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Local shares plunge amid fears of US rate hike

Philippine Stock Exchange index

Philippine shares fell on Friday as the local bourse took a hit from the higher-than-expected US inflation rate, which could trigger the Federal Reserve to increase its rates next month.

The 30-member Philippine Stock Exchange index (PSEi) plunged 162.26 points or 2.18% to end at 7,270.36, while the broader all shares index dropped 52.61 points or 1.34% to finish at 3,872.13.

“Philippines shares retreated on a red-hot inflation report that could trigger the Fed to hike interest rates as early as March,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

US consumer prices rose by 7.5% in January, the biggest annual increase in inflation in 40 years, which could fuel financial markets speculation for a 50-basis points interest rate hike from the Federal Reserve next month, Reuters reported.

“An aggressive monetary tightening in the US is seen to have repercussions on the local economy including capital outflows and a weakening of the peso,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a Viber message.

COL Financial Group Chief Technical Analyst Juanis G. Barredo said the index reshuffling may have also contributed to the index drop on Wednesday.

He said he expected some volatility in some stocks like Monde Nissin Corp., gaining 12.10%; Emperador Inc., losing 6.25%; Bloomberry Resorts Corp., declining 3.31%; and Robinsons Retail Holdings, Inc., climbing 3.91%. The first two  were added to the PSEi membership while the last two were removed.

Cristina S. Ulang, vice president and research head of First Metro Investment Corp., said investors also took profits after the index touched 7,500 levels, which she said is an already a strong resistance, but the index managed to move higher.

Meanwhile, all sectoral indices lost at the end of Friday’s trade, except for property, which gained 7.22 points or 0.21% to close at 3,397.07.

Services led the losers as it tumbled 69.83 points or 3.53% to 1,908.18; holding firms declined 194.88 points or 2.76% to 6,844.31; financials skidded 38.85 points or 2.21% to 1,715.55; industrials plunged 197.21 points or 1.82% to 10,585.54; and mining and oil dropped 106.68 points or 0.96% to 10,951.40.

Value turnover jumped to P22.83 billion with 1.93 billion shares that switched hands on Friday from the P10.48 billion with 1.31 billion issues traded the previous trading day.

Declining issues beat advancing ones, 121 versus 66, while 50 names closed unchanged.

Net foreign buying climbed to P4.47 billion on the last trading day of the week from the P407.82 million net purchases logged on Thursday. — M. C. Lucenio

Philippine dollar reserves dip

UNSPLASH

By Luz Wendy T. Noble, Reporter 

The country’s gross international reserves (GIR) slipped in January as the government paid debt and the value of the central bank’s gold holdings declined. 

Dollar reserves slid by 0.3% to $108.45 billion at the end of last month from December, according to preliminary data released by the Bangko Sentral ng Pilipinas (BSP) on Thursday evening. These were also 0.2% lower than a year earlier. 

“The month-on-month decrease in the GIR level reflected mainly the National Government’s payments of its foreign currency debt obligations and downward adjustment in the value of the BSP’s gold holdings due to the decrease in the price of gold in the international market,” the central bank said in a statement. 

Treasury bureau data showed that debt service payments tripled to P81.24 billion in November from a year earlier as amortization payments surged. Principal payments to foreign creditors reached P6.95 billion, while interest paid on external debt was P3.68 billion. 

The country’s debt service bill in the 11 months to November rose by 27.6% to P1.13 trillion from a year earlier. 

“Unless replenished by foreign exchange generating activities, the huge amount of obligations we have now may indicate a continuous trend,” John Paolo R. Rivera, an economist from the Asian Institute of Management, said in a Viber message. 

While the country’s foreign exchange buffers slipped, the end-January GIR level was enough to cover 10.3 months’ worth of imports and payments of services and primary income, the central bank said. 

The GIR was also about 8.6 times the country’s short-term external debt based on original maturity and 5.9 times based on residual maturity. 

Dollar reserves safeguard the economy from market volatility and show the country’s ability to repay debt. 

As of end-January, foreign currency deposits fell by three-quarters to $785.3 million from a month earlier and by 77.9% from a year ago. 

The BSP’s gold holdings were valued at $9.181 billion, 1.6% lower than a month earlier and 14% lower year on year. 

Monetary policy tightening and rising inflation could affect the central bank’s gold valuation, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. 

“Fed rate hikes tend to reduce the appeal of gold, with zero interest rate, but offset by the fact that gold is a hedge against higher inflation,” he said in a Viber message. 

The BSP expects the dollar reserves to rise to $112 billion by year-end. 

Treasury to sell P30-B retail bonds

BW FILE PHOTO

By Luz Wendy T. Noble, Reporter 

The Treasury Bureau will sell at least P30 billion worth of five-year Retail Treasury Bonds this month, it said in a statement on Friday. 

The offer period for the peso-denominated debt is from Feb. 15 to 28, while settlement is on March 4, it said in a statement. There will also be a swap offer for bonds falling due on March 14 and July 4. 

This will be the first retail bond offer by the Treasury this year. In November, the government raised P360 billion from five-year Retail Treasury Bonds with a coupon rate of 4.625%. 

The bonds are targeted for small investors who want low-risk, higher-yielding savings instruments backed by the government. 

In a separate statement, the Treasury bureau said government-owned and -controlled companies and local government units may place their orders for the bond offer starting Feb. 15 through state lenders Land Bank of the Philippines and Development Bank of the Philippines. 

To make way for the bond sale, the government will cancel the auction for seven- and 10-year Treasury bonds on Feb. 15 and 22. 

Yields of the five-year bonds at the secondary market stood at 4.4332% on Friday, based on data from the PHP Bloomberg Valuation Service Reference Rates posted on the Philippine Dealing System’s website. 

Also on Friday, the Philippine central bank raised P120 billion in one-month securities at an auction, with rates falling after inflation slowed last month. 

The Bangko Sentral ng Pilipinas (BSP) fully awarded the 28-day debt, which was oversubscribed as tenders hit P158.1 billion. Bids were still lower than P190.2 last week. 

Accepted rates for the one-month debt hit 1.627% to 1.685% from 1.63% to 1.6945% a week earlier. The average rate slipped to 0.23 basis point week on week to 1.6699%. 

The central bank uses its short-term securities and term deposit facility to mop up excess liquidity in the financial system and guide market rates. 

Yields on the one-month bills declined after inflation eased in January, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message. 

The consumer price index quickened by 3% in January from 3.6% in December as the increase in utility prices slowed, the local statistics agency said. This was the first time 2018 was used as a base year, from 2012 previously. 

Inflation soared to 4.5% last year, above the central bank’s 2-4% target, due higher food and oil prices. The BSP expects inflation to slow to 3.4% this year. 

Mr. Ricafort said yields on the BSP securities had also fallen as investors shifted their funds to short-term tenors amid more hawkish signals from the US Federal Reserve. 

Fed officials have hinted that they were open to raising interest rates starting next month as the US economy recovers and in order to tame elevated inflation. 

Fewer cars sold in January

The modernized IOS showroom design highlights Isuzu Tagum’s sprawling 11,000 sq.m. — PHOTO FROM ISUZU PHILIPPINES CORPORATION

CAR SALES declined by 11.2% in January from a year earlier after a fresh surge in coronavirus infections spurred by the highly mutated Omicron variant, according to an industry group. 

Vehicles sold by the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association fell to 20,765 units last month, they said in a joint report on Friday. 

Passenger car sales fell by a fifth to 5,784 units from a year earlier, while commercial vehicle sales declined by 6.9% to 14,981 units. January car sales were also a quarter lower than a month earlier. 

In a statement, chamber President Rommel R. Gutierrez said the industry expected the decline, noting that car sales are typically sluggish after the holidays. 

He said vehicle sales had also been affected by the coronavirus spike. 

“Unfortunately, we cannot dismiss the impact of tighter restrictions reimposed in January as new cases of COVID-19 rose particularly in National Capital Region and nearby provinces, resulting in a lukewarm reception for big-ticket item spending,” Mr. Gutierrez said.   

The government tightened the lockdown in the capital region on Jan. 3 to 31 because of the infection surge. It has since been relaxed after COVID-19 cases started falling. 

“The pandemic is something that the industry will have to continue dealing with during these uncertain times just like other industries even with the rollout of the vaccines,” Mr. Gutierrez said. “Hopefully, COVID-19 will be contained in the foreseeable future so we can all get back on track to recovery.” 

The groups said Toyota Motor Philippines Corp. had the biggest market share at 47.57% or 9,877 units sold, followed by Mitsubishi Motors Philippines Corp. with 2,954 units sold (14.23%), Nissan Philippines, Inc. with 1,781 units (8.58%) and Suzuki Phils., Inc. with 1,430 units (6.89%).  

The industry groups missed their goal of selling 295,400 units last year, having sold 268,488 units, for a 20% yearly growth. — Revin Mikhael D. Ochave 

Infections fewer than 5,000 for 4th day

PHILIPPINE STAR/ MICHAEL VARCAS

By Kyle Aristophere T. Atienza, Reporter 

The Philippines posted 3,788 coronavirus infections on Friday, the fourth straight day the tally fell below 5,000. 

This brought the total to 3.63 million, the Department of Health (DoH) said in a bulletin. The death toll hit 54,854 after 72 more patients died, while recoveries rose by 5,652 to 3.48 million.  

The agency said 14.7% of 32,795 samples on Feb. 9 tested positive for COVID-19, still above the 5% threshold set by the World Health Organization (WHO). 

Of 91,147 active cases, 3,261 did not show symptoms, 83,145 were mild, 2,986 were moderate, 1,443 were severe and 312 were critical. 

DoH said 97% of the latest cases occurred on Jan. 29 to Feb. 11. The top regions with new cases in the past two weeks were Metro Manila with 470, Western Visayas with 455, and Davao with 453. It added that 44% of new deaths occurred in February and 32% in January. 

The agency said 726 duplicates had been removed from the tally, 449 of which were reclassified as recoveries and one was tagged as a death, while 52 recoveries were relisted as deaths. One laboratory failed to submit data on Feb. 9. 

It said 34% of intensive care unit beds in the country had been used, while the rate for Metro Manila was 24%. 

Earlier in the day, Health Undersecretary Maria Rosario S. Vergeire refuted a claim by researchers from the University of the Philippines that Manila, the capital and nearby cities were now at low risk from the coronavirus. 

“Although cases in the National Capital Region are falling, our metrics shows that it is still under moderate risk, not low risk,” she told an online news briefing in mixed English and Filipino. 

Metro Manila’s daily attack rate was 12.53, with a seven-day moving average of 886 per day, she said. 

OCTA Research Group fellow Fredegusto P. David on Wednesday said the capital region was at low risk from the coronavirus.  

 “I don’t understand why our metrics don’t align,” Ms. Vergeire said. “It’s confusing people. DoH is the official source and we are using metrics that show NCR is still classified as moderate risk.” 

OCTA uses data from DoH and the website of The Act Now Coalition, a nonprofit group founded by volunteers in March 2020. 

Edsel T. Salvana, director of the Institute of Molecular Biology and Biotechnology at the National Institutes of Health-University of the Philippines Manila, said they consider the level of community transmission and vaccination rate, among other things, before classifying the risk level. 

Meanwhile, Ms. Vergeire said the coronavirus is not yet endemic because infections have yet to stabilize. 

She also said the government is preparing for an eventual shift to Alert Level 1, which will become the so-called new normal.  

The Philippines is scrambling to vaccinate more people as it reopens the economy.  

On Thursday, it took delivery of 3.4 million doses of Pfizer, Inc.’s coronavirus vaccines donated by the United States under a global initiative for equal access. 

“As the largest contributor to COVAX, the United States has facilitated the delivery of more than 69 million vaccine doses [to the Philippines, including more than 28.5 million doses donated by the American people,” the US Embassy said in a statement on Friday. 

Ms. Vergeire said the government’s two-day vaccination campaign on Feb. 10 to 11 would be extended until Feb. 18. 

She said 662,318 vaccine doses were injected on the first day of the immunization drive, 442,236 of which were first doses and 219,972 were boosters. The government seeks to fully vaccinate 77 million people by end-March. The country has fully vaccinated 60 million people. 

She said only four of 52,262 children aged 5 to 11 who were vaccinated against COVID-19 in 56 sites nationwide experienced minor adverse reactions. 

Rajendra Prasad, the World Health Organization’s acting representative to the Philippines, said 2.5 million seniors have yet to be vaccinated. 

“Vaccinating older people is one of the most impactful ways to save lives during this pandemic,” he separately told a televised news briefing. “We know that senior citizens are at high risk of developing severe disease, getting hospitalized and dying from COVID-19.”  

Comelec ruling favoring Marcos assailed

By John Victor D. Ordoñez and Kyle Aristophere T. Atienza, Reporter 

A FORMER election commissioner on Friday cited inconsistencies in a division’s ruling allowing the son and namesake of the late dictator Ferdinand E. Marcos to run for president this year. 

The decision written by Commissioner Aimee P. Ferolino was full of contradictions, retired Commissioner Maria Rowena V. Guanzon, who used to preside over the First Division of the Commission on Elections (Comelec), said in a Facebook post on Friday.  

“If there is no law punishing the nonfiling of the income tax returns, how was the regional trial court able to convict Marcos, Jr.?” she asked, referring to former Senator Ferdinand “Bongbong” R. Marcos, Jr. 

The division on Thursday said Mr. Marcos’s failure to file tax returns in the 1980s, for which he was convicted a decade later for tax evasion, did not involve wicked, deviant behavior. 

“In ruling out moral turpitude, Ferolino relied exclusively on the elements of the offense,” said Ms. Guanzon, who earlier accused her fellow commissioner of delaying the case so her vote would not be counted. “This is wrong.” 

“Determination of whether an offense involves moral turpitude is a question of fact and depends on all the surrounding circumstances,” she added. 

Ms. Guanzon earlier alleged that a senator from Davao was meddling in the lawsuit filed by survivors of the dictator’s martial law regime.  

“If Ferolino has any shame left, she should inhibit herself from voting on the motion for reconsideration,” she tweeted separately. 

The petitioners would seek reconsideration of the ruling next week, Howard M. Calleja, their lawyer, told a news briefing. 

“We will continue to exhaust all remedies available to bring out the truth, to attain justice and to bring the issue to the proper legal conclusion it deserves,” he said. 

Bonifacio P. Ilagan, a martial law victim and one of the petitioners, said the ruling has strengthened their doubts about Comelec’s integrity. 

Marcos lawyer and spokesman Victor D. Rodriguez applauded the Comelec ruling on Tuesday night, calling the lawsuits “nuisance.” 

“Enough of the quarrel, enough of the conflict,” he said in a statement in Filipino. 

The Marcos family was forced to flee the country in 1986 after a popular street uprising supported by military generals toppled the dictator’s regime. Marcos, Jr. was among the first members of the family to return to the Philippines from exile in the United States in 1991. 

5 ex-NEDA chiefs back Robredo for president

PHILSTAR

More than 160 economists, including five former socioeconomic planning secretaries, on Friday endorsed Vice-President Maria Leonor “Leni” G. Robredo for president, saying she is best positioned to lead the country’s economic recovery amid a coronavirus pandemic. 

In a statement, they also said the Philippines needs a better pandemic response — “one that is sound, prompt, informed by science and evidence-based.” “This should be the centerpiece of any program for the complete resumption of economic activity.” 

“Vice-President Leni Robredo is our best hope to turn the tide and bring back the people’s trust in government in order to restore and sustain vigor to people’s lives and livelihoods at the soonest possible time,” they added. 

Among those who signed the statement were Ernesto M. Pernia, President Rodrigo R. Duterte’s former socioeconomic planning chief and his predecessors Solita G. Collas-Monsod who served under the late President Corazon C. Aquino, Cielito F. Habito under ex-President Fidel V. Ramos, Dante B. Canlas under Gloria Macapagal Arroyo and Emmanuel F. Esguerra under the late President Benigno S.C. Aquino III. 

The former chiefs of the National Economic and Development Authority (NEDA) said Ms. Robredo has a solid economics and legal background needed to craft policies to quicken economic recovery. 

She has also shown genuine concern for the poor as a human rights lawyer before she entered politics, they said. “This will be crucial not just in bringing back people’s trust in government, but also in making sure that economic recovery improves the lives of Filipinos from all walks of life.” 

Former central bank Deputy Governor Diwa C Guinigundo and economist-lawmaker Stella Luz A. Quimbo also signed the statement. — Kyle Aristophere T. Atienza

Campaign permit rule excessive — group

The Commission on Elections (Comelec) should do away with campaign permits, a lawmaker said in a statement on Friday.  

Party-list Rep. Arlene D. Brosas urged the election body to reconsider its campaign system, noting that an inter-agency task force guidelines are enough to enforce health protocols amid a coronavirus pandemic.  

“IATF guidelines are already in place to ensure mobility restrictions and health protocols,” she said in mixed English and Filipino. “We think this is enough. We do not need a campaign permit system.” 

Under a Comelec order, election candidates holding motorcades and face-to-face campaigns must get a permit from the agency and local government units. — Jaspearl Emerald G. Tan

Chief Justice: Lawyers should be service-oriented

PHILSTAR FILE PHOTO

The country’s chief justice on Friday urged the Philippine Association of Law Schools to modernize their role.  

In a statement dated Feb. 10, Chief Justice Alexander G. Gesmundo said the group should manage the expectations of aspiring lawyers by ensuring that social responsibility rather than financial gain and recognition becomes their goal. 

“If we want lawyers who would put justice above professional success, without regard for glamor or recognition, and if we want competent and proficient lawyers, we initially look to legal education to inculcate the correct values and give the proper and adequate training and preparation,” he said. 

Mr. Gesmundo on Thursday led the oath to newly appointed board of trustees and officers of the legal association.  

The chief justice said the Supreme Court and legal education institutions are working closely to help develop a new generation of highly proficient and service-oriented lawyers.  

“We are relying on you, our legal educators, to support and give impetus to our reforms in the other areas of law practice and in the judicial system as a whole,” he added. — John Victor D. Ordoñez

Ex-Customs official convicted for hiding wealth

DOF.GOV.PH

A Manila trial court has convicted a former Customs official of falsification after she tried to hide her husband’s business interests, according to the Finance department. 

The official faces jail time for failing to state in her net worth statement that her husband was an incorporator and stockholder of a property company, it said in a statement on Friday. 

The Office of the Ombudsman filed several criminal cases against the ex-Customs official in 2017 based on a complaint from the Revenue Integrity Protection Service of the Finance department. 

She was sentenced to an indeterminate jail term of two to eight years and was fined P5,000 for the crime, it added. — Luz Wendy T. Noble

PAL swings to profit with P1.7B in December

Philippine Airlines, Inc. (PAL) made a profit of $32.97 million (P1.7 billion) in December, four months after filing for Chapter 11 bankruptcy protection, reversing a loss of $11.67 million incurred in November.

According to PAL Chief Financial Officer Nilo Thaddeus P. Rodriguez’s end-December report to the United States Bankruptcy Court for the Southern District of New York, the airline had a gross income of $183.82 million for the month, up 28.1% from $143.48 million earned in November.

PAL filed its December operating report on Jan. 18, according to a copy of the document from the airline’s claims agent Kurtzman Carson Consultants LLC.

Broken down, PAL’s passenger revenue grew 37.7% to $132.27 million in December from $96.09 million in November, while cargo revenue declined by 4% to $42.27 million from $44.04 million previously. Ancillary revenue increased 57.5% to $6.74 million from $4.28 million in November.

Its total comprehensive loss since the Chapter 11 filing on Sept. 3 until Dec. 31 reached $36.12 million.

On Dec. 31 last year, the airline announced that it had “emerged” from its voluntary Chapter 11 proceedings “as a more efficient airline with a strengthened balance sheet.”

PAL said it successfully completed its financial restructuring within four months, in contrast to other airlines that remain in the Chapter 11 process more than a year after filing in 2020.

“The company’s plan of reorganization, which was approved by the US restructuring court on December 17, 2021, provides for over $2 billion in permanent balance sheet reductions from existing creditors, improvements in PAL’s critical operational agreements and additional liquidity including a $505 million investment in long-term equity and debt financing from PAL’s majority shareholder,” the airline said in a statement.

“The airline’s consensual restructuring plan was accepted by 100% of the votes cast by its primary aircraft lessors and lenders, original equipment manufacturers and maintenance, repair, and overhaul service providers, and certain funded debt lenders,” it added.

In January, PAL announced that its senior vice-president for operations, Capt. Stanley K. Ng, was appointed as its new president and chief operating officer, in an acting or officer-in-charge capacity, replacing Gilbert F. Santa Maria.

The airline has said that it aims to restore more routes and increase flight frequencies as travel restrictions ease and borders reopen, including the resumption of regular flights to multiple cities in mainland China, full regularization of flights to Australia and the commencement of new services to Israel.

The company anticipates to generate an operating income of $220 million this year and $364 million in 2023. — Arjay L. Balinbin

SPC, affiliate buy STEAG’s 51% stake in power firm

SPC Power Corp. on Friday said it had executed along with an affiliate an agreement to buy the 51% stake of German power firm STEAG GmbH in a company that owns a 210-megawatt coal-fired power plant in Misamis Oriental.

“This acquisition is in line with the objective of SPC to support growth and address the country’s need for reliable, affordable and sustainable power supply,” SPC said.

The deal prompted the Philippine Stock Exchange to suspend the trading of SPC shares ahead of the company’s submission of a comprehensive disclosure report as called for by disclosure rules.

Before the suspension, SPC disclosed that it had agreed to buy 40.5% of STEAG State Power Inc.’s outstanding capital stock held by STEAG GmbH’s, while the remaining 10.5% will be bought by its affiliate Intrepid Holdings, Inc.

Their share sale and purchase agreement was executed on Feb. 10, the listed Cebu-based power company said.

STEAG State Power’s plant was built through a build-operate-transfer scheme with the National Power Corp. as the other party to a 25-year power purchase agreement.

The deal will be closed subject to the following considerations for the transfer of ownership rights over the shares: around $33.89 million for the common shares; around $18.11 million for the redeemable shares; and accrued interest on the said common shares and redeemable shares at the locked box interest rate.

The locked box interest rate, the company said, is an amount equal to the interest accrued on a daily basis, at 4% yearly from Jan. 1, 2021 until and including sale completion or March 31, 2022, whichever is earlier.

“The closing of the sale shall be subject to conditions precedent,” SPC said.

The trading suspension on SPC took effect at 11:11 a.m. on Friday until further notice. The PSE said after a review of SPC’s disclosure, it deemed the deal as covered by the exchange’s “Substantial Acquisition Rule.”

STEAG GmbH operates 11 hard coal-fired power plants, of which eight are located in Germany, and one each in Turkey, Colombia, and the Philippines.

SPC has five subsidiaries: SPC Island Power Corp., Cebu Naga Power Corp., SPC Malaya Power Corp., Bohol Light Co., Inc., and SPC Light Co., Inc.

It also has two associates: KEPCO SPC Power Corp., and Mactan Electric Co., Inc. SPC Power holds 40% ownership in each company. — Marielle C. Lucenio

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