How PSEi member stocks performed — June 30, 2021
Here’s a quick glance at how PSEi stocks fared on Wednesday, June 30, 2021.
Stocks drop on lack of leads, Delta variant fears
PHILIPPINE shares closed in negative territory on Wednesday amid a lack of catalysts and worries over the Delta variant of the coronavirus disease 2019 (COVID-19).
The bellwether Philippine Stock Exchange index (PSEi) dropped by 54.74 points or 0.78% to end at 6,901.91 yesterday, while the broader all shares index fell by 17.79 points or 0.41% to close at 4,244.58.
Philstocks Financial, Inc. Research Associate Claire T. Alviar said in a mobile phone message that the market fell on Wednesday amid the absence of leads and lingering concerns over the new COVID-19 variant.
“The sentiment was further pulled by the worries over the Delta variant and by the downgrade of the Philippine economic growth forecast to 6.4% this year by the ASEAN+3 Macroeconomic Research Office (AMRO),” Ms. Alviar said.
In its latest Annual Consultation Report released on June 29, AMRO revised its 2021 gross domestic product (GDP) for the Philippines to 6.4%, lower than its previous estimate of 6.9% growth.
Despite being lower, AMRO’s estimate is still within the 6-7% growth target of the government for 2021.
Darren Blaine T. Pangan, trader at Timson Securities, Inc., said in a mobile phone message that the bourse ended lower as investors remained cautious as they continue to monitor the progress of the government’s vaccination program.
About 10.07 million doses of COVID-19 vaccines have been administered since the start of the country’s inoculation program in March, the Health department said on Monday. Of the total, 7.54 million were first does while the remaining 2.53 million were second doses.
The government is eyeing to fully vaccinate as many as 70 million people against COVID-19 by yearend to attain herd immunity.
Sectoral indices were mixed at the end of Wednesday’s trading. Property went down by 59.12 points or 1.74% to 3,321.71; holding firms declined by 65.01 points or 0.93% to 6,920.49; and financials retreated by 12.92 points or 0.85% to 1,498.54.
Meanwhile, mining and oil improved by 86.96 points or 0.92% to close at 9,543.67; services gained 7.86 points or 0.49% to 1,590.80; and industrials rose by 3.09 points or 0.03% to 9,630.09.
Value turnover reached P6.38 billion on Wednesday with 1.85 billion issues switching hands, up from the P5.21 billion with 1.82 billion shares seen the prior day.
Decliners bested advancers, 109 against 94, while 47 names ended unchanged.
Net foreign selling amounted to P730.73 million, higher than the P379.35 million logged on Tuesday.
“6,800 is where support may be drawn, while 7,080 remains the PSEi’s immediate resistance area,” Timson Securities’ Mr. Pangan said.
“The local bourse will test the 6,900 support area, but given the lack of positive catalysts, it may fail to stay above that level. Investors will be monitoring the COVID-19 daily cases, as well as the new more infectious variant, the Delta Variant. Meanwhile, we may also see month-end window dressing, particularly in the index stocks,” Philstocks Financial’s Ms. Alviar added. — Revin Mikhael D. Ochave
Peso down on month-end dollar demand, virus concerns
THE PESO weakened anew versus the greenback on Wednesday on month-end demand for the dollar and amid concerns over the Delta variant of the coronavirus disease 2018 (COVID-19).
The local unit closed at P48.80 per dollar yesterday, shedding 30 centavos from its P48.50 finish on Tuesday, based on data from the Bankers Association of the Philippines.
The peso opened Wednesday’s session at P48.60 versus the dollar, which was also its intraday best. Meanwhile, its weakest showing was at P48.83 against the greenback.
Dollars exchanged climbed to $1.105 billion on Wednesday from $763.08 million on Tuesday.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the peso weakened amid corporate demand for the dollar.
“This may be used to pay for some end-month/quarter-end requirements for some imports,” Mr. Ricafort said in a text message.
Meanwhile, a trader attributed the peso’s depreciation to worries over the Delta variant of COVID-19.
The Philippines has so far reported 17 cases of the Delta variant. Data from the Department of Health showed COVID-19 infections rose by 4,509 on Wednesday to bring the total to 1.412 million.
For today, Mr. Ricafort gave a forecast range of P48.65 to P48.85 versus the dollar, while the trader expects the local unit to move within a slightly weaker band of P48.70 to P48.90. — LWTN
ERC alters basis for triggering price caps to 72-hour average
THE ENERGY Regulatory Commission (ERC) has revised the formula that will trigger the imposition of price caps, which will now come into play based on power price movements over 72 hours rather than 120.
It said the new trigger event for price caps hopes to address price surges on the wholesale electricity spot market (WESM).
In a statement Wednesday, the ERC said the new trigger for price caps was effected by amending a 2017 resolution on pre-emptive mitigating measures in the spot market.
“The amendment (includes the) lowering of the rolling average period from 120 hours or five days to 72 hours or three days,” the commission said.
According to ERC Chairperson and Chief Executive Officer Agnes VST Devanadera, the implementation of such measures in May would have resulted in a lower average WESM price.
“Because of the imposition of the secondary price cap (SPC) in May 2021, (the) average price in WESM was at P7,428/MWh (megawatt-hour) instead of P8,120/MWh. That is for the five days’ rolling average. If reduced to three days’ rolling average, (the) resulting price would have been P6,338.66/MWh,” she said.
Asked to comment, the Philippine Rural Electric Cooperatives Association, Inc. (Philreca) said shortening the rolling average period “may not guarantee lower prices in the market nor reduce price spikes, but will protect the public from unreasonable high market prices.”
“We commend the ERC for looking after and protecting the welfare of the consuming public. (But) due to the volatility that is inherent to the market, price spikes may not entirely be avoided,” Philreca Executive Director Janeene D. Colingan told BusinessWorld by e-mail Wednesday.
She said that reducing the time for the SPC to kick in does not address the issue of the lack of reserves. “We believe that more need to be done by our government planning and regulating agencies to ensure stability and security of energy supply,” Ms. Colingan added.
The Independent Electricity Market Operator of the Philippines (IEMOP) has said that it imposes the cap when it observes “sustained high prices in the spot market for the past five days.”
Last week, the market operator said it implemented the SPC during 103 trading intervals from June 1 to June 20. The month before, the IEMOP imposed the cap during 55 trading intervals.
Another change in the ERC’s 2017 resolution is the setting of a regional or island SPC mechanism which will “have the same SPC value, CPT (cumulative price threshold) and rolling average period similar to that of the system-wide imposition and shall be applied during certain conditions.”
On Wednesday, the commission said that the amendments will be outlined in an updated resolution which will be released in a few days. It said that it held public consultations in November 2019 on the matter.
The IEMOP has said high prices at the start of the May billing period triggered the SPC. The cap continued to be imposed until the following month as the Luzon grid underwent a series of yellow and red alerts from May 31 to June 2 due to thinning reserves, forced plant shutdowns and higher temperatures. — Angelica Y. Yang
Employers gearing up for million-job push
PRIVATE SECTOR groups plan to organize job caravan events and identify job vacancies among member companies as part of their pledge to create a million jobs by the end of the year.
In an event organized by the Employers Confederation of the Philippines (ECoP), industry groups representing the export, hotel and restaurant, construction, and electronics sectors committed to a partnership with government agencies to source talent for their industries.
According to the groups’ manifesto, the private sector will help find jobs for qualified but unemployed Filipinos and make recommendations to the government’s National Employment Recovery Strategy (NERS) task force.
Unemployment surged last year as lockdown restrictions were put in place to contain the COVID-19 pandemic, peaking at a 17.6% jobless rate in April 2020. The unemployment rate by April 2021 was at 8.7%, higher than the 7.1% reported in March, according to a Philippine Statistics Authority preliminary survey.
The NERS task force for its part will provide worker profiles for job vacancy referrals, promote alternative work arrangements, train workers, and help facilitate vaccination for qualified workers.
“We have highlighted in the manifesto the specific responsibilities that we will undertake to achieve our goal,” Trade Secretary Ramon M. Lopez said at the ECoP conference.
“These include: creating a policy environment that encourages generation and improved access to employment, livelihood and training opportunities; improving employability, wellness, and productivity of workers by taking advantage of the opportunities in the labor market.”
Employers at the ECoP conference said that they commit to regular dialogue with the government to support reforms in the business environment and recover from the pandemic.
According to the conference resolutions, the employers recommended that the government “formulate effective national policies that would strike a balance between prioritizing lives and promoting livelihood.”
To do this, they said that the government should address vaccine hesitancy and ramp up the roll out of COVID-19 jabs. Employers added that the government should support small businesses through subsidies, mobilize private sector participation in infrastructure projects, and coordinate seamless social programs like cash transfer and other recovery packages. — Jenina P. Ibañez
Mental health problems weighing on PHL workforce, study finds
More than half of Filipino workers have experienced mental health challenges during the pandemic, with many of them considering quitting their jobs, mental health firm MindNation said, citing the findings of a study.
According to the report released Wednesday on a study of 6,000 respondents, 53% said they worry about health risks and financial pressures.
“Now that the boundaries between personal life and work are blurred with people working from home, employees are working more than they did pre-pandemic when they were onsite with colleagues,” according to the report. Almost half of the respondents said that they have too much work.
The survey, conducted between September and April, found that respondents were experiencing weakened focus and low levels of self-confidence. Employees also reported sleeping problems and less pleasure in activities they normally enjoy.
Mental health challenges led 13% of respondents to consider more sick leave, while 35% believe their productivity has been impaired.
“The ones having productivity issues are losing an average of two hours every day. This means that these employees are losing one day per week, which translates into a loss of two months a year due to their productivity challenges,” it said.
Almost a quarter of the respondents said they are thinking about quitting due to mental health challenges.
“When we factor in the employees who are really challenged with mental health issues and think about quitting, it becomes 5% of the total employee base in every company,” the study found.
MindNation said that these concerns could cost companies at least P700,000 per 100 employees each year, based on a 262-day work a year and a $30 daily average salary.
“Losing talent is a significant failure to the company as it takes days to find a replacement for a vacated position. This also entails additional time and effort from the organization as a new hire requires onboarding and training,” MindNation said.
In countries like the US, resignations hit record numbers. More than four million Americans quit their jobs in April.
MindNation said that employee assistance programs in the Philippines have low usage rates and are not always accessible.
The firm said companies should increase the reach of mental health services for employees because they are usually made available to a small part of a company’s population.
“It is crucial to be proactive (instead of) reactive in mental health and wellbeing challenges, providing a safe space where employees can open up the moment they need it, rather than waiting until it is too late,” it added. — Jenina P. Ibañez
Policies on piracy to be unified across 50 gov’t agencies
AN INTERAGENCY committee on intellectual property is aiming to help develop policies against counterfeiting and piracy in 50 government agencies by 2025.
The National Committee on Intellectual Property Rights (NCIPR) said that 50 national agencies and 18 local government units should have such policies by the deadline on the piracy of items like software.
So far, only four government agencies have developed such policies. While all four are NCIPR members, another nine members will roll out their policies by the end of 2021, the Intellectual Property Office of the Philippines (IPOPHL) said in a statement Wednesday.
“As servants in government, we must be the role models in obeying the law. We must demonstrate this by being mindful of all laws, including the IP (intellectual property) Code, when formulating policies or initiatives and by taking appropriate action against violators,” NCIPR Acting Chairman and IPOPHL Director General Rowel S. Barba said.
The NCIPR in its revised vision statement said that it plans to significantly reduce counterfeit and pirated goods sold on the market, especially in urban areas, by 2025.
The committee is an interagency body headed by the Department of Trade and Industry, while IPOPHL holds the vice-chair role.
The NCIPR through its newest member the Department of Information and Communications Technology is also studying a possible audit on the use of illegal software within government agencies.
Intellectual property rights violations reports sent to IPOPHL spiked during the lockdown last year, with a majority of complaints related to piracy and counterfeiting. Most of the violations, the agency said, are done online. — Jenina P. Ibañez
SC upholds CoA ruling on unauthorized SEC disbursements
THE Supreme Court (SC) has affirmed a 2013 finding by the Commission on Audit (CoA) which concluded that the Securities and Exchange Commission (SEC) had no authority to apply its retained earnings in 2010 to pay for a P19.7-million contribution to the employee provident fund, but ruled that the officials involved did need to refund the disallowed disbursements.
In a decision dated April 27 and published on June 25, the court said CoA’s disallowance was valid because Section 75 of the Securities Regulation Code or Republic Act 8799 authorizes SEC to use its retained earnings “subject to the auditing requirements, standards and procedures under existing laws.”
The SC said one such law is the General Appropriations Act of 2010, which specifies that SEC’s retained earnings “shall be used to augment (its) MOOE (Maintenance and Other Operating Expenses) and Capital Outlay requirements,” with no provision for personnel costs.
However, the SC found that the SEC officials acted in good faith and were absolved from having to pay back the funds.
It found that the SEC had been using its retained earnings to pay its provident fund contribution for five years without having been flagged by CoA.
The SEC officers were also not found to have unduly benefited from the unauthorized disbursement. — Bianca Angelica D. Añago
BIR ends two amnesty programs without extension
THE Bureau of Internal Revenue (BIR) said the Voluntary Assessment and Payment Program (VAPP) and tax amnesty for delinquencies expired Wednesday with no plans to extend the deadline.
BIR Deputy Commissioner Marissa O. Cabreros said in a Viber message the deadlines will not be extended after several such extensions given last year.
In the case of the tax amnesty on delinquent accounts, Ms. Cabreros said the BIR is not authorized to extend the program by Republic Act No. 11494 or the Bayanihan to Recover as One Act (Bayanihan II), which had allowed the government to move statutory deadlines as a form of pandemic relief.
The BIR has yet to disclose collections generated by the program.
The validity of the tax amnesty program on delinquencies was extended four times last year, after an initial April 23 deadline. It covers all national internal revenue taxes such as income tax, withholding tax, capital gains tax, donor’s tax, value-added tax, other forms of percentage tax, excise tax and documentary stamp tax running back to 2017.
The BIR collected P3.544 billion in revenue from the program from its launch in April 2019 to December 2020.
The two tax amnesty programs were authorized by Republic Act No. 11213 or the Tax Amnesty Act signed in February 2019. Certain provisions were vetoed by President Rodrigo R. Duterte, who opposed a general amnesty without lifting bank secrecy laws.
The VAPP allowed taxpayers to voluntarily settle their tax arrears allowing the BIR to collect revenue that would have otherwise had to be extracted via audits. It covers all internal revenue taxes for the taxable year ending December 2018 and fiscal year 2018 ending July 2018 to June 2019.
The program was initially set to expire at the end of 2020. The BIR extended its validity until June 30.
Meanwhile, the agency is also still waiting for President Rodrigo R. Duterte’s to sign a bill that will extend the validity of the estate tax amnesty program for another two years, after the program concluded on June 14.
The BIR collected P872.414 billion between January and May, up 29.5% from the same period last year. The agency is tasked to collect P2.081 trillion this year. — Beatrice M. Laforga
To VAT or not to VAT: Incentive regulations of IPA registrants
Over the years, the incentives availed of by enterprises registered with investment promotions agencies (IPAs), such as the Philippine Economic Zone Authority (PEZA), have been closely scrutinized and challenged by the tax authorities. For example, policy changes in the past limited the direct cost deductions of these registered enterprises; more recently, a sunset period was imposed for some incentives by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. Even so, new rules further regulating tax incentives have come as a complete surprise to taxpayers.
I am referring to the recently issued Revenue Regulations (RR) No. 9-2021, amending some provisions of the value-added tax (VAT) regulations. Under the RR, some transactions that were previously considered VAT zero-rated are now being taxed at 12%. Consequently, a tax advisory was issued, declaring that the certificates for VAT zero-rating of certain transactions of registered business enterprises are no longer effective starting June 28.
The provisions implemented by the RR are actually from the first package of the government’s comprehensive tax reform program, Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which took effect on Jan. 1, 2018. Under the RR, the following transactions are now subject to 12% VAT:
For sale of goods: (1) sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented enterprise, or directly to an export-oriented enterprise whose export sales exceed 70% of total annual production; and (2) those considered export sales under Executive Order (EO) No. 226 and other special laws.
For sale of services: (1) services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed 70% of total annual production; and (2) processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of Bangko Sentral ng Pilipinas (BSP).
This specific provision in the TRAIN Law was proposed by the Department of Finance and legislated by Congress to control the leakages in the VAT system by limiting VAT zero-rating to direct exporters only, and at the same time, by setting up a proper cash refund system so as not to burden the exporters. In support of this policy objective, the following conditions must first be satisfied before the 12% VAT rate could be imposed: (1) the successful establishment and implementation of an enhanced VAT refund system that grants refunds of creditable input tax within 90 days from the filing of the VAT refund application with the BIR; and (2) the payment in cash of all pending VAT refund claims as of Dec. 31, 2017.
With the issuance of the RR, the BIR effectively pronounced that the above two conditions were satisfied even though no supporting statistics or information had been presented for the taxpayers to validate. The RR having been circulated, taxpayers can only assume that the requisite conditions are in place for the efficient observance of the policy.
Contrary to what the TRAIN Law wants to achieve — a simple, fairer, and more efficient tax system — these amendments seemed to cause more confusion and anxiety, especially among entities registered with the IPAs. This is because of their understanding that their local purchases shall now be subject to 12% VAT. Even during the TRAIN Law deliberations, the representatives of certain IPAs put forth their concerns on this change in the VAT treatment. According to them, this would lead to, among others, decreased competitiveness in the international market, increased imports instead of purchasing from local suppliers, and in the worst-case scenario, closure of registered businesses, thus fueling unemployment.
I think the notion that local purchases of IPA-registered firms are no longer entitled to VAT zero-rating also stems from the President’s veto of zero-rating provisions that the legislators added specifically granting VAT zero-rating to such transactions. From a personal perspective, however, I believe that there is sound legal basis to continue to subject the local purchases of registered entities under special laws (such as Republic Act No. 7916 or the PEZA Law, except those whose incentives are granted under EO No. 226 or those registered with the Board of Investments) to a 0% VAT rate. While the TRAIN Law and RR No. 9-2021 only removed the VAT zero-rating on certain indirect exports and those falling under “other special laws,” it did not entirely remove all sale of goods or services to persons or entities with exemptions provided under special laws which still appears in the other sections of the law and the VAT regulations.
This can be confirmed from the paragraph after the discussion on “export sales” [Section 4.106-5(b) of RR No. 9-2021] and the second enumeration on services [Section 4.108-5(b)(2) of RR No. 9-2021], which are both still subject to 0% VAT. These follow the same provisions on 0% VAT rate which likewise remain in the amended Sections 106(A)(2)(b) and 108(B)(3) of the Tax Code. Since some local suppliers are now insisting on passing on VAT to these registered entities because of confusion, or perhaps, for prudence’s sake, affected registered enterprises may try appealing to the BIR to clarify the matter (although I understand that PEZA already submitted an appeal to the Department of Finance) or explore other legal remedies.
With the CREATE Act codifying the incentives law in the Tax Code, incentives granted by IPAs after the sunset period will now fall under the Tax Code and not under special laws. The question will then be — will IPA registrants continue to enjoy incentives beyond the sunset period?
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Samantha Joy H. Oreta is a senior manager with the Tax Services group of Isla Lipana & Co., the Philippine member firm of the PwC global network.
Duterte political capital to help anointed bet
By Kyle Aristophere T. Atienza, Reporter
PRESIDENT Rodrigo R. Duterte would probably remain popular during his last year in office, which could boost his political capital and ensure the victory of his chosen presidential bet at next year’s elections, political analysts said.
The tough-talking leader, who is barred by law from running for reelection, would try to do his best before he steps down because this could benefit his daughter, Davao City Mayor Sara Duterte-Carpio, whose supporters are urging her to run for President, they added.
“In the Philippines, good or bad deeds are transferable to kin,” political strategist Gerardo Eusebio said in a Viber message.
This could spell bad for the opposition, which up to now does not have a strong presidential candidate.
“The opposition does not have a popular or even common candidate,” said Jay Bautista, managing director at market research firm Kantar Media Philippines. “Pit that against the Duterte image and machinery, it will be a difficult road for the opposition.”
He cited Mr. Duterte’s “almost cult-like following” particularly among the masses, which means he has a solid base. These supporters “would not fault him directly for the problems and challenges facing the country,” he said in a Viber message on Wednesday.
“For this segment of the population, President Duterte is doing his best.”
Still, the tough-talking leader’s 16 million voters in 2016 had probably been eroded after failing their expectations, Mr. Bautista said.
Mr. Duterte’s approval rating would remain high as long as he doesn’t slip badly, Mr. Eusebio said.
“Unless there are proven allegations of corruption or gross incompetence against him, his image will remain positive among the masses,” he said. “Without these, he will just glide smoothly in the next 10 months to election day.”
Mr. Duterte on Monday night floated his potential vice presidential bid in 2022, saying it was not “a bad idea.” His spokesman, Herminio L. Roque, Jr., said his unfulfilled business, such as his campaigns against illegal drugs and corruption, might prompt him to run for the post.
Mr. Duterte’s approval rating slipped five points to 65% in March from a quarter earlier, according to a poll by Publicus Asia, Inc. His trust rating also fell by 7 points to 55%.
The President might lose his popularity if he fails to improve people’s lives amid a coronavirus pandemic, Mr. Eusebio said.
Mr. Duterte should press Congress to pass priority measures that are part of the government’s pandemic response, said Michael Henry Ll. Yusingco, a lawyer and research fellow at the Ateneo de Manila University Policy Center.
“If he can put his much vaunted ‘political will’ behind these measures, then his last year in office can very well define his legacy,” he said. “If he remains as is, visibly lethargic and just content with jousting with his critics, then his legacy may not be as impressive as his supporters would want it to be.”
Mr. Duterte might become a lame duck President as most lawmakers and some Cabinet officials prioritize their interests, said Dennis C. Coronacion, who heads the University of Santo Tomas Department of Political Science.
“He has already defined his legacy in the past five years,” he said. “He will be known in history as the tough-talking President who brought us close to China. His last year in office is about protecting his legacy.”
The government would likely fast-track infrastructure projects at the tail end of Mr. Duterte’s six-year term, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.
“More government projects nationwide, especially infrastructure projects would become the target for completion before the May 2022 elections, especially those covered by the election ban,” he said in a Viber message.
John Paolo R. Rivera, an economist at the Asian Institute of Management, said Mr. Duterte should ensure that the 2022 national budget is passed on time so his successor could start on a clean slate in jumpstarting the economy.
He should also lay down the policies to ensure the proper transition of projects and avoid wasting resources, he said in a Viber message.
“The outgoing administration should be conscious of facilitating a smooth transition and transfer of power so the economy can once and for all recover,” Mr. Rivera said. “The economy is always impacted by political risks. Mitigating politics can advance the economy.”