Overseas Filipinos’ cash remittances (June 2023)
MONEY SENT by overseas Filipino workers (OFWs) rose to a six-month high in June, data from the Bangko Sentral ng Pilipinas (BSP) showed. Read the full story.
PSE to implement T+2 settlement by Aug. 24
Philippine Stock Exchange, Inc. (PSE) said on Tuesday its subsidiary Securities Clearing Corporation of the Philippines (SCCP) is set to implement the two-clearing day initiative for stock market transactions.
In a press release, PSE said the clearing house obtained approval from the Securities and Exchange Commission (SEC) to start implementing the T+2 settlement cycle by Aug. 24.
“The successful roll out by SCCP of its new clearing and settlement infrastructure five months ago has led to this landmark development for our market,” PSE President and Chief Executive Officer Ramon S. Monzon said in a statement.
“We expect the shortened settlement cycle to enhance operational efficiency and reduce risk,” Mr. Monzon added.
The local bourse operator said the move is in line with the T+2 settlement cycle already implemented for financial markets overseas.
“I am optimistic that the compliance rate of clearing members on the delivery of securities and cash obligations will continue to be within the current range,” he said
“Since August 28, Monday, has been declared a national holiday, trades on Aug. 24 will be settled on Aug. 29, Tuesday. That is the same settlement date for trades completed on Aug. 23, the last trading day under the T+3 cycle,” PSE said.
It added that all transactions starting Sept. 12 would be subject to the regular noon settlement deadline.
“Applicable penalties for late settlement under the SCCP Rules shall apply,” it added. — Adrian H. Halili
Government makes full award of new 10-year Treasury bonds
THE GOVERNMENT made a full award of the fresh Treasury bonds (T-bonds) it auctioned off on Tuesday on strong market demand, even as the coupon fetched was higher than secondary market levels.
The Bureau of the Treasury (BTr) made a full P30-billion award of the new 10-year bonds it offered on Tuesday as total bids reached P66.824 billion or more than twice the amount on the auction block.
The bonds were awarded at a coupon rate of 6.625%. Accepted yields ranged from 6.4% to 6.625% for an average of 6.558%.
The coupon fetched for the tenor was 4.5 basis points (bps) higher than the 6.58% quoted for the 10-year bond and 8.9 bps above the 6.536% fetched for previously issued 10-year bonds maturing on Sept. 15, 2032 at the secondary market before the auction, based on PHP Bloomberg Valuation Service Reference Rates data provided by the Treasury.
“The Auction Committee fully awarded the new 10-year Treasury Bonds at today’s auction, setting the coupon rate at 6.625%,” the BTr said in a statement on Tuesday.
“The auction was 2.2 times oversubscribed as total submitted bids amounted to P66.8 billion. With its decision, the Committee raised the full program of P30 billion,” it added.
The coupon rate fetched for the new T-bonds was higher than secondary market yields for the same tenor due to a weaker peso recently, which could prompt the Bangko Sentral ng Pilipinas (BSP) to match the US Federal Reserve’s latest hike, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The higher T-bond rate tracked the higher expectations on domestic bond yields following the recent weakness of the local currency,” a trader likewise said in an e-mail.
The peso sank to an eight-month low against the greenback on Monday due to broad dollar strength and faster US producer inflation last month.
The local currency closed at P56.78 versus the dollar on Monday, weakening by 46.50 centavos from Friday’s P56.315 finish, data from the Bankers Association of the Philippines’ website showed.
This was the peso’s weakest close in over eight months or since its P56.94-a-dollar finish on Nov. 23, 2022.
Meanwhile, the Fed last month raised borrowing costs by 25 bps, bringing its target interest rate to a range between 5.25% and 5.5%.
The US central bank has now hiked rates by a total of 525 bps since March 2022.
The Fed will hold its next policy review on Sept. 19-20.
For its part, the BSP will hold a policy meeting on Thursday.
A BusinessWorld poll last week showed 13 of 15 analysts see the Monetary Board keeping its key interest rate steady at 6.25% this week.
On the other hand, two economists expect the BSP to hike borrowing costs by 25 bps to mirror the Fed’s latest move.
The Monetary Board kept its key policy rate unchanged at a near 16-year high of 6.25% at its last two meetings after hiking borrowing costs by 425 bps from May 2022 to March 2023 to tame inflation.
The BTr wants to raise P225 billion from the domestic market this month, or P75 billion via Treasury 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. — A.M.C. Sy
Russian central bank hikes key rate to support rouble
MOSCOW — Russia’s central bank hiked its key interest rate by 350 basis points to 12% on Tuesday, an emergency move to try and halt the rouble’s recent slide after a public call from the Kremlin for tighter monetary policy.
The extraordinary rate meeting came after the rouble plummeted past the 100 threshold against the dollar on Monday, dragged down by the impact of Western sanctions on Russia’s balance of trade and as military spending soars.
The rouble pared gains after the decision to stand 0.4% weaker at 98.03 by 0829 GMT, but still significantly above lows near 102 on Monday which had not been hit since the early weeks after Russia invaded Ukraine.
President Vladimir Putin’s economic adviser Maxim Oreshkin on Monday rebuked the central bank, blaming what he called its soft monetary policy for weakening the rouble.
Hours after Mr. Oreshkin’s words, the bank announced the emergency meeting, throwing the currency a lifeline.
“Inflationary pressure is building up,” the bank said in a statement on Tuesday. “The decision is aimed at limiting price stability risks.
“The pass-through of the rouble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.”
Central Bank Governor Elvira Nabiullina has won plaudits for her handling of the economy since Russia began what it calls a “special military operation” in Ukraine, but the plunging rouble and high inflation have put her on the back foot, especially among pro-war nationalists.
The Kremlin’s public criticism of her monetary policy on Monday adds further pressure as Russia heads towards a presidential election in March 2024, with consumers battling rising prices for basic goods.
INFLATION PRESSURE
The bank last made an emergency rate hike in late February 2022 with a rate raise to 20% in the immediate fallout of Russia’s despatching troops to Ukraine. The bank then steadily lowered the cost of borrowing to 7.5% as strong inflation pressure eased in the second half of 2022.
Since its last cut in September 2022, the bank had held rates but steadily increased its hawkish rhetoric, eventually hiking by 100 basis points to 8.5% at its last scheduled meeting in July. The next rate decision is due on Sept. 15.
Russia saw double-digit inflation in 2022 and after a deceleration in the spring of 2023 due to that high base effect, annual inflation is now above the central bank’s 4% target once more and quickening.
In annualized terms on a seasonally adjusted basis, current price growth over the last three months amounted to 7.6% on average, the bank said.
The bank removed its signal that it was ready to raise rates further, said Sovcombank chief analyst Mikhail Vasilyev, interpreting that as a sign that rates have peaked.
“We believe that the key rate will remain at the current 12% level until the end of the year,” Mr. Vasilyev said. “A cycle of key rate cuts is likely as early as next year, when inflation starts to slow down.” — Reuters
Hollywood studios offer new concessions to striking screenwriters
HOLLYWOOD studios have made a new offer to striking screenwriters that includes concessions on issues such as the use of artificial intelligence (AI) and access to viewer data, Bloomberg News reported on Monday citing people familiar with the discussions.
The Alliance of Motion Picture & Television Producers has agreed to ensure humans are credited as writers of screenplays, instead of replacing them with AI, the report said, adding that the companies would also share data on the number of hours viewed on streaming services.
Other parts of the offer include a better-than-20% increase in residual payments to writers when their shows appear on networks other than the one they were made for, Bloomberg said.
Netflix Co. Chief Executive Officer Ted Sarandos has emerged as a strong force and Walt Disney Co. Chief Executive Officer Bob Iger, in recent weeks, has joined him in seeking to reach a deal with the writers, the report added.
The union representing striking Hollywood writers said on Friday it had received a counterproposal from the studios that it would consider, an apparent sign of progress in the more than 100-day-old strike.
The strike by Hollywood writers began on May 2 after talks between the WGA and the major studios reached an impasse over compensation, minimum staffing of writers’ rooms and residual payments in the streaming era, among other issues.
The Alliance of Motion Picture & Television Producers and Writers Guild of America didn’t immediately respond to a Reuters request for comment. — Reuters
Meralco agrees to sell electric vehicle solutions unit eSakay for P87 million
MANILA ELECTRIC Co. (Meralco) has sold its wholly owned subsidiary eSakay, Inc. to On-Us Solutions, Inc. for P87.4 million, the listed power distributor said on Tuesday.
In a stock exchange disclosure, Meralco said it had signed a share purchase agreement with On-Us Solutions on Aug. 15, the company did not provide additional information about the transaction.
On its website, Meralco described eSakay as aiming to be an end-to-end electric vehicle transport solutions provider.
Meralco affiliate Metro Pacific Tollways Corp., through its subsidiary MPT Mobility Corp., has a minority stake in On-Us Solutions.
According to MPT Mobility’s website, On-Us or Byahe is a privately owned modernized jeepney operator. To date, it operates about 30 “environment-friendly” jeepneys within Metro Manila, Pampanga, and Nueva Ecija.
In March, Meralco announced the creation of a new subsidiary Movem Electric, Inc. that will focus on the development and deployment of different electric transport solutions. The move allows eSakay to focus on public transportation services.
Movem Electric will own, create, develop, manufacture, produce, operate, install, license and sell service networks utilizing electric energy and other alternative energy sources, and their component charging stations both for local and foreign markets.
At the local bourse on Tuesday, shares in the company gained P2.60 or 0.76% to end at P344.60 apiece.
Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose
DoST opens P11.3-M health tech startup incubator in Davao
THE Department of Science and Technology (DoST) has launched an P11.3-million technology business incubator (TBI) aimed at cultivating the healthcare technology startup ecosystem in Davao City and the region, an official said on Monday.
“We are providing a platform for students, faculty, and researchers to transform their R&D outputs into impactful startups, especially in the healthcare sector, that benefit the community,” Enrico C. Paringit, DoST-Philippine Council for Industry, Energy, and Emerging Technology Research and Development (PCIEERD) executive director, said in an e-mailed statement.
The DoST-PCIEERD has partnered with the University of the Immaculate Conception to deliver the Mobilizing Advanced Research and Innovations to Advocate Nation-Building (MARIAN) TBI while bridging the gap between academic research and the health tech industry.
“This collaboration aligns with our vision of advancing technology and entrepreneurship to contribute to the nation’s growth and development,” Mr. Paringit added.
“We are thrilled about the possibilities this incubator offers to the health technology startup ecosystem in Davao City,” said Ceasar Ian P. Benablo, manager at MARIAN TBI.
“We envision an environment where brilliant business ideas and research outputs converge to address pressing societal issues through the development of cutting-edge ICT tools, including mobile and web applications,” he added.
Health tech was found to be the third emerging sector among startups in Southeast Asia, below fintech and e-commerce, according to data from Deal Street Asia and estimates from Kickstart Ventures, Inc. Health tech startup deals slowed down to 4.8% in the second quarter of this year, from 7.2% in the first quarter.
Davao City inched up eight places to rank 951st out of 1,000 cities in the 2023 edition of the Global Startup Ecosystem Index by research center StartupBlink.
With a score of 0.13, Davao City placed fifth out of the five Philippine cities included in the index, representing about 2% of the country’s startups. Manila, in local first place, ranked 95th globally with a score of 7.43 and fintech as its top industry.
“The startup scene of Davao City shows much promise,” StartupBlink said.
Trainings and workshops will be conducted with targeted regional partners and mentors to boost awareness and participation in the local startup ecosystem of Davao through the TBI program, the DoST-PCIEERD noted.
Among the 44 TBIs supported by the DoST-PCIEERD, the MARIAN TBI was funded by DoST-PCIEERD through its Higher Education Institution Readiness for Innovation and Technopreneurship program to help universities meet funding requirements and address the growing demand for early-stage regional entrepreneurial support. — Miguel Hanz L. Antivola
The crude truth is oil’s not what it used to be
TO JUDGE by the energy industry’s most trusted forecasters, consumption of crude oil is blasting ahead with no peak in sight.
Usage will rise to a record 102.2 million barrels a day (mb/d) this year, the International Energy Agency (IEA) said on Friday. It will still be climbing at a brisk pace when it hits 105.7 mb/d at the end of the IEA’s current five-year forecast in 2028. Demand for oil will rise by about 16 quads, or roughly 7.5 mb/d, between 2021 and a peak in 2040, according to Exxon Mobil Corp.’s latest energy outlook.
That’s hard to square with the picture on the ground. Saudi Arabia said earlier this month that it would extend its 2 mb/d production cuts into September and consider deepening them further. China’s gasoline demand will peak this year, two years earlier than expected, thanks to the rapid uptake of electric vehicles, said an official with China National Petroleum Corp. The country’s overall oil demand may have peaked in the second quarter this year, dashing expectations of surging imports toward the end of 2023.
The disconnect makes far more sense if you consider just how slippery that term “oil” can be.
A century ago, it was simple. A refiner would buy barrels of viscous black liquid drilled from the ground — crude oil — and process it into fuel for engines and boilers. If you counted the barrels leaving refineries and made a few adjustments, you had a decent proxy for “oil demand.”
That’s changed. Though we still count “oil demand” in roughly the same way, biofuels, plus a suite of volatile chemicals from gas wells (known as natural gas liquids or NGLs), now constitute nearly a fifth of the feedstock for the world’s oil processors.
That shift explains the disconnect. To most of the world, “oil” is synonymous with “crude oil” — the sticky black liquid that’s subject to quotas set by the Organization of Petroleum Exporting Countries (OPEC), is priced off the Brent and West Texas Intermediate futures contracts, and has an API gravity of less than 45. To energy analysts, however, “oil” is synonymous with “refinery products” — and increasingly, the raw materials for that industry come not from oil fields, but from gas wells and farms.
OPEC’s bearish output cuts make a lot more sense when seen in that light. Output from refineries will be up about 1.7 million daily barrels this year, compared to its pre-pandemic peak in 2019. This sounds like evidence of a rising market. Almost all of the increase, however, comes from NGLs and biofuels. Supply of crude oil, the product that OPEC ministers target, will average about 200,000 barrels a day below 2019’s levels, according to the IEA’s data, and 600,000 daily barrels below 2018’s number, which was higher still.
Will output of crude oil ever regain its 2018 levels? That’s heavily dependent on both total demand for refined products, and output of biofuels and NGLs. The IEA now sees crude supply level with its 2018 peak next year, before it bounces back in 2025 to a level about 1.7 million barrels above the previous record. In 2028, it will hit 1.9 billion barrels above a decade earlier.
That margin could be eroded rapidly, though. India and Indonesia, home to two of the fastest-growing vehicle fleets, will now require respectively 20% and 50% of their road fuel to come from biofuels by 2025, a sharp increase from current rates of 10% and 35%. If supply matches the IEA’s accelerated scenario rather than the more pedestrian numbers in its oil market forecast, some 700,000 barrels of that 1.9 million barrel increase vanishes.
NGLs may also perform more strongly than expected. The chemicals are an inevitable by-product of natural gas production, so any increase in gas output is likely to add more NGLs into the market. Output soared over the past few decades as the US took efforts to reduce flaring and leaking of methane from its gas fields, and several major producers have promised to repeat the trick under the Global Methane Pledge announced in 2021. Abu Dhabi National Oil Co. in July announced plans to cut its methane emissions to zero by 2030, while Saudi Arabian Oil Co. said in March that it was in the process of adding 1 mb/d of NGL output.
Put all that together, and the path for crude oil to rise above previous peak levels may be far narrower than you’d think from hearing bullish reports of refinery output. Last September, I predicted a global recession driven by fast-rising interest rates would prevent crude oil demand ever rising above its pre-pandemic record. The recession hasn’t materialized, but crude demand is still waiting to recover. Should biofuels and NGLs continue to outperform, we may come to look back on 2018 as the year that 150 years of crude oil demand finally peaked.
BLOOMBERG OPINION
Total approved foreign investment pledges
FOREIGN INVESTMENT PLEDGES approved by investment promotion agencies (IPAs) rose by an annual 27.8% in the second quarter, data from the Philippine Statistics Authority (PSA) showed. Read the full story.
UK watchdog starts ‘politically exposed persons’ review
LONDON — Britain’s Financial Conduct Authority (FCA) said on Monday it will ask lawmakers to report any problems they have opening or maintaining a bank account ahead of a formal investigation.
The review is part of a wider look at “debanking,” which recently became a political issue after former Brexit Party leader Nigel Farage said his account at private bank Coutts, part of NatWest, had been closed due to his political views.
“We are reviewing how financial services firms have applied the Politically Exposed Persons (PEP) regime and whether any changes are needed for UK PEPs,” the FCA said.
Under global rules, politicians, their families and close associates are seen as potentially more susceptible to bribery and corruption given the influence they can have on decision making and transfer of funds, and therefore face tougher checks on opening and maintaining bank accounts.
Britain’s financial services minister Andrew Griffth said last month that he had asked the FCA to consider creating a domestic PEP regime to reflect the lower category of risk from those that have no international role.
The FCA wants to hear some early evidence before it publishes the full terms of reference of its review in September, with a report next June.
“We are keen to hear directly from UK PEPs on their experiences, including any problems they have encountered — so we’re proactively reaching out to parliamentarians and other UK PEPs at an early stage,” the FCA said in a statement.
The watchdog will initially contact lawmakers from both Houses of Parliament, chairs of parties polling more than 5%, senior civil servants and senior ranks of the armed forces.
The PEP rules were drafted by the Financial Action Task Force on money laundering, and the FCA issued guidance in 2017 on how they should be applied.
The review is separate from an urgent data gathering exercise into the scale of debanking called for by British finance minister Jeremy Hunt, who suggested that any lender involved in widespread and unjustified debanking should be fined.
The outcome of the data-finding exercise is due by mid-September. — Reuters
Screenwriter’s Stranger Things copyright lawsuit ends
NETFILX and the makers of its hit show Stranger Things have resolved a lawsuit brought by a screenwriter who claimed they copied his screenplay about a girl with special powers who fights monsters from another dimension, according to a filing in Los Angeles federal court. Jeffrey Kennedy’s Irish Rover Entertainment agreed on Friday to drop its lawsuit against Netflix and Matt and Ross Duffer with prejudice, which means it cannot be refiled.
“Stranger Things was independently conceived by the Duffer Brothers, came into existence because of their creativity, and has succeeded because of their vision and hard work,” a Netflix spokesperson said on Monday. “This lawsuit was completely meritless and we’re glad to be able to put it behind us.”
Representatives for Irish Rover did not immediately respond to a request for comment on Monday.
A trial in the case was scheduled to begin next month.
Stranger Things, the story of a group of adolescent friends in rural Indiana in the 1980s who battle creatures from an alternate dimension called the “Upside Down,” debuted on Netflix in 2016 and became a smash hit for the streaming platform.
Mr. Kennedy’s company sued Netflix and the show’s creators the Duffer Brothers in 2020 for allegedly copying from his screenplay for a project called Totem.
Mr. Kennedy said his work was based on one of his childhood friendships in South Bend, Indiana, in the 1980s. He said that Totem and Stranger Things both revolve around a young girl with supernatural powers seeking to “rescue a loved one from having been abducted by a monster and carried to an alternate dimension that is a dark copy of their current reality.”
The lawsuit says Mr. Kennedy’s screenplay and Stranger Things have several similarities in their characters, plot, dialogue, and themes. Mr. Kennedy accused an artist who developed concept art for both his project and Stranger Things of sharing his work with the Duffer Brothers.
Netflix and the makers of Stranger Things denied the allegations in court filings and said the stories are “objectively different” by “virtually every imaginable measure.”
“Most glaringly, Stranger Things features a core group of children who fight off evil monsters while navigating teenage social issues,” the defendants said. “Totem, on the other hand, features adults, and its characters and storylines are deeply immersed in Native American imagery and mythology.” — Reuters
What is critical infrastructure under the Public Service Act
Republic Act No. 11659, amending Commonwealth Act No. 146 or the Public Service Act (PSA), was passed into law on March 21, 2022, with the intent to, among others, expand investments into the public services sector, a sector that has been generally considered as “highly regulated.”
With the passing of the amended PSA, clarification as to what are considered as public utilities was made, enumerating such to cover distribution of electricity; transmission of electricity; petroleum and petroleum products pipeline transmission systems; water pipeline distribution systems and wastewater pipeline systems, including sewerage pipeline systems; seaports; and public utility vehicles. For these public utilities, a requirement for a legislative franchise and a 40% maximum foreign equity threshold was confirmed. In carving out the public utilities from the greater set of public services, the ambiguity on what public utilities are covered within the realm of public services has somewhat been eradicated.
While the amended PSA has been lauded as legislation that finally opens a market long been ripe for foreign investments, in the same breadth, the amended PSA introduced industries considered as “critical infrastructure,” over which a specific set of rules apply. Under the amended PSA, a critical infrastructure is defined as “any public service which owns, uses, or operates systems and assets, whether physical or virtual, so vital to the Republic of the Philippines that the incapacity or destruction of such systems or assets would have a detrimental impact on national security, including telecommunications and other such vital services as may be declared by the President of the Philippines.”
On its face, “critical infrastructure” has a broad definition, one that grants the President discretion to identify industries as critical infrastructure, as long as such industries fall under the amended PSA. As of this writing, only telecommunications has been identified in the amended PSA as a critical infrastructure, with the caveat that “no other public service shall be considered critical infrastructure unless declared by the President.”
In relation to that caveat, the Implementing Rules and Regulations (IRR) of the amended PSA allows the President to identify additional critical infrastructure through executive orders, and further allows the National Economic and Development Authority (NEDA) or the applicable administrative agency, such as the National Telecommunications Commission for telecommunications, to recommend to the President additional industries as possible critical infrastructure.
Although the NEDA issued the IRR in June of this year, seeking to further contextualize the broad strokes made in the amended PSA, the ambiguity with respect to critical infrastructure remains present.
What are the possible issues that come with investing in critical infrastructure? At the outset, foreign investors seeking to invest into industries considered as critical infrastructure must consider the limits on equity ownership in such industries. As a general rule, foreign nationals (natural or juridical) cannot own more than 50% of the capital of entities considered as critical infrastructure, unless reciprocity is accorded to Filipino nationals. This reciprocity is satisfied when Philippine nationals are allowed to own more than 50% of capital stock in any activity related to agriculture, industry, and services in the home country of the foreign investor; or if the home country of the foreign investor allows Philippine nationals to invest the same value of capital in any economic activity related to agriculture, industry, and services [IRR, Section 45].
More importantly, foreign investors should consider the latitude of the discretion granted to the President that poses a risk to investors. For one, commercial decisions are not made in a few days. The decision to invest in any industry, especially by foreign investors, is painstaking and deliberate. As such, the identification of “critical infrastructure” and the latitude granted to the President to determine them, leave these investors in a bind. To drive this point home, imagine a foreign investor who has prepared for months and raised funds to invest in a certain entity engaged in industry, only to later have the President declare such an industry as critical infrastructure. What will happen to that investment? What if the foreign investor has breached the maximum foreign equity limits, or the home country of that investor does not grant reciprocity to Filipino nationals? The potential capacity of that investment to revitalize that industry is all but hampered.
In some way, foreign investments in industries likely to be considered as critical infrastructure poses risks that can only be limited through further identification of what industries these are, through an executive order issued by the President identifying additional critical infrastructure. Perhaps by limiting the list of industries considered as critical infrastructure, investors can find guidance on the type of industries potentially to be classified as such. Until such time, investors will have to take the risk in respect of investing in sensitive industries and will need to manage the timing and extent of their investments in the same.
The views and opinions expressed in this article are those of the author. This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or opinion.
Roilan Rigil Kent A. Alonzo is an associate of the Corporate and Special Projects Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).
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