18.2% expansion a year ago and 0.3% in the second quarter.

Ms. De Castro said high policy rates discouraged the private sector from borrowing and dampened private investments.

“As we don’t expect the macroeconomic backdrop to change drastically over the next quarter, there remain downside risks to growth in the next few quarters,” she said.

Also, BMI said a global slowdown may lead to lesser demand for Philippine goods and services.

“Our global team is forecasting the world economy to expand by just 2.1% in 2024 compared to 2.6% in 2023. Crucially, the US and mainland China, which are the Philippines’ major trading partners, are set for a slowdown,” it said.

BMI said China may slow to 4.7% in 2024 from a likely 5.2% growth this year, while the US may enter a shallow recession next year.

“Both countries account for about 30% of Philippine total merchandise exports. This makes it exceedingly difficult for Philippine trade to stage a turnaround next year,” it added.

In the first nine months of the year, exports dropped by an annual 6.6% to $54.54 billion.

Despite the challenges, the Philippines is still seen to be one of the top performers in the region in terms of economic growth.

Mark Canizares, head of equities at Manulife Investment Management, said consumer spending remained stable despite elevated inflation.

Private consumption also sets the Philippines apart from regional neighbors that rely more on trade and tourism.

“In addition, the recent deceleration of inflation, as seen in November, and peaking interest rates could boost the Philippine economic growth trajectory into 2024,” Mr. Canizares said.

Easing inflation may also provide support for private consumption, BMI said.

“We continue to expect inflationary pressures to recede over the coming months. Our base forecast is for headline inflation to reach 4.7% by end-2023 before settling within the BSP target range of 2-4% in 2024,” BMI said. — Keisha B. Ta-asan

Ayala income climbs 82% on units’ better showing

LISTED conglomerate Ayala Corp. logged an 82.2% increase in its attributable net income for the third quarter amid higher revenues from its various businesses. 

The conglomerate said in a stock exchange disclosure on Tuesday that its July-to-September profit improved to P13.90 billion from P7.63 billion a year earlier.

Third-quarter revenues rose 3% to P81.14 billion from P78.54 billion, it added.

From January to September, attributable net income rose 35% to P32.31 billion while core net income rose 42% to P31 billion on better results from subsidiaries Bank of the Philippine Islands (BPI), Ayala Land, Inc., and ACEN Corp.   

“Ayala’s year-to-date core net income is already at par with its full-year 2019 net income,” the conglomerate said.

Nine-month consolidated revenues improved 13.5% to P245.38 billion from P216.2 billion last year. 

“Despite macroeconomic and geopolitical headwinds, our outlook remains intact as we look to end the year with profits exceeding pre-COVID levels. We continue to build on our solid nine-month period results and rationalize our portfolio wherever it makes sense to do so,” Ayala President and Chief Executive Officer Cezar P. Consing said.

Ayala said BPI’s nine-month net earnings rose 26% to P38.6 billion led by sustained loan growth, margin expansion, and reduced provisions.

BPI’s total revenues rose 15% to P100.9 billion due to sustained growth in net interest income that countered the decline in noninterest income.

Ayala Land logged a 38% increase in its nine-month net income to P18.4 billion led by the “continuing resilience of the residential market and vibrant consumer activity despite macroeconomic challenges.”

Property development revenues rose 4% to P57.2 billion due to higher residential completion, stable bookings, and improved office unit sales.

Residential sales reservations rose 11% to P85.9 billion led by strong demand in projects such as Ayala Land Premier’s Ciela, Arcilo, and Parklinks South Tower, Alveo’s Park East Place, and Avida’s Tower Makati Southpoint.

Commercial leasing revenues rose 32% to P30.8 billion due to higher occupancy and rental rates in Ayala Land’s malls, offices, and leisure developments.

Ayala said ACEN’s nine-month net income rose 59% to P6.6 billion led by new power capacity and a sustained net selling position. 

“Earnings were boosted by value realization and remeasurement gains related to the sale of a stake in the Salak and Darajat plants in Indonesia,” Ayala said.

ACEN’s consolidated revenues increased 13% to P28.7 billion due to new contributions from New England Solar and Pagudpud Wind projects and higher tariffs for renewable energy sources that offset lower wholesale electricity spot market prices.

Meanwhile, Globe Telecom, Inc. recorded a 27% decline in net income to P19.4 billion after last year’s partial sale of its data center business.

Total service revenues rose 3% to P121.1 billion led by contributions from mobile data, corporate data, and digital service revenues.

In a separate disclosure, Ayala’s real estate investment trust AREIT, Inc. said its net income for nine months through September rose 42% to P3.43 billion.

AREIT’s earnings before interest, taxes, depreciation, and amortization rose 39% to P3.56 billion while total revenues rose 41% to P5 billion amid stable operations and the contribution of new assets.

The company’s properties posted a 97% occupancy rate at end-September.

In September, AREIT secured government approval for the subscription of Ayala Land, Ayala-land Malls, Inc., and Northbeacon Commercial Corp. to 607,559,380 AREIT shares in exchange for properties. The transaction was valued at P22.48 billion. 

These properties are One Ayala Avenue East and West business process outsourcing (BPO) towers at the corner of Ayala Ave. and EDSA, the Glorietta 1 and 2 mall wing and BPO buildings at Ayala Center, and the MarQuee Mall in Angeles, Pampanga.

“The new assets contributed to AREIT’s performance beginning the third quarter of 2023 and boosted its gross leasable area (GLA) more than five-fold to 861,000 square meters,” the company said.

“Moreover, the company’s assets under management (AUM) reached approximately P87 billion, nearly triple its size since it went public and currently the largest among Philippine REITs,” it added.

On Tuesday, shares of Ayala Corp. closed unchanged at P620 apiece, while AREIT shares fell 10 centavos or 0.31% to P32.50 apiece. — Revin Mikhael D. Ochave

GT Capital’s third-quarter income down 2%, nine-month profit up 54%

LISTED conglomerate GT Capital Holdings, Inc. posted a 2% decline in its attributable net income for the third quarter due to higher costs and expenses. 

In a regulatory filing on Tuesday, GT Capital said its July-to-September income fell to P6.5 billion from P6.65 billion last year.

The company’s total revenue rose 12% to P74.91 billion from P66.71 billion a year ago, led by its automotive operations, which climbed 17.5% to P65.29 billion.

However, its total cost and expenses increased 11.5% to P65.61 billion from P58.83 billion a year ago, led by the cost of goods and services sold, which rose 17% to P48.76 billion.

Despite the lower third-quarter net income, GT Capital said it had a 54% increase in its consolidated nine-month net income to P23.09 billion from P14.95 billion last year.

GT Capital’s core net income also rose 105% to P23.25 billion from P11.33 billion.

The conglomerate said its core profit was driven by Metropolitan Bank & Trust Co. (Metrobank), which posted a 36% increase in net income to P31.8 billion, led by asset expansion, improving margins, and healthy noninterest income growth.

GT Capital said Metrobank logged a 39% year-on-year growth in net earnings as of September to P10.9 billion, while net interest income surged 24% to P77.2 billion on the back of higher margins and a 7% growth in gross loans.

GT Capital said Toyota Motor Philippines Corp. (TMP), in which it has a stake, also logged a 159% growth in net income to P10.9 billion.

TMP’s consolidated revenues improved 22% to P162.8 billion led by a 16% increase in vehicle sales as of end-September to 144,232 units compared with 124,884 units in the same period last year.

“We are very encouraged by the 25% growth in the automotive market in the first three quarters of 2023. This is a strong indication of the return to motorization that is an essential enabler of economic growth in the country. TMP continues its growth trajectory with nine-month sales already exceeding pre-COVID levels by 26%,” TMP President Atsuhiro Okamoto said. 

Property unit Federal Land, Inc. also reported a 176% increase in net income to P1.9 billion while AXA Philippines posted a 17% increase to P2.1 billion. 

GT Capital said that Metro Pacific Investments Corp. also contributed to the conglomerate’s “healthy performance” as it recorded a 37% increase in its core net income to P16.2 billion. 

“With gross domestic product (GDP) growth beating estimates and inflation improving during the third quarter, our operating companies continue to far exceed expectations. Metrobank continued its record-setting pace during the quarter. TMP sales volume is on track to over-achieve its targets for 2023. Federal Land’s reservation sales and core income are at an all-time high,” GT Capital President Carmelo Maria Luza Bautista said.

“With our key businesses thriving, GT Capital continues to be resilient despite persistent economic headwinds. We are hopeful that our growth momentum will help carry us forward for the rest of the year,” he added.

On Tuesday, shares of GT Capital rose P8 or 1.48% to P548 apiece while Metrobank shares fell 35 centavos or 0.67% to P52.20 each. — Revin Mikhael D. Ochave

Alliance Global profit jumps 16% as revenues rise

TAN-LED Alliance Global Group, Inc. (AGI) logged a 16% increase in its net income during the third quarter as revenues surged.

In a stock exchange disclosure, AGI said its third-quarter income reached P6 billion while consolidated revenues improved 12% to P51.3 billion.

For nine months through September, its net income climbed 18% to P20.1 billion as consolidated revenues surged 17% to P150.4 billion led by the continued rise in consumer spending and improved economic activity despite prevailing macroeconomic headwinds.

“AGI has sustained its strong financial and operating performance in the first nine months of the year even in the wake of persistent domestic and global economic challenges,” AGI Chief Executive Officer Kevin L. Tan said.

“During the period, the group continued to introduce new and exciting experiences across all our business segments, delivering superior products and services in the local and international market,” he added.

Property development unit Megaworld Corp. logged a 43% growth in nine-month net income to P12 billion as consolidated revenues rose 14% to P48.6 billion. 

Real estate sales improved by 11% to P29 billion and accounted for 60% of overall revenues. Sales reservations rose 28% to P109.5 billion led by attractive big-ticket projects catering mainly to the mid- to high-income market segments.

Brandy company Emperador, Inc. recorded a 10% increase in consolidated revenues to P47.1 billion while attributable net income stood at P6.8 billion.

“Whisky revenues have sustained its stellar growth pace of 22% year on year to P19.3 billion as its premium whisky brands have maintained their popularity mainly in Asia and North America, coupled with the resurgence in travel retail sales,” AGI said.

“Its brandy segment posted a modest 4% year-on-year increase in revenues to P27.8 billion, supported by some price adjustments and improving sales of its premium brands despite the stiff competition in the market,” it added.

AGI’s leisure and tourism arm Travellers International Hotel Group, Inc. recorded a net income of P773 million, reversing its P235 million net loss a year ago. 

The company’s net revenues during the period rose 27% to P23.3 billion.

“This was driven by the resurgence in tourism and meetings, incentives, conferences, and exhibitions (MICE) activities which allowed for a robust 41% year-on-year increase in hotel and other revenues to P5 billion, while its gross gaming revenues went up by 14% year on year to P25.9 billion,” AGI said.

Meanwhile, Golden Arches Development Corp. recorded a 44% increase in nine-month net income to P1.47 billion as sales revenues rose 28% to P30.7 billion.

The company has an exclusive franchise to operate restaurants in the Philippines under the McDonald’s fast food brand.

McDonald’s Philippines “remained relevant in the highly competitive consumer sector with its creative product offerings and pricing.”

“We look forward to a more hectic economic activity in the last quarter, accompanied by the much-vaunted holiday spending. Given our superior and attractive product offerings, and armed with an indomitable spirit, we hope to end the year on a stronger note regardless of the macro headwinds,” Mr. Tan said.

Shares of AGI at the local bourse fell 16 centavos or 1.5% to P10.50 apiece. — Revin Mikhael D. Ochave

MPIC posts 22% income growth

PANGILINAN-LEd Metro Pacific Investments Corp. (MPIC) posted a 22% surge in its attributable net income as of September on its subsidiaries’ higher revenues.

In a statement on Tuesday, MPIC said its nine-month profit rose to P16.1 billion from P13.1 billion last year.

“Reported net income attributable to the parent company increased 22% to P16.1 billion compared with P13.1 billion last year, which had the benefit of gains from the acquisition of Landco Pacific Corp.,” MPIC said.

“Improved financial and operating results from MPIC’s holdings delivered a 31% increase in contribution from operations, mainly driven by the strong performance of the power generation business and higher water tariff for the water concession,” it added.

Last year, MPIC took full control of real estate developer Landco for P429 million as part of its expansion into the real estate business.

The company’s consolidated core net income went up 37% to P16.2 billion from P11.8 billion a year ago.

“Among the company’s core businesses, power had the largest share at P13.8 billion or 69% of net operating income while toll roads and water contributed P4.1 billion and P3.5 billion, respectively,” MPIC said.

Manila Electric Co. (Meralco) logged a 53% increase in its consolidated core net income to P30 billion during the period due to growth from its power generation business. Total revenues climbed 6% to P335.2 billion as a result of increased pass-through charges, higher generation revenues, and growth in volumes sold.

Metro Pacific Tollways Corp. had a P4.1-billion core net income, or flat compared to last year, due to higher concession amortization on newly opened roads and financing cost on the Jakarta-Cikampek Elevated Toll Road in Indonesia, which was acquired in the second half of last year.   

Toll revenues rose 20% to P19.8 billion carried by toll fee increases and traffic growth in the Philippines and Indonesia.

“Average daily vehicle entries for the Philippines rose 14% to 654,580, while entries in Vietnam increased 7% to 78,194 vehicles, and entries Indonesia climbed 85% to 485,910 vehicles,” MPIC said.

Meanwhile, Maynilad Water Services, Inc. logged a 46% increase in core net income to P6.8 billion led by lower amortization resulting from the extension of the concession period.

The water provider’s revenues rose 18% to P20.3 billion on the back of 2% growth in billed volume and higher effective tariffs.

“Our consistently strong performance reflects significant volume increases for our core businesses on power, toll roads, and water, bolstered by favorable tariff adjustments and savings resulting from operational efficiencies,” MPIC Chairman, President, and Chief Executive Officer Manuel V. Pangilinan said.

“We are also realizing the fruits of strategic investments in the power generation business, and we expect this to continue to be a driver of growth in the future. “Together with our new partners, we look forward to further investing in national development and continuing to deliver high-quality essential services,” he added.

MPIC is one of three key Philippine units of First Pacific, the others being Philex Mining Corp. and PLDT Inc.

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. — Revin Mikhael D. Ochave 

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