THE NATIONAL GOVERNMENT narrowed its budget deficit to P121 billion in July as an uptick in revenues failed to offset muted government spending amid the pandemic, the Bureau of the Treasury (BTr) reported on Tuesday. Read the full story.
Here’s a quick glance at how PSEi stocks fared on Tuesday, August 24, 2021.
THE PHILIPPINES will receive $2.8-billion worth of Special Drawing Rights (SDRs) from the International Monetary Fund (IMF), as part of the latter’s efforts to help countries recover from the coronavirus pandemic. Read the full story.
PHILIPPINE shares closed in the green on Tuesday as investor sentiment got a boost from improvements in the country’s vaccination rate and fresh data showing a narrower budget deficit in July.
The Philippine Stock Exchange index (PSEi) gained 87.15 points or 1.32% on Tuesday to close at 6,678.82, while the broader all shares index added 33.92 points or 0.82% to end at 4,144.88.
“[This is] after the latest budget deficit data narrowed to the least in three months, local COVID-19 vaccines administered [went] above the 30 million mark, and after US stock markets mostly posted new record highs on optimism on increased immunization requirements or mandates versus COVID-19, stronger US existing home sales data,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.
The Treasury reported on Tuesday that the country’s budget deficit narrowed to P121.2 billion in July, 13.57% lower than the P140.2 billion in the same month last year. Year-to-date, the budget deficit swelled to P837.3 billion, 19.5% up from a year ago.
“Market sentiment [is] also supported by Metro Manila already vaccinated 43% of the target population and targeting 50% by end-August 2021,” Mr. Ricafort added.
Overall, the country has administered over 30 million coronavirus disease 2019 (COVID-19) vaccines, but only 12.14% or 13.13 million Filipinos have been fully vaccinated.
The local stock market also appeared to have shrugged off the continued rise in COVID-19 cases. On Monday afternoon, the Health department reported a record 18,332 in daily COVID-19 infections, and admitted there was already community transmission of the more infectious Delta variant in Metro Manila.
Darren Blaine T. Pangan, trader at Timson Securities, Inc. said the US markets positive performance overnight appeared to have spilled over to the local market.
Investors cheered the news that the US Food and Drug Administration gave its full approval for the COVID-19 vaccine developed by Pfizer, Inc. and BioNTech SE, a move seen to boost vaccination rates.
“The local bourse closed higher as foreigners continue to be net buyers today. This comes after the two-day profit taking activity that happened the past few days,” Mr. Pangan said.
Net foreign buying increased to P291.11 million on Tuesday, from the P105.79 million logged in net purchases on Monday.
All sectoral indices posted gains on Tuesday. Holding firms rose by 112.85 points or 1.71% to finish at 6,678.89, while industrials went up by 138.04 points or 1.42% to close at 9,807.25.
The property index increased by 30.32 points or 0.99% to 3,073.39, while mining and oil gained 81.64 points or 0.89% to close at 9,199.61. Financials moved up by 12.70 points or 0.88% to 1,440.59; and services inched up by 6.01 points or 0.36% to end at 1,650.68.
Value turnover declined to P5.53 billion with 2.68 billion shares switching hands on Tuesday, from the P6.29 billion with 1.94 billion issues traded the previous day.
Advancers beat decliners, 106 against 83, while 54 names remained unchanged.
Timson Securities’ Mr. Pangan said he expects the market to trade within the 6,270 to 6,840 range. — K.C.G. Valmonte
THE PESO strengthened versus the greenback on Tuesday due to positive market sentiment as the local stock market rallied and with preference for the local unit due to weaker-than-expected US manufacturing data report.
The local unit closed at P50.116 per dollar, gaining 15.40 centavos from its P50.27 finish on Monday, based on data from the Bankers Association of the Philippines.
The peso opened Tuesday’s session at P50.16 a dollar. Its weakest showing was at P50.24 while its intraday best was at P50.06 versus the greenback.
Dollars exchanged rose to $967 million on Tuesday from $717.65 million on Monday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso’s strength was due to positive market sentiment due to gains in the local stock market.
The bellwether Philippine Stock Exchange index rose b 87.15 points or 1.32% to close trading at 6,678.82 on Tuesday. The broader all shares index also increased by 33.92 points or 0.82% to 4,144.88.
Meanwhile, a trader said the peso appreciated after the release of a weaker-than-expected US manufacturing sector report.
The IHS Markit’s US Composite Purchasing Managers Index (PMI) Output Index, which gauges the manufacturing and services sector, dropped to a reading of 55.4 in August from 59.9 in July. The index was the lowest since December, Reuters reported on Monday. It was still however above the 50-reading mark that indicates expansion in the sector.
For the flash services sector PMI, the reading stood at 55.2 from 59.9 in July. This was also weaker than the 59.5 estimate in a Reuters poll.
On the other hand, the flash manufacturing PMI was at 61.2, falling from the 63.4 in July. A Reuters poll estimated a stronger reading of 62.5 for August.
For Wednesday, both Mr. Ricafort and the trader gave a forecast range of P50 to P50.20 per dollar. — Luz Wendy T. Noble with Reuters
SOUTHEAST ASIA’S stunted growth momentum due to the severity of its lockdowns will be temporary because of its critical role in global supply chains, which will allow it to eventually close the gap with regions that remained relatively open like Latin America, Moody’s Analytics said.
Moody’s Analytics noted that strict lockdowns in Southeast Asia have hurt key growth drivers in the region such as consumer spending and exports.
“Pandemic restrictions proved largely successful in preventing mass outbreaks in export-oriented manufacturing industries, a key motor of growth for Southeast Asian economies,” Moody’s Analytics Economist Jesse Rogers said in a note Tuesday.
“However, with restrictions on the service sector severing the traditional link between manufacturing and gains in the broader economy, trade will provide only limited support,” it added.
Mr. Rogers said Latin American countries saw a smaller hit to consumer spending, retail sales and industrial production, as most leaders pushed “to keep economies running even at the expense of adverse health outcomes.”
“Sweeping restrictions on social and business activity caused output to decline in Malaysia, the Philippines and Vietnam on a seasonally adjusted basis in the second quarter,” Mr. Rogers said.
“Thailand and Indonesia fared better, but Delta’s surge in these countries did not begin until late June, and we expect the hit from pandemic restrictions to show forcefully when July data begin to trickle in later this month,” he added.
Asian Institute of Management Economist John Paolo R. Rivera said the ASEAN strategy is more aligned with the region’s healthcare capacity.
“While this is not economically sustainable, lockdowns allow governments to buy time in creating innovative ways to manage the pandemic whilst having manageable economic repercussions,” Mr. Rivera said in a text message.
Metro Manila and some provinces reverted to the strictest lockdown settings for two weeks in March and April due to an infection surge.
Restrictions have since been eased. However, Metro Manila and some provinces were again back on lockdown from Aug. 6 to 20 to contain the Delta variant of the coronavirus.
Moody’s Analytics downgraded its growth outlook for the Philippines to 4% in August, from the previous estimate of 4.9%, citing the new lockdowns.
Gross domestic product (GDP) rose 11.8% in the second quarter, ending a 15-month recession. However, GDP dropped 1.3% quarter on quarter, reflecting the impact of the lockdown in March and April.
COVID-19 cases rose by 12,067 Tuesday, bringing total active infections to 127,703, according to the Department of Health.
Another factor that dampened Southeast Asian growth in comparison to Latin America is the late start of vaccination campaigns in ASEAN, Moody’s Analytics said.
“In most of the region, less than one-fifth of the population has received vaccine first doses — means that pandemic waves will reverberate for some time,” Mr. Rogers said. — Luz Wendy T. Noble
THE DEPARTMENT of Energy (DoE) said the public health emergency has set back the timetables of 37 transmission projects of the National Grid Corp. of the Philippines (NGCP).
Twenty-four of the projects are being implemented in Luzon, 10 in the Visayas, and three in Mindanao.
“At the height of the nationwide community quarantine, NGCP was constrained to suspend its construction projects to ensure compliance with health and safety regulations,” the DoE said in its 2020 Power Situation Report posted on its website this week.
The Mindanao-Visayas Interconnection Project (MVIP), which links the power grids of the two island groups, is one of the 37 projects which were delayed, it said.
The MVIP, which has been certified by the DoE as an energy project of national significance, was initially scheduled for completion in December, but was set back by the pandemic, and also by damage to one of its fiber optic submarine cables.
The DoE said that the MVIP’s completion date is now December 2022, according to the transmission development plan submitted by the NGCP.
In the same report, the DoE also said power capacity in 2020 grew by around 3% to 26,286 megawatts (MW), after two large coal-fired power plants started operating — Masinloc Unit 3 on Luzon and GNPower Kauswagan Unit 4 on Mindanao.
“By the end of 2020, a total of 655 MW of installed capacity was added to the country’s power supply. The bulk of the capacity additions were supplied to the grid and equaled 643 MW, comprising coal (527 MW), solar (71 MW), oil-based (45 MW), and hydro (0.3 MW),” the DoE said.
Last year, coal accounted for 56% of the gross power generated on Luzon. Natural gas and hydro made up 26.9% and 6.2%, respectively.
“Over the past years, the power generation mix followed a similar trend, with coal and natural gas as the consistent top sources of energy in Luzon,” DoE said. — Angelica Y. Yang
THE FINTECH industry has room to grow in Southeast Asia, which is underbanked and has a large population of young people, Fitch Ratings said.
In a note Tuesday, the ratings agency said over half of the 580 million combined population of the Philippines, Singapore, Indonesia, Malaysia, Thailand and Vietnam are under 35 years of age.
“This presents a large pool of consumers who will underpin demand for financial services as incomes rise over the next decade,” it said.
Fitch Ratings cited a World Bank finding that over half of the region’s population remained unbanked — with the largest cohort in the Philippines and Vietnam. It noted that the lack of funds remains the major barrier for registering with a financial institution, keeping financial services penetration rates low.
“Geography poses further complications, as the archipelagic nature of Indonesia and the Philippines raises distribution and servicing costs in those markets,” Fitch said.
Fitch believes service providers will be able to overcome the region’s income and geographical issues in the region, though the technology tools most likely to be used to bridge those gaps remain vulnerable to cyberattack.
“Scalable technology can lower the marginal cost-to-serve and broaden geographic coverage, although benefits will take time to crystallize; upfront costs may be significant, network connectivity remains uneven and mis-steps will occur as innovators test uncharted waters,” it said.
Regulators are also supportive of fintech in the region, Fitch noted. The Bangko Sentral ng Pilipinas has a target of migrating 50% of payment transactions to digital by volume and value by 2023. Countries are also working to build cross-border payment mechanisms.
Fitch said credit could be the biggest opportunity for fintechs particularly in Indonesia and the Philippines.
“Limited access to formal credit stems partly from low and inconsistent incomes, identity documentation gaps and a lack of financial records,” Fitch said, can be overcome by fintechs, who have expertise in evaluating the credit of non-prime customers shunned by banks.
It said fintechs may target small consumer transactions or small businesses, where the unserved demand for financing services has been estimated at $400 billion by the International Finance Corp.
“Connectivity remains a challenge for rural communities in Indonesia and the Philippines, which could constrain fintech expansion in these areas,” it said. It however noted the national ID initiative of the Philippines alongside the construction of a secure payment system will help the market grow there. — Luz Wendy T. Noble
INDUSTRY GROUPS said they are opposed to the inclusion of motor vehicle parts on a list of Thai products being considered for a suspension of tariff concessions.
The Trade department is seeking to suspend tariff concessions in retaliation against Thailand over a 13-year-old trade dispute involving Philippine tobacco products.
The Tariff Commission in January presented the proposed 112 product lines for potential suspended concessions, which include cars, materials for plastic goods, air conditioners, and flavor enhancers. Industry representatives have called attention to the potential disruptions to regional supply chains that might ensue, as well as the threat of higher prices for goods.
The Philippine Parts Maker Association, Inc. (PPMA) has since proposed 34 more motor vehicle parts tariff lines, including vehicle air conditioning, fuel cut-off valves, wiring harnesses, battery cables, seat belts, floor mats, and silencers.
“We find this the right time also to be included in the suspension of concessions… it would definitely help promote and support the local production of these components,” PPMA President Ferdinand I. Raquelsantos said during the commission’s public hearing Tuesday.
The Philippines first complained in 2008 of Thailand’s customs valuation of Philippine cigarette exports, and the World Trade Organization (WTO) has ruled in favor of the Philippines. In response to Thailand’s non-compliance with the WTO ruling, the Philippines last year wrote a request to the WTO’s dispute settlement body to retaliate against Thai automotive exports to the Philippines.
The two countries have since agreed to a mediated process to resolve the ongoing trade dispute.
Arnupab Tadpitakkul of the Thai Automotive Industry Association called trade retaliation an alarming development in the state of the trade relationship between the two countries.
“The high cost of imported parts would naturally lead to higher costs of finished products produced in the Philippines. As a result, both sides of the fence would be adversely affected by such trade measures,” he said. “We believe that that there remain other viable and less disruptive options for both parties.”
Rommel R. Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines, Inc., said the industry association is opposed to the suspension of concessions, which he said would raise retail prices and reduce supply.
“It is quite difficult to understand why automotive has been targeted for cross-retaliation. Automotive trade with Thailand is very critical to the Philippine automotive industry,” he said.
In response, Trade Assistant Secretary Allan B. Gepty said the Philippines has made use of all avenues to arrive at a resolution, adding that it is up to Thailand to avert what he called “the suspension of concessions that are rightfully available to the Philippines.” — Jenina P. Ibañez
HOUSE LEGISLATORS approved on second reading Tuesday a bill that would exempt from tax cash gifts and rewards for athletes and coaches participating in international competition.
House Bill No. 9990, also known as the Hidilyn Diaz Act, would amend Section 4 of Republic Act No. 10699 or the National Athletes and Coaches Benefits and Incentives Act, to exempt from tax, charges or fees any rewards and bonuses granted to athletes and coaches participating in international competition.
Prizes will also be made deductible against gross income in computing for the donor’s income tax. The tax relief is valid for the one year before an athlete competes in an international sports competition and three months after the event.
Donations made prior to the competition may only be used to fund training and competition-related expenses.
The tax exemptions are to be retroactive to June 1, 2021 to cover incentives given to athletes and coaches who participated in the Tokyo Olympics.
The measure was approved in the House Committee on Ways and Means on Aug. 9.
AAMBIS-OWA Party-list Rep. Sharon S. Garin, one of the principal authors of the measure, said that the bill was “long overdue” as recognition and support for Filipino athletes.
“We believe that support for training (outweighs) any incentive that may be received by athletes after winning a medal. It is in that path leading to their goals when they most need financial assistance,” she said in her sponsorship speech. — Russell Louis C. Ku
THE DEPARTMENT of Agriculture (DA) said it is seeking to expand the Philippines’ engagement with Brazil in agricultural commodities and technical cooperation.
Agriculture Secretary William D. Dar met with Brazilian Ambassador to the Philippines José Maria De Souza e Silva on Aug. 23 to urge Brazilian companies to purchase more desiccated coconut, coconut oil, palm kernel, and palm oil from the Philippines.
Mr. Dar also pushed for a collaboration between Philippines and Brazil in the use of abaca in automotive parts.
“The DA seeks to elevate and make the trading system between the two countries more vibrant. We want to continue this collaboration and elevate our partnership,” Mr. Dar said.
Mr. Dar also sought an update on the country’s bid to export papaya seed to Brazil, adding that the Bureau of Plant Industry (BPI) is ready to go forward with a pest and risk analysis.
He said the Philippine National Dairy Authority is interested in procuring girolando cattle semen from Brazil to improve its own breeding program, while the Sugar Regulatory Administration is proposing collaboration in sugarcane and ethanol production.
Mr. Dar confirmed that the BPI and the Bureau of Animal Industry (BAI) are conducting a risk analysis on proposed Brazilian exports of melon, fresh apple, chicks, and hatching eggs.
He added that the DA looks forward to the 5th Philippine-Brazil bilateral consultation mechanism scheduled on Sept. 13.
“The Philippine delegation for agriculture will put forward several agricultural cooperation (proposals) during this bilateral meeting which includes technical cooperation in agriculture, dairy, fisheries and aquaculture, abaca fiber, coconut, and sugar cane,” Mr. Dar said.
The Ambassador asked the DA to increase the number of Brazilian establishments accredited to ship beef, pork, and chicken meat to the Philippines.
“Brazilian foreign meat establishments have come a long way in terms of production, efficiency and quality control,” he said.
According to BAI data, Brazil accounted for 88,567.66 metric tons or 15.4% of Philippine meat imports as of June 30.
Some 60.1% of Brazil’s meat shipments to the Philippines came in the form of chicken cuts, chicken leg quarters, mechanically deboned meat, fats, offal, and rind/skin. — Revin Mikhael D. Ochave
THE DEPARTMENT of Agriculture (DA) said it has lifted the temporary ban issued on poultry imports from Ukraine after that country was certified as free of bird flu.
Agriculture Secretary William D. Dar signed Memorandum Order No. 47 on Aug. 23 clearing the way for imports of Ukrainian domestic and wild birds and their products including meat, day-old chicks, eggs, and semen.
Ukraine was declared free from the highly pathogenic avian influenza (HPAI) provided by the country’s veterinary authorities in a report to the World Organization for Animal Health (OIE).
“Based on the evaluation of the DA, the risk of contamination from importing poultry meat, day-old chicks, eggs, and semen is negligible. In accordance with the provisions of the OIE Terrestrial Animal Health Code 2019, Ukraine is now free from HPAI,” Mr. Dar said in the memorandum order.
The ban on Ukrainian poultry imports was imposed on Jan. 30, 2020.
Ukraine had detected bird flu outbreaks in Buhakiv, Nemyriv, Vinnitsa. — Revin Mikhael D. Ochave
