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Central bank books higher net income on fee, FX gains

BW FILE PHOTO

THE BANGKO SENTRAL ng Pilipinas (BSP) booked a higher net profit in 2021, backed by improvements in its interest and fee earnings as well as gains from foreign exchange (FX) rate fluctuations.

Data released on the BSP website showed the central bank’s net income rose by nearly a third (32.8%) to P42.11 billion in 2021 from the P31.71 billion booked a year earlier.

However, it was still lower by 8% than the P45.81 billion it recorded in 2019 prior to the pandemic.

The BSP’s revenues climbed by 41.3% to P166.98 billion in 2021 from P118.15 billion a year earlier.

Broken down, interest income increased by 35% to P115.43 billion from P80.58 billion in 2020.

Miscellaneous income, which include trading gains, fees, and penalties, improved by 58% to P51.55 billion from P32.72 billion a year prior.

Meanwhile, expenses expanded by 68.8% to P136.01 billion in 2021 from P80.58 billion the previous year.

The BSP’s interest expenses in 2021 increased by 30% to P60.34 billion from P46.44 billion in 2020. Other expenses more than doubled to P75.67 billion from P34.15 billion.

Meanwhile, the central bank gained P10.86 billion from foreign exchange
fluctuations in 2021. This is a turnaround from the P5.78-billion FX net loss it incurred in the prior year.

The BSP’s total assets rose by 7.1% to P7.576 trillion at end-2021 from P7.075 trillion a year earlier.

Total liabilities grew by 7.8% to P7.44 trillion from P6.904 trillion.

At end-2021, the BSP’s net worth stood at P136.14 billion, down by 20% from the P171.05 billion a year ago. — L.W.T. Noble

CREC to supply solar power to Toyota Motors Cebu

A UNIT of Citicore Renewable Energy Corp. (CREC) will supply renewable energy to a Toyota Motor Philippines Corp. franchisee in Cebu to step up the “acceleration of its customer diversification,” the company said.

In a media release sent over the weekend, CREC said it would supply solar energy for two years to Toyota Motors Cebu through its retail electricity supplier arm Citicore Energy Solutions, Inc., which is listed under the government’s Green Energy Option Program (GEOP).

GEOP allows end-users with 100-kilowatt power demand to opt for renewable energy supply from sources accredited by the Energy department.

“The pace at which renewable energy (RE) becomes so relevant among industry leaders and big energy consumers provides an excellent growth opportunity for the entire Citicore organization. Being one of the highly-integrated RE players in the country, we are in a unique position to take advantage of this surge, which we believe we are making significant inroads into,” said CREC President and Chief Executive Officer Oliver Y. Tan in a statement.

The company declined to disclose the contracted power supply, but said it sees the agreement as “a start in the automotive market.”

CREC earlier reported a 250% increase in its customer base from 2016 to 2021, bringing a total of 90 megawatts (MW) of contracted supply, including 5.1 MW of renewable energy supplied to partner facilities such as Tutuban Mall in Manila.

“This entry into the automotive industry is another testament to CREC’s capability to deliver reliable supply of energy to any areas and business, while being more always available and accessible to its potential customers,” Mr. Tan said.

CREC has earmarked P70 billion for capital expenditure projects spread in the next five years to add 1,500 MW of renewable energy to its portfolio. This year, it has set aside P3 billion for existing projects. — Marielle C. Lucenio

Data innovation to boost fintech: A Q&A with FinTech Alliance.PH

By Bernadette Therese M. Gadon, Researcher

THE FINANCIAL TECHNOLOGY (fintech) landscape in the Philippines has been growing despite the setbacks experienced due to the coronavirus disease 2019 (COVID-19). The rapid movement of digitalization in the past years paved the way for financial services to expand and be more convenient for the average Filipinos.

According to Philippines Fintech Report 2022, there are currently 222 fintech companies in the country, that focus on lending segment (27%), payments (20%), e-wallets (13%), blockchain and cryptocurrency (12%), and remittances (12%).

Amid the improvements in fintech, the Bangko Sentral ng Pilipinas’ (BSP) granted licenses to six digital lenders, making banking accessible to far-flung areas in the country, and tapping into the underserved and unbanked Filipinos.

FinTech Alliance.PH, a self-regulating organization that contributes about 90% of fintech-initiated transactions volume in the country, has been one of the leaders in expanding fintech in the Philippines. For this year, its goal is to continuously innovate and sustainably expand the digital finance system to improve the economy.

One of these is obtaining and sharing information in traditional data, big data, and alternative data to create a new and inclusive way of credit scoring.

FinTech Alliance.PH welcomes these improvements to be more inclusive to every Filipino, however, it is also aware of the risks and obstacles in using alternative data that are making other industries hesitant to jump into online finance.

To know more about the fintech landscape, BusinessWorld reached out to Angelito “Lito” M. Villanueva, founding chairman of FinTech Alliance.PH and executive vice-president and chief innovation inclusion officer of Rizal Commercial Banking Corp. (RCBC), via a video call interview regarding the country’s fintech condition, how they tackle certain issues, and their promotion for digital finance in the Philippines. Here’s the excerpt of the interview:

What are the challenges that FinTech Alliance.PH have encountered in implementing its projects/programs amid the pandemic? How did the organization overcome these?

Mr. Villanueva: I think launching, scaling, and sustaining innovation at the height of the pandemic have never been an easy task. We all know that. But if there is some advantage of the pandemic, it really accelerated the massive digitalization efforts of all the stakeholders, especially the push of the BSP. But there are definitely challenges. So, what are these challenges that we need to overcome?

Internet connectivity and infrastructure. We know for a fact that in the Philippines, the fundamentals of digital banking such as internet connectivity and infrastructure remain to be a challenge. And the good news is that the government has been paying great attention to this, especially during COVID-19. Last year, BSP came up with a push for what we called satellite broadband — that would now allow the far-flung areas with rugged terrains to be able to have access to data.

Cybersecurity threats. Another challenge that we all know has been a concern amongst not only for consumers but definitely the players in the industry, and we really need to address this, which loom large on digital banking or any digital financial service. Because of this, [FinTech] Alliance had to establish strong internal cybersecurity measures and this starts with partnering with the best and the most trusted fintech service providers and the best individual contributors when it comes to handling technology. With the guidance of the BSP [and] the necessary regulations pertaining to being cyber-resilient, especially at the height of massive digitalization. While we have seen the massive digital adoption, it’s directly proportional that we also see quite a number of cyber issues.

Lack of financial education amongst Filipinos. I think it’s really more on having to further promote financial education and digital literacy. And the most pressing hurdle that [FinTech] Alliance had to contend with is not really structural, but behavioral, or attitudinal hesitancy among Filipinos to go digital for their financial transaction remains to be a major challenge for the Alliance members. And this is rooted in the internalized misconception amongst Filipinos regarding the high-risk nature of digital finance transactions due to cybersecurity threats, the low rates of financial education also contributed to this perceived residency. That’s why we came up with our code of conduct and code of ethics to even police the ranks in the industry.

What notable projects has FinTech Alliance done in the past? What projects does your organization have this year that the industry should look out for?

Mr. Villanueva: [FinTech] Alliance played a very important role — especially last year — in our pursuit to help the BSP in further promoting digital payments. We know for a fact that BSP has its digital payments transformation roadmap that calls for the twin goals of having 50% of financial transactions to become digital and that 70% of Filipino adults will be part of the financial system [by next year] — enabling all these people to have transactional accounts. And the good thing here is that we were also tapped as a resource coming from the fintech industry by the Philippine Congress in coming up with insights, recommendations and other suggestions pertaining to some of the bills or proposed legislations. Aside from this, we also contributed to the crafting of the BSP’s two major circulars, particularly the digital bank licensing framework and also the Open Finance Framework, among other things. Plus, other regulations or circulars by other regulators such as from the Securities and Exchange Commission (SEC), the National Privacy Commission (NPC), and even from the Credit Information Corp. (CIC).

We also are supporting the Philippines Statistics Authority (PSA), which is the agency mandated to push for the Philippine Identification System (PhilSys) ID. And the recently relaunched BSP National Strategy for Financial Inclusion, which was held last [Jan. 28]. Those are the things that we’ve been busy with in the past year. And we are also continuously doing all these initiatives to make sure that we can really promote a sustainable and inclusive digital finance.

For this year, what we will be seeing would be the full operations of the six digital bank licensees… Because right now we have the Overseas Filipino Bank (OFBank) and Tonik Digital Bank that are already operational. What we will be seeing this year would be the operations of the other four digital bank licensees, such as the Maya Bank, the UNOBank, the TymeBank of Robinson’s and Tyme. And of course, lastly is the Union Digital Bank of UnionBank.

The second one would be the final composition of the Open Finance Oversight Committee (OFOC), because right now we have the OFOC transition group that are tasked to come up with the final implementing rules and regulations or the final framework that would govern the open finance regime in the Philippines.

The third is the voters’ education for the coming elections, which will be in collaboration with strategic partners.

The Bangko Sentral ng Pilipinas has touted the use of alternative data in assessing the capacity of the borrowers to pay their debt which could help unbanked and underserved Filipinos to gain access to financial services. What’s FinTech Alliance.PH’s stand on this? How would this be helpful in the financial services sector?

Mr. Villanueva: Yes, in fact, we are one of the staunchest supporters of this. BSP came up with a survey amongst some stakeholders as regards the use of alternative data for credit to finance. We know for a fact that even the CIC only utilizes traditional data. But we know for a fact that given the developments in digital technology with all of this credit scoring algorithm, alternative scoring, etc., you could come up with alternative data scoring to cover even the unbanked or underserved Filipinos or consumers. So that’s why this is a welcome development for the FinTech Alliance, especially for our unbanked and underserved Filipinos who will now have a greater chance of having to access responsive and responsible credit. The whole idea is on how we can protect our borrowers from predatory lenders and from illegal lenders as well.

As alternative data use information from various sources such as social media, utilities, behavioral, online transactions, etc., what will be the security implications on this for the consumers? How can we protect and secure consumer data for possible data breach?

Mr. Villanueva: Data security is a legitimate concern with a greater push for the use of alternative data. And this is something that the FinTech Alliance is working on to help the BSP ensure that possibilities of data breaches will be minimized, if not eliminated. Hence, we encourage our members and other financial institutions to employ what we call a data privacy by design strategy. And the Alliance, together with the BSP, the NPC, and even the CIC, is also working closely in developing a regulatory sandbox to ensure that these innovations are compliant with loss and to ensure that it complies with international data protection standards for the mutual benefit of all.

How will the use of big data and analytics benefit the Philippine financial industry?

Mr. Villanueva: We will benefit from this one big time. With a highly interoperable financial ecosystem that mostly runs in the cloud, data generation grows exponentially. That’s why I said that this is something really big for the country. In an article by Information Week, it was reported that people generated about 1.7 megabytes of data every second in 2020. And this corresponds to the flood of customer and user data available, especially with the emergence of more digital banks, cryptocurrencies, e-wallets and ecommerce platforms. With this massive network of generated data, big data analytics proves to be extremely helpful in mining or processing or interpreting data to better understand consumer profiles, behaviors, and needs in a macro scale. And the insight coming from these big data analytics can help fintech players and of course, other BSP-Supervised Financial Institutions to develop products and services that are more frictionless, agile, and responsive to the needs of our customers.

Do Philippine banks and fintech firms have the manpower and technical know-how to implement this? What could be the possible setbacks big data adoption on an industry level could present in the country?

Mr. Villanueva: I would describe year 2022 as the age of massive “coop-petition.” Because we talk about coop-petition, it’s really more about collaborating with everybody. And if you are to look at the industry right now, we could see that there is a demand for digital talent. We have seen quite a number of companies right now being victims of talent poaching, because you have seen quite a number of digital banks or fintech companies launching their businesses in the Philippines or some incumbents growing their digital initiatives. So hence, they need excellent digital talents. So that’s why, we could actually see movements in the digital talent space and I think the Philippines over the past years has become a hot spot for more digital hyperscalers. We are not just talking about talent poaching domestically amongst players in the Philippines but actually even companies from overseas. They would want to tap Philippine digital talents to build up their organization. And as the fintech industry continues to boom in the Philippines, so is the need for better technology and more skilled manpower. That’s why I’m saying that it’s more of a supply and demand nowadays. So, we really have to train or to have more digital talents because there’s so much demand already in the market.

But I think we also see some loss in the past before such as the innovations act that would now further encourage innovation in the fintech industry in the Philippines. So that’s why we think that the next item would be more about upscaling and continuous innovation.

[For this year,] I think we are ready. Definitely it’s [still] a work in progress. There’s no such thing as perfect. So, I think my short answer to that is we are ready but, we have to continuously build up all of these elements necessary to make it really sustainable.

How can the FinTech Alliance contribute to fast-track the use of data and data analytics in fintech space as well as the general banking industry?

Mr. Villanueva: I don’t think there is a drought or there is a huge shortage of technology or platforms when it comes to data or data analytics or big data in the industry. In fact, we have a surplus of platforms that would address any tech-related concerns may it be on payments, may it be on insurance, may it be on wealth tech, may it be on e-Know Your Client (eKYC), etc. Currently, you don’t need to set up an entirely new team or new group or hire more people like developers to build some of the digital products for your company because you could practically outsource. And there is an outsourcing regulation with the BSP. That’s why the mind-set now is that you don’t really need to create it from ground up, because if you have to create it by yourself, it will take you so much time and resources. That’s why you have quite a surplus, quite a number of all of these fintech players [or] platforms provider available in the market.

How can big data impact the lives of those unbanked Filipinos still yet to be connected to the internet?

Mr. Villanueva: Big Data can help map out the scale and degree of financial inclusivity in the country. Through this, we can better assess the needs of the unbanked or underserved, especially coming from the what we call the geographically isolated and disadvantaged areas. Artificial intelligence or AI has long been a cornerstone of any digital transformation but as technology continues to turn its wheels, AI has turned out to become smarter and more predictive year after year. With the wealth of data running in the cloud, it is now possible for industries to isolate, block out, and synthesize relevant data to come up with new designs, products, and even services. I think it’s [a] necessity in our businesses [and] our decision-making processes must be based on empirical data and we have to leverage and we have to optimize the value of big data especially in catering or servicing the unbanked members of the Philippines.

What programs/projects you have implemented to help bring unbanked Filipinos into the fold? Have you formed strategic partnerships with other financial institutions to realize this goal? What are these?

Mr. Villanueva: Of course, each member would have its own programs to push for financial inclusion. For example, GCash, PayMaya, Grab, etc. and for RCBC, at the height of the pandemic in July 2020, we launched the Philippines’ first and only Taglish and Cebuano financial inclusion super app known as Diskartech. And the whole idea is on how to make onboarding as simple as possible and frictionless, and how we can entice ordinary Filipinos to open or create accounts — transactional accounts that earns for them a very high interest rate of 3.25% per annum for their savings placements with Diskartech. And the good thing there is that with just one ID, there’s no required opening deposits or maintaining balance, no dormancy fees. So, this is within the context of the BSP’s definition of the basic deposit account.

Moreover, the FinTech Alliance members, in their own capacities, are also doing quite a number of partnerships, including also RCBC and Diskartech. And we know for a fact that the Filipinos are ready for the digital way, especially the micro, small, and medium enterprises (MSMEs), like partnering with the Department of Trade and Industry (DTI) and also in helping craft the DTI’s ecommerce roadmap, being championed by Secretary Ramon “Mon” Lopez. We have seen how the exponential growth of ecommerce, especially during the pandemic.

How does FinTech Alliance.PH stand to benefit from foreign fintech firms wanting to operate in the country?

Mr. Villanueva: Definitely, we welcome new players in the industry because you could see the dynamism of the market and with the foreign firms investing in fintech companies in the Philippines would be an indicator of how healthy and how robust the industry is right now. We have seen that with quite a number of rural banks being bought by some foreign entities, or having 40% equity into those rural banks bought by these players. We have also seen quite a number of the digital banks that have been given licenses to be backed up by foreign entities as well, and this is a good indication that the fintech industry is very dynamic and it’s really growing. So, the whole idea is on how we can enable, empower and engage the likes of rural banks, cooperatives, microfinance institutions to embrace digital without them having to invest heavily on the digital infrastructure. But with this initiative, we will be able to level the playing field, and enable all these small players in this industry to also provide digital services to their respective clients.

As the government plans to tighten taxation and regulation of fintech firms in the country, do you think this will stifle innovation in the industry in the long run?

Mr. Villanueva: I don’t think so. The good thing with the regulators right now is that there could be potential regulatory arbitrage given the fact that we have so many regulators and there could be potentially overlapping of regulated entities whatever in terms of all of these concerns, but the good thing here is that they came up with a sort of a clearing house of sorts. They have what we call the FSF — Financial Sector Forum — comprised of SEC, BSP, Philippine Deposit Insurance Corp. (PDIC) and Insurance Commission (IC) and the whole idea is how they can rationalize regulations… And that is actually something good with our regulators. We are looking for ways on how to further expedite the process and to how to provide businessmen or businesses more support in terms of having seamless transactions with government.

Anything else you would like to share with us?

Mr. Villanueva: Actually, I think FinTech Alliance is very lucky to have very dynamic, progressive, and aggressive regulators. If you are to look at other jurisdictions or other markets, the fintech players or digital players would have difficulty having to deal with their regulators. But in the Philippine setting, the regulators are the ones [who are] more aggressive, more excited in pushing all the players in the industry to do this, to do that in terms of having to cover as many [of the] Philippines as possible, and that is good. That’s why it’s very easy to have discussions with the regulators. We have this very open line with them. I think that would be the thing that I would want to highlight here. There is such a good partnership to really meet those goals, to benefit more Filipinos, especially in catering to the unbanked and undeserved market, because we have a very ambitious role that by end of 2023 — and in fact, we are very confident that we will be able to meet those roles even before 2023.

We are also launching quite a number of programs. This will include the open finance program, and industry sandbox initiatives, and of course, some initiatives pertaining to the promotion of alternative data, especially in catering to the new-to-credit individuals, and how we can further provide more access to finance to most Filipinos. Watch out for a series of our webinars. And FinTech Alliance will also have a collaboration with an international university to push for a sort of a fintech institute on how we can generate more digital talents.

Visit FinTech Aliance.PH’s website at https://www.fintechalliance.ph/ to learn more about its upcoming events.

BSB Junrose distributes Valeo wipers

IMAGE FROM BSB JUNROSE

WINDSHIELD WIPERS are the first line of defense when driving in the rain. The wipers also instantly get rid of small debris that might hinder one’s view when driving under any weather condition. Because road accidents usually happen due to poor driving visibility, windshield wipers are considered most vital for safe driving, along with lights.

BSB Junrose, distributor of Valeo wipers, shared in a release that, “When having your car washed, don’t overlook cleaning the windshield wiper blades as dirt stuck on those could cause trouble when you use the wipers. You may use soft cloth to wipe clean the wiper blades to avoid any possible problem.” The company suggested to inspect windshield wipers and their blades frequently. “Look out for several potential issues when doing so. Those include metal corrosion, a broken frame, or any visible damage appearing in the rubber part. When any or all of these are observed, get ready to replace the blades.”

Valeo is a European tech and automotive parts company which offers automotive wiper systems that include a complete range of windshield wipers. Its products are meticulously designed and manufactured to be efficient, attractive, and easily adaptable for any type of vehicle in the Philippines and even in the entire Southeast Asian region.

Valeo First carries the brand’s reputable wiper blades in the after-market segment. As an original equipment supplier, Valeo manufactures over 100 million wiper blades annually — distributed in 33 countries, including the Philippines.

“We are proud to distribute Valeo windshield wipers in the country,” said BSB Junrose President Benjamin Bangayan, Jr. “The brand’s promise to bring ‘Smart Technology for Smarter Mobility’ naturally aligns with BSB Junrose’s commitment to provide only the best automotive supplies to vehicle owners in the country.”

Check out Valeo Official Store page on Lazada, or follow the company on Facebook (VOSPH) for updates.

‘Beautiful hair starts with a healthy scalp’

COVERED with hair as it is, it’s easy to ignore your scalp. A press conference about scalp care earlier this month by Kérastase Philippines details how one should take care of their scalp, which is often ignored in favor of skincare and haircare.

“Beautiful hair starts with a healthy scalp,” said Kérastase Senior Education Manager Annadel de Leon during the press conference. The event was held to promote the launch of Kérastase Spécifique Potentialisté, a scalp serum. The serum works with the scalp’s microbiome to keep and restore the balance between the body and its microbes, as opposed to the former paradigm of eliminating them completely. The product is equipped with a combination of Bifidus Prebiotics and Probiotics, and an advanced Vitamin C-derivative with antioxidant properties. The addition of these ingredients to the serum’s formula is supposed to nourish the microbiome with each application, strengthening it against daily external stressors and restoring its optimal state as a protective barrier. With daily use, the serum is supposed to ensure that the scalp is hydrated, healthier, and revitalized. The brand is part of the L’Oréal Group Professional Products Division.

Ms. De Leon said that the scalp is four times more sensitive than the skin on our bodies, owing to the scalp having more sebaceous glands, blood vessels, and nerve endings. “We should really treat our scalp the same way we treat our face,” she said. “We see a hairdresser or we go to the doctor if we are already experiencing either itchiness, sensitivity, or dryness,” she noted, pointing out how the scalp is only paid attention to when there are already problems.

“Hair begins at its roots, or in the scalp.”

Ms. De Leon said that scalp (and thus, hair) problems are caused by external and internal aggressors. On external aggressors, she says, “We cannot really do anything about it; it’s there.” These include exposure to heat (including styling), the air, pollution, and water. Internal aggressors include one’s diet, stress levels, and hormonal changes. Untreated, these cause dryness, frizz, falling hair, and dandruff.

To deal with these aggressors, she gave a number of tips. They include using two shampoos (one that cares for the scalp, the other for the hair); exfoliating the scalp twice a month (a service available at Kérastase partner salons), and moisturizing and treating it (enter Kérastase Spécifique Potentialisté).

“It should be part of our skincare already,” said Ms. De Leon.

The serum will be available at the Kèrastase Official Store on Lazada starting March 27. — JLG

MinDA pitches agri logistics projects to European investors

By Marifi S. Jara, Mindanao Bureau Chief

LOGISTICS and transport connectivity projects that will strengthen the agriculture sector are among the biggest investment opportunities in the southern Philippines, the Mindanao Development Authority (MiNDA) told European businesses at a forum on Friday.

“What Mindanao has been able to demonstrate is a growth that is relatively better than the national average in the last 15 years,” MinDA Deputy Executive Director Romeo M. Montenegro said during the first Davao Business Conference co-organized by the Italian Chamber of Commerce in the Philippines.

Mr. Montenegro, who also heads the agency’s investment promotions and international relations team, cited as an example the southern Philippines’ outperformance with a 5.7% contraction in gross domestic product during the first year of the pandemic, while the national average was a 9.6% decline.

“This is on account particularly of its positive showing in the agriculture and fisheries sector… Our agri sector has been our glimmer of hope in demonstrating resiliency,” he said.

Mindanao is the country’s main producer of agricultural export commodities such as coconut, banana, pineapple, seaweed, rubber, and tuna.

“This gives Mindanao a rather interesting investment context as a leader in agri exports… that’s why moving forward, the need to focus in ensuring the link from production areas to the market centers,” he said.

MinDA is mainly tasked with coordinating development plans and programs across Mindanao.

It has been seeking to encourage economies of scale by coordinating production in each region and encouraging local specialization, he added.

Mindanao has also been positioning as a major producer and exporter of other high-value products such as cacao and coffee.

At this year’s Philippine Coffee Quality Competition (PCQC) which has in previous years been dominated by producers from Mindanao, the top 10 winners for the Arabica category were all from Davao del Sur and Bukidnon.

For Robusta, five of the top 10 winners were also from Mindanao, particularly Sultan Kudarat and Bukidnon. Ilocos Sur coffee farmer Mabini C. Ubuan, however, ranked first while two others from the northern province placed 6th and 9th. Farmers from Negros Occidental and Kalinga also made it to the top 10. 

With over 200 samples submitted this year, PCQC-Technical Working Group Chair Cherry Cruz said interest in the coffee sector, particularly for premium-grade varieties that command higher global prices, is booming across the country. 

“More regions since 2018 have been participating,” she said at the awarding ceremony held on Friday in Davao City.

Meanwhile, MinDA Chair Mabel Sunga-Acosta met last week with Zamboanga City Special Economic Zone Freeport and Authority Administrator Raul M. Regondola to drum up halal-related investments in the ecozone, located in Zamboanga City.

The overall direction for investment, Mr. Montenegro said, is rolling out more regional inter-linkages and logistics hubs, and facilitate bringing agricultural products up the value chain. 

He said investment programs are now grounded on “paying equal amount of attention to the interdependencies of water, energy, food and the climate” to ensure sustainability.

“If you think about investments and development, we think about… how we are laying down the future 30-40-50 years from now.”

The Davao business forum was held in partnership with the Davao, German, French, Dutch, Spanish, Nordic, and Austrian business chambers.

Cariaso hopes Alaska players get another run at PBA glory

PBA IMAGES

THEIR “Alas-Dance” over, coach Jeff Cariaso batted for his youthful but competitive crew to get another run at PBA glory under a new banner.

“I hope they see the team that we’re starting to build,” Mr. Cariaso said after Alaska took its final bow as an illustrious member of Asia’s first play-for-pay league Saturday night.

“I think this team just needs a few tweaks here and there. But our young vets are learning to play more consistently and stepping up in big games. I hope there’s someone who is willing to take a risk with this team,” he added.

Mr. Cariaso’s charges had played the last four weeks burdened with the fact it was the franchise’s last tournament after 35 seasons. Still, the Aces soldiered on, made the quarterfinals as No. 7 seed and forced No. 2 NLEX to a do-or-die for a semifinal seat before eventually bowing out with a 96-80 loss.

Alaska management is currently in deep talks with prospective franchise buyers. Reports say a telecoms service provider, a food/beverage conglomerate and a canned food processor are in play.

“If that (sale) happens, that’s great because the priority naman is the players. I want them to have at least an opportunity or a chance to be part of the same team but maybe a different name kung matutuloy yun,” said Mr. Cariaso, who started his playing career as Alaska’s first-round selection in the 1995 rookie draft.

Mr. Cariaso said his coaching staff and he are open to assuming the same roles if the new team owner sees fit.

“Bahala na ang bibili if we’re going to be part of that. But the whole pizzazz, I think the future is bright. We just need to sharpen the tools, be better in big games. Sayang, what we’ve built already,” he said. — Olmin Leyba

Yields on government debt climb ahead of US Fed hike

By Bernadette T.M. Gadon, Researcher

YIELDS on government securities (GS) continued to soar last week in the run-up to the US Federal Reserve’s policy meeting where it raised rates from near-zero to help quell inflation.

Debt yields, which move opposite to prices, went up by an average of 15.81 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of March 18 published on the Philippine Dealing System’s website.

At the short end of the curve, yields on 91-, 182-, and 364-day Treasury bills (T-bills) picked up on Friday compared with March 11 by 6.43 bps (to 1.2005%), 14.34 bps (1.4172%), and 9.09 bps (1.7486%), respectively.

The belly of the curve likewise climbed as the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) rose by 17.2 bps (to 3.3996%), 19.87 bps (4.0314%), 22.33 bps (4.6019%), 24.48 bps (5.0551%), and 24.78 bps (5.48%), respectively.

The long end of the curve also continued its upward trend, with yields on the 10-, 20-, and 25-year T-bonds gaining 8.45 bps (to 5.5646%), 12.87 bps (5.5433%), and 14.12 bps (5.5345%).

“A large part that affected the yield curve [last] week was the uncertainty towards the FOMC (Federal Open Market Committee) meeting this week,” a bond trader said in an e-mail, referring to the policy-making body of the US central bank.

“It also did not help that the BTr (Bureau of the Treasury) partially awarded the four-year FXTN (fixed-rate Treasury notes) 577 at a high yield, which shows their strong inclination to borrow at any cost,” the trader said.

The trader said yields on government debt “normalized” after the Fed meeting.

“We believe that this will be well-communicated throughout the year and markets should be able to adjust accordingly,” the trader said.

As widely expected, the Fed decided to hike rates last week by 25 bps for the first time since 2018, Reuters reported. It also signaled more tightening to come as it projects its key rates to range from 1.7% to 2% by end of the year and 2.8% next year to combat rising inflation.

Meanwhile, the government partially awarded the reissued T-bonds it offered on Tuesday as investors asked for higher yields in anticipation of the Fed’s rate hike.

The Bureau of the Treasury (BTr) raised just P13.035 billion via the reissued five-year T-bonds it auctioned off on Tuesday, less than the programmed P35 billion, even as the offering attracted P35.305 billion in bids.

The debt papers, which have a remaining life of four years and 23 days, were awarded at an average rate of 4.669%, up by 58 bps from the 4.089% quoted when the series was last offered on Feb. 3.

“The noticeable increase in long-term yields indicated that the Russia-Ukraine conflict continue to influence domestic inflationary concerns, specifically on the impact of the conflict on commodity prices,” another bond trader said in an e-mail.

Recent auctions have been “notably timid” amid uncertainties over the economy’s recovery from the pandemic, the second trader added.

For the week, analysts said yields will continue to rise ahead of the Bangko Sentral ng Pilipinas’ policy meeting on March 24 and the BTr’s return to the English auction format, where there is a suggested opening bid. It previously conducted its fundraising activities via Dutch auctions, where offers start at the highest price and lowered until a price is accepted.

“Notice that the BTr opted to do an English auction via reissuance so it could secure itself some awards instead of the twice rejected Dutch auction for the supposedly new seven-year FXTN 766. Indicative yield for the 6.4-year FXTN 765 is at 5.40%-5.65%,” the first trader said.

The government will offer reissued seven-year bonds with a remaining life of six years and four months worth P35 billion on March 22.

“Investors should be wary of incoming debt supply for March and the release of the April borrowing schedule [two] weeks from now. BSP MB (Monetary Board) meeting should be neutral with assurance that inflation won’t stray too much,” the first trader added.

“Market participants, especially on the bond markets, are highly expected to be on the lookout for the shape and flattening of the US Treasury yield curve from the combined effect of aggressive monetary policy on the short end and dimming optimistic over the global economy as reflected by the long end of the yield curve,” the second trader said.

“Local yields might move higher from expectations of hawkish signals ahead of the BSP policy meeting amid rising local inflationary risks. Yields might likewise increase from the impact of the highly hawkish Fed policy meeting this week,” the second trader added. — with Reuters

Largest Hyperscale Data Center, PLDT Group’s 11th VITRO facility to rise in Sta. Rosa, Laguna

PLDT and Smart President and CEO Alfredo S. Panlilio, fourth from left, recently led the groundbreaking of the 11th and largest VITRO hyperscale data center facility, expanding the group’s network of world-class data centers. Joining him during the ceremonies held in Sta. Rosa, Laguna were, from left: RED Engineering’s Martin Webb, DICT Regional Director Cheryl Ortega, Meralco President and CEO Atty. Ray Espinosa, PEZA Director General Charito Plaza, Laguna Governor Ramil Hernandez, Sta. Rosa City Mayor Arlene Arcillas, and PLDT FVP and Head of Digital Office Viboy Genuino, to officially mark the start of the VITRO mega facility’s construction.

Financial Market Outlook: Market volatility to continue amid Fed lift-off, Russia-Ukraine conflict

FREEPIK

FINANCIAL MARKETS may continue to experience volatility in the near term following the Federal Reserve’s start of its tightening cycle and the geopolitical tensions between Russia and Ukraine.

The barometer Philippine Stock Exchange index (PSEi) averaged 7,206.92 in the October-December period, up by 6.8% from 6,750.01 on a quarter-on-quarter basis. On an end-period basis, the index was up by 2.4% to 7,122.09 from 6,952.88 the previous quarter.

Meanwhile, the peso averaged P50.45 against the dollar in the fourth quarter, depreciating by 0.6% from the previous quarter’s average of P50.14:$1, and 4.5% weaker compared with the P48.27-to-a-dollar average seen in the fourth quarter of 2020, data by the Bangko Sentral ng Pilipinas (BSP) showed.

Treasury bill (T-bill) auctions conducted in the last three months of 2021 continued to see robust demand, data by the Bureau of the Treasury showed. Total subscriptions in these T-bills reaching around P461.6 trillion, which is estimated 3.1 times the P150-billion aggregate offered amount. This oversubscription amount of P311.6 billion was lower compared with the P506.7 billion posted in the previous quarter.

Similarly, auctions of Treasury bonds (T-bonds) during the period posted a total subscription amount of P360 billion, 12 times more than the offered amount of P30 billion.

At the secondary bond market, domestic yields were higher by 32.4 basis points (bps) for the 10-year T-bonds and 95.8 bps for the five-year papers compared with end-September 2021 levels.

However, the yields for 91-day, 182-day, 365-day, 20-year and 25-year government securities were lower by 3.2 bps, 11.6 bps, 0.7 bp, 31.2 bps and 34 bps, respectively, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

“Markets were generally supported by the improvement in the local coronavirus disease 2019 (COVID-19) situation, the ease in COVID-related movement restrictions, and the continued accommodative policy stance of the BSP,” the central bank said in an e-mail.

The BSP added that local markets were also supported by upbeat economic data releases during the period.

The Philippine economy rose by 7.7% in the final three months last year, higher than the 6.9% in previous quarter and a turnaround of the 8.3% contraction in the fourth quarter of 2020. This brought the full-year GDP growth to 5.6%, a reversal from the record 9.6% decline posted in 2020.  This surpassed the revised 5-5.5% 2021 growth assumption of the Development Budget Coordination Committee (DBCC) last year.

Under Philippine Statistics Authority (PSA) rebased 2018 prices, inflation continued to show downward result for the fifth straight month in December at 3.2%. The inflation averaged 3.9%, still within the central bank’s target range of 2-4% last year.

However, BSP expressed that towards the end of the year, sentiment was dampened by concerns over the economic impact of Typhoon Odette, worries over the Omicron variant and expectations that the US Federal Reserve (US Fed) will stay on its path of interest rate hikes in 2022.

“Factors which affected the financial markets in the fourth quarter of 2021 are likely to remain relevant in the early parts of 2022, including the pace of economic recovery and progress in the easing of coronavirus-related restrictions. These may continue to provide support to the local markets. However, the looming interest rate hikes by the Fed may limit gains,” added BSP.

After keeping an accommodative policy environment for nearly four years, the US Federal Reserve hiked its near-zero policy rates by 25 bps to fight 40-year-high inflation. The central bank of the world’s largest economy expects its interest rate to range between 1.75-2% by end of this year, translating to six 25-bp increases for the remaining Fed meetings.

The BSP said it will not follow the pace of the adjustments made by the Fed. BSP Governor Benjamin E. Diokno said the central bank would remain patient and expects to adjust interest rates by the latter half of the year to ensure sustained economic recovery.

However, Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said the central bank might need to adjust its monetary policy to temper the impact of the Fed tightening especially on the exchange rate.

“Expectations of tighter dollar liquidity in the coming months might exert pressure on the peso and the BSP’s dollar reserves if the policy rate is kept at 2%,” Mr. Neri said in an e-mail.

The BSP maintained the key policy interest rate on the overnight reverse repurchase facility at record low 2%. The corresponding interest rates on the overnight deposit and lending facilities remained at 1.5% and 2.5%, respectively.

The central bank’s Monetary Board will meet to review its current policy settings on March 24.

WHAT INDICATORS TO WATCH OUT FOR
Aside from policy normalization and potential threats from new COVID-19 variants, economists said investors should watch out for market volatility amid the ongoing conflict between Russia and Ukraine.

In late February, Russia invaded Ukraine on the pretext of demilitarization and “denazification.” This sent commodity prices, most notably oil, surging to levels not seen since 2014.

“The ongoing conflict will likely continue to roil financial markets with general flight to quality. The peso could come under considerable heat given a likely bloating of the import bill due to expensive oil,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“The situation remains fluid particularly with the sanctions imposed and to be imposed as well as the uncertainty if this conflict will remain protracted or reach a faster resolution,” Security Bank Corp. Chief Economist and Assistant Vice-President Robert Dan J. Roces said in an e-mail.

“As such that uncertainty will continue to roil markets and cause volatility,” he added.

For Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort, he said the financial markets could remain volatile in the first quarter amid increased geopolitical risks related to Russia’s invasion/war with Ukraine, in view of the uncertainties ahead.

The central bank also flagged the risks of the rising global oil prices amid the ongoing tensions between the two East European countries.

“Movement in oil prices should also be monitored as this would have a significant effect on global inflation and may prompt other central banks to begin tightening their monetary policies as well,” the BSP said.

It also warned of the market jitters on the uncertainty of the local political landscape due to the upcoming May 2022 national elections as this could weigh on investors’ risk sentiment.

INFLATION OUTLOOK
BSP estimated that the inflation would ease towards the midpoint target range of 2-4% target range this year.

BPI’s Mr. Neri said domestic inflation has slowed down in recent months but sees risks that could change its direction.

“Strong demand and limited increase in oil supply may continue to push oil prices higher. Peso depreciation is another factor that could drive the increase in consumer prices,” Mr. Neri said in an e-mail.

Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion expects Typhoon Odette’s (international name: Rai) supply shocks to ease in March but agricultural output could be aggravated by the dry season in the second quarter.

“Weak peso and elevated oil prices would be at the core of cost-push inflation. Our forward-looking, best guess deprived of a statistical model is an inflation average of 3.5% this year, which implies close to 4% inflation in second half of 2022 as the recovery gains traction,” Mr. Asuncion said.

Security Bank’s Mr. Roces sees inflation to moderate due to base effects in this year.

“However, risks are tilted on the upside with global oil price movements, elevated commodity prices, external supply chain disruptions, and import-dependence on certain food items,” he said.

“Demand-pull may become more pronounced with consumption rebound, but base effects will offset. Moderated levels give BSP some room to maintain accommodative stance in near to medium term to support recovery,” Mr. Roces said.

RCBC’s Mr. Ricafort estimated that year-on-year inflation could mathematically ease to 3% levels due to coming from low base in 2021, but offset by elevated global oil prices among seven-year highs and the prices of other major global commodities among decade-highs recently.

ING’s Mr. Mapa said that domestic inflation will likely be more subdued in 2022, owing in large part to the 2018 rebase of the consumer price index.

“Nonetheless, we could see elevated supply side pressure emanating from still high energy prices and meat inflation persist due to the ongoing unquelled African Swine Fever,” he said. “Demand side pressures are also returning due to improving economic prospects.”

With these developments in mind, below are the BSP’s and analysts’ outlook for each of the key markets:

FIXED-INCOME MARKET
BSP: “The domestic bond market is expected to be liquid with robust demand as the BSP continues to ensure the proper functioning of financial markets. With the market flush with liquidity and with lingering uncertainty, most market players are expected to continue placing funds in safe assets, as evidenced by the high oversubscription consistently seen in the weekly Bureau of the Treasury auctions. Moreover, with the continued accommodative monetary policy stance of the BSP and the appropriate intervention in the secondary market, yields on government securities are expected to remain steady.”

Mr. Asuncion: “The fixed-income market has seen PHP Bloomberg Valuation Service rates continuing to rise with the Ukraine uncertainties even as it was already rising with expectations of a tighter monetary policy stance of the US Fed… and we expect this rising trend to continue for the first quarter this year until tensions simmer down.”

Mr. Ricafort: “The large upward correction in some long-end local bond yields already seen since last year, with an increase of about 170-180 basis points in 2021, so the big moves could have been seen already amid an environment of easing year-on-year inflation at the 3% levels for 2022, thereby could set the valuation for long-term interest rates for 2022 and in the coming years as well.”

Mr. Mapa: “General increase, more pronounced on long rates. Mid-tenor could be impacted by pace of BTr borrowing, projected to be front loaded while rates are low. Short dates to take their queue from potential BSP rate hikes by mid year.”

Mr. Neri: “Local bond yields will likely track the increase in UST (US Treasury) yields with additional upward pressure from government borrowing and possible BSP tightening as a response to the Fed rate hikes.”

EQUITIES MARKET
BSP: “In the near term, stock market volatility is expected to continue in 2022 due to a number of risk factors, including: (1) rising global interest rates; (2) occasional surges in coronavirus infections that may lead to tighter mobility restrictions; (3) local election-related uncertainties; and (4) heightened geopolitical tensions.”

Mr. Asuncion: “The risk asset market has been performing well this 2022, reaching the 7,500 level. It will be highly dependent on local economic news, particularly that of COVID-related ones. Restriction level downgrade would be a welcome development and will definitely bode well for the PSEi’s medium-term prospects. National election uncertainties may, however, mar the improving prospects of the equities market. Second half of 2022 may show more stability as the new administration sets itself up moving forward.

“We expect uncertainties through higher volatility in risk asset markets as investors will be cautious of potential adverse events coming their way, and we have seen the local PSEi respond negatively already to the Ukraine invasion by Russia. Asian currencies, on the other hand, have been quite steady but persistent bouts with flight to safety are undeniable especially as the situation in Ukraine is still very fluid.”

Mr. Ricafort: “The local stock market PSEi could continue to go higher, consistently with improved economic recovery prospects as the economy reopens further towards greater normalcy, leading to higher production, sales, earnings, employment, and overall valuation amid increased vaccination doses towards herd immunity that would effectively reduce the risk of lockdowns.”

Mr. Neri: “We expect a faster economic recovery in the first quarter, especially now that COVID-19 cases are declining. Local stocks have the momentum to go up further especially those in high-contact service industries.”

FOREIGN EXCHANGE MARKET
BSP: “The peso will remain market-driven and will continue to reflect the economy’s long-run macroeconomic fundamentals. The stability of the peso will be supported by structural inflows from exports, overseas Filipino remittances, BPO receipts, and foreign direct investments. These inflows are seen to continue as the domestic economy recovers and external demand strengthens in the next few quarters. The ample international reserves could also buttress the Philippine peso.”

Mr. Asuncion: “Peso has risen to almost the line-in-the-sand of BSP at 51.50 level, but it seems BSP is committed to this level at the moment. However, we also think that the strong USD narrative will continue to persist with the reopening of the global and local economy and the need to tame global inflation and unwind expansionary policies employed due to the COVID-19 pandemic.”

Mr. Ricafort: “The country’s GIR (gross international reserve) could still increase close to the record high of US$110 billion or could even post new record highs for the coming months, in view of the continued growth in the country’s structural US dollar inflows such as OFW remittances, BPO revenues, resumption of foreign tourism receipts (after being disrupted for nearly 2 years by the COVID-19 pandemic), POGO (Philippine Offshore Gaming Operator) revenues, foreign investments [both portfolio and FDIs (foreign direct investments)], though offset by increased imports/wider trade deficit as well as some payment of the country’s foreign debts.”

Mr. Mapa: “General weakening scenario on strong USD theme. Weaker also on both current and financial market outflows.”

Mr. Neri: “Peso is expected to weaken as imports will likely exceed exports and remittances,” referring to financial markets. — Lourdes O. Pilar

Watsons recycles 833,000 plastic bottles, incentivizes suppliers to go green

Speaking of sustainability: Anna Oposa of Save Philippine Seas, Viki Encarnacion of Watsons Philippines, David Katz of Plastic Bank, and Commissioner Crispian Lao of the National Solid Waste Management Commission.

WATSONs, the drugstore and cosmetics one-stop shop, has been able to recycle 833,000 plastic bottles from their stores. This was disclosed during a webinar where Watsons discussed their sustainability plans from last year and into the future.

Viki Herrera-Encarnacion, Watsons Philippines Public Relations and Sustainability Director, talking during the Watsons Do Good Webinar on March 17, said that last year, customers were able to access about 1,200 sustainable products that were deemed to have more planet-friendly packaging and ingredients, and reduce electricity intensity by 17% from 2015. More importantly, it has been able to recycle 833,000 plastic bottles from their stores in a collaboration with Plastic Bank.

Plastic Bank, according to its website, has a network of plastic collection branches that “gather plastic waste directly from local beaches, riverbanks, neighborhoods, and even households.”

“Our collectors exchange plastic waste at local Plastic Bank branches for bonuses that help provide basic family necessities, such as groceries, cooking fuel, school tuition, health insurance, digital connectivity, and clean drinking water. By offering safe, secure, and traceable sources of income, we’re empowering vulnerable communities with a path out of poverty,” said the social enterprise. In turn, the collected plastic is turned into a product called Social Plastic feedstock “used in the production of products and packaging — thus helping create new life for old plastic,” they said.

“Admittedly, these numbers are small relative to the problems the world faces today. That is why in the coming months, Watsons aims to step up our programs for the communities and the planet,” said Ms. Herrera-Encarnacion.

Watsons has incentives for suppliers when they tick off their sustainability goals. “For a retailer like us, for any program to make a strong impact, we must involve many stakeholders… for our suppliers, we’re encouraging them to come up with more sustainable products,” said Ms. Herrera-Encarnacion. She encourages suppliers to have more options for refill packs, and use more planet-friendly ingredients for their products. “We incentivize them. Once they qualify for that classification, we actually give them more display space.” From the 1,200 sustainable products they already have, they plan to double that number.

“There had been over 10 trillion kilos of plastic produced so far [in history]. All the plastic that we have produced are still here,” David Katz, CEO and founder of Plastic Bank, pointed out during the webinar, calling from Vancouver.

“Recycling isn’t just an opportunity to return material back in the manufacturing in the supply chain. It’s an opportunity to look at things differently. To look for where there is worth where others saw waste. See where all these opportunities where others thought there was despair,” he said in a speech. “With our partnership with Watsons, the world is powerfully going to not just witness the change of the communities and the lives of our collectors, but they are going to see a new way of thinking and new way of doing business.”

The Philippines generated about 44,000 tons of waste per day in 2019 said Crispian Lao, Vice-Chairman of the National Solid Waste Management Commission (under the Office of the President). “Each person contributes about 0.3-0.7 kilograms,” he said. “What’s important is to segregate whether (in) your home, in your workplace, and wherever you are, you need to segregate. It’s not only the law but it helps in the whole ecosystem of waste management,” he said, citing the Ecological Solid Waste Management Act 4A9003 (otherwise known as Ecological Solid Waste Management Act of 2000).

He said that one can drop off residual waste at different SM Malls, some of which “already have trash to cash programs.”

On a parting note, he gave a laundry list of simple things an individual can do to help make a less-polluted planet. “Bring your own grocery bag as you go shopping, buy in bulk, avoid small packets when feasible, purchase quality and repairable products, and participate, as I’ve said, in recovery programs and drop-off centers or at least the minimum: bring it to junk shops… finally, if you have waste to dispose of, please dispose properly.”

“It is critical for us to do our share for the environment and participate in the programs that are already there, and if possible, develop your own programs within your community,” he said. — Joseph L. Garcia

Little Trees brand makes a comeback

IMAGE FROM LITTLE TREES

THE ICONIC car air freshener marque Little Trees Car Air Freshener makes a comeback as it turns 70 years in 2022. Since its founding, the brand has been recognized for its unique design: the familiar shape of the evergreen tree. In a release, its distributor, Waido Marketing, said, “Over decades, it has continuously been renowned for delivering long-lasting, tried-and-true fragrances, always light and clean, without any irritating after-effect.”

The air freshener has been a pop culture icon — appearing on television, advertising, social media, and even cartoons.

The company behind Little Trees is Car-Freshner Corp., based in Watertown, New York. The shape is said to be a tribute to the founder’s efforts in extracting aromatic oils in the pine forests of Canada. “The original Little Trees car air fresheners were made with a combination of a specialized blotter material and fragrances, eventually evolving to remain in the highest quality possible to deliver the best in durability, longevity, and performance,” continued the statement.

The Little Trees freshener is said to keep vehicles smelling clean and fresh without fuss and irritation. The product comes in the familiar convenient, lightweight format — getting the job done without being in the way. “The fragrances are designed to be pleasant, non-irritating, and not overly concentrated. The smell is not too strong, won’t irritate the nose, and will not stick to the fabrics of your car interior.”

Little Trees come in over 20 scents from “classic and calming to fruity and floral” like the iconic Royal Pine, or Lavender and Black Ice.

Follow Little Trees Philippines on Facebook (littletreesphofficial), Instagram (@littletreesphofficial), and the hashtag #LittleTreesLetItHang. Waido Marketing said that the brand will be coming out with three new formats this year.

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