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Gov’t fully awards Treasury bills at higher rates

BW FILE PHOTO

THE GOVERNMENT made a full award of the Treasury bills (T-bills) it offered on Monday at higher rates as investors expect the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) to keep benchmark borrowing costs elevated.

The Bureau of the Treasury (BTr) raised P15 billion as planned from the T-bills it offered on Monday as total bids reached P39.831 billion or more than twice the amount on the auction block.

Broken down, the BTr borrowed P5 billion as programmed from the 91-day T-bills as tenders for the tenor reached P10.939 billion. The three-month paper was quoted at an average rate of 5.87%, 9.8 basis points (bps) higher than the 5.772% seen last week. Accepted rates ranged from 5.824% to 5.895%.

The government likewise made a full P5-billion award of the 182-day securities, with bids reaching P13.632 billion. The average rate for the six-month T-bill stood at 5.973%, up by 8.8 bps from the 5.885% fetched last week, with accepted rates at 5.9% to 5.99%.

Lastly, the Treasury raised P5 billion as planned via the 364-day debt papers as demand for the tenor totaled P15.26 billion. The average rate of the one-year debt went up by 6.1 bps to 6.044% from the 5.983% quoted last week. Accepted yields were from 6.025% to 6.064%.

At the secondary market before the auction, the 91-, 182-, and 364-day T-bills were quoted at 5.7727%, 5.8969%, and 6.0514%, respectively, based on PHP Bloomberg Valuation Service Reference Rates data provided by the BTr.

T-bill rates rose on Monday amid hawkish Fed and BSP bets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The higher T-bill yields came amid  market expectations that the Fed may cut rates just once this year, if not at all, due to faster-than-expected inflation data, a trader likewise said by phone.

Recent US economic data on the labor market and inflation have caused market expectations for a rate cut from the Fed to be dialed back yet again, Reuters reported.

Expectations for a cut of at least 25 bps in June have shrunk to 26%, down from 50.8% a week prior, according to CME’s FedWatch Tool. US rate futures have now priced in a 77% chance of the first rate cut taking place in September.

Fed fund futures have also pared back the number of rate cuts of 25-bp cuts this year to fewer than two, or roughly 46 bps, from about three or four a few weeks ago.

The US consumer price index (CPI) rose 0.4% last month after advancing by the same margin in February, the Labor department’s Bureau of Labor Statistics said.

In the 12 months through March, the CPI increased 3.5%, the most since September. The CPI was also boosted by last year’s low reading dropping out of the calculation. It rose 3.2% in February. Economists polled by Reuters had forecast the CPI gaining 0.3% on the month and advancing 3.4% year on year.

Meanwhile, BSP Governor Eli M. Remolona, Jr. last week said they could begin their easing cycle later than initially expected as they have become “more hawkish than before” due to persistent upside risks to inflation stemming from higher food and transport costs.

He said they could cut rates by 25 bps in the third quarter if inflation is within target and economic growth is weak. However, policy easing could start as late as the first quarter of 2025 if inflation risks persist, he said.

The Monetary Board kept the target reverse repurchase rate unchanged at a near 17-year high of 6.5% at its meeting last week, as expected by all 16 analysts in a BusinessWorld poll.

The central bank hiked borrowing costs by 450 bps from May 2022 to October 2023 to help bring down elevated inflation.

Headline inflation picked up to 3.7% year on year in March from 3.4% in February. This was slower than the 7.6% clip in the same month last year and marked the fourth straight month that the CPI was within the central bank’s 2-4% target.

For the first quarter, headline inflation averaged 3.3%, below the BSP’s baseline forecast of 3.8% and risk-adjusted forecast of 4%.

On Tuesday, the BTr will offer P30 billion in reissued 20-year Treasury bonds (T-bonds) with a remaining life of 14 years and nine months.

The Treasury is looking to raise P195 billion from the domestic market this month or P75 billion from T-bills and P120 billion via T-bonds.

The government borrows from local and foreign sources to help fund its budget deficit, which is capped at 5.6% of gross domestic product this year. — A.M.C. Sy with Reuters

Century Properties net income hits P1.86 billion

LISTED property developer Century Properties Group, Inc. (CPG) recorded a 32% increase in its consolidated net income to P1.86 billion in 2023 from P1.4 billion the previous year.

The company’s 2023 net income is a ten-year high and exceeded pre-pandemic levels, CPG said in an e-mailed statement on Monday.

Revenues climbed by 14% to P12.7 billion, with the first-home residential development platform (PHirst) brand accounting for 58% or P7.4 billion of the total.

The company’s in-city vertical developments took up 27% or P3.49 billion of the total revenue, while the commercial leasing segment shared 11% or P1.35 billion.

The remaining 4% or P463 million came from CPG’s property management segment.

Earnings before interest, taxes, depreciation, and amortization also increased by 36% to P3.37 billion from P2.48 billion in 2022.

“We are very satisfied with the 2023 performance of the company as we have proven that the deliberate and prudent measures taken by the management to navigate through the challenges during the crisis period, and the strategies we implemented are now materializing,” CPG Chief Finance Officer Ponciano S. Carreon, Jr. said.

Meanwhile, CPG President and Chief Executive Officer Marco R. Antonio said the company will launch five new projects this year under the PHirst brand. The projects cover 85 hectares and have over 8,000 units worth P18 billion.

“Three of these developments will be in Calabarzon, while the other two will be in Central Luzon. We are also taking proactive strategies to sustain and enhance our financial performance in the coming months,” Mr. Antonio said.

Mr. Antonio said the company is also eyeing to unveil projects under its in-city vertical developments.

“We look forward to unveiling our upcoming projects tailored to meet the evolving needs of various market segments, including a premium low-density boutique residence in Makati City, a mid-rise residential building in Quezon City, as well as a mid-rise residential development within Azure North estate in San Fernando, Pampanga,” he said.

On Monday, CPG shares rose by 3.70% or one centavo to 28 centavos each. — Revin Mikhael D. Ochave

SSI Group’s profit surges to P2.58 billion

THE TANTOCO family’s listed specialty retailer SSI Group, Inc. saw a 34% jump in its net income to an all-time high of P2.58 billion in 2023, led by strong sales across its brand portfolio.

Revenue climbed by 17% to P27.7 billion last year as the company benefitted from its “unique brand portfolio, strategic store network, and resilient customer base,” SSI Group said in a stock exchange disclosure on Monday.

The company said it also captured the “increasing discretionary spending on international fashion brands and restaurants” of consumers as sales from e-commerce sites and third-party marketplaces, which took up 7% of last year’s revenue, reached P1.9 billion.

“Our record full-year 2023 results reflect the group’s ability to capture increasing discretionary spending through our emphasis on delivering world-class customer experiences. The group also continues to benefit from a resilient customer base, a flexible operating platform, an optimized expense base, and a strong cash position,” SSI Group President Anthony T. Huang said.

In the fourth quarter, SSI Group logged a 4.1% increase in net income to P1.1 billion while revenue improved by 8.4% to P8.8 billion.

SSI Group’s brand portfolio covers various specialty and lifestyle concepts spanning luxury, casual and fast fashion, beauty, footwear, home, and restaurant categories.

The company has 96 brands across more than 500 stores. Some of the brands being carried by SSI include Payless Shoe Source, Old Navy, Nine West, Michael Kors, Muji, Shake Shack, and Zara.

On Monday, SSI Group shares rose by 1.05% or four centavos to P3.84 each. — Revin Mikhael D. Ochave

Sunset Boulevard and Scherzinger shine at UK’s Olivier awards

LONDON — A revived version of Sunset Boulevard, the musical based on the 1950s film, and its leading actress Nicole Scherzinger were among the big winners at the Olivier Awards on Sunday, picking up seven prizes at Britain’s top theater ceremony.

The show’s lead duo of US singer Scherzinger, who rose to fame with pop band The Pussycat Dolls and is of Filipino ancestry, and Britain’s Tom Francis were named best actress and actor in a musical, while Jamie Lloyd won the award for best director.

The Broadway-bound show, with music by Andrew Lloyd Webber, also clinched the musical revival category, along with the best lighting design, musical contribution, and sound design awards at the ceremony at London’s Royal Albert Hall.

Ms. Scherzinger, who was born in Hawaii and raised in Kentucky, portrays Norma Desmond, a one-time film star who longs for a comeback, in the 1993 reinvention of the 1950 film, which featured Gloria Swanson.

Australia’s Sarah Snook followed up on her recent success starring in the television series Succession by winning the award for best actress for her role in The Picture of Dorian Gray, which also claimed best costume design.

London’s National Theater won three awards, including best new play for Dear England, a portrayal of the English national soccer team’s perennial heartbreak, and best actor for Mark Gatiss in The Motive and The Cue, as director John Gielgud in a difficult professional relationship with actor Richard Burton.

Stranger Things, The First Shadow, a stage adaptation of part of the hit Netflix series Stranger Things, won the best new entertainment or comedy play and set design categories.

The best new musical prize went to Operation Mincemeat, which tells the story of British military subterfuge during World War II. — Reuters

BSP unlikely to fully unwind rate hikes

BW FILE PHOTO

THE BANGKO SENTRAL ng Pilipinas (BSP) is unlikely to bring its policy rate back to pre-pandemic levels this easing cycle as it aims to keep inflation stable and support the peso, HSBC Global Research said.

“Achieving macroeconomic stability is a balancing act… When the central bank does begin its much-awaited easing cycle, we do not think the policy rate will be eased back to the pre-pandemic levels… Our view is that the easing cycle will stop when the policy rate reaches 5.00%,” HSBC economist for ASEAN Aris D. Dacanay said in a note dated April 12.

“Maintaining a policy rate that is higher than pre-pandemic levels will help mitigate any volatility in the peso, attract the financing needed to fund the economy’s ambitious infrastructure agenda, and help keep inflation within the central bank’s 2-4% target band,” Mr. Dacanay added.

BSP Governor Eli M. Remolona, Jr. last week said the Monetary Board could begin their policy easing cycle later than initially expected due to worsening upside risks to inflation.

The central bank could cut rates by 25 basis points (bps) in the third quarter if inflation is within target and economic growth is weak, he said, but policy easing could start as late as the first quarter of 2025 if price risks persist.

The BSP last week kept its target reverse repurchase rate unchanged at a near 17-year high of 6.5% for a fourth straight meeting.

The central bank cut benchmark rates by a total of 200 bps in 2020, with the policy rate reaching a record low of 2% in November that year from 4% at end-2019, amid the impact of the coronavirus pandemic on the economy.

It started unwinding its easy policy in May 2022 to help stem elevated inflation, with cumulative rate hikes until October 2023 reaching 450 bps.

Mr. Dacanay said the Development Budget Coordination Committee’s (DBCC) latest set of targets and assumptions support their view that the BSP will keep benchmark rates higher for longer amid a challenging macroeconomic environment, with the economy’s twin deficits expected to put pressure on the currency.

The DBCC last month cut its 2024 gross domestic product (GDP) growth target to 6-7% from 6.5-7.5% previously. The goal for 2025 was narrowed to 6.5-7.5% from 6.5-8%.

Meanwhile, it retained the 6.5%-8% goal for 2026 to 2028.

“[The] change in the growth target, we think, represented a rebalancing of the DBCC’s view of the country’s macroeconomic environment, one that incorporated the current headwinds that persist in the economy,” Mr. Dacanay said.

He noted that the government is also now expecting a gradual narrowing in the fiscal deficit, which means a slower pace of consolidation.

The DBCC revised the deficit ceiling this year to P1.48 trillion, equivalent to 5.6% of GDP. This was slightly higher than the previous P1.39-trillion ceiling, equivalent to 5.1% of GDP.

By 2028, the deficit-to-GDP ratio is seen settling at 3.7% from 3% previously.

As of end-2023, the deficit as a share of GDP stood at 6.2%, a tad higher than the 6.1% target set by the government but lower than the 7.3% ratio at end-2022.

“But despite widening the fiscal deficit assumption in the next 5 years, we do not think this change represents any indication of fiscal loosening or, in a more general sense, fiscal imprudence. This is because the wider fiscal deficits are a result of lower assumptions for growth, and not higher expenditures,” Mr. Dacanay said. “When GDP growth is lower, it means two things. One, the size of the tax base is smaller, leading to less government revenue. Two, the denominator in the ‘fiscal deficit-to-GDP’ ratio is smaller, which makes the overall ratio larger. That said, there is no change in fiscal policy here. It is just an incorporation of the fact that times are still harder than usual.”

“Nonetheless, we cannot ignore the fact that the Philippine economy is in twin deficits. The government’s ambitious infrastructure agenda requires the importation of key inputs such as steel, cement, and technology… This has led to wider current account deficits, which we do not expect to go below 2% of GDP until 2025. And these deficits will require a good amount of financing from abroad,” he added. — AMCS

Food security: The other paradigm

MK-S--UNSPLASH

Many economists think of scale and clustering as the only way to be food secure. Entrepreneurs tend to think differently.

I was recently in Batanes where they seem to have no issues about food security. It is because they learned to deal with the scarcity and seasonality of food long before climate change became a national or global issue. They have been a microcosm of what the country is now going through — unpredictable weather patterns, stormy seas, and only a few days of good weather — they eat these for breakfast as the saying goes.

So, can the solution to food security be the Ivatan way? They store food for the bad times. They learn how to use an animal from nose to tail, and not just using choice cuts or choice parts. They learn to dry fish and they observe marine sanctuaries, unlike our overfished municipal waters because of our consumer demand for canned fish products.

Sometimes the solution may be the exact opposite of what economists propose. Scale is sometimes just the reason to want much more than necessary and if we moderate our need, we learn to do small things in meaningful ways.

Other than the Ivatan way, we can also look at age-old practices of saving for the proverbial rainy day. Coffee farmers store their produce for the “rainy days” or when they need money for tuition, fiestas or medical emergencies. This practice of storing “black gold” — coffee beans not to be sold immediately — has been there for many years. It is our ancestors’ way of saving grains which can withstand being stored for long periods of time, be it palay, corn, or coffee.

Food security may also mean looking for food other than commercial varieties, like rice and corn, which consumers have been used to, and traders take advantage of. In Batanes, they use root crops, like taro (gabi), sweet potato (camote) and cassava. In fact, they even have a Rootcrop Processing and Training center established by the Department of Agriculture (DA). They use their root crops as alternatives to rice and corn, and they also add value by making them into chips or snacks called Wakay.

Another grain that has come back into the mainstream is adlai or Job’s tears. This grain, which I first came across with in Bukidnon, became popular a few years ago when chefs started using it for paella, champorado, salads and when the Slow Food Movement (www.slowfood.com) started promoting its use and made sure it was available in supermarkets and specialty stores. I remember chef Margarita Fores calling me for adlai because she would serve it as the carbohydrate for a wedding reception. Those moves brought adlai into the mainstream as an alternative grain to rice — and one with a lower glycemic index, too. This is good news for diabetics who avoid rice. Adlai is the better alternative, and this supports our local adlai farmers.

As far as vegetable supply is concerned, we now know of urban farming techniques, like plant towers (you can find them on YouTube), and other urban gardening styles, like using backyard plots. Condo dwellers may find community gardens in places like Bonifacio Global City (BGC) where local vegetables are within easy reach.

If you like local fish, do get familiar with dried and semi dried (lamayo, a technique of semi-drying fish after marination) versions of bangus (milkfish) and even small fish like dilis (anchovy). Instead of canned fish, look for tawilis (a freshwater sardine) and other sardines — the marine biologists tell me it is safer to eat the smallest fish as they have the least mercury content, having stayed in the sea water for just a limited time and are caught soon. Now that’s a tip for the salmon and cod eaters — eat small. That means respecting small fish like sardines, instead of small lapu-lapu (groupers, which can grow bigger if left longer at sea).

If you are a beef eater, look at local cattle to reduce your carbon footprint from imported meat cuts. But if you are able to shift to using meat only once or twice a week, that will already help curb our imports and give our local livestock industry a leg up.

If you like lechon (whole roasted pig), save it for special occasions. It will also help you manage your cholesterol numbers even without medication. Eat less processed meat and we will need less pork and imports of pork parts. Did you know that even most of our chicharon (pork crackling) is imported?

Methane — coming from livestock who expel the gas — is the biggest contributor to global warming and climate change. Less animals, less methane, lower temperatures. That is the simple explanation why our choice of food becomes the solution to both food security and climate change.

Ultimately, businesspeople will have to start thinking from the smallest unit of decision-making and that is home consumption. If we change our eating habits at home, we change what supermarkets will carry. We can change what public markets will carry. Because what is not bought by consumers like you will never be sold again.

Food security may be addressed on a small scale starting with our eating habits.

1.  Choose local whenever you can.

2. Follow Meatless Mondays and Fish Fridays to lessen meat consumption.

3. Choose small fish like fresh sardines to play safe and to lessen demand for canned fish.

4. Learn to eat “nose to tail” so producers can use all the parts of an animal without passing the cost to only choice cuts.

5. Grow your own vegetables.

6.  Eat local fruits. Stop looking for larger sizes which may turn out to be hybrid varieties that are imported.

Ultimately, the solution to food security is in our own very hands. It is not government alone that must change laws to ensure food security.

Start with your food habits and we can all be food secure.

 

Chit U. Juan is co-vice chair of the Management Association of the Philippines (MAP) Environment Committee. She was the chair of the ASEAN Women Entrepreneurs Network (AWEN) from 2016-2018 and is now a Philippine Women’s Economic Network trustee and member of AWEN’s Advisory Council. She is also 1st vice-president of the ASEAN Coffee Federation.

map@map.org.ph

pujuan29@gmail.com

Megawide board OK’s P5-B bond offering

SAAVEDRA-LED Megawide Construction Corp. said its board has approved a P5-billion bond offering as part of its fundraising plans.

The company’s offer will be peso-denominated fixed rate bonds, Megawide said in a stock exchange disclosure on Monday.

The issuance will have a base offer of up to P4 billion and an oversubscription option of up to P1 billion consisting of three-year Series C bonds due 2027, five-year Series D bonds due 2029, and seven-year Series E bonds due 2031.

The construction company tapped PNB Capital and Investment Corp., RCBC Capital Corp., and SB Capital Investment Corp. as the joint issue managers, joint lead underwriters, and bookrunners of the offer.

Megawide is a listed construction company. It is involved in various infrastructure projects such as the Malolos-Clark Railway and the Metro Manila Subway.

The company is also engaged in property development through its subsidiary PH1 World Developers, Inc.

On Monday, Megawide shares declined by 2.89% or nine centavos to P3.02 apiece. — Revin Mikhael D. Ochave

Coppola, Cronenberg, Lanthimos to compete at Cannes Film Festival undimmed by strikes

MARGARET QUALLEY, Jesse Plemons, and Willem Dafoe in a scene from Kinds of Kindness, directed by Yorgos Lanthimos. — IMDB

BERLIN — Directors Francis Ford Coppola, David Cronenberg, and Yorgos Lanthimos will compete for the Cannes Film Festival’s top prize next month, organizers said last week, easing concerns that strikes in Hollywood might dim the star-studded event.

Mr. Coppola will bring his long-in-the-making passion project Megalopolis, starring Adam Driver, to the competition, while Mr. Lanthimos teams up with Emma Stone after the success of Poor Things with Kinds of Kindness, and Mr. Cronenberg will pull in horror fans again with The Shrouds starring Vincent Cassel.

Last year marked a difficult one in Hollywood as strikes by actors and writers forced filming and post-production work to shut down for months, leaving gaps in 2024’s movie schedule.

Other directors unveiling their new films in competition include Italy’s Paolo Sorrentino with the Naples-set Parthenope, Brazilian Karim Ainouz’s erotic thriller Motel Destino, and France’s Jacques Audiard with Emilia Perez, a musical set in the milieu of a Mexican drug cartel starring Selena Gomez.

Several films take inspiration from real-life figures, including exiled Russian director Kirill Serebrennikov’s Limonov – The Ballad about the late Russian dissident and writer Eduard Limonov.

With The Apprentice, Iranian-Danish director Ali Abbasi, known for Holy Spider, looks at Donald Trump’s early years as a real estate tycoon, with Sebastian Stan of superhero movie fame playing the former US president.

And Rumours, a dark comedy out of competition, features Cate Blanchett channeling the likes of European Commission President Ursula von der Leyen at a Group of Seven (G7) meeting that goes awry.

This year also marks the return of several big-name Chinese directors after a four-year gap due to the COVID pandemic, festival director Thierry Fremaux told journalists.

They will include Cannes veteran Jia Zhangke in the main competition with Caught by the Tides, and Peter Chan’s She Has No Name screening out of competition.

Several big-name actors are making a Cannes appearance, including Richard Gere, Uma Thurman, and Jacob Elordi, who all star in director Paul Schrader’s competition film Oh, Canada, as well as Hollywood icons Nicolas Cage and Demi Moore.

The festival will kick off on a lighter note with the previously announced opening film The Second Act, a French comedy directed by Quentin Dupieux and starring Lea Seydoux.

Coming off the resounding success of last summer’s Barbie, US director Greta Gerwig will head this year’s jury.

Organizers had built up anticipation for this year’s line-up by announcing George Miller’s new Mad Max film and a Western starring Kevin Costner would be premiering.

In addition, Hollywood legend George Lucas is set to walk Cannes’ seaside Croisette to receive an honorary Palme d’Or this year.

The 2024 festival runs from May 14-25. — Reuters

Cebu still top pick for outsourcing and multinational firms — Colliers

CHARANJEET DHIMAN-UNSPLASH

COLLIERS PHILIPPINES has observed that outside Metro Manila, Cebu remains the top choice for outsourcing firms and multinational companies. Cebu led in terms of office space take-up outside of the capital region in 2023, with a total of 65,800 square meters (sq.m.). Despite strong net take-up, vacancies remain elevated due to new supply, which is expected to persist through 2024. Colliers believes that shared services, healthcare companies, and other multinational firms are likely to occupy more office spaces in this location. While rationalization of office real estate is still occurring, Colliers projects a slight increase in net take-up in 2024. The persisting tenant-leaning market for Cebu should provide an opportunity for tenants to take advantage of the newer and better-quality office buildings, skilled labor pool, and improving infrastructure. Landlords should remain proactive in improving their occupancy and developing higher quality buildings to address the demands of a more discerning tenant base.

NEW SUPPLY TO NEARLY DOUBLE IN 2024
In 2023, we recorded the delivery of 60,200 sq.m. of new office space with the completion of Johndorf Tower in Cebu Business Park (CBP), Faustina Center in CBP Fringe, and Skyrise 3B in Cebu IT Park (CITP). In 2024, we project the delivery of 107,900 sq.m. of new office space; with the reclamation area accounting for more than 50% of new supply. Among the buildings due to be completed in 2024 are Astra Corporate Center, Excelsior Corporate Tower, Filinvest Cebu Cyberzone Tower 3, Grand Tower Cebu Condo Office, Il Corso, MAHI, Patria de Cebu and Northwing Tower 1. From 2024 to 2026, we project the annual delivery of about 73,500 sq.m. of new office space with CITP and reclamation area cornering a combined 58% of the new supply.

CEBU LEADS OFFICE TRANSACTIONS
About 208,800 sq.m. of office transactions were recorded outside of Metro Manila in 2023, down from the 221,100 sq.m. posted a year ago. Cebu accounted for 112,900 sq.m. of deals or 54% of total transactions outside the capital region. Outsourcing firms dominated, covering nearly 75% of total deals in Cebu. Among the notable transactions include spaces occupied by Concentrix, OfficePartners 360, Avant, TOA Global and Optum. These firms took up spaces in Cebu IT Park.

As of end-2023, vacancy in Cebu reached 20.4%, a slight improvement from the 21.7% vacancy posted in 2022. Demand continues to outpace new supply, resulting in the marginal drop in vacancy. However, in 2024, we expect vacancy to rise to 21.3%, given the delivery of 107,900 sq.m. of new office space.

 In 2023, we recorded a net take-up of 65,800 sq.m., down from the 109,200 sq.m. in 2022. In 2024, we project net absorption to reach 72,000 sq.m. as we expect greater absorption of office space from third-party outsourcing and shared services firms looking to set up and expand their operations.

OFFER CONCESSIONS AND CONSIDER HIGH QUALITY OFFICE SPACES IN THEIR FUTURE OFFICE PIPELINE
Over the past couple of years, we observed significant relocation and consolidation transactions which are considered flight-to-quality and flight-to-value movements as the market remains to be in favor of tenants. Spaces are available in high quality buildings with green features for tenants to align their ESG initiatives with. Considering this, landlords are advised to proactively engage their tenants to understand how they can retain them within their portfolio through the offering of attractive deal structures while implementing building improvements to achieve high occupancy levels. In addition, landlords are also encouraged to introduce higher quality office buildings in their pipeline to attract future demand.

CAPTURE DEMAND FOR FLEXIBLE WORKSPACE
As of end-2023, flexible workspace vacancy in Metro Cebu dropped to 20%, significantly lower than the 27% vacancy posted in 2022. Flexible workspace operators such as BPO Seats, Avant Offices, and Regus have capitalized on the demand for flexible workspaces by adding new sites to their portfolio. Profiles of notable flexible workspace occupiers include multinational companies, contact centers, accounting and financial services firms.

With the market’s increased preference for non-traditional leases in Metro Cebu, Colliers encourages landlords to seize this opportunity by incorporating flexible workspaces in their leases. Landlords may also look into joint venture agreements with serviced office providers.

CAPITALIZE ON CHANGING TENANT PREFERENCE
Colliers has noted that tenant’s preferences have changed significantly over the past few years. There is a luxury of choice in the Cebu market for discerning tenants to align with. This is an opportunity that landlords should embrace to take advantage of the growing market coming from shared services, health information management, IT and software development and other multinational companies.

 

Dom Fredrick Andaya is executive director of Office Services – Tenant Representation at Colliers Philippines.

Emerging markets battle weak currencies amid dollar’s might

CURRENCY INTERVENTION has become a key battleground in emerging markets, especially Asia, as the latest leg up in the dollar piles pressure on officials to act.

In South Korea, Thailand and Poland, officials have said they are closely monitoring for currency volatility or spelled out they’ll step in if needed. Indonesia has gone a step further by selling dollars and China has repeatedly pushed back against depreciation, implying to traders that the yuan’s stability is key.

Faster-than-expected US inflation data last week damped bets on Federal Reserve interest-rate cuts, suggesting the battle against dollar strength isn’t going to end anytime soon. Increasing tensions in the Middle East between Israel and Iran risk creating a fresh surge in demand for the greenback as a haven.

“Right now, we do see lots of verbal intervention from different central banks,” said Marcella Chow, global market strategist at JPMorgan Asset Management in Hong Kong. Given the Fed seems unlikely to ease policy soon, “there might be more weakening with regards to Asian currencies and that may suggest that there might be more verbal intervention that’s needed,” she said in an interview on Bloomberg TV.

The uptick in central bank activity is just another zone of conflict stemming from the Fed’s pivot to higher-for-longer rates. Traders have been winding back bets on expected US rate cuts in recent months due to sticky consumer-price data, which suggests emerging-market policy makers still have plenty of work ahead of them.

CURRENCY JAWBONING
Thai policy makers are faced with a stern test in trying to support the baht, which has tumbled about 6% this year. Their approach has been to use rhetoric to try and talk it higher.

“The committee will continue to closely monitor the volatilities in the foreign exchange market,” policy makers said at their April 10 meeting. They kept interest rates on hold at the gathering to help the currency, defying the wishes of Prime Minister Srettha Thavisin who has stressed the need to ease policy.

Poland’s central bank repeated at its April 4 meeting that it may intervene to bolster the zloty. A stronger local currency helps curb inflation, policy makers said after they held rates.

And Bank of Korea officials have said they are watching the won closely, after it came under pressure last week. Governor Rhee Chang-yong’s remarks on the currency on Friday contained verbal intervention terminology, Director General Oh Kum-hwa told Bloomberg.

SELLING DOLLARS
Bank Indonesia has gone a step further by buying the rupiah to limit losses. Governor Perry Warjiyo has said intervention and the sale of high-yielding securities will be their main levers this year to underpin the currency.

Their latest official foray was on April 2 when the local currency slid to a four-year low. In Indonesia’s case though it’s not just the dollar to blame: the rupiah has also been under pressure due to concerns about the spending plans of incoming president Prabowo Subianto.

Peru’s central bank, which surprised economists with an interest rate cut last week, is said to have been a frequent seller of dollars in recent months as it seeks to prop up the sol. Officials have said in the past the goal of interventions is to reduce currency fluctuations.

Although not primarily in response to the dollar, Israel’s central bank deployed unprecedented sales of its US currency following the Hamas attack in October to protect the shekel. 

Many of the most interventionist central banks have been in Asia, which has seen some of the largest currency losses in the past month.

“Asian central banks just can’t let down their guard,” said Paul Mackel, global head of foreign-exchange research at HSBC Holdings Plc in London. Given that weak currencies often stoke price pressures, “it could also mean that actually the last mile of inflation is not only difficult for the US, it could be for a number of different economies,” he said.

CHINA’S DILEMMA
A prime example of the challenge facing some officials in emerging markets is China’s dilemma over the yuan: prop it up and risk worsening the economic downturn, or let it weaken and encourage capital outflows.

The central bank has chosen the former, and turned to its trusted yuan fixings as its key instrument. Policy makers have kept the daily reference rate in a tight range in recent months, even as the yuan has weakened, meaning the currency is getting ever closer to the 2% daily boundary around the fixing in which it’s allowed to trade.

The dangers of relaxing their hold have already been demonstrated. The People’s Bank of China set a weaker-than-expected fixing on March 22 and the yuan slumped the most in two months.

China is prioritizing exchange-rate stability but may have to use more tools to keep yuan depreciation at bay if the dollar continues to strengthen, said Khoon Goh, head of Asia research at ANZ Group Holdings Ltd. in Singapore.

TIME TO BUY?
Still, while there are few signs the dollar rally is about to let up, some analysts at least suggest this may be a decent time to start returning to some of the most beaten up currencies.

The likelihood of the Fed delaying rate cuts after March US inflation data “adds to the continued headwinds for Asian currencies,” said David Chao, a strategist at Invesco Asset Management in Singapore. “This could be an opportunity to buy the dip” in regional risk assets, he said. — Bloomberg

Iran attacks Israel: What it implies for global economy, markets

ISRAEL DEFENSE FORCES-WIKIMEDIA

IT IS GENERALLY agreed that this month has seen a significant escalation in long-standing Iran-Israel tensions. Both countries argue that their territory has been attacked in a manner that warrants and justifies direct retaliation. Both are threatening further escalation, notwithstanding other countries calling for calm.

Regardless of what happens next, many feel that a significant line has now been crossed in an unsettled part of the world that has experienced tremendous human tragedy, especially in the last six months. What some had deemed a relatively contained disequilibrium in the Middle East has now transitioned to a perilously unstable disequilibrium involving many parties.

As trading resumes Monday, traders and investors will react to higher geopolitical risks whose spillover can reach far and wide in asset markets. Beyond that, they must factor in the higher threat of stagflationary winds for the global economy at a time when risk-mitigating policy tools, such as fiscal and monetary measures, are already overly stretched, and inflation in the US is proving sticky.

Notwithstanding the view that this weekend’s escalation could have been much worse, it wouldn’t surprise me if Monday’s market open included higher gold and oil prices and lower stocks and government bond yields. What comes after that will be a function of whether the collective wisdom of traders and investors concludes that both Iran and Israel have sent a message to each other and thus feel that they have done enough for now. That is what international diplomacy, including Sunday’s Group of Seven meeting, aims to accomplish. However, they are dependent on the two countries’ assessment of the situation.

The global economy and markets are relatively well-placed to handle a once-and-for-all increase in the geopolitical risk premium. They are not well-placed to navigate further escalations that would involve more parties in a more significant manner.

The energy price shock that would follow such further escalations would stifle the recovery in manufacturing that is helping countries such as Germany and the UK emerge from their technical recessions. It would complicate a US inflation picture that is already subject to price increases proving more stubborn than many, including the Federal Reserve, expected. It would make the structural reforms that China needs more difficult. And it would intensify the move toward greater international economic and financial fragmentation.

There is a lot at stake, depending on what happens next between Iran and Israel. The hope is for a de-escalation there and elsewhere in the Middle East, both in the immediate and longer term. That would help contain the adverse spillovers to the global economy and markets and, more critically, also save lives and livelihoods following the tragic number of deaths, injuries, and mental and physical damage of the last six months. Whether this hope will turn into reality, however, is far from guaranteed at this stage.

BLOOMBERG OPINION

Axelum allocates up to P400 million in capex

LISTED coconut products maker Axelum Resources Corp. has earmarked up to P400 million in capital expenditure (capex) this year to improve its production facilities.

In a regulatory filing on Monday, the company said that its capex for the year was estimated at P350 million to P400 million, to be used for increasing capacity, modernizing equipment, and upgrading facilities.

Axelum also reported a net loss of P158 million for 2023 due to “weaker than normal performance,” reversing the P983.52 million in net income in 2022.

This was mainly due to the pandemic-induced shipping crisis, which led to increased inventory levels and reduced demand for its key products.

“The prior year saw a unique opportunity to revisit our fundamentals and strategies, as we gear up to restart our momentum in 2024,” Axelum President and Chief Operating Officer Henry J. Raperoga said.

The company reported sales of P5.7 billion during the year, due to the consistent performance of its coconut water and coconut milk/cream segments. This was lower than the P7.04 billion reported in 2022.

Its gross profit was P970 million, representing a 53.02% decline from the P2.11 billion reported a year prior.

Axelum’s selling and general administration expenses for the year were P685 million and P456 million, respectively.

“To date, we are already seeing positive macro indicators particularly tempering inflation and anticipated interest rate cuts, which are seen to fuel consumer activity in our largest export market,” Mr. Raperoga added.

On Monday, Axelum shares fell by 1.83% or four centavos to close at P2.14 apiece. — Adrian H. Halili

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