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Rates on bond offers likely to track secondary market levels

RATES of the tokenized papers and Treasury bonds (T-bonds) on offer this week could to track secondary market movements after the Bangko Sentral ng Pilipinas (BSP) kept borrowing costs steady last week.

The government canceled the auction of P15 billion in Treasury bills (T-bills) scheduled on Monday and will instead hold its maiden offer of tokenized bonds, from which it aims to raise at least P10 billion.

On Tuesday, the Bureau of the Treasury (BTr) will offer P30 billion in reissued 20-year T-bonds that have a remaining life of 15 years and two months.

The one-year tokenized Treasury bonds to be auctioned off on Monday could fetch yields matching secondary market levels, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message, with demand expected to be high.

Meanwhile, T-bond rates could track the drop in comparable secondary market yields after the central bank left benchmark borrowing costs unchanged at its review on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Secondary market rates dropped following the decline in US Treasury yields due to a weaker labor market and easing inflation in the world’s largest economy, a trader said in an e-mail.

The trader expects the rates of T-bonds to be offered on Tuesday to range from 6.6% to 6.7%.

At the secondary market on Friday, the one-year benchmark tenor was quoted at 6.4916%, based on PHP Bloomberg Valuation Service Reference Rates data published on the Philippine Dealing System’s website.

Meanwhile, the 20-year bond saw its rate go down by 14.19 basis points (bps) week on week to end at 6.7486%, while the yield on the same bond series being traded at the secondary market stood at 6.7919%, the same data showed.

The BSP last week left benchmark interest rates unchanged after inflation eased in October, but reiterated that they could resume tightening if needed.

The Monetary Board on Thursday kept its policy rate steady at 6.5%, as expected by 15 of 18 analysts in a BusinessWorld poll. Interest rates on the central bank’s overnight deposit and lending facilities were also maintained at 6% and 7%, respectively.

This was the central bank’s first policy meeting after it hiked rates by 25 bps in an off-cycle move on Oct. 26.

The BSP has raised benchmark rates by a total of 450 bps since May 2022.

BSP Deputy Governor Francisco G. Dakila, Jr. said after last week’s meeting that keeping borrowing costs steady would allow previous hikes to work their way through the economy.

However, he said they are ready to resume tightening as necessary to make sure inflation returns to the 2-4% annual target.

The Monetary Board will hold its last meeting for the year on Dec. 14.

Last week, the government raised P15 billion as planned via the T-bills it auctioned off as total bids reached P46.441 billion or more than thrice the amount on offer.

Broken down, the Treasury made a full P5-billion award of the 91-day T-bills, with tenders for the tenor reaching P20.133 billion. The average rate of the three-month paper fell by 22.9 bps to 6.123%. Accepted rates ranged from 6.024% to 6.197%.

The government likewise borrowed the programmed P5 billion from the 182-day securities, as bids for the paper reached P10.732 billion. The average rate for the six-month T-bill stood at 6.513%, down by 2.3 bps, with accepted yields ranging from 6.45% to 6.549%.

The government also raised just P5 billion as planned via the 364-day debt papers, with bids reaching P15.576 billion. The average rate of the one-year T-bill went down by 3.1 bps to 6.56%. Accepted yields were from 6.54% to 6.585%.

Meanwhile, the reissued 10-year bonds to be offered on Tuesday were last auctioned off on Nov. 28, 2019, where the government raised just P12.271 billion out of the P20-billion program at an average rate of 5.341%.

The government plans to borrow P225 billion from the domestic market this month or P75 billion via T-bills and P150 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 6.1% of gross domestic product this year. — AMCS

Marcos eyes Starlink in boosting internet connectivity

MUHAMMAD RAUFAN YUSUP-UNSPLASH

PRESIDENT Ferdinand R. Marcos, Jr. has ordered the Department of Information Communications Technology (DICT) to work with satellite internet service Starlink to boost internet connectivity in the Philippines, according to Malacañang.

In a press release, it said Mr. Marcos is “eyeing forging an alliance” with Starlink, following his visit to Space Exploration Technologies Corp. (SpaceX) facility in Los Angeles.

Mr. Marcos was accompanied by DICT Secretary Ivan John E. Uy.

“President Marcos said that he has already ordered Uy to ensure that the project will push through as he emphasized the need to adopt and recognize the appropriate technology and bring it to the Philippines,” the Palace said. It did not elaborate.

SpaceX President and Chief Operating Officer Gwynne Shotwell and SpaceX Vice-President for Starlink Operations Lauren Dreyer welcomed the President during the facility visit.

“Starlink’s satellite internet is touted to have significant advantage with respect to connecting to areas that are difficult to reach like rural communities and island provinces and barangays,” the Palace said.

“Beaming internet signals directly from space, the company ensures wider and better coverage without the need for extensive infrastructure thus more cost-efficient,” it added. — Kyle Aristophere T. Atienza

PHL may enlist TikTok to train farmers in e-commerce sales

REUTERS

THE GOVERNMENT is considering including farmers in an e-commerce training program for small businesses using short-form video app TikTok, according to Malacañang.

TikTok, developed by Chinese company ByteDance Ltd., will conduct training with the Department of Trade and Industry and “possibly” the Department of Agriculture “for small business owners and farmers on how to use TikTok and other platforms to promote their products,” Presidential Communications Office Secretary Cheloy Velicaria-Garafil said in a Viber message on Saturday.

The partnership was discussed during President Ferdinand R. Marcos, Jr.’s meeting with TikTok, Inc. CEO Shou Zi Chew at the sidelines of the Asia-Pacific Economic Cooperation Summit in San Francisco. 

“We want to give more resources and highlight and train the local sellers in the more rural parts of the country because that’s one thing interesting on the platform,” Mr. Chew told Mr. Marcos.

“What we want to do is highlight local products, especially from smaller (sellers),” he added.

Mr. Chew said TikTok has provided sellers in Vietnam, Indonesia, and Malaysia “a platform to sell around the country and export around the world.”

“That’s the plan (for the Philippines),” he said.

Amid growing cybersecurity concerns, many governments have banned TikTok from devices issued to public sector employees. 

In September, the Philippine National Security Council (NSC) said it was studying the possibility of imposing a ban on TikTok for government employees involved in national security.

“We know for a fact that there are information operations and psychological warfare and other stuff being done,” NSC Assistant Director Jonathan Malaya said at the time. “If there is a need for banning, it would not be for public school teachers, it would not be for those in the civilian, it would be for the security sector.”

TikTok was introduced to the Philippines in May 2017. In April last year, the video platform launched its online market, TikTok Shop, in the Philippines.

“TikTok sees Southeast Asia as its biggest emerging market outside the US, with its 325 million monthly active users covering nearly half the region’s population,” the Palace said.

TikTok Shop generated gross merchandise value in Southeast Asia of $4.4 billion in 2022. — Kyle Aristophere T. Atienza

Human brains aren’t wired to fight climate change

FREEPIK

HUMANS are very likely the only species that can imagine very distant futures. Unfortunately, our brains aren’t wired to behave in a way that optimizes those futures. After all, most of us don’t even save enough for retirement. If we have a choice between eating a donut right now and being marginally more healthy later, the donut almost always wins.

Individual choices can have broad social implications. If we’re broke in retirement, we’ll rely on public assistance. If we make ourselves sick from eating too many donuts, we’ll be less productive and a drain on health-care resources. But society as a whole is also prone to toxic short-termism. Take climate change. Burning fossil fuels, clear-cutting forests and mass-producing cows serve our immediate needs for lights, farmland, and cheeseburgers, but at the cost of ruining the climate for many future generations. 

How many generations, exactly? Andrew Dessler, director of the Texas Center for Climate Studies at Texas A&M University, recently posted a chart to “The Climate Brink,” the Substack newsletter he co-authors with climate scientist Zeke Hausfather. He labeled it “the scariest plot in the world”*:

The chart lays out global temperatures since the depth of the last ice age, almost 20,000 years ago, and projects them out another 10,000 or so years. It demonstrates the many slow millennia it took for Earth to warm by roughly 4 degrees Celsius until reaching the pleasant climate of the Holocene interglacial period, the era in which humans thrived and developed electricity, agriculture, and cheeseburgers.

The chart also demonstrates just how quickly the Earth could heat by 3 degrees Celsius as a result of humanity’s wanton burning of fossil fuels over just a few hundred years. And that would occur in the blink of a geological eye compared to Earth’s previous gradual warming phase. That amount of heating would be catastrophic for billions of current and future humans, leading to ever-more deadly and destructive heatwaves, wildfires, droughts and storms, along with wars, disease, famine and more.

Unfortunately, that outcome is more or less what we can expect, given current policies and practices around the world. And even if we stop burning fossil fuels in the decades to come, most of the human-caused heating would likely stick around for another 100,000 years, according to Dessler. “The decisions we make in the next few decades will determine the climate for the next 5,000 generations,” Dessler wrote. “If we choose unwisely, people in the future will justifiably be furious with us because we know what we’re doing but we’re doing it anyway.”

At the moment, we are choosing very unwisely. There have been a flurry of big climate-change reports ahead of the next United Nations climate confab, known as COP28, beginning in late November. Each has been a hammer blow of harsh truth about just how badly we are managing the climate for future generations:

• The concentration of greenhouse gases in the atmosphere hit a record high in 2022, with “no end in sight to the rising trend,” the World Meteorological Organization said.

• Current global policies have emissions on track to be 9% higher than 2010 levels by the end of this decade, making the goal of limiting warming to 1.5C impossible, the United Nations reported.

  The World Resources Institute called efforts to fight climate change “woefully inadequate,” failing on 41 of its 42 performance metrics.

• Government climate actions grew by just 1% last year, the slowest pace in more than 20 years, the Organization for Economic Cooperation and Development reported.

What makes this more infuriating is that current generations are already suffering the effects of our foot-dragging. The White House reported that no part of the US or its territories is immune from the ravages of global heating. Health is already significantly worse around the world as a result of hotter weather and disasters, the Lancet reported.

Our failure to act isn’t just short-sightedness; it’s willful ignorance. This may be the result of another flaw in human wiring: We tend to assume the future will look a lot like the present, so even if the present is slightly worse than the past, it’s hard for us to imagine things could get even worse still.

The good news is that none of this is a mystery. Our awareness of these flaws is the first step to recovery. We do have leaders who at least give lip service to making the world safe for future generations. Most voters worry about climate change and want to see action. And all the tools we need are at hand. We have the technology to end our reliance on fossil fuels and limit warming to 1.5C; we just have to be willing to make the investment to deploy it at scale.

“This is not a science problem; it’s a political problem,” Dessler said in an interview. “If we don’t solve it, it’s because we chose not to solve it, not because we didn’t have the solution.”

Some of us break into a cold sweat when trying to figure out what to make for dinner on any given night or when a job interviewer asks us where we see ourselves in five years. It’s ironically easier to have a vision for where the planet could be in five, 50, or 5,000 years. We just need to share that vision, loudly and often, with the people and organizations who have the power to make that vision a reality. Our future selves will thank us.

BLOOMBERG OPINION

*The scariest climate plot in the world — by Andrew Dessler (theclimatebrink.com)

Giorgio Armani fashions his own legacy with succession plan

MILAN — Giorgio Armani has always kept a tight grip on the firm he founded, and the Italian fashion king’s attention to detail extends to clear rules on how it should be run after his death.

Mr. Armani, 89, remains chief executive officer (CEO) and effectively sole shareholder of the business he set up with his late partner in the 1970s, which had a 2.35-billion ($2.5 billion) turnover last year.

With no children to pass it on to, there has been speculation about the long-term future of Mr. Armani’s empire and whether, in an industry dominated by luxury conglomerates, it will be able to maintain the independence he treasures.

But a hitherto obscure document from 2016, held by a notary in Milan and reviewed by Reuters, sets out the future governing principles for those who inherit the group, while another details issues including protecting jobs at the firm.

The first document explains how his heirs should approach a potential stock market listing — though not until five years after his passing — and any potential M&A activity.

For the Armani look itself, the document commits them to the “search for an essential, modern, elegant and unostentatious style with attention to detail and wearability.”

The document is the product of an extraordinary meeting that Mr. Armani called in 2016 to adopt new bylaws for the group which would come into force upon his death.

SUCCESSION PLAN
Mr. Armani’s heirs are expected to include his sister, three other family members working in the business, long-term collaborator Pantaleo Dell’Orco and a charitable foundation.

The bylaws divide the company’s share capital into six categories with different voting rights and powers, and were amended in September to create some without voting rights.

The Armani group, which as well as the CEO also represents the family members mentioned in the document, declined to comment on the document or its contents.

It is not clear from the document how the different blocs of shares will be distributed, but corporate governance experts say the guidelines should ensure a relatively smooth transition by giving the board a central role.

“It is an organization that reduces the margins for disagreement between the heirs,” Guido Corbetta, professor of Corporate Strategy at Milan’s Bocconi University, told Reuters.

Mr. Armani has a younger sister, Rosanna, two nieces, Silvana and Roberta, as well as a nephew, Andrea Camerana. Dell’Orco is also considered part of the family.

All are currently board members and, apart from Rosanna, all work for the Armani group.

Silvana and Dell’Orco are heads of design, working closely for decades with Mr. Armani, who dubbed them his “lieutenants of style.”

The 2016 bylaws set the process for how the board will appoint future women’s and men’s style directors in a company known for its classic tailoring.

Roberta is Head of Entertainment & VIP Relations, while Camerana is sustainability managing director.

Other fashion groups including LVMH, Europe’s most valuable luxury company, also have succession issues, with the five children of LVMH CEO and Chairman Bernard Arnault all having key management roles at brands in the empire.

LASTING LEGACY
Mr. Armani also created a foundation in 2016 which currently has a tiny symbolic stake but is earmarked to play a pivotal role in protecting the business he set up with Sergio Galeotti before going it alone when his partner died in 1985.

Its purpose is to reinvest capital for charitable causes and to maintain Armani’s lasting influence over the group.

The foundation’s bylaws, which were also seen by Reuters, call for it to manage the shareholding with the aim of creating value, maintaining employment levels, and the pursuit of company values. The Armani group has almost 9,000 employees.

The arrangement has echoes of one adopted by Rolex founder Hans Wilsdorf who left the brand to a foundation in 1960 that still owns the luxury watchmaker.

Mr. Armani has always defended his firm’s independence and ruled out a merger, especially with the French groups that swallowed up Italian brands such as Gucci, now owned by Kering.

The group bylaws include a “cautious approach to acquisitions aimed solely at developing skills that do not exist internally from a market, product or channel point of view.”

They also provide for the distribution of 50% of net profits to shareholders.

Any eventual stock market listing requires the favorable vote of the majority of directors “after the 5th year following the entry into force of this statute.”

The Armani group declined to comment on a potential listing in the mid-term.

“The founding principles show Armani’s desire to transmit and prolong his idea of a company, of business, there is a desire for eternity,” Bocconi professor Corbetta said.

Despite his meticulous planning, whether Mr. Armani’s aims outlast him will ultimately be beyond his control.

“They (the rules) could restrict the company a little and become incompatible with drastic changes in the market,” Mr. Corbetta said. — Reuters

Peugeot lines up special holiday deals

Peugeot 2008 SUV — PHOTO FROM PEUGEOT PHILIPPINES

AS CHRISTMAS approaches, Peugeot Philippines said in a release that it is gifting its customers with attractive offers, value-added payments, and special monthly installments on its full lineup. For a limited time, customers can get a Peugeot for as low as P1,418,000. The holiday promo also includes offers for an exclusive down payment of just 20% or a monthly installment that starts at P15,417.

“Peugeot Philippines and Security Bank have joined hands to make this holiday season extra special for you and your loved ones, with exclusive deals that are sure to make owning a Peugeot more accessible for all this Christmas season,” said Astara Philippines Marketing Director Timmy Naval-de Leon.

Included in this special holiday promotion are the Peugeot 5008 SUV (Allure and Active), Peugeot 3008 SUV (Allure and Active), Peugeot 2008 Allure SUV, and the Peugeot Traveller Premium eight-seater and seven-seater vans.

The Peugeot 5008 SUV is a premium mid-size seven-seater SUV that offers an “immersive driving experience with the new-generation Peugeot i-Cockpit” and Advanced Driver Assistance Systems (ADAS) such as active blind-spot detection, lane-keeping assistance, and driver attention alerts. The Peugeot 3008 SUV is a compact five-seater SUV with “a new design that exudes style and distinction while maintaining a strong road presence.” Both the 5008 and 3008 are available in Allure and Active variants.

The Peugeot 2008 SUV is a subcompact five-seater SUV that “offers a modern interpretation of versatile driving. With its distinctive style and balanced proportions, it leaves a lasting impression on the road.”

Lastly, the Peugeot Traveller Premium, which is imported from France, is said to set “new standards in its segment with comfort, elegance, and style. It features a spacious cabin, an enhanced driving experience, comfortable passenger amenities, and a range of safety and security features, all wrapped in an elegant exterior design.”

Peugeot’s holiday campaign runs until Dec. 31, 2023, in conjunction with the Peugeot Easy Own Financing Program. Customers can avail of this offer at any of the brand’s showrooms and satellite dealerships nationwide. For more information, visit https://www.PEUGEOT.ph/buy/buy-online/offers.html.

Alterenergy Holdings Corp. to hold 2023 Annual Stockholders’ Meeting via remote communication on Dec. 13

 


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PLDT commits to use AI in enhancing operations

PANGILINAN-LED PLDT Inc. has expressed its commitment to tap and utilize artificial intelligence (AI) to boost and enhance its operations.

In a media release, the listed telecommunications company said it is ready to tap AI-powered technologies to enhance its operations, particularly in improving customer service.

“It is not enough to merely adopt AI — we must do so with a deep sense of ethics and responsibility. We need to safeguard customer and employee rights, uphold privacy and security, and champion diversity and inclusivity. Corporate governance principles must be at the core of the adoption of every new technology,” Alfredo S. Panlilio, president and chief executive officer of PLDT and its wireless subsidiary Smart Communications, Inc., said in a media release on Saturday.

The company has also expressed its interest in exploring AI-powered technologies to enhance its network operations.

“In an increasingly interconnected world, AI has the potential to revolutionize the way we operate, with opportunities to enhance efficiencies, improve customer experiences, ensure data accuracy, and rationalize costs,” Mr. Panlilio said.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose

Italian parliament approves prohibition on food grown in labs

REUTERS

ROME — Italy’s lower house of parliament gave final approval for a law banning the use of laboratory-produced food and animal feed as angry farmers confronted a group of centrist lawmakers opposed to the bill.

The proposal, already approved by the Senate, passed by 159 votes in favor to 53 against, prohibiting the use, sale, import and export of food and feed “from cell cultures or tissue derived from vertebrate animals.”

Factories breaching such rules can be subject to fines of up to 150,000 euros and risk being shut down, while owners may lose their right to obtain public funding for up to three years.

The proposal of Agriculture Minister Francesco Lollobrigida, a close aide of Prime Minister Giorgia Meloni, is seen as part of a broader bid by the rightist coalition to safeguard tradition.

As the debate in parliament was under way, tensions erupted between demonstrators from agricultural lobby group Coldiretti and two opposition lawmakers, one of whom claimed the president of the lobby group, Ettore Prandini, had assaulted him.

“I believe it is subversive that the president of Coldiretti believes he can assault a lawmaker,” lawmaker Benedetto Della Vedova said, adding he would report Mr. Prandini to police.

Mr. Della Vedova appeared to have been pushed in the chest in the incident but was not hurt.

Mr. Prandini told Reuters the lawmakers had provoked the farmers with offensive banners, and played down the confrontation.

The +Europa party and other opposition groups depicted the right-wing’s administration move as an attempt to please farmers and breeders’ lobbies, as lab-grown food is not yet available in the European Union (EU).

Critics of the bill say producing meat without breeding animals would limit greenhouse gas emissions and provide an option for consumers who would appreciate eating a product that does not involve slaughter.

The opposition warned the government risked breaching EU single market rules by unilaterally banning the product in case the bloc ever decided to make lab food available.

Minister Lollobrigida reiterated the ban was needed to protect the food industry. — Reuters

Fight the fakes

ANSHU A-UNSPLASH

An estimated one in 10 medical products in low- and middle-income countries (LMICs) is substandard or falsified, a fact that must be revisited as the country observes the National Consciousness Week Against Counterfeit Medicines.

Substandard medicines are authorized medical products that fail to meet either their quality standards or specifications, or both. Falsified medicines are medical products that deliberately or fraudulently misrepresent their identity, composition, or source.

Substandard and falsified medical products may cause harm to patients and fail to treat the diseases for which they were intended, as well as contribute to antimicrobial resistance and drug-resistant infections. Moreover, these illicit products lead to loss of confidence in medicines, healthcare providers, and health systems.

According to the World Health Organization (WHO), falsified medical products may contain no active ingredients, the wrong active ingredients, or the wrong amount of the correct active ingredient. They also commonly contain corn starch, potato starch, or chalk.

Some substandard and falsified medical products are toxic in nature with either fatal levels of the wrong active ingredient or other toxic chemicals. Substandard and falsified medical products are often produced in very poor and unhygienic conditions by unqualified personnel, and contain unknown impurities and are sometimes contaminated with bacteria.

The WHO has received reports of substandard and falsified medical products from all main therapeutic categories, including medicines, vaccines, and in vitro diagnostics. Among the most commonly reported are anti-malarials and antibiotics. Both generic and innovator medicines can be falsified, ranging from very expensive products for cancer to very inexpensive products for treatment of pain. They can be found in illegal street markets, via unregulated websites, all the way through to pharmacies, clinics, and hospitals, the WHO stated.

A United Nations study on transnational crime published in 2019 found that the Philippines had the highest incidence of falsified medicines among Southeast Asian countries from 2013 to 2017.

The WHO notes that some falsified medical products are almost visually identical to the genuine product and very difficult to detect.

However, the general public can take steps to identify fake medicines. Examine the packaging for condition, spelling mistakes, or grammatical errors. Check the manufacture and expiry dates and ensure any details on the outer packaging match the dates shown on the inner packaging. Ensure the medicine looks correct, is not discolored, degraded or has an unusual smell. Discuss with a pharmacist, doctor or other healthcare professional as soon as possible if one suspects the product is not working properly or if one has suffered an adverse reaction. Report suspicious medical products to the Philippine Food and Drug Administration (FDA) through their eReport online reporting facility at www.fda.gov.ph/ereport or call (02) 8809-5596.

The Philippine FDA cautions the public not to buy pharmaceutical products from establishments or online stores operating without the necessary government permits. The agency urges consumers to purchase medicine and other health products only from government-licensed pharmacies that have the appropriate FDA marketing authorizations.

The International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) believes that the counterfeit medicines trade is a complex global health challenge which requires an integrated, multi-stakeholder approach.

Strong coordination is necessary to ensure that all aspects of this global challenge are adequately addressed. Tackling falsified medicines requires strengthening legislative frameworks and regulatory systems, collecting data, implementing effective technologies, and raising awareness. An effective response must engage a variety of stakeholders, including patients, health professionals, public and private organizations, pharmaceutical manufacturers, distributors, wholesalers, retailers, and national regulatory and enforcement agencies.

Public awareness is vital to inform patients and the global population about the risk posed by falsified medicines. The IFPMA is a founding member of the Fight the Fakes Alliance, which raises awareness of the dangers of falsified and substandard medicines and gives a voice to people personally affected by them as well as those working to stop this crime.

The Pharmaceutical and Healthcare Association of the Philippines (PHAP) is a member of the Coalition for Safe Medicines, a multi-stakeholder alliance convened by the Philippine FDA to bolster the country’s campaign against fake medicines through public awareness and advocacy campaigns, research and policy development, and other pertinent activities to promote patient safety at all levels.

 

Teodoro B. Padilla is the executive director of Pharmaceutical and Healthcare Association of the Philippines (PHAP). PHAP represents the biopharmaceutical medicines and vaccines industry in the country. Its members are in the forefront of research and development efforts for COVID-19 and other diseases that  affect Filipinos.

Gov’t debt yields drop on US inflation report

YIELDS on government securities (GS) dropped last week as slower US consumer inflation bolstered bets that the US Federal Reserve might be done hiking rates this year.

GS yields, which move opposite to prices, fell by an average of 15.15 basis points (bps) week on week, according to the PHP Bloomberg Valuation Service Reference Rates as of Nov. 17 published on the Philippine Dealing System’s website.

Yields fell across the board last week. The 91-, 182-, and 364-day Treasury bills saw their rates decrease by 4.22 bps (to 6.1423%), 15.72 bps (6.301%), and 10.01 bps (6.4916%), respectively.

At the belly, the two-, three-, four-, five- and seven-year T-bonds declined by 17.70 bps, 17.13 bps, 16.95 bps, 17.21 bps and 19.83 bps to 6.3052%, 6.3309%, 6.3489%, 6.3692% and 6.4226%, respectively.

Lastly, at the long end, the yield on the  10-year bond dropped by 20.26 bps to 6.539% and rates of the 20- and 25-year papers went down by 14.19 bps (to 6.7486%) and 13.48 bps (6.7502%), respectively.

Total GS volume reached P32.24 billion on Friday, surging from the P11.43 billion seen on Nov. 10.

GS yields declined following slower US consumer inflation last month, a bond trader said, which fanned expectations that the Fed may pause its tightening cycle anew.

“This put less pressure on the BSP (Bangko Sentral ng Pilipinas) to hike [last week] in spite of an out-of-cycle move late last month and the pause was pretty much expected already,” the trader said in a Viber message.

US consumer prices were unchanged in October as Americans paid less for gasoline, and the annual rise in underlying inflation was the smallest in two years, bolstering the view that the Federal Reserve was probably done raising interest rates, Reuters reported.

Though rents continued to rise last month, the pace of the increase slowed considerably from September. The softer-than-expected inflation readings reported by the Labor department’s Bureau of Labor Statistics on Tuesday pushed US Treasury yields lower and sparked a stock market rally.

The unchanged reading in the consumer price index (CPI), the first in more than a year, followed a 0.4% rise in September.

In the 12 months through October, the CPI climbed 3.2% after rising 3.7% in September.

Economists polled by Reuters had forecast the CPI would gain 0.1% on the month and increase 3.3% on a year-on-year basis.

The lower US CPI led to the extended rally in GS yields, a second bond trader said in a Viber message.

The result of the 10-year T-bond auction last week “helped fuel momentum,” the first bond trader added.

The Bureau of the Treasury raised P30 billion as planned via the reissued 10-year bonds it auctioned off last week as total bids reached P65.928 billion or more than twice the offered volume.

The bonds, which have a remaining life of nine years and nine months, were awarded at an average rate of 6.781%, with accepted yields ranging from 6.748% to 6.8%.

Government securities are expected to continue trading with a downward bias this week, the second bond trader added.

“Although the Fed and the BSP have signified their willingness to remain hawkish, if need be, markets are pricing in the tightening is at an end,” the second trader said.

“Traders will likely monitor developments that could threaten the inflation outlook from here on out,” the first bond trader added. — B.T.M. Gadon with Reuters

Exclusivity the name of the game as luxury firms target China’s wealthiest for growth

SHANGHAI/PARIS — The world’s biggest luxury brands seeking growth in their second-largest market, China, are all courting the likes of wealthy entrepreneur Diana Wang.

Shanghai-based Ms. Wang, an investor who also owns a namesake fashion label, is an avid collector of fine jewelry who regularly shops at Cartier, Tiffany, and Chopard, among others.

She is also what luxury companies call a VIC, or very important client, a segment of the market they are increasingly targeting as China’s post-pandemic economic slowdown dries up the spending power of the once-aspirational middle-class that for years generated the bulk of their revenue growth.

Last month, Wang attended a gala dinner hosted by Tiffany, owned by the world’s biggest luxury firm LVMH, which also launched its new collection of high jewelry with private sales appointments for select clients.

“Luxury brands offer you this event experience, this personal experience and it makes you feel privileged,” Ms. Wang told Reuters. “It’s a big part of what makes me want to buy the brand.”

The lack of a strong rebound in luxury demand following China’s post-pandemic re-opening has spooked investors, adding to jitters about the industry’s prospects.

Shares in LVMH are down around 17% since July, while Richemont is 24% lower. Burberry also flagged low double-digit growth due to a slowdown in luxury spending globally, and in China.

To overcome, brands are focusing on selling fewer, more valuable items, relying on the 5% of luxury consumers who, according to HSBC analysts, account for more than 35% of their sales in China.

Offering perks such as exclusive access and meet-the-designer events to this handful of clients is a tried-and-tested strategy for luxury brands globally, but not one that they have employed as much in the past in China, where mass events aimed at raising brand awareness and whetting the luxury appetites of new consumers were more the norm.

From 2019 to the beginning of 2022, China’s domestic luxury sales doubled and some brands recorded year-on-year growth rates of 40-60% with middle class consumers accounting for “more than half” of that growth, according to Jacques Roizen, managing director of consulting at Digital Luxury Group.

Now, a property crisis and record-high youth unemployment have forced high-end retailers from Chanel to Cartier-owner Richemont and Gucci-parent Kering to compete for the discretionary spend of those fewer, wealthier customers still keen to treat themselves.

“It’s not only about advertising and communication,” said Jean-Marc Duplaix, chief financial officer and deputy chief executive of Kering, referring to company investments to woo shoppers across the spectrum globally. “It’s more broadly about how we engage with customers.”

INTIMATE AND EXCLUSIVE
Making Chinese VICs feel important is central to that engagement.

At the Shanghai gala, Tiffany made sure a celebrity was sat at every table, Wang said. Versace, owned by Capri Holdings which is in the midst of a $8.5 billion takeover by Tapestry, also recently held an intimate dinner for about 40 people at the historic Bund with designer Donatella Versace.

Gucci, Chanel, and Dior have also set aside more retail space in Shanghai exclusively for their wealthiest clients.

“We pay a lot of attention to the details and the anchorage to local culture,” said Cartier Chief Executive Cyrille Vigneron. The brand will hold its annual entrepreneurship awards for women in Shenzhen in May.

Executives at rival LVMH are also keen for that local edge, with Louis Vuitton recently opening a pop-up bookstore and cafe in Shanghai with a billboard in the local dialect and also launching a Mandarin-language podcast.

FEEDING THE LUXURY HABIT
Even as they narrow their focus, luxury brands remain optimistic about the potential in China, which is forecast to account for almost 40% of global luxury sales by 2030, according to consultants Bain.

And unlike foreign financial firms and companies in other industries which are shrinking their presence in China as geopolitical tensions rise and “derisking” takes precedence over potential market opportunities, many luxury companies say they are here to stay.

“We think medium and long-term development potential remains strong,” said Eric du Halgouet, executive president of finance at Hermes, whose Birkin handbag is a coveted hallmark of wealth.

Luxury consultant Mario Ortelli said several luxury firms are hedging their bets on China by also expanding their global footprint. This year has also seen many events and openings in South Korea, Japan, and Thailand, as well as China.

“But you still need to invest in your biggest market and one that is an engine of growth,” Mr. Ortelli said. “The only way for luxury companies to protect themselves is to make your brand as desirable as possible so you are the last one that a cost-cutting customer will stop buying.”

As China’s economic growth sputters, even VICs like Ms. Wang say they are thinking more carefully about the value of the luxury goods they are buying. That, however, isn’t necessarily bad news for retailers.

“We will think twice or three times now before spending more money than usual,” Ms. Wang said. “Though I wouldn’t say we will stop buying, it’s become a habit now.” — Reuters