Banks told to adapt as gov’t starts to unwind support from pandemic

December 6, 2021 | 12:29 am

By Lourdes O. Pilar, Researcher

WITH ECONOMIC RECOVERY expected to be underway, banks will have to tailor their relief measures accordingly as authorities begin unwinding its support to the financial sector.

This sentiment was reflected by Bangko Sentral ng Pilipinas’ (BSP) Governor Benjamin E. Diokno at a virtual convention of the Chamber of Thrift Banks on Oct. 12. In that event, Mr. Diokno encouraged banks to grant financial relief that considers the borrowers’ payment and risk-bearing capacity as lenders are not similarly affected by the coronavirus disease 2019 (COVID-19) pandemic.

Mr. Diokno added the BSP believes financial institutions have already been given enough time to assess their loan portfolio and that the central bank is “constrained from extending regulatory relief measures provided” as they will affect the banks’ viability and their capacity to continue lending.

Some of the relief measures provided by the BSP have already lapsed. For instance, the central bank’s recognition of allowances for loan losses on a staggered basis for all types of credit for retail and business borrowers affected by COVID-19 has ended on March 8.

Meanwhile, others are scheduled to lapse by the end of this year such as the reduction of the credit risk weight of loans to micro-, small-, and medium-sized enterprises (MSMEs) to 50%, the lower minimum liquidity ratio (MLR) of 16% for thrift banks from 20% previously, and the higher single borrowers’ limit (SBL) of 30% for banks from 25%.

The BSP has also permitted lenders to count their lending to MSMEs and pandemic hit large enterprises as part of banks’ alternate reserve compliance until the end of next year or will be reviewed once the limits of P300 billion for MSMEs and P425 billion for large firms would be reached.

To recall, the central bank in late April last year reduced the reserve requirement ratio (RRR) for thrift banks to 3% from 2% to provide a liquidity boost amid the ongoing pandemic. It was later extended to pandemic-hit large enterprises but are only applicable to those with asset sizes of more than P100 million but are not part of a conglomerate.

The BSP in December last year capped credit to MSME and large enterprises that banks could utilize as alternate reserve compliance at P300 billion and P425 billion, respectively.

In an e-mail to BusinessWorld, the BSP said the unwinding of the temporary relief measures “will be done in a gradual, prudent, and informed manner.”

“The time-bound nature of the BSP’s support measures allows for an orderly transition based on a holistic analysis of the impact of the COVID-19 not only on the financial system but also on other critical sectors of the economy. In particular, the BSP will consider the pace of liquidity and credit growth; improvements in market confidence and financial market activity, including the bond markets; recovery in consumer spending and private sector investment; and stability of the financial system,” the BSP said.

The BSP has emphasized the need for timely communication of policies and decisions in setting expectations as the government strikes a delicate balance between providing debt support to struggling households and firms affected by the COVID-19 pandemic and, at the same time, guard against the buildup of inflationary pressures and risks within the banking system.

As of this writing, the BSP is still assessing the duration of some of the policy relief measures it has implemented during the pandemic.

What is clear is that the central bank is retaining some of these measures at least until next year.

“The relief measures that incentivize lending to sectors such as underserved market segments, MSMEs and critically impacted large enterprises will be retained for as long as necessary to support their recovery,” the BSP said.

They also cited the recently issued two regulations that will further give banks an incentive to grant new loans or restructure the loan accounts of their borrowers.

“The first measure clarifies the prudential treatment of modifications to loan terms, including restructuring arrangements, and will be in effect until [Dec. 31, 2022]. The second measure allows banks to add back to their capital, the increase in provisioning requirements applicable to new and restructured loans starting [Jan. 1, 2022 until Dec. 31, 2023],” the BSP said, explaining these measures look to temper the impact of provisioning requirements on new and restructured loans on capital which will provide banks with room to further tailor loan terms to their clients’ requirements.

TAILORED APPROACH
On top of these measures, the BSP has allowed banks to provide financial relief to their borrowers through loan payment terms that considers their paying capacity and cash flows.

“This tailored approach will allow banks and their clients to arrive at mutually agreeable loan payment terms that consider the bank’s financial capability and the client’s requirements. This also increases likelihood of loan collection rather than loan default,” the BSP said.

With this flexibility, banks are expected to look into the borrowers’ reputation, as well as the purpose of credit, and sources of repayment and capacity to repay based on cash flow projections, the BSP said. In the case of commercial credits, the BSP said banks should consider the firm’s business expertise, its credit relationships including its shareholders and directors, and the status of the borrower’s economic sector, among others.

“It is also important for the bank to distinguish between borrowers that are facing serious or temporary financial difficulties and employ the appropriate risk management and remedial or workout measures on their exposures to these borrowers,” the BSP noted.

In an e-mail, Development Bank of the Philippines (DBP) President and Chief Executive Officer Emmanuel G. Herbosa noted that in addition to payment moratoriums, waiver of penalties and other fees and additional low-interest facilities, the bank has also “proactively implemented loans restructuring… to recalibrate and adjust the payment schedules and terms of outstanding loans of enterprises given the new realities of their operations.”

“Conditions that are now the ‘new normal’ of their business transactions are considered in either extending loan tenors, repricing loans, extending grace periods, and other payment schemes that allow the bank to capture cash flow for repayment without impairing the businesses’ capacity to operate sustainably,” Mr. Herbosa said.

For its part, BDO Unibank, Inc. said it has proactively engaged with its borrower clients to help them weather the challenges brought by the health and economic crisis.

“We ensured continued access to credit facilities for clients with resilient and sustainable business models amid the pandemic, as well as granted loan moratoria to qualified customers in compliance with Bayanihan Acts I and II,” BDO said.

BDO added it offered loan restructuring packages for its clients in the hard-hit travel, tourism, retail, and transportation sectors to tailor fit cash flow capabilities that are specific to their needs.

Thrift bank Bank of Makati, Inc. (BMI) also provided loan restructuring, as well as payment arrangements and the waiving of penalties among their qualified clients.

BMI said it would be favorable for bank if the BSP retains some of its relief measures such as the use of qualified MSME loans for compliance with reserve requirements, the lower risk weight for qualified MSME loans for the purposes of CAR (capital adequacy ratio) computation.

DBP’s Mr. Herbosa shared a similar assessment, noting that the measures that reduced credit risk weights of loans to MSMEs, the staggered booking of allowance for credit losses, and the counting of MSME loans as compliance to the RRR “greatly enhanced” DBP’s ability to continue lending to those that were most adversely affected by COVID-19.

“Without such relief measures, the bank’s capital ratios would not have been able to carry the additional risks of continuous on-lending to distressed industries,” Mr. Herbosa said.

Nevertheless, Mr. Herbosa said the prevailing economic conditions has compressed the state lender’s margins this year.

“The low interest rate environment resulting in a lack of high-yielding investment instruments, as well as the bank’s mandate to lend to distressed sectors at below market rates, have limited its capacity to generate profits. Additionally, due to a number of loans falling past due this year, the provisioning requirements for non-performing loans have further reduced its bottom line. Its thinning margins has caused the Bank to prioritize and carefully consider its interventions and assistance, recognizing its own institutional challenges,” Mr. Herbosa said.

“[A]s a licensed universal bank, DBP also maintains the same minimum capital and other regulatory ratios expected from private commercial banks, therefore increased pressure on these ratios brought about by lending to risky sectors within a volatile economic environment further limits its capacity to extend more generous assistance. Unlike private commercial banks that can easily raise capital from the market, DBP’s options as a wholly government-owned development bank is limited and it can only increase its capital through income and direct capital infusion,” he noted further.

Likewise, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the decision to allow lending to firms as alternative compliance for RRR “is a good relief measure given that the overall directive is to lower the RRR.”

“This way, banks can free up more funds for lending activities,” he said.

Mr. Mapa added these relief measures should remain in place to further help bolster bank lending.

“Despite aggressive rate cuts by the BSP, banks have not passed on lower borrowing costs to consumers just yet. This is likely the reason why the lagged impact of policy rate cuts has taken eight months. With the economy still not fully healed, perhaps BSP should still encourage banks to lend and keep these measures until capital formation rebounds in a convincing manner,” Mr. Mapa said.

Latest data by the BSP showed outstanding loans by universal and commercial banks (U/KBs) increased 2.7% in September, following an annual 1.3% growth in August. Prior to that, it had declined for eight straight months.

OUTLOOK
As of the third quarter of 2021, the country’s gross domestic product (GDP) expanded by 4.9%, within the government’s revised 4-5% target range for the entire year.

The BSP said the country’s banks “remain cautiously optimistic, projecting positive business outlook in the next two years.”

“Results of the First Semester 2021 Banking Sector Outlook Survey show that banks will remain stable with prospects of double-digit growth (between 10% and 15%) in assets, loans, investments, deposits, and net income,” the BSP said.

“Meanwhile, results of the latest consumer and business confidence survey likewise indicate a more optimistic/encouraging outlook in the succeeding quarters. This is expected to prop up credit and lending activities in the coming months,” it added.

BDO noted that their clients can expect a further rollout in its new digital capabilities as investments in their digital capabilities bear fruit.

“We launched early this year our mobile wallet, BDO Pay, and re-engineered our operations to allow paperless in-branch transactions, card-less ATM transactions using biometrics and QR codes, and fully digital account opening while continuing to ensure compliance with KYC (know-your-client) requirements,” BDO said.

DBP’s Mr. Herbosa was similarly upbeat: “Barring another surge in COVID-19 cases, the country may face a better economic environment in 2022 and moving forward. With recovery plans updated and readily in place, the bank in particular, is better prepared for a possible similar disruption in the future,” he said.

“The bank’s umbrella program for COVID-19, the DBP RESPONSE (Rehabilitation Support Program on Severe Events), will remain as its primary flagship credit assistance facility post-pandemic. Under the program, credit packages that are tailor-fit to the needs of affected industries and those that effectively support business transformation and resiliency will remain accessible to enterprises. This is in addition to grants from the National Government that may be tapped through DBP, such as the P1-billion interest subsidy fund for local government units for their pandemic recovery projects,” he explained further.

In line with market expectations, the BMI expects the economy to return to pre-pandemic levels by the second quarter of this year profits. BMI expects its MSME clients to start recovering from the effects of the pandemic.

“This market improvement would enable the Bank to focus on its strategies of creating a better customer experience for its clients. Aligned to its tagline of being a Malalapitan, Maaasahang Kaibigan (A Reliable Friend), the bank will be introducing new products and services that would cater to the changing needs of the market and empower existing and potential clients’ to recover and grow their businesses,” the thrift bank said.

ING Bank’s Mr. Mapa noted that while lenders have remained resilient throughout the pandemic, they have “largely remained on the sidelines in terms of contributing to the recovery story.”

“Lending rates have even increased after BSP rate cuts, which may have made it more difficult for consumers and firms to access much needed financing,” Mr. Mapa said.

“With the economy on surer footing this year, perhaps banks can join in and jump headlong to help contribute to the recovery by performing its primary function of delivering credit to real sector activities that in turn will fuel capital formation and drive GDP growth into higher gear,” he added.

Expanding MSME reach: A Q&A with Small Business Corp.

December 6, 2021 | 12:29 am

By Ana Olivia A. Tirona, Researcher

THE PAST TWO years have been rough on micro-, small-, and medium-sized enterprises (MSMEs). According to the Philippine Statistics Authority’s (PSA) List of Establishments data, the number of the country’s MSMEs fell by 4.3% to 952,969 in 2020 from 995,745 the year before. The closure of around 43,000 of these firms led to approximately 130,000 jobs lost.

While analysts and the country’s economic managers expect economic output to return to pre-pandemic levels as early as the second quarter of 2022, they recognize that the economy is still “not quite out of the woods yet.” For MSMEs, there still needs for state support as they continue to stave off financial collapse.

Small Business Corp. (SB Corp.), the financing arm of the Department of Trade and Industry (DTI), hopes to continue providing that support.

The funding institution originated in 1991 as the Small Business Guarantee and Finance Corp. (SBGFC) with the role to invest in MSMEs in manufacturing, processing, agribusiness and services (with the exception of crop level production and trading). Through an executive order, SBGFC was merged with Guarantee Fund for Small and Medium Enterprises (GFSME) in 2001 to what would become SB Corp.

Since then, SB Corp. has been pushing to innovate its financing services and strengthen its institutional partnerships to enhance the access of MSMEs to low-cost credit. By 2025, SB Corp. looks to be the “leader in building financing alternatives” for the country’s MSMEs that would put them at the “forefront of inclusive growth.”

In particular, SB Corp. actively targets seven MSME segments: micro and small agri and aqua enterprises, micro retailers, small island economies, MSMEs requiring rehabilitation arising from disaster, Islamic MSMEs, indigenous people (IP)-owned enterprises, and first-time small businesses.

To know more about the financing institution, BusinessWorld reached out to the management of SB Corp. regarding its current and future offerings for the aspiring Filipino business owner.

What changes did SB Corp. have to make as a result of to the pandemic? Were there operational challenges, and if so, how were these being dealt with?

The pandemic has challenged the way we do business. We shifted last year to online application and processing of loans to reduce or eliminate face-to-face interactions, and to also fast-track evaluation and approval. We also streamlined our requirements to reduce processing time and become more responsive to the needs of affected businesses.

We have developed products to cater to specific segments that were heavily affected, such as the tourism, overseas Filipino workers (OFW), and retail sectors, aside from vulnerable MSMEs in the manufacturing, trade, and service sectors.

In May 2020, we launched the CARES Program or the COVID-19 Assistance to Restart Enterprises Program, which provided interest-free, non-collateral loans with grace periods of up to one year and up to four years to pay.

The initial funding allocation for CARES came from the Pondo sa Pagbabago at Pag-asenso (P3) Fund, as approved by the Governing Board and DTI Secretary Ramon M. Lopez.

With the enactment of Bayanihan II, our loan funds for the CARES Program increased. Congress allocated P10 billion for the CARES Program as equity to SB Corp. under Bayanihan II. However, the Department of Budget and Management (DBM) only [earned] P8.08 billion in November 2020.

We re-launched CARES in Oct. 2021 and renamed it Bayanihan CARES. The loan products under the Bayanihan CARES program include Helping the Economy Recover Thru OFW Enterprise Start-ups (HEROES) for OFWs, CARES for Tourism Rehabilitation and Vitalization of Enterprises and Livelihood (CARES for TRAVEL), Sustaining Trade Access to Primary Food and Link to Enterprises (STAPLES) for sari-sari stores, mini groceries, and other micro and small businesses in the retail chain, and Bayanihan CARES, the product itself. Just last November, we launched a new product for a limited period, called the 13^th Month Loan Facility to help micro and small businesses fund their mandatory 13^thmonth pay for employees and workers.

The products we developed in response to the pandemic are on top of the loan products we have for the P3 Program and for our regular corporate lending. The pandemic has made us very busy in responding to the financing needs of the MSME sector, especially as we were mandated by the government to provide credit for early recovery and provided with additional funds for the purpose.

There were a lot of internal challenges to us, especially the reconfiguration of our information technology (IT) systems for us to migrate to online lending, and the maintenance of a high level of quality and efficiency in our work despite work from home arrangements. The government’s response to the pandemic has increased our workload significantly, and we have responded to the challenge given the limitations.

Your firm looks to be the leader in the building financing alternatives for Philippine MSMEs by 2025 as per your vision statement. In what ways did current conditions affect the realization of said vision?

The current conditions have afforded us opportunities to pursue our mandate as we cater to MSMEs that are so called “unfinanceable,” or those that pose higher risks which the private sector is unwilling or unable to finance. These include those affected by calamities and hazards, small island economies, agri-aqua MSMEs, micro and small retailers, indigenous peoples, and the like. We provide financing and other forms of assistance to help them grow so that they can eventually engage the formal banking and quasi banking sectors. We provide the bridges for them to become stable, viable and sustainable so that they can become “financeable” by the mainstream finance sector.

In the future, we will pursue more purposeful and strategic interventions into these vulnerable and marginalized sectors so that we can catalyze the countryside and aide in urban development through affordable financing products and terms.

How would you characterize the demand among MSMEs on the programs offered by SB Corp.? Would you say this demand has been met?

There has been a large demand for our products, especially as our flagship program, Bayanihan CARES which provide very soft terms. These terms are needed because of the current pandemic situation. They were designed so that they could really help and not become an added burden in the future. That is why there was a grace period of up to one year and up to four years to pay, on top of the zero interest and zero collateral required.

We could say that we have met the demand to the extent of the availability of the funds provided us by the National Government. An exception is the loan uptake for the CARES for TRAVEL Program which has been slow to take off because of the restrictions in traveling.

Which among your programs were most sought by MSMEs? Can you provide us figures illustrating this increase in demand?

SB Corp. has since been offering regular retail, wholesale, and microfinance wholesale lending programs to MSMEs and partner financial institutions. These are regular products which are offered based on the current market rates. When the COVID-19 pandemic happened, SB Corp. came up with the CARES Program in May 2020. This recovery financing assistance program has become the most sought-after program to date. With the initial P1.5 billion using SB Corp.’s P3 program fund, it expanded with the additional capitalization of P8.08 billion that was provided to SB Corp. upon the enactment of the Bayanihan 2 law in September 2021. The expanded CARES program is re-launched in October 2020 as “Bayanihan CARES.”

We received a total of 61,031 applications of which 37,186 have been approved as of Nov. 10, 2021. The total approved loan is P6.09 billion.

Among your Company’s target MSME segments, which one required the most assistance? What kind of assistance were provided to said segments?

Our existing financing programs and guidelines were designed to respond to the financing needs and realities of the different segments we serve. As such the segments can effectively access our products and services.

However, due to the very small sizes of their micro businesses, it is difficult to cater to clients of the P3 program on a retail basis. To improve access, we partnered with different private financing institutions who can identify them and visit them on a more regular and frequent basis. We provide soft, wholesale loans to these institutions, which they can relend, also at low rates to end borrowers. These institutions include rural banks, microfinance institutions, cooperative rural banks, and mother cooperatives.

What were the company’s target outcomes for this year? Would you say these targets have been met?

We have set out to provide more than P12-billion worth of loans to MSMEs all over the country for 2021. This is a 70% increase over our target in 2020. This is a tall order, but we are doing our best to achieve it so that we could help alleviate the condition of more MSMEs, as instructed by the National Government. We are hopeful we can achieve this target by the end of the year.

What are some of your concerns that need to be addressed as we go into 2022?

One of our foremost concerns is the extent of recovery experienced by our client borrowers, due to the series of lockdowns and restrictions that were imposed in 2021. We are looking at their situation pro-actively so that we could be prepared to help when they encounter problems in repayment, such as helping them to re-structure their loans to make their payment terms even more affordable. We foresee this to be a major concern as we move towards 2022.

Is there something, in terms of regulation or public policy, which you would want to be passed or enforced to help MSMEs cope with the persisting effects of COVID-19? If so, what are these?

We would like to lobby for an increase in capitalization so we could serve the MSMEs more, especially the priority sectors that have not been fully integrated into the economic mainstream, or are still very vulnerable to external shocks, such as climatic, physical and health hazards like this ongoing pandemic. The backbone of a healthy economy are resilient and sustainable MSMEs, and the more we help the unfinanceable sectors, the more we provide opportunities for broad-based development across the country. We are currently studying the nature and magnitude of the financing needs of these sectors, along with their potential impact on economic growth and poverty reduction, especially in the poorest municipalities all over the country. From these studies that we are conducting, we hope to convince Congress to provide for more loan funds and increase our capitalization.

What can we expect for SB Corp. coming into next year? Will there be new offerings? Modifications in current ones?

There will be new product offerings as we continue to adjust and tailor fit our products to the needs of the MSME sectors that we serve. We constantly innovate and study how we can be most responsive within our mandate, while adhering to government laws, policies, and regulations.

Any advice you can give to small- and medium-sized business owners coming in to 2022 and the years ahead?

We think they should all adjust to the so called new normal. This includes accessing financing assistance online, doing marketing online, availing of training and product development assistance online, and so on. Technology will be a key component and driver of success, even for MSMEs. We would advise our MSMEs to embrace this direction and prepare for it. Obviously, many are still technologically handicapped or have some aversion to using the internet for business and government transactions, or even just to obtain important information. As more and more people embrace mobile phone technology and online payment solutions, the MSMEs should also level up with the market, no matter how small they are. Information technology is a great equalizer.

We would also advise them to be on the lookout for government programs that try to assist them and be open to be accountable and responsible partners of the government in the growth of their businesses, and in the development of our country.

Anything else you would like to share with us?

Visit our website, www.sbcorp.gov.ph and our Facebook page, Small Business Corp. (facebook.com), to learn more about us.

PHL recovery hopes to support financial markets

December 6, 2021 | 12:27 am

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ANALYSTS expect the country’s financial markets to recover along with the economy next year, but cautioned risks remain with the threat of the coronavirus disease 2019 (COVID-19), as shown by the mixed performance in the third quarter.

“In [the third quarter], financial markets showed mixed trends with investor sentiment influenced by various developments both domestically and externally,” the Bangko Sentral ng Pilipinas (BSP) told BusinessWorld in an e-mail.

The BSP said domestic financial markets were weighed by developments at home and abroad such as the renewed lockdowns to curb the spread of the more-infectious Delta variant and news on the US Federal Reserve’s plans to wind down its massive bond-buying program.

To recall, the government in August cut its economic growth target to 4-5% from 6-7% previously to reflect the effect of stricter mobility restrictions declared to curb the Delta-driven surge in COVID-19 cases in Metro Manila.

Furthermore, the account of the July 27-28 meeting showed Fed officials largely expecting to reduce the US central bank’s emergency monthly purchases of $120 billion of Treasury bonds and mortgage-backed securities.

The BSP also noted the forecast and outlook downgrades by the International Monetary Fund, the World Bank, ASEAN+3 Macroeconomic Research Office (AMRO), Oxford Economics, S&P Global Ratings, Moody’s Investors Service and Fitch Rating as among key factors in driving investor sentiment during the quarter.

On the other hand, the central bank also noted favorable macroeconomic data that lifted sentiment such as the faster-than-expected gross domestic product (GDP) growth in the second quarter and the sustained recovery in other metrics such as factory activity, corporate earnings, remittances from overseas Filipinos, foreign direct investments, unemployment, and domestic inflation.

These mixed developments reflect the results in the country’s financial markets.

In the third quarter, the Philippine Stock Exchange index (PSEi) averaged 6,751.98, up by 2.76% from the 6,570.78 in the second quarter, data from the local bourse showed. On an end-period basis, the PSEi was 0.74% higher in the third quarter at 6,952.88 versus the preceding quarter.

Meanwhile, BSP data showed the peso averaging P50.11 against the dollar in the July-September period, depreciating 4.01% from the previous three-month period’s average of P48.17:$1.

Demand for government bonds remained strong during the period. Treasury bill (T-bill) auctions conducted in the third quarter saw total subscription for the quarter amounting to around P701.68 billion, which is around 3.6 times the P197-billion aggregate offered amount. This oversubscription amount of P504.68 billion, however, was lower than the P705.52 billion in the previous quarter.

Demand for Treasury bonds (T-bonds) were likewise robust with a total subscription amount of P868.26 billion, almost twice more than the offered amount of P455 billion.

In the secondary bond market, domestic yields as of end-September were higher by a range of 5.89 basis points (bps) for the 364-day T-bonds to 58.13 bps for the 10-year bonds compared with end-June levels. On the other hand, rates for the 91- and 182-day T-bills were lower by 4.51 bps and 1.67 bps, respectively.

On average, yields were higher by 23.21 bps on a quarter-on-quarter basis, according to the PHP Bloomberg Valuation Service Rates published on the Philippine Dealing System’s website.

WHAT INDICATORS TO WATCH OUT FOR
“Financial market participants are anticipated to closely monitor developments in the country’s GDP, corporate earnings, inflation, remittances, and trade balance, to name a few,” the BSP said.

The central bank added that market players are also expected “to be mindful of the downside risks” to economic growth such as the potential spike of new COVID-19 cases that could trigger a reimposition of lockdown restrictions.

“External developments such as global inflation concerns following the movement in global oil and commodity prices, as well as potential changes in the monetary policy stance of major central banks will likewise be in the radar of investors,” the BSP added.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion cites the Purchasing Managers’ Index (PMI) as “an insightful indicator” in gauging how businesses will perform in the future, as well as looking at trends in the manufacturing and service sectors.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said market players should keep an eye on developments in China.

“Inflation is heating up in large part due to the multispeed recovery with the US the main driving force behind this acceleration. However, China has limped along after a strong start to the year and a possible slowdown of the world’s second largest economy may be the issue that throws a monkey wrench into next year’s recovery narrative,” Mr. Mapa said.

“Included also on this list should be the normalization of monetary policy by the Fed and others, but I believe China’s growth fortunes plays a major part in this space as well,” he added.

Analysts also cited pandemic-related developments to continue influencing markets, albeit at a lesser degree compared with the previous quarters.

“[B]usinesses that were previously restricted are now allowed to operate again and with higher capacity…,” said Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort.

For Asian Institute of Management (AIM) economist John Paolo R. Rivera, the impact of the pandemic “has been slowly integrated into the system” as people learn to coexist with the virus.

“Investor confidence is not dependent on whether the current situation can be improved further to avoid any return to strict restrictions,” he said.

ECONOMIC RECOVERY PROSPECTS
Barring a resurgence of COVID-19 cases, the economy is expected to have performed better in the last three months of 2021, analysts said.

“There are signs of a continued recovery in [the fourth quarter 2021] as mobility data are already reflecting a strong rebound in domestic activity; data for retail and recreation, grocery and pharmacy mobility signaling the highest level of activity since the onset of the pandemic. These should be positive for market sentiment as well,” said Security Bank Corp. Chief Economist Robert Dan J. Roces.

The BSP expects the economy to settle within the revised 4-5% growth target this year.

“With the acceleration in vaccine deployment and the recalibration of quarantine protocols, the government is optimistic that the country will be able to recover further in 2022 with a growth of 7.0-9.0%, and over the medium term with growth rates of 6.0-7.0% in 2023 and 2024,” the BSP said.

“After five consecutive quarters of contraction, the positive performance in [the second and third quarter]… suggests that the economy could be on its way to recovery,” the central bank added.

The country’s GDP expanded by an annual 12% and 7.1% in the second and third quarter, respectively, following a 3.9% decline in the first three months of the year. This brought year-to-date growth at 4.9%.

The economy would have to grow by 1.7% in the fourth quarter to meet the lower end of the government’s 4-5% target band, while it would need to expand by 5.3% to reach the higher end of the goal.

“The Philippine economy is in a better position in 2021 compared to 2020 due to the effects of vaccination. It could have been better if vaccination had been much faster but nonetheless, the vaccination process has saved a lot of lives and jobs. Hopefully, this would continue as we achieve herd immunity and co-exist with the virus until its eventual eradication,” AIM’s Mr. Rivera said.

ING Bank’s Mr. Mapa was less upbeat, citing the recovery is the result of base effects after GDP plunged to 2017 levels.

“Relatively outsized [year-on-year] growth prints were to be expected and scarring effects from the protracted recession will begin to show in the coming quarters,” he said.

With these in mind, below are the BSP’s and analysts’ outlook for each of the key markets. — Bernadette Therese M. Gadon

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EQUITIES MARKET
BSP: “In the near term, the local bourse may be expected to further rally and trade over the 7,400 and 7,500 levels amid the continued improvement in the pace of the country’s vaccine rollout, decline in COVID-19 infections, and the continued reopening of the Philippine economy. Moreover, the sustained government spending on infrastructure and the implementation of the third stimulus package under the “Bayanihan to Arise as One Act,” complemented by decisive monetary policy support by the BSP, could further boost investors’ buying momentum.”

Mr. Mapa: “A disappointing GDP performance in the coming quarters will sober market expectations after base effects wear off, capping equity market rallies.”

Mr. Roces: “Better, with improved business optimism and investor sentiment.”

Mr. Asuncion: “As lockdowns continue to ease down during the fourth quarter, consumer spending is expected to increase and strengthen manufacturing supply and demand. The forecasted value of PMI is expected to be at a number above the expansion 50.0 plus range.”

Mr. Ricafort: “The PSEi could still gain towards well into the pre-pandemic levels, should there a breach above 7,500 and eventually 8,000 levels, partly supported by liquidity-driven gains amid greater normalization of the economy (though may be in a gradually manner) amid increased vaccinations and further significant reduction in new COVID-19 cases.

“Further measures to re-open the economy would increase capacity for many businesses, especially the previously restricted ones, thereby leading to higher sales, earnings, employment, more business activities, and higher investment valuations for many positively affected listed companies.

“New record high US stock markets amid liquidity-driven gains and improved US/global economic recovery would help support global market risk appetite/risk-on mode.”

Mr. Rivera: “It is hard to say, but assuming the situation continues to improve faster than the Philippines’ counterparts, we would be in a relatively better position to attract investors to put in their money. This would also have repercussions on our PHP (Philippine Peso) being stronger than other currencies. Financial markets behave depending on the state of economic and public health.”

FIXED-INCOME MARKET
BSP: “The domestic bond market is expected to remain liquid amid the BSP’s continued liquidity support to ensure the proper functioning of financial markets. In the corporate bond market, firms are expected to continue to tap the bond market as alternative source to finance existing debt, business operations, and investments, as the economy enters the recovery phase.

“Meanwhile, the BSP expects some narrowing trend in debt spreads due to improved investor sentiment as business activities start to reopen. However, negative developments such as the possible resurgence of COVID-19 cases could pose significant downside risk to growth and affect debt spreads. Eventual monetary policy normalization in the US could also exert upward pressure on both sovereign and corporate debt yields.”

Mr. Mapa: “[R]ates are moving higher and much higher as BSP will likely need to adjust rates against a backdrop of elevated inflation. A ratings downgrade may also force the bond space into some correction.”

Mr. Roces: “In the short-to-medium term, we see yields trading on an upward trajectory given upward risks from local inflation; upward risks remain as well with rising global inflation and with expectations of a Fed rate hike next year. But with the view of lower local inflation expected next year, end-2022 GS10 yield may be lower than end-2021.”

Mr. Asuncion: “Supply constraints coupled with wage increases is expected to increase inflation as demand picks up near the holiday season. Alongside inflationary pressures, Fed bond purchases have begun tapering on November. Despite this, the national treasury holds an optimistic view that government bonds would remain attractive amidst the speculations for inflation. This was manifested by the debt paper rates increasing, both local and international, given that inflation rates remain elevated. Moreover, the GDP data for the fourth quarter [is] expected to be at 5.5%, however, this will change because of the better-than-expected outlook.”

Mr. Ricafort: “Any increase in Fed rates in the latter part of 2022, by about 0.25% and by another 0.25% in 2023, consistent with the hawkish Fed signals since June 16, 2021, could lead to higher key policy rates for some countries around the world, from unusually low levels, including the Philippines, especially if the economy recovers further with increased vaccinations versus COVID-19.”

Mr. Rivera: “It is hard to say but assuming the situation continues to improve faster than the Philippines’ counterparts, we would be in a relatively better position to attract investors to put in their money. This would also have repercussions on our PHP being stronger than other currencies. Financial markets behave depending on the state of economic and public health.”

FOREIGN EXCHANGE (FX) MARKET
BSP: “Consistent with the country’s floating exchange rate arrangement, the peso will remain market-driven and would continue to reflect emerging demand and supply conditions in the FX market. Over the near term, the peso will continue to be supported by structural FX flows through recovery in exports, remittances, and business process outsourcing (BPO) receipts. FX inflows related to FDIs are seen to continue to grow as the global economy recovers and National Government (NG) infrastructure spending continues. The latest outlook on the external sector for 2021-2022 likewise suggests improvements in these sources of FX amid expected recovery in major trading partners as well as the gradual reopening of the domestic economy as the share of vaccinated population in most economies continue to increase. The ample international reserves could also buttress the Philippine peso.

“Nonetheless, (i) uncertainties over the potential resurgence of COVID-19 cases amid new virus variants, which could negatively impact on the deployment of [remittances] and tourist arrivals as well as dampen investor sentiment, among others; (ii) the rise in global yields (in particular, US interest rates) which could result in investors’ portfolio reallocation; and (iii) the possible continued rise in deglobalization (or protectionism) which could weaken the demand for exports and foreign investments, could pose risks to the peso. At the same time, weak market sentiment may persist if the availability and deployment of safe and effective vaccine in the Philippines is delayed.

“Given these risks, the BSP will rely on measures that will cushion the impact of possible sharp currency movements such as maintaining a healthy level of FX reserves as a buffer alongside reviewing and adjusting existing macro-prudential measures.”

Mr. Mapa: “A strong USD (US Dollar) environment should translate to a gradual depreciation trend for the PHP.”

Mr. Roces: “PHP to depreciate with wider trade deficit and stronger USD as the US economy continues to rebound.”

Mr. Asuncion: “The peso-dollar exchange rate has demonstrated strong depreciation beginning Q2 2021. The peso has remained sensitive to COVID-19 outbreaks given the poor vaccination rates and difficulty in managing the effect of the pandemic. As remittances has experienced sustained growth over the months and the expected headline inflation to come, the PHP is expected to continue to depreciate for 2022.”

Mr. Ricafort: “The seasonal increase in remittances and conversion to pesos in the fourth quarter, culminating in the Christmas holiday season, would help provide some support on the local currency vs. the US dollar.

“Continued growth in remittances, BPO revenues, foreign investments, as well as some possible pick up in BPO revenues and tourism receipts eventually would help finance the country’s trade deficit, in view of the expected pickup in economic activities including importation as the economy re-opens further.

“The country’s gross international reserves, near record highs recently and equivalent to more than 10 months of imports, or way above the minimum acceptable standard of three to four months, would continue to provide structural buffer for the peso exchange rate, especially greater protection versus any speculative attacks, going forward.”

Mr. Rivera: “It is hard to say but assuming the situation continues to improve faster than the Philippines’ counterparts, we would be in a relatively better position to attract investors to put in their money. This would also have repercussions on our PHP being stronger than other currencies. Financial markets behave depending on the state of economic and public health.”

Analysts give rosy outlook on stocks

December 6, 2021 | 12:26 am

WITH THE ECONOMY showing signs of recovery, investors may consider bank stocks for next year as lenders are seen to be in a better position to bounce back compared with the previous quarters.

The Philippine Stock Exchange index (PSEi) averaged 6,751.98 in the third quarter, up 2.76% from 6,570.78 in the preceding quarter.

In comparison, the financials sub-index, which included the banks, grew at a slower pace with 1.1% to average 1,438.17 in the three months to September from 1,423.19 in the three months to June.

The third quarter saw 11 of the 14 listed banks whose share prices have fallen on a quarter-on-quarter basis. These were Rizal Commercial Banking Corp. (RCB, -18.1%), Philippine Business Bank (PBB, -15.1%), East West Banking Corp. (EW, -14.2%), Philippine National Bank (PNB, -10.6%), Metropolitan Bank & Trust Co. (MBT, -10.3%), Security Bank Corp. (SECB, -10.2%), Philippine Bank of Communications (PBCOM, -8.4%), Bank of the Philippine Islands (BPI, -8.2%), China Banking Corp. (CHIB, -5.3%), Asia United Bank (AUB, -2.4%), BDO Unibank, Inc. (BDO, -2.3%),

On the other hand, UnionBank of the Philippines (UBP) led gainers with 10.6%, followed by Philippine Trust Co. (PTC, 8%) and Philippine Savings Bank (PSB, 0.8%).

“What mainly affected bank stock performance in [the third quarter and early fourth quarter] were pandemic-related developments, particularly the rise in COVID-19 (coronavirus disease 2019) cases due to the Delta variant, subsequent tightening of restrictions, and eventual easing of quarantine classifications as daily virus case counts retreated,” said China Bank Securities Corp. Research Associate, Zoren Philip A. Musngi.

Mr. Musngi, however, noted a recovery in loan growth in August and September due to better lending activity “all of which are encouraging indicators that point to sustained economic recovery.”

Latest data by the Bangko Sentral ng Pilipinas (BSP) showed outstanding loans by universal and commercial banks (U/KBs) increased 2.7% in September, following an annual 1.3% growth in August. Prior to that, it had declined for eight straight months.

In a separate BSP release, U/KBs showed net interest margin — or the ratio that measure banks’ efficiency in investing their funds by dividing annualized net interest income to average earning assets — slightly declined to 3.33% as of September from 3.39% in end-June and 3.49% in end-March.

RCBC Securities, Inc. Equity Analyst King Patrick A. de Mesa noted most banks were able to substantially lower loan loss provisions, as well as see a recovery in fee-based income following the increase in transaction volumes due to the relaxation of quarantine restrictions.

“Aside from the respective banks’ earnings results, I think the recent economic reopening as well as the good GDP (gross domestic product) growth in [the third quarter] influenced bank stocks for the period,” Mr. De Mesa said.

PNB Senior Equity Research Analyst Wendy B. Estacio attributed the third-quarter result to the market’s anticipation in a decline in banks’ net interest income “as earning asset yield were repriced lower.”

“In addition, limited trading income was also priced in by the market as interest rates started to go up. As a reference, the 10-year BVAL (Bloomberg Valuation) rate increased by 58 basis points during the same period,” Ms. Estacio said, referring to the 10-year government bonds.

OUTLOOK
Analysts pinned their hopes on the economic recovery to be sustained into next year.

The second and third quarter saw GDP growing by 12% and 7.1%, respectively, following the economic recession that started in the first quarter of 2020 up until the same quarter of this year. Year to date, GDP expanded by 4.9%.

The country’s economic managers expect the economy to recover by 4%-5% for the entire 2021 following the record 9.5% plunge in 2020.

Metro Manila is currently under a more relaxed Alert Level 2, with businesses allowed operate at higher capacity. Economic managers expect the Alert Level to be further lowered to 1 by January 2022 as COVID-19 cases drop and the vaccination rate improves.

The government also expects nominal GDP to recover to pre-pandemic levels by early 2022.

“I expect listed banks to perform on a positive note for the rest of 2021 and for next year given attractive valuations and favorable economic outlook on the back of continuously improving virus situation in the country,” RCBC Securities’ Mr. De Mesa said.

“More mobility would mean more business activity, which could translate to higher loans, and subsequently, higher income for banks,” Mr. De Mesa added.

PNB’s Ms. Estacio noted that while the loan growth seen since August is still below its peak, investors should factor in a recovery in banks’ loan portfolios due to a rebound in household spending.

“Along with this, investors should remain on guard of the possible rise in banks’ nonperforming loans (NPL),” Ms. Estacio said.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan shared a similar assessment.

“Determining whether or not a bank’s NPL coverage ratio is sufficient and if they’re at least meeting the required BSP capital requirements are also going to help gauge the future prospect of the banks,” he said.

Mr. Limlingan also cited the normalized loan loss provisioning, but noted it is difficult to determine whether the improvement will be substantial given uncertainties posed by the pandemic.

“Nonetheless, the rebound would likely be carried over into next year, assuming more business activity will be generated by then, following the increased vaccinated population, which will lead to the further easing of quarantine restrictions,” he noted.

NPLs held by big banks went up to P400.65 billion as of end-September compared with the P397.18 billion in end-June.

Their NPL ratio dipped to 3.99% in September from 4.03% in June. However, this remained higher than the 2.95% in September last year.

Meanwhile, the U/KBs’ NPL coverage ratio — which shows the allowance for potential losses due to bad loans — improved to 89.44% in September from June’s 87.63%. Still, it was below last year’s 102.9%.

China Bank Securities’ Mr. Musngi was also upbeat, advising investors to mainly focus on macroeconomic events such as the pandemic situation, pace of vaccinations, and changes in quarantine restrictions, as well as the industry’s indicators such as NPL coverage, interest rate outlook, and loan growth “as these will likely be the drivers for performance going forward.”

“In particular, investors should focus on banks with strong NPL coverage (over 100%) and improving NPL ratios, as these institutions would be in a better position to navigate future adverse surprises such as the emergence of another virus variant or re-imposition of restrictions,” he said.

He noted investors are particularly bullish in the sector given the improving outlook for loan growth as economic activity continues to pick up.

“This optimism holds despite expectations of higher interest rates in the coming year, since banks have already positioned themselves to benefit from higher rates. In addition, banks have been investing in more technological solutions such as digital banking, e-commerce, e-payments, which are growth areas that investors are focusing on as future value drivers,” he explained further.

First Metro Investment Corp. Head of Research Cristina S. Ulang expects “good share price performance” next year “in light of credit cycle pickup in sync with economic reopening.”

A watch for a very special lady

December 6, 2021 | 12:08 am

Kiri Te Kanawa - Rolex Website — THE opera singer Dame Kiri Te Kanawa — ROLEX WEBSITE

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ROLEX places ladies (notably, a dame, and even a princess) in a new campaign released on Dec. 1.

The one-minute spot features the watch itself, but also wearers like marine biologist Sylvia Earle, the golf champion Annika Sörenstam, the opera singer Dame Kiri Te Kanawa, pianist Yuja Wang, the tennis champion Garbiñe Muguruza, the biologist Emma Camp, and sitar virtuoso Anoushka Shankar. The late Princess Grace of Monaco, once the actress Grace Kelly, was also in the film, having been photographed wearing the watch several times.

The watch was first made in 1957 as a smaller, more feminine version of the Datejust, itself launched in 1945. Thus dubbed a classic, it features an instantaneous date display under a cyclops lens, a 28mm case, and the Calibre 2236, a self-winding mechanical movement entirely developed and manufactured by Rolex with a power reserve of approximately 55 hours.

While available in a variety of forms, this year, Rolex introduced a sparkling new version of its Oyster Perpetual Lady-Datejust. This entirely gem-set version in 18-carat yellow gold is draped in glittering diamonds. The case is entirely set with 158 brilliant-cut diamonds on the case sides and lugs, while the bezel features 44 brilliant-cut diamonds. This new Lady-Datejust is fitted on a President bracelet set with 596 brilliant-cut diamonds. Its dial, featuring 18-carat yellow gold Roman numerals with a black finish, is paved with 291 brilliant-cut diamonds.

The jewel is set to be an adornment on the wrist of a very special lady. — JLG

Villar developing 2,000-hectare business district

December 6, 2021 | 12:08 am

Villar---Evia-Lifestyle-Center — EVIA Lifestyle Center facade, featuring Villar group brands such as AllAmerican, AllBikes, and AllHome. — PHOTO BY KEREN CONCEPCION G. VALMONTE

By Keren Concepcion G. Valmonte, Reporter

REAL ESTATE tycoon Manuel B. Villar, Jr. said he is developing a 2,000-hectare central business district in the southern part of the Greater Manila.

“This is going to be my biggest project,” Mr. Villar told reporters at a virtual briefing on Friday. “It’s much bigger than Vista; it’s much bigger than any project I’ve ever done.”

The 2,000-hectare business district, which is being developed through the Villar Land, is “going to be bigger than Makati,” the businessman noted. It will be “expandable” up to 2,500 hectares.

“I want this to be the biggest and the best,” he also said.

The development may be accessed through a new light rail transit line. The Muntinlupa–Cavite Expressway “cuts across” the project, Mr. Villar noted.

“You’ll be surprised that it is in the center of 11 cities,” he said, adding that the project is located along the boundaries of Parañaque, Las Piñas, Muntinlupa, San Pedro in Laguna, Bacoor, Imus, and Dasmariñas of Cavite. “[It] will be seen as the heart of 11 cities.

Some of the retail components have already been built along Daang Hari Road in Las Piñas, such as Evia Lifestyle Center, SOMO (South of Molino) – A Vista Mall, and NOMO (North of Molino) – A Vista Lifestyle Center. Mr. Villar noted malls under listed Vista Land & Lifescapes, Inc. have already eclipsed pre-pandemic foot traffic.

The development will be outlined by parks and plazas. It will also include a market, the “trading center of the South.”

“There is no rush to do an IPO (initial public offering), there is no rush to develop this,” Mr. Villar said.

MORE STORES, NEW CONCEPTS
Meanwhile, the Villar group launched more than 20 new brands and concepts recently, as it had to innovate after some retailers in its malls were hit by the public health crisis.

The new brands include Napa, San Marco, Dear Joe, Roma, SOMO Market, Global Market, Green Centrale, Pet Buddies, KAL, No Name, All Green, Get All, All American, Shieldtech, Yummy Bakes, All Bikes, Pet Café, Sombrero, All Digital, Bread Basket, Boston Chicken, and Crossing Café.

“I want to create Filipino retail brands that are world-class,” Mr. Villar said in Filipino. The new brands will be featured in Villar Land.

The group will continue to use its “premiumization” strategy for the retailers, the businessman noted.

Other Villar-led listed firms, AllHome Corp. and AllDay Marts, Inc., will be opening 10 more stores each next year.

REIT, COFFEE PROJECT IPO
The Villar group also intends to take several of its companies public next year through small IPOs, depending on market conditions.

Mr. Villar said the group is planning to take its homegrown café business Coffee Project to the capital markets.

The Villar group launched several Coffee Project spin-offs this year, including the Ruined Project in Tagaytay. Mr. Villar said they want the Coffee Project to have over 100 stores by next year from its current 64 branches.

The group is also planning to launch a real estate investment trust (REIT) early next year, which will include office developments. Some of the buildings have limited commercial spaces. It was previously said that the REIT unit will be launched this year.

“It’s okay that the REIT was delayed because rates and occupancy are starting to improve,” Mr. Villar said in Filipino.

Rates of Treasury bills, bonds to rise on strong US jobs data

December 6, 2021 | 12:07 am

RATES OF government securities on offer this week could inch up this week due to improved US jobs data and concerns over the Omicron variant of the coronavirus disease 2019 (COVID-19).

The Bureau of the Treasury (BTr) will offer P10 billion in Treasury bills (T-bills) this week, broken down into P2 billion in 92-day instruments, P3 billion in 183-day debt papers, and P5 billion in 365-day securities.

The government will also auction off P20 billion reissued 10-year Treasury bonds (T-bonds) with a remaining life of nine year and seven months.

Yield may inch higher due to improved US job data, which further strengthens the case for the Federal Reserve to quicken their tapering, a trader said in a Viber message.

The US Labor department on Friday reported that the unemployment rate dropped to a 21-month low of 4.2% in November, reflecting that the labor market is tightening, Reuters reported.

Meanwhile, nonfarm payrolls increased by 210,000 last month, the lowest increase since December 2020.

Developments on the Omicron variant could also affect yields, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The World Health Organization’s emergencies director Mike Ryan said there is not enough evidence to show the need for a new vaccine tailored for Omicron.

At the secondary market on Friday, the 91-, 182-, and 364-day T-bills were quoted at 1.2229%, 1.4583%, 1.6596%, respectively, based on the PHL Bloomberg Valuation Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the 10-year T-bonds fetched a yield of 4.9874%.

The Treasury made a full P10-billion award of T-bills last week as demand reached P37.65 billion, nearly four times the offer and also higher than the P33.76 billion in bids the previous week.

Broken down, the BTr raised P2 billion as planned via the 91-day debt papers with bids reaching P11.38 billion. The average rate of the papers slipped by 1.4 basis points (bps) to 1.164% from 1.178% previously.

The BTr likewise borrowed P3 billion as programmed from the 182-day T-bills as bids hit P13.98 billion. The tenor’s average rate went up by 0.6 bp to 1.449% from the 1.443% quoted in the prior auction.

The government also made a full P5-billion award of its offer of 363-day T-bills, with the papers fetching tenders worth P12.35 billion. The tenor’s average rate increased 0.8% to 1.636% from 1.628% previously.

Meanwhile, the BTr raised P35 billion as planned via its previous offer of the reissued T-bonds on Nov. 9, which attracted bids amounting to P55.37 billion. The papers, which have a remaining life of nine years and eight months, fetched an average rate of 5.13%, up by 44.1 bps from 4.689% previously.

For this month, the Treasury is eyeing to raise P70 billion from the local market, where P30 billion will be sourced from T-bills while P40 billion will come from Treasury bonds.

The government is looking to raise P3 trillion from both external and local sources this year to plug a budget deficit seen to hit 9.3% of the country’s gross domestic product. —L.W.T. Noble with Reuters

Retailers expect ‘handsome’ sales despite Omicron

December 6, 2021 | 12:07 am

By Revin Mikhael D. Ochave, Reporter

LOCAL retailers remain optimistic about strong holiday sales despite the threat of the potentially more contagious Omicron coronavirus variant.

Retailers are looking forward to “revenge spending” during the holiday season, said Steven T. Cua, president of the Philippine Amalgamated Supermarkets Association.

“Barring any strong negative effects or impact from the Omicron variant, the retail industry is hoping to reap handsome sales from revenge spending by consumers this Yuletide season,” he said in a phone message.

“This hoped-for revenge buying won’t compensate for the tremendous drop in sales since the initial lockdown, but it should partially make up for lost sales,” he added.

Further, Mr. Cua said retailers should enforce safety protocols, avoid overstocking to reduce carrying costs, stock up on products, and instill discipline in personnel and customers to prevent prolonged lockdowns.

Retailers are anticipating an increase in spending as a result of the upcoming national elections, he noted.

“For the food retail industry, we look forward to accelerated spending by current public servants and aspiring local candidates who look forward to getting votes or re-elected next year,” he said.

“Christmas is the perfect season to put food on the table for constituents and would-be supporters.”

Roberto S. Claudio, Philippine Retailers Association (PRA) vice-chairman, said in an e-mail interview that the group also continues to be optimistic despite the situation.

“We continue to be optimistic that the Omicron variant will not be as harmful as previous variants,” he said. “For so long as there will no longer be any prolonged or severe lockdown, we can meet our targets for this year.”

He added that businessmen and retailers have to continue operations despite the emergence of the Omicron variant.

“We have to learn how to live with this virus; businessmen and retailers can no longer wait and see on where the Omicron variant will go,” Mr. Claudio said.

Mr. Claudio also recommended hastening vaccination rollouts and enhancing contact tracing to better manage the possible entry of the Omicron variant.

“More lockdowns will not solve the virus problems if the medical issues are not addressed,” he said.

“We will instead create two problems of economic and medical proportions. We need economic activities to address the economic issues.”

The Department of Health recently said there is still no indication that the Omicron variant, which was first detected in South Africa, has entered the country.

What is adaptive clothing and how can it make life easier for people with a disability?

December 6, 2021 | 12:07 am

a3ce95b3-8144-41c4-8a03-f1612e39bd67 — Nike’s Go FlyEase — NIKE.COM/PH/FLYEASE

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Have you ever tried to do up a zip or button a shirt one-handed? Put on a pair of jeans while seated? Do you know someone with Autism Spectrum Disorder who can’t stand the feeling of certain fabrics against their skin? If your feet are different sizes, or you only have one foot, how do you buy shoes?

Advances in “adaptive clothing” aim to address these problems.

Adaptive clothes are specially designed for people with a disability. This can mean providing one-handed zippers on shoes, replacing buttons with magnetic closures or designing clothing and footwear so you can get dressed while in a seated position.

The key to effective adaptive clothing is catering for the vast array of needs different consumers have, while maintaining style and fashionability.

Recently, fashion brands have begun to provide on-trend clothing with new styles, combining fashion and technology for people with a variety of disabilities.

Here are five different ways fashion is approaching adaptive clothing.

Under Armour were one of the first to adopt a magnetic zipper in clothing. Their redesigned jacket zip called MagZip uses magnets to connect the ends of the zip, making clothing easier to do up one-handed.

Magnets have also been used in shirts, pants and other garments in lieu of buttons. These enable individuals who don’t have the dexterity or ability to use buttons to better dress themselves.

Different iterations of shoes also aim to make the process of tying laces easier, or remove the need all together. Zips can replace traditional laces, enabling shoes to be done up one-handed.

Another design is Nike’s Go FlyEase, a sneaker utilizing a hinge design. The wearer steps into the shoe and the hinge opens, holding the shoe in place.

The first FlyEase shoes proved popular with a wider audience, creating supply issues and a large resale market. This shoe is an example of Universal Design — a principle which proposes products should be designed in such a way that anybody can use them.

Many people with autism are sensitive to certain fabrics or to tags and clothing labels.

Adaptive brands, such as JAM the Label, screen-print labels, avoiding physical tags and offer a range of hyposensitive bamboo and linen fabrics.

Baby onesies and traditional bathers which cover the stomach are not always practical for everyone. Their design can be restrictive to people who are tube feed or use ostomy pouches.

Among other designs, Australian adaptive clothing manufacturer Wonsie sells garments with stomach access for both children and adults who require frequent access to the stomach, meaning medical devices need not be a barrier to fashion.

In the past, adaptive products were often designed to be unobtrusive, such as black wheelchairs or flesh-colored prostheses and hearing aids. But this is changing too.

3D printing and advanced manufacturing are allowing for great flexibility and customized designs of various devices and fashion items.

Open Bionics used 3D printing to create the Hero Arm, a bionic arm powered by muscle movements. By using 3D printing to customize the arm to the user, the company is also able to provide users options around designs ranging from colors to branded content: a blend of function and fashion.

The technology behind adaptive fashion is not limited to product design: it is also used in sales and marketing.

Every Human’s Unpaired system allows consumers to purchase single shoes, while searching by size, width and a range of adaptive features such as easy to put on, and friendly for those who are wearing ankle/foot orthosis.

This can benefit people who have different sized or shaped feet or with prosthetics, where traditional shoes would not suit.

While it seems like a relatively simple idea, this requires brands to have more sophisticated ordering systems. Products must be itemized individually, rather than in traditional pairs, and tagged with additional features such as left or right shoe, and which adaptive features each side possesses, so consumers can search by their needs.

Like many consumers, people with a disability simply want to be able to shop in physical or online stores and find clothing they like and that fits. So, while technology is helping retailers offer an increasing range of adaptive clothing, it is not the only solution.

The next step is to not only think about the clothing itself, but also about the wearer and how they want to shop.

All fashion brands should be adapting their items to the vast array of consumer needs: the technology is already here.

Louise Grimmer is a Senior Lecturer in Retail Marketing, University of Tasmania. Gary Mortimer is a Professor of Marketing and Consumer Behavior, Queensland University of Technology. Jason Pallant is a Senior Lecturer of Marketing, Swinburne University of Technology. Jessica Pallant is a Lecturer in Marketing, Swinburne University of Technology.

Calendar girl times 5

December 6, 2021 | 12:06 am

GINEBRA San Miguel’s new Calendar Girl — actress, dancer, reality star, and model Chie Filomeno – not only graces five new calendars from the spirits brand, she comes to life through an online interface.

Each one-page calendar features the full year and Ms. Filomeno in one of five poses: on roller skates, with a surfboard, at a photoshoot, working out, and in a car.

This year’s edition goes beyond just a calendar to tack on a wall: each of the Ginebra San Miguel calendars features a QR code which can be scanned with a smartphone. This leads to behind-the-scenes videos of the calendar girl photoshoots and message from Ms. Filomeno.

During an online launch on Dec. 1, Allan Mercado, Sales and Marketing Manager for Ginebra San Miguel said, “Every year, we have consistently chosen the exemplary Filipina: not just for her beauty and her excellent physique, but more importantly, for her character, which personifies Ginebra San Miguel’s brand values of matapang (brave), ganado (energized), and ‘never-say-die’.”

Ms. Filomeno, who has 16 credits to her name on her IMDB page (this includes her stint on Pinoy Big Brother just this year, her stint on noontime TV show It’s Showtime, and acting credits on films such as Crazy Beautiful You) joins a roster of Ginebra’s calendar girls that includes former Miss Universe Pia Wurtzbach and actress Anne Curtis. “This calendar girl is a long-held tradition in Ginebra San Miguel, and an important part of our history. Since its inception in 1988, beauty queens, actresses, and models who have made their mark in their respective industries have graced our calendars,” said Mr. Mercado.

Upon being announced as next year’s Ginebra San Miguel Calendar Girl, Ms. Filomeno appeared onscreen in a red spaghetti-strap crop top and a sequinned skirt. She danced while behind-the-scenes clips of her posing for the calendar played in the background. “Very overwhelmed ako (I’m very overwhelmed),” she said. “Lahat ng paghihirap namin, from the staff of Ginebra, as in, thank you po from our hearts. (All of our trials, from the staff of Ginebra, thank you from our hearts). We love you all.”

Asked how she started out in showbiz (her earliest credits were from 2012), she admitted that, “It started with me trending on social media at some point.” This was possibly when she was with a dancing girl group called Girl Trends, which became famous for a performance on noontime TV show It’s Showtime, which featured her and her co-dancers not dancing in sync.

Asked how she prepared for her calendar shoot, she said that she worked out every day and contacting her trainer when she found out she was chosen for the role.

“It’s more than just being sexy. I want to be strong,” she said. “I’m hoping that our new strength paves the way for new wins and successes in the coming year,” she said.

“Ngayong pandemya, higit na mahalaga ang papel ng ating Ginebra San Miguel Calendar Girl (In this pandemic, the role of our Ginebra San Miguel Calendar Girl is more important),” said Mr. Mercado. “Iyon ay para magsilbing inspirasyon sa nakakarami; bilang simbolo ng pag-asa, katatagan at ang bagong tapang (That is to serve as inspiration for many; as a symbol of hope, strength, and new bravery).” — JLG

Deutsche Bank traders face ‘choppiest times’ in market

December 6, 2021 | 12:06 am

DEUTSCHE BANK AG traders are facing almost unprecedented volatility in interest rates, currencies and emerging markets in the fourth quarter, even as other parts of the investment bank benefit from rising stock markets and a surge in dealmaking.

Fixed-income markets have been “a tale of two cities,” with credit trading and financing performing well along with stock markets, trading head Ram Nayak said in an interview. But debt securities more sensitive to global economic developments “have gone through the choppiest times we have seen.”

“We’ve managed the choppiness quite well,” he said. “In credit and financing, we have kept the momentum going.”

Rates, currencies and emerging markets have been a key driver for the investment bank, contributing about half of the unit’s revenue in the first nine months of last year. A slowdown there would add to challenges for Deutsche Bank Chief Executive Officer Christian Sewing as he enters the final year of his turnaround plan, which has been carried largely by the trading and securities unit. The corporate lending business he initially prioritized, meanwhile, has struggled with negative interest rates.

Nayak’s comments are among the first indications of how major investment banks performed in the final months of the year. As inflation accelerates, threatening to end a three-decade hiatus, traders who for the most part haven’t lived through such a period are having to contend with unusual swings in everything from government bonds to currencies.

In the US, Treasury yields surged Wednesday after Federal Reserve Chair Jerome H. Powell suggested Tuesday that stubbornly high inflation warranted increasing the pace of policy tightening. That saw the market reverse course after benchmark 10-year yields fell to a two-month low this week on fears that the new omicron variant of the coronavirus could be resistant to existing vaccines. At the Bank of England, meanwhile, a widely anticipated increase in interest rates could be delayed by the emergence of omicron.

Still, for Deutsche Bank’s traders, Nayak gave a cautiously upbeat outlook on next year, saying his unit can “possibly do a bit better” than the 5% drop forecast by analysts for fixed-income trading across the industry.

“Our goal is not to give back any market share, and we’re confident we can,” he said. Nayak’s unit has been growing faster than the Wall Street average for much of 2021, suggesting his traders have regained market share that was lost in previous years while Deutsche Bank was going through a period of instability.

Speaking in the same interview, Mark Fedorcik, the head of the advisory business, struck a more positive tone after his unit made dozens of hires this year at the level of managing director or director, more than offsetting departures.

“We have the most momentum and the best team in three years,” he said. The business of advising on mergers and debt origination performed particularly well in the fourth quarter, he said, adding he expects that trend to continue into the first quarter of next year.

Revenue in the business led by Fedorcik, known internally as origination and advisory, was up 22% in the first nine months of the year. That made it the fastest-growing unit by far at Deutsche Bank among the businesses for which the lender provides a revenue breakdown.

The investment bank led by Nayak and Fedorcik is the largest revenue contributor to Deutsche Bank and its performance has exceeded Sewing’s expectations when he unveiled his strategy a little over two years ago. Fedorcik said there’s no reason to change the lender’s previous full-year guidance that investment banking revenue will be at least as high as last year.

The investment banking division generated €9.3 billion ($10.5 billion) in revenue last year. It has also said it expects the unit to make about €8.5 billion next year.

The performance also means that its staff can expect substantial payouts, Fedorcik’s comments suggest, even though he declined to comment directly on whether bonuses would rise. “We had two very strong solid years and you want to keep that momentum going,” he said in response to a question about variable pay. “You need to compensate people commensurate with performance and market.”

In addition, Fedorick pointed to intense competition for bankers as a pay factor. There is “upward pressure on salaries” across the industry, he said, especially for junior bankers and associates.

“Demand for talent is the highest I’ve ever seen,” he said. — Bloomberg

Haus Talk to lead initial public offerings in 2022

December 6, 2021 | 12:06 am

By Keren Concepcion G. Valmonte, Reporter

THE Philippine Stock Exchange (PSE) has approved the initial public offering (IPO) of residential property developer Haus Talk, Inc., the first company to list on the local bourse in 2022.

This comes as more companies are set to list on the main board of the PSE this month.

“Haus Talk is one of the companies in [the] PSE’s handholding program for potential IPO listing applicants,” PSE President and Chief Executive Officer (CEO) Ramon S. Monzon said in an e-mailed statement on Sunday.

“We are pleased to see that their IPO journey will soon come into fruition,” he added.

The PSE’s handholding program is an initiative to encourage and guide more companies in tapping the stock markets to raise capital.

Over 30 companies have availed of the program, the majority of which are applicants for the PSE’s small, medium, and emerging board.

“We have long wanted to grow the number of SMEs (small and medium-sized enterprises) listed,” Mr. Monzon said. “To achieve this, we relaxed our listing rules and beefed up the support we provide to potential listing applicants.”

The offer period for Haus Talk is slated to run from Jan. 3 to 7, with a tentative listing date of Jan. 17. According to its preliminary prospectus dated Aug. 25, the company plans to list under the ticker symbol “HTI.”

“We hope that the IPO of Haus Talk will set the tone for 2022 in encouraging other SMEs to consider raising capital through the stock market,” Mr. Monzon said.

The company will be offering to the public up to 500 million primary shares for up to P1.50 apiece. It will set the final offer price on Dec. 27 after its book-building process.

“Investors may still be looking forward to the final offer price in a few weeks, to help them decide on how to go about with their subscriptions to this IPO,” Timson Securities, Inc. Trader Darren Blaine T. Pangan said in a Viber message on Friday.

Haus Talk engaged Investment & Capital Corp. of the Philippines (ICCP) as the transaction’s issue manager and underwriter.

The PSE has a couple more firms slated to list this month. Analysts said investors remain excited for IPOs and other share sales.

“There would still be some market excitement for some IPOs or share sales amid the context of improved economic recovery prospects that could help shore up valuations,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said in a separate Viber message on Friday.

Timson Securities’ Mr. Pangan said it would be “interesting to see how the upcoming offerings would perform” given the holiday season.

“Although the first three days of trading for the month of December has been volatile given the weak sentiment brought about by the spread of the Omicron variant across the globe, the progress made over the country’s vaccination program may help boost sentiment in the remaining trading days of the month,” Mr. Pangan said.

Last week, the benchmark Philippine Stock Exchange index (PSEi) plunged to the 6,900-level over worries on the new coronavirus disease 2019 (COVID-19) variant.

First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said the drop was a “knee-jerk reaction” and that the country’s growth momentum remained intact on the back of “adequate system liquidity and continuing business confidence.

“Earlier selldown to 6,900 was [a] knee-jerk reaction to [the] Omicron [variant], but Philippine reopening and growth momentum [are] still intact, which is reflected in market resiliency. Thematic IPOs can still fly, those in healthcare and clean energy,” Ms. Ulang said in another Viber message on Friday.

Medical equipment distributor Medilines Distributors, Inc. is scheduled to list on the main board of the PSE on Tuesday, Dec. 7. It will list under the ticker symbol “MEDIC.”

Medilines has been dubbed as the country’s “first pure-play healthcare IPO.”

Its offer saw an “overwhelming market response,” both from institutional and retail investors. The IPO demand exceeded P4.7 billion, which resulted in an oversubscription of 2.5 times the offer size of P1.9 billion.

“It was a pleasant surprise to see overwhelming interest from a diverse set of investors — spanning from high quality, long-only domestic institutional investors and thousands of Filipino retail investors from across the world,” Medilines Chairman Virgilio B. Villar said in an e-mailed statement on Friday.

Medilines plans to use part of the IPO proceeds for its plans to get into the medical consumables business.

“Increased spending on medical and health-related products since the pandemic and in view of the need keep people healthy and support the healthcare system to prevent lockdowns would still benefit those related industries such as medical supplies, pharmaceutical, hygiene, and other related products,” RCBC’s Mr. Ricafort said.

Medilines tapped PNB Capital and Investment Corp. as the sole issue manager, lead underwriter, and sole bookrunner for the IPO.

On the other hand, Solar Philippines Nueva Ecija Corp.’s (SPNEC) offer period will run until Dec. 7. It is scheduled to list on the main board of the PSE on Dec. 17 under the ticker symbol “SPNEC.”

SPNEC is offering to the public 2.7 billion common shares priced at P1 apiece. The company plans to use its IPO proceeds to fund the first 50-megawatt-direct current (MWdc) for “Phase 1A” of its 500-MW solar project.

“Renewable energy would still be interesting for some investors as favored in view of the need to comply or adhere with ESG regulations or requirements on various investments worldwide, as encouraged and even required by regulators locally and internationally,” RCBC’s Mr. Ricafort said.

SPNEC assigned Abacus Capital and Investment Corp. as the issue manager and lead underwriter for the offer, while ICCP is a participating underwriter.