From broker notes to memes: how the stock market went viral

January 29, 2021 | 4:56 pm

Stockholm – “Stocks only go up”, concludes a video montage of televangelists, dancing Ghanaian pallbearers, and Donald Trump’s personal pastor repeatedly saying she can hear the “sound of victory”.

The tongue-in-cheek meme, designed to characterise bullish stock market sentiment when news of Pfizer BioNTech’s successful COVID-19 vaccine broke, has been viewed more than 1 million times on Instagram and Twitter.

Far more wide-reaching than broker research notes, memes have become central to a new form of financial literacy – or illiteracy, depending on your viewpoint – behind the frenzied boom in retail trading of cryptocurrencies or stocks on platforms like Robinhood.

Using images from pop culture overlaid with market commentary, they’re being praised – and vilified – for making trading entertaining and game-like.

“So many more people are getting into the stock market through Robinhood and bitcoin, so everyone is now in on the jokes about flipping your stimulus money or Fed intervention sending stocks up,” said Lit, the moniker of the man behind Litquidity, which produced the “sound of victory” meme.

He set Litquidity up four years ago, using memes to entertain young finance workers, but its Instagram following – the “litfam” – has doubled to around half a million since last March.

Lit, who works in finance and prefers not to go by his real name, is now making money from his sideline, attracting sponsorship from companies eager to reach a young audience with disposable income.

Litquidity’s recent 30 under 30 list of young people in finance – playing on the more established Forbes magazine’s annual ranking – was sponsored by trading apps and an eye wear brand. Lit has also posted a meme in partnership with payments app Revolut.

AUDIENCE REACH

For meme sponsors the potential audience was already huge but it has grown even further in the past few days.

Website Reddit’s wallstreetbets page, which this week picked the pockets of seasoned short sellers by encouraging a buying frenzy on GameStop, added two million followers in the last 48 hours.

On video sharing app TikTok, where 85% of users are under 35, there have been 5 billion and 1.4 billion views for #sidehustle and #finance, respectively.

Irish day trader Damian McVeigh said that social media content and memes helped pique his interest in finance.

“I always thought it was dry, but internet content livens it up. There’s less of a barrier because of it,” McVeigh – a quantity surveyor by trade – said.

This time last year McVeigh had limited interest in financial markets, but, after getting bored during lockdown, he now has a portfolio worth a quarter of his annual salary and a YouTube channel where he blogs about companies.

Trading app eToro grew its user base by around a third in 2020, with $1.5 billion invested on the platform, a 400% increase from 2019 as stuck-at-home punters splashed their cash.

However, critics say turning finance into entertainment can create a carnival atmosphere which promotes risk-taking by inexperienced traders.

“Memes or videos of people waving dollars around are a similar culture expression of joy as risk,” said Dr Cesar Albarran-Torres, a media lecturer at Swinburne University of Technology in Australia.

Albarran-Torres said internet chatter encourages uninitiated people to gamble on the stock market, adding: “It makes money into a video game.”

However, many social media users see the retail traders as worthy underdogs in a David v Goliath battle against established hedge funds who are used to getting their own way.

Twitter personality Liz Franczak tweeted: “the free market is when you stop reddit from trading meme options,” in reference to trading halts on stocks popular with Reddit’s wallstreetbets.

Top behavioural economist Professor Colin Camerer told Reuters that the three million strong Reddit traders “are all in a stadium cheering together”.

“Social media makes it possible to coordinate these mass actions,” Camerer said, adding that it will be interesting to see how the dynamics of this new financial phenomenon play out when some individuals in the group want to sell.

Regulation is another potential threat.

Lit, however, distances himself from accounts which recommend buying individual stocks. He says his role as meme creator is more akin to an observer or satirist.

“I like to caution at times when things seem very exuberant, to signal that this might not end well,” he added. — Reuters

Schools in low-income countries are embracing ‘low-tech’ solutions amid the pandemic

January 29, 2021 | 4:04 pm

“Low-tech” interventions such as paper-based activities and radio programs are helping educational institutions in low-income countries educate those who need it the most amid the pandemic.

At the Central Visayan Institute and Foundation (CVIF) in Bohol, the chronic lack of qualified teachers, textbooks, and equipment is bypassed by learning activity sheets prepared by subject teachers.

The analog solution also dispenses with the need for Internet connectivity in a community where only 10% of students have access to data services, which is “very unstable,” according to Marivic Bernido, who runs the school with her husband and fellow physicist, Christopher Bernido.

The sheets are distributed weekly to students, who send text messages to teachers through SMS (short message service) or Viber if they have questions. Teachers check submitted papers and provide written feedback on the sheets, which are returned to the students.

“Some basic, low-tech interventions—such as learning sheets and radio—are working. It’s interesting that in 2021, we’re relying on these things,” said Francis L. Larios, Phinma Education’s chief learning officer.

The scenario is a familiar one for participants at the first Education@theMargins conference, which gathered industry experts from Jordan, South Africa, Brazil, and Australia.

“In the Philippines, there are three crises: the virus, the quality of education, and the economy. … “Somehow, they have to respond to all of those all at once. This probably applies to other low-income countries,” said Ken Vine, principal research adviser of SiMERR National Research Centre at the University of New England, which works with rural communities in Australia to improve educational outcomes.

Like Bohol’s CVIF, Bridge International Academies, which creates community school programs for children in underserved communities such as Lagos and Uganda, has tied up with radio and TV channels to decrease reliance on mobile phones. It also provides support to parents by sending information through SMS to enable learning to happen at home. Parents are likewise able to send information back to teachers via SMS.

“We do not aim for four or six hours of education per child,” said Sujatha Muthayya, vice-president for policy and partnerships at Bridge International Academies. “It’s an hour for instruction and an hour of practice per child, because we know a lot are sharing devices. This is minimal, but let’s be consistent.”

Students in Brazil’s Anima Educacao, a secondary and tertiary educational group, are better off in comparison: apart from lending students Chromebooks and upgrading Zoom and Skype accounts, the organization also provides courses that boost mental health like meditation, aikido, and yoga.

“We try to create a psychologically safe environment,” said Rafael Ávila, director of innovation and trends in education at Anima Educacao. “We offer psychological assistance to students because they started to become depressed. The university is a social part of their lives.”

Mr. Ávila also noted the similarities between the Philippines and Brazil. “We have public universities that are really good, but only the rich can [get] spots here,” he said. “The others go to private universities. They have to pay, but these are poor kids. We’re trying to change the situation. It’s not good for the country. As a private sector, we are trying to do what the government is supposed to do.”

Education is a whole-of-society responsibility, and requires a system-wide approach and investment at a high level, said SiMERR’s Mr. Vine. “We shouldn’t think about it as a government problem alone,” he said.

Phinma Education’s Mr. Larios added: “Whether it’s a student in a low-income country like Brazil, South Africa, or Jordan, the dreams look the same. The difficulties also seem the same.”

The idea of a global alliance for education was raised by panelists to “vaccinate the world from the disease of poor quality learning.” Such an alliance, however, is contingent on multi-partisan collaboration and an understanding that—while dreams and difficulties look the same, as Mr. Larios said—cultural differences have to be taken into account.

“There are differences within countries. Different countries are going to have different solutions,” said John Pegg, director of SiMERR National Research Centre at the University of New England in Australia. It is important for countries, he added, to share methods that work and methods that don’t work, so that others may benefit from hindsight. “We have to look with culturally sensitive eyes.” — Patricia B. Mirasol

Nearly 99% of SSS benefit disbursements coursed through e-channels

January 29, 2021 | 3:44 pm

The Social Security System (SSS) has expanded the use of electronic disbursement channels to release benefits to its members.

SSS said from January to November 2020, about P168.55 billion in social security and employees’ compensation benefits were disbursed using banks, e-wallets, and remittance transfer companies/cash payout outlets (RTCs/CPOs). It accounts for 98.6% of the total disbursements worth P170.97 billion to 3.68 million members and beneficiaries during the period.

Retirement, Disability, Unemployment, Sickness and Maternity Benefits of individual members, as well as Funeral and Death Benefits of beneficiaries who are SSS members themselves, are now coursed through Unified Multi-Purpose Identification card enrolled as an ATM card (UMID-ATM), UnionBank of the Philippines (UBP) Quick Card, Philippine Electronic Fund Transfer System and Operations Network (PESONet) participating banks, e-wallets, and RTCs/CPOs. Non-member claimants of Funeral and Death Benefits can opt to receive the benefits through PESONet participating banks, e-wallets, and RTCs/CPOs.

Pension loans and short-term member loans for Salary, Calamity, and Emergency advances are released through UMID-ATMs and UBP Quick Cards. Member loans may also be released through PESONet participating banks.

Employer’s Sickness and Maternity Benefit Reimbursements are also paid through PESONet participating banks.

SSS issued circulars last year to implement the mandatory checkless disbursements of benefits and loans. It includes pensioners who are receiving their monthly pensions through checks and non-PESONet participating banks who are given until 31 March 2021 to change their disbursement accounts into PESONet participating banks, e-wallets, or RTCs/CPOs.

From January to November 2020, the number of benefit disbursements through checks decreased by 39.7 percent to 264,208 from 437,947 in the same period in 2019.

While SSS transitions to these new disbursement methods, there are still benefit releases such as pensions paid to a confined member or claimant in an institution such as penitentiary/correctional/rehabilitation that uses the conventional mode.

“Our goal in this initiative is to provide our members, pensioners, beneficiaries, and covered employers with safer, faster, and more convenient means of receiving benefits and loans, as we comply with the Ease of Doing Business Act,” SSS President and CEO Aurora C. Ignacio said.

Formally known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 (Republic Act 11032), the Ease of Doing Business law seeks to increase efficiency by reducing processing time, eliminating red tape, and curbing corrupt bureaucratic practices.

Upon issuing the said circulars, the SSS advised members, pensioners, beneficiaries, and covered employers to register their PESONet participating bank or e-wallet account or mobile number for disbursements through RTCs/CPOs with the SSS if they still have not.

Disbursement account registration and uploading of proof of account can be made through the Disbursement Account Enrollment Module (DAEM), previously known as Bank Enrollment Module, listed under the E-Services tab of the My.SSS web portal in the SSS website (www.sss.gov.ph).

“With the social distancing and health protocols issued to stem the spread of Covid-19, the importance of digital technologies has been redefined. We appreciate our covered employers, and members, pensioners, and their beneficiaries’ who supported our ongoing digital transformation. We stay committed to continuously look for ways to bring our services closer to you,” Ignacio said.

For more information, follow the SSS on Facebook at “Philippine Social Security System,” Instagram at “mysssph,” Twitter at “PHLSSS,” or join the SSS Viber Community at “MYSSSPH Updates.”

Meralco powers Malabon City’s new COVID-19 facility

January 29, 2021 | 1:14 pm

In support of the government and private sector’s fight against COVID 19, Meralco has energized the new Department of Public Works and Highways (DPWH)-initiated treatment center located along C4 Road, Barangay Tañong, Malabon City. The energization of this project involved the installation of a new metering facility, four (4) concrete poles, and two (2) 75-kVA Distribution transformers; reconductoring of three (3) spans of bare conductor to covered overhead conductors; and relocation of an elevated metering center facility including an existing distribution transformer. This treatment center is one of the many vital COVID 19 facilities and isolation centers in the Meralco franchise area that are given the highest priority in terms of providing a safe, adequate, and reliable supply of electricity in line with the distribution utility’s thrust of assisting the government during the pandemic. To date, Meralco has energized more than 90 vital facilities which include government agencies, public and private hospitals, testing laboratories, quarantine facilities, and treatment centers.

The rapid rise of the retail investor

January 29, 2021 | 8:30 am

The global pandemic was an event no one was prepared for, leaving millions of deaths, unemployment, and economic meltdown. With millions forced to stay at home, the internet became a window for people to connect with their loved ones, conduct business, and bring back a sense of normalcy in their lives.

Facebook, Instagram, TikTok – the biggest sources of pandemic entertainment and trends. Various forms of social media are available for everyone to keep up with the latest frenzy. And the latest source of fascination? The Philippine Stock Market.

In 2019, the Philippine Stock Exchange reported a stunning 12.7 percent growth in total stock market accounts, with online investors leading the way. This boom in retail participation was mainly a result of convenience and accessibility of online investment platforms and investment learning programs. Then the pandemic suddenly accelerated the Filipinos’ adoption of technology, especially when it came to investing.

For instance, First Metro Securities Brokerage Corporation (FirstMetroSec), Metrobank Group’s stock brokerage arm, experienced a skyrocketing number of account applications at the advent of lockdowns. The ease of the online account opening process enabled any banked Filipinos to now have his/her own trading account. Many prospective investors also became keen to start investing, wisely following the old adage repeated by many of the industry’s legendary investors: “Buy when everyone is fearful, and sell when everyone is greedy”.

Thanks to education-centric stock brokerage firms like FirstMetroSec, more and more Filipinos are now less intimidated and more eager to learn the dynamics and nuances of the investing world. Learning programs that used to gather only 50 attendees pre-COVID are now generating 500or more online viewers. New investors are clamoring to learn more, with demand for intermediate and advanced level lectures reaching peak numbers.

This sudden influx of new investors contributed to the Philippine Stock Exchange Composite Index, or the PSEi, recovering relatively in the wake of a pandemic that caused a technical recession. To date, the PSEi has gone up by 70 percent after crashing to a low of 4,040 points back in March of 2020. Aside from clearly depicting the trust and belief of investors in the strength of the Philippine economy, the new money that came in helped hasten the pace of recovery.

Thus, in a world previously ruled by giants, the individual investors are making their presence known, proving that they are a critical force in the market. Both local and foreign institutional trading volume, which used to dominate the exchange, are now being challenged by retail.

With the aid of online trading, the rapid rise of the Filipino retail investor will continue. Retail investors are finally participating actively in the capital markets. There is so much more improvement needed to further expand investment and growth opportunities while mitigating risks — education, technology, investment products. But the trend has been established. The playing field has been leveled. Adversity has inspired opportunity. The Filipino retail investor is now a real force to reckon with.

Philippines’ remarkable IPOs

January 29, 2021 | 8:05 am

In the previous years, several initial public offerings (IPOs) have flourished in the local bourse. Even amid apparent volatility in the market — especially with the current pandemic impacting the economy on a large scale — there are companies that have gone public as a means of achieving their goals such as expansion, acquisitions, and innovation.

The following are some of the notable IPOs that the Philippine Stock Exchange (PSE) has witnessed in the past five years.

MerryMart
Last year, four IPOs have emerged in spite of the crisis that the pandemic brought. On June 15, grocery operator MerryMart Consumer Corp. (PSE: MM), owned by Edgar “Injap” J. Sia, became the first company to go public in that challenging year.

Its P1.6-billion IPO offered 1.59 billion shares to the public at P1 each, and it closed its maiden trading session at P1.50 per share. PNB Capital and Investment Corp. (PNB Capital) served as the lead underwriter, issue manager, and bookrunner for the offering.

As BusinessWorld reported last year, the grocery operator plans to put up 1,200 branches across the country by 2030, where the first hundred branches would be open as early as the fourth quarter of 2021.

APVI
MerryMart’s IPO was followed by Altus Property Ventures, Inc. (PSE: APVI), which made its debut in the stock market on June 26 by way of introduction, which means it did not immediately offer its shares publicly.

The IPO of the real estate company that was a former unit of Robinsons Land Corp. (RLC) was initially priced at P10.10 per share. Shares went up to as high as P240 per share before closing at P18.50 apiece on its trading debut. First Metro Investment Corp. (First Metro) was tapped as the financial adviser for this offering.

AREIT, Inc.
Last August, Ayala Land, Inc.’s AREIT, Inc. (PSE: AREIT) launched the country’s first real estate investment trust (REIT) offering, with an amount of P12.33 billion. In spite of its tumble on its first trading day on Aug. 13, at P24.90 apiece from its offer price of P27, it saw a twice oversubscription by the time it ended the offer period on Aug. 3.

BPI Capital Corp. (BPI Capital) served as the sole global coordinator and joint bookrunner for the offering. UBS AG Singapore Branch was sole international bookrunner, while BPI Capital, PNB Capital, and SB Capital Investment Corp. served as the domestic underwriters.

AREIT, Inc., whose portfolio consists of 24-storey commercial building Solaris One, mixed-use development Ayala North Exchange, and five-storey commercial office McKinley Exchange, intends to use the proceeds from the offering to buy Teleperformance Cebu and to invest in other real estate properties in Metro Manila and key regions.

Converge ICT
Amid intensified action among telcos to meet the increasing demand for connectivity, fiber Internet provider Converge ICT Solutions, Inc. (Converge ICT) kicked off its IPO last Oct. 26. The largest offering to date, Converge ICT’s IPO amounted to P29.08 billion and offered up to 1.51 billion common shares at P16.80 each. This exceeds the P28.11 billion Robinsons Retail Holdings, Inc. raised in 2013.

The IPO had BPI Capital as the sole local coordinator, joint local underwriter, and joint bookrunner, while BDO Capital & Investment Corp. (BDO Capital) was tapped as the joint local underwriter and joint bookrunner. First Metro and PNB Capital are among local participating underwriters.

Converge ICT (PSE: CNVRG), owned by Pampanga-based businessman Dennis Anthony H. Uy, intends to use about 90% of the offer’s net proceeds to support capital expenditures as it expands nationwide. Its services currently cover the Luzon region, especially Metro Manila.

Fruitas
Year 2019 was noted for the entry of fruit and beverage kiosk operator Fruitas Holdings, Inc. (PSE: FRUIT). On its debut, Fruitas’ shares opened at P1.82 each up 8% from its IPO price of P1.68 each, and it reached as high as P2.45 before closing at P1.71 apiece. The company offered 533,660,000 primary common shares with an over-allotment option of up to 68,340,000 outstanding common shares.

BDO Capital and First Metro were tapped as joint issue managers, bookrunners, and lead underwriters for the offering.

Fruitas aims to generate P1.2 billion in the IPO, which will fund its expansion plans, acquisitions, introduction of new concepts, and debt repayment. Since the IPO kicked off, Fruitas has aimed to open 150 to 250 stores per year in the next three years.

DMWAI
D.M. Wenceslao & Associates, Inc. (DMWAI) was among the companies that went public in 2018 amid volatility in the market. Under its P17.89-billion IPO, DMWAI (PSE: DMW) plans to sell 679.17 million shares at P22.90 apiece, with an over-allotment option of up to 101.88 million shares.

BPI Capital and Maybank King Eng Securities Pte. Ltd. were tapped as joint global coordinators and bookrunners for the offer, with the latter also acting as international lead manager and underwriter.

Net proceeds of DMWAI’s issuance were intended to fund its projects in the 204-hectare Aseana City in Parañaque City.

Wilcon Depot
Home improvement and construction supplies retailer Wilcon Depot, Inc. (PSE: WLCON) debuted on the equities market in 2017 with a P7.92-billion IPO, comprising of almost 1.4 billion common shares priced at P5.68 apiece.

The retailer hired First Metro as issue manager and bookrunner, as well as BDO Capital as joint lead underwriter for the maiden share sale.

At the maximum price, Wilcon has expected to net P7.58 billion from the IPO. It has intended to disburse P6.11 billion for store network expansion until 2021; P972.4 million for debt repayment until 2018; and P500 million for general corporate purposes until 2018.

Cemex
Cemex Holdings Philippines, Inc. (PSE: CHP), the Philippine unit of Mexican cement and construction materials company Cemex S.A.B. de C.V., was the biggest IPO in 2016, prior to Converge ICT. The IPO, which saw BDO Capital as the lead underwriter for the offering, amounted to P25.1 billion and priced at P10.75 per share.

The net proceeds from the IPO were intended to settle short-term debts, allowing the company to finance its $300-million expansion plan for its Solid Plant in Antipolo City, Rizal using internally generated funds. — Adrian Paul B. Conoza

The complete beginner’s guide to IPOs

January 29, 2021 | 8:00 am

By Bjorn Biel M. Beltran, Special Features Writer

The Philippine Stock Exchange recently announced its goal of having more companies to go public this year. President and Chief Executive Officer Ramon S. Monzon said that the stock exchange has a target for at least three companies and four real estate investment trusts to hold initial public offerings (IPOs) in 2021, which caused no small amount of commotion in the investment community.

But what exactly are IPOs and why are they such a big deal? We have gathered insights from top experts in the investment community to answer these questions.

What is an IPO? Why are they a big deal?

“An IPO is the company’s maiden equity issue of its shares to the public. This occurs when a privately held company sells its shares to the public equity market. It’s transformational for the issuer, from the wealth it creates for shareholders, to the way the company is governed and their ability to fund growth from the equity markets,” First Metro Investment Corporation’s Executive Vice-President and Head of Investment Banking Group Daniel D. Camacho said.

This means that a company is selling either primary or secondary shares or a combination of both to the general public to raise funds for its goals. Primary shares are the offer of new shares, the sale of which would result in proceeds which may be used by the company for its stated work program — capital expenditures, plans income-accretive endeavors, among others. Secondary shares involve the sale by existing, pre-IPO shareholders of their shares to the public.

First Metro Securities Brokerage Corporation President Gonzalo G. Ordoñez added that IPOs often signal a significant development in companies’ growth, and in many ways further legitimize businesses and allow organizations to reach wider audiences. For investors, IPOs mark the very first time the public is given the opportunity to invest in these companies.

“IPOs are considered a big deal in the financial markets because they usually happen only when a company is ready to expand and wishes to finance its rapid growth from the participation of public investors. Usually, a company must have first built up enough goodwill and trust from the investing public before they can even begin to consider taking their company public,” Mr. Ordoñez said.

How can a company go public?

Eduardo V. Francisco, president of BDO Capital, noted that there are multiple parties involved in an IPO, comprising of the issuer; the regulators (Securities and Exchange Commission or SEC and Philippine Stock Exchange or PSE); the underwriting syndicate and its legal counsel; transfer and escrow agents; the issuer’s financial advisory team; as well as the trading participants in the stock exchange.

There is a timeline that can reach up to three years before a company can go public, and this involves the due diligence, documentation, and regulatory approvals before the offer period and actual listing. Naturally, the process is not to be taken lightly, and it requires intense preparation on the part of the issuing company.

The regulatory requirements involved, Mr. Francisco said, range from corporate governance matters, such as the appointment of a compliance officer, to the issuance of reports and disclosures such as financial statements and administrative changes.

“As investment bankers, we are involved with the whole spectrum of activities leading to a company’s IPO. From day one, we assist the company in tailor-fitting the IPO structure based on what the company’s shareholders want and what the market is willing to accept. Sometimes, these two principles are so distinct from each other but it’s part of our job to help create a bespoke structure that is not just acceptable but is actually attractive to the shareholders and the equity capital market alike,” Mr. Camacho said.

“Once the basic structure has been prepared, regulatory filings and marketing activities are the next steps and, once regulatory approvals have been received, determining the price and shares to be offered to the public would be next. The culmination of all these activities would be the listing of the company on the PSE. All these activities can be completed anywhere from six months to over a year, depending on the preparedness of the issuer,” he added.

What are the benefits? Why go through all that trouble?

Mr. Camacho pointed out that the main and most compelling advantages for companies to go public would be the wealth creation generated by the activity and access provided in terms of tapping the equity capital market for funding.

Such funding can be utilized for profit-generating activities which can help spur growth for the business. Other advantages of an IPO include tax-efficiencies, specifically in terms of stock-transaction tax and estate planning, the liquidity provided to investors, the promotion of a more professional organization, and the enhanced public image that the listed company enjoys.

“All these benefits do not come free as a publicly-listed company has numerous responsibilities to its shareholders,” he said.

“Foremost is the sharing of ownership control with other shareholders. Also included is the sharing of financial gain since a listed company is expected to have a dividend policy in place. Other responsibilities or concerns that a potential IPO candidate may face include the time-consuming process of due diligence needed for the IPO, management of the company geared towards maximization of shareholder value, sharing of strategic information through corporate disclosures, costs of going public, and compliance with regulatory requirements,” he added.

Mr. Francisco noted that there is also prestige involved with going public.

“An IPO would raise the public profile of your company with customers, suppliers, investors, and the media, and your company may be covered in analyst reports or be included in an index,” he said.

He added, “There are around 850,000 plus corporations in the SEC but only around 260 listed companies in the PSE. So doing an IPO already puts one in a small unique group. There are also only 3 to 5 IPOs in a year so launching an IPO is a big deal for the Philippine capital market and the PSE.”

When is a company ready to go public?

As noted before, undergoing the process of public listing would give a business access to alternative funding and a broader investor base. It will also demand more from the business in general. Publicly listed companies are beholden to regulatory requirements and restrictions, and are required to be transparent and professional in all its ventures.

“Entrepreneurs should ask themselves if they are ready to adhere to stricter standards of disclosure and governance before fully committing to the exercise,” Mr. Camacho said.

Will receiving equity from the public help support your company’s growth plans? Will you be able to use the proceeds in activities which will help boost the company’s bottom line? Can this help pay off some debts and make your company healthier and more sustainable? Are you ready to professionalize your company and subject yourself to periodic reportorial submissions from the regulators? Are you willing to be more transparent and discuss more the results of operations, as well as plans and strategies with investors and analysts?

If the answer to all these questions is yes, then you are ready to take the next step.

“It takes a while to prepare — can take up to three years to prepare to reorganize the company, fix its audited numbers, hire professionals and directors, etc. There is a lot of housekeeping and requirements to professionalize the company. But if a company and its founders feel that it is time to bring the company to the next level, an IPO is a way to go,” Mr. Francisco added.

Are IPOs a good investment?

As of January 2021, the country’s sole stock exchange, the PSE, has 250 public companies listed, all tradeable through a variety of online and traditional stock brokerage firms, Mr. Ordoñez said.

Through such platforms, any investor can participate in an IPO. The PSE has even set up a variety of ways to reserve shares. One is through clients’ favored stock brokerage firms and another is through the PSE’s own Local Small Investor Program via its PSE Easy online platform.

“Despite many investors believing that IPOs are their first chance to buy companies when their shares of stock are still cheap (or in other words getting in on the ‘ground floor’ of the companies), making money is still never guaranteed,” Mr. Ordoñez warned.

“That is because the share price of the companies once listed may be volatile as buyers and sellers conduct trading activities, or perhaps the future prospects of the company may turn bleak. Increased volatility in the share price movement, and/or the changes in the future prospects of the company may scare off investors causing them to sell and drive down share prices. Though the IPO process is mostly the same for all companies that have undergone it, the outcome of each event varies,” he explained.

How to know if an IPO is worth investing in?
Mr. Ordoñez pointed out that the best companies to invest in are those with clear and achievable expansion plans. Such companies may have outlined their growth through the acquisition of new companies, opening new branches, entering or expanding new markets, researching and developing new products, buying new equipment, or just about any activity that will increase revenue and income.

“Increased revenue and income will translate to dividends and capital appreciation for investors. It is for these initiatives that the companies will use the IPO proceeds for. Companies such as these will make investing and holding the shares of stock, despite increased volatility, worth it,” he said.

As with all things in the investment market, however, it all comes with risks. Potential investors should do adequate research and conduct a careful study of the company. Reading the prospectus of the company and research reports are a good start, as is doing a careful survey of its management team and track record. Investors should know what they are buying, and have some estimation of the value of the shares.

But perhaps most important of all is the why, Mr. Ordoñez noted.

“What is the reason for participating in the IPO? Is it to invest in the company, to grow capital coinciding with the growth of the business? Or is it simply to trade the share price once listed, taking advantage of the high trading volume, buying low and selling high?” he said.

“Knowing the WHAT and the WHY will greatly help investors assess the investment, and properly weigh the risks and rewards of participating in the IPO. Every investor’s goal is to grow capital. Every trader’s goal is also to grow capital. Doing this exercise simply matches the goal with the investor or trader’s strategy, and the nature of the investment,” he added.

The decision whether to invest in the new IPOs that the PSE is eyeing depends on the investor. Mr. Francisco noted that despite the pandemic, the Philippine investment market has fared well, seeing its first real estate investment trust last year and also the largest IPO to date in Converge.

“There are several IPOs slated this year that could again set new records in size. The success of our IPOs last year and this year reflects well on the Philippines. Foreign investors will not invest in our IPOs if they do not believe in the Philippine story,” he said.

Philippine GDP shrinks by record 9.5% in 2020

January 29, 2021 | 12:34 am

Gross domestic product (GDP) contracted by 9.5% in 2020, the worst ever in Philippine history. — PHILIPPINE STAR/MICHAEL VARCAS

By Beatrice M. Laforga, Reporter

THE PHILIPPINE ECONOMY suffered its worst annual contraction on record in 2020, even after gross domestic product (GDP) shrank by a slower pace in the fourth quarter, the statistics agency said on Thursday.

Preliminary Philippine Statistics Authority (PSA) data showed the country’s GDP contracted by 8.3% in the fourth quarter, a reversal of the 6.7% growth in the fourth quarter of 2019. However, this was better than the revised -11.4% in the third quarter and the record -16.9% in the second quarter.

For the full year, GDP plunged 9.5% — the steepest economic contraction in Philippine history, according to the PSA which began collecting annual data in 1947.

This was also the Philippines’ first economic contraction in more than two decades or since the -0.5% seen in 1998 amid the Asian financial crisis. It also exceeded the -7% in 1984 and -6.9% in 1985, near the end of the Marcos regime.

Last year’s full-year GDP hit the low end of the 8.5-9.5% decline projected by the Development Budget Coordination Committee (DBCC), and matched the median estimate of the BusinessWorld poll.

“The year 2020 will be remembered as the most difficult year in our lives. The road ahead remains challenging but there is now light at the end of the tunnel,” Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said in a briefing on Thursday.

The prolonged lockdown, considered one of the strictest in the world, was implemented by the government last year to curb the spread of the coronavirus disease 2019 (COVID-19) but it came at a “huge cost” to the economy, he said.

Mr. Chua estimated quarantine restrictions cut household spending by P801 billion or an average of P2.2 billion a day in 2020.

“The fall in consumption translates into a total income loss of around P1.04 trillion in 2020 or an average of around P2.8 billion per day. On a per capita basis, annual family income declined by some P23,000 per worker, but this average masks wide differences across sectors and jobs. Some workers were hit much harder, while others lost their jobs completely,” he said.

Quarter on quarter, the economy grew by a seasonally adjusted 5.6% as more businesses reopened and more forms of public transportation were allowed to operate.

“However, it also shows the limits of economic recovery without any major relaxation of our quarantine policy,” said Mr. Chua.

Private consumption, which accounts for 70% of GDP, remained weak as it fell by 7.2% during the fourth quarter.

“Restrictions on the demand side, notably on the mobility of children, and hence families, prevented private consumption from making a stronger comeback,” Mr. Chua said.

President Rodrigo R. Duterte on Monday recalled an order allowing minors as young as 10 years old to go out, citing the risk of infection from a more contagious strain.

All major sectors shrank in the fourth quarter, led by industry (-9.9%), services (-8.4%), and agriculture (-2.5%).

“Nevertheless, we see green shoots of recovery. Investments had a slower contraction of -29.0% from -41.6% in the previous quarter. Both private and public constructions saw improvements, but inter-province travel restrictions have prevented many workers from going back to work,” Mr. Chua said.

Government spending also grew by 4.4% in the last three months of 2020, despite a high base in 2019, Mr. Chua noted.

Meanwhile, gross national income (GNI) — the sum of the nation’s GDP and net primary income (NPI) from the rest of the world — contracted by 12% during the October-December period from the 5.8% growth in the same period of 2019. For 2020, it slumped by 11.1% against 2019’s 5.2%.

REBOUND UNLIKELY IN 2021
While prospects for 2021 are “encouraging,” Mr. Chua said the economy will likely return to pre-pandemic level by mid-2022 with the further easing of quarantine restrictions, fast-tracking the vaccine rollout, and keeping COVID-19 infections “to the lowest level possible.”

The DBCC targets a 6.5-7.5% growth this year and expects the economy to expand further by 8-10% in 2022.

“Further opening the economy in 2021 will require a careful and calibrated approach given risks from new virus strains. However, prolonging the status quo of community quarantine and risk aversion is not an option,” Mr. Chua said. He suggested increasing public transport capacity, a gradual return to face-to-face schooling, and expanding the age group of people allowed to go outside, but with safeguards.

Mr. Chua said the P4.5-trillion spending plan, an increased budget for infrastructure projects, and the passage of key economic bills will help drive economic recovery.

“Despite the 9.5% contraction in the economy, we are not counting on authorities to whip out any form of stimulus to offset the downturn, both on the monetary or fiscal front,” said ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa, who estimated that the GDP will remain in the negative territory this quarter before rising by 13% in the second quarter due to 2020’s low base.

Mr. Mapa said household spending is likely to be muted this year as the jobless rate is likely to stay elevated. He noted private investments will not “make a significant comeback” while bank lending growth continues to be subdued.

“With only a modest pickup in government outlays expected in 2021 and with the trade balance forecast to remain in deficit, we do not see a stark pickup in economic activity with GDP growth powered mainly by base effects with the economy still lacking substantial momentum to drive growth back to the 6% level,” he added.

Capital Economics Economist Alex Holmes said the economy is likely to remain 10% smaller compared with its pre-pandemic level this year, as quarter-on-quarter growth is expected to slow down by 2-3%, with the year-on-year recovery mainly driven by base effects.

“Vaccination would be a game changer for the economy, allowing social distancing restrictions to be lifted and the resumption of tourist arrivals. But widespread inoculation doesn’t look likely until at least next year. The Philippines has so far not secured enough vaccines to cover its population and faces many logistical challenges, not least running a vaccination program across its roughly 2,000 inhabited islands,” he said in a note on Thursday.

Meanwhile, the Makati Business Club (MBC) expects the economic boost from a successful rollout of the vaccination program, will “safely trigger re-hiring and hiring for new jobs.”

Philippine economy suffers worst decline in 2020

January 29, 2021 | 12:33 am

Philippines slides 2 spots in Corruption Perceptions Index

January 29, 2021 | 12:33 am

By Jenina P. Ibañez, Reporter

THE PHILIPPINES slipped two spots in a global corruption index released on Thursday by Transparency International, which noted widespread corruption has weakened many countries’ response to the coronavirus disease 2019 (COVID-19) pandemic.

In the Corruption Perceptions Index (CPI) 2020, the Philippines was tied with Moldova at 115^th place out of 180 countries or territories.

The Philippines retained its score of 34 out of 100 in a scale that measures perceived levels of public sector corruption according to experts and businesspeople. The scale indicates 100 as “very clean” and 0 as “highly corrupt.”

“Efforts to control corruption in the Philippines appear mostly stagnant since 2012,” Transparency International said.

The Philippine government’s response to the pandemic was characterized by abusive enforcement and major violations on human rights and media freedom, Transparency International said.

Human rights organizations last year criticized the Philippine government for its treatment of Filipinos found violating public health regulations, forcing them to sit under the heat of the sun or locking them in dog cages.

Topping the 2020 Corruption Perceptions Index were Denmark and New Zealand, which both had 88 points. Finland, Switzerland, Singapore and Sweden ranked 3^rd, with the same score of 85.

Malaysia took the 57^th spot, while Indonesia ranked 102^nd spot. Thailand and Vietnam shared 104^th place.

The Philippine score is below the global average of 43.

Transparency International said the global response to the pandemic revealed “enormous” flaws in health and democratic institutions. Healthcare systems are burdened with bribery, embezzlement, overpricing, and favoritism.

“COVID-19 is not just a health and economic crisis. It is a corruption crisis. And one that we are currently failing to manage,” Delia Ferreira Rubio, chair of Transparency International, said in a statement.

Ms. Rubio noted that countries with higher levels of corruption “have been less able to meet the challenge.”

“Those in power or who hold government purse strings often serve their own interests instead of those most vulnerable.”

University of Santo Tomas political science professor Marlon M. Villarin said the Philippines’ drop in Corruption Perceptions Index was a result of the Duterte administration’s failure to be more transparent in responding to the pandemic.

“What is sensationalized in the eyes of the Filipino people is the blatant inability of the government to be more transparent particularly in how we contract our vaccine,” he said.

“I think the Duterte administration needs to improve on their transparency and accountability policy, particularly in government’s response to COVID-19 pandemic.”

Jocelyn M. Cabrera, political economy professor at the University of Asia and the Pacific, said there was a regression in the effort to reduce corruption in the government.

“We can associate this poor perception to the high level of uncertainty in government’s management of not only the fiscal and economic response to the COVID-19 pandemic, but also the inconsistency in implementing lockdown rules across regions and classes of society,” she said in a mobile message.

“People who are closer to the seats of power are given significant level of allowance in their lack of compliance to regulations, while ordinary folk — including unemployed jeepney drivers, workers, and even sick and infirm people wanting to access healthcare — are punished heftily and denied due process.”

She added that the rejection of the ABS-CBN franchise renewal application affects the assessment of investors on the government’s willingness to collaborate with civil society.

University of the Philippines political science professor Maria Ela L. Atienza said the pandemic prompted questions about the government’s medical procurement response as well as public healthcare spending and insurance.

“The current shortcomings in the pandemic response of the administration further exposes the lackluster efforts of the administration since it started in 2016. While anti-corruption programs are included in the priorities of the Duterte administration, it has not been very serious in its efforts,” she said in an e-mail.

European Chamber of Commerce of the Philippines President Nabil Francis said that transparency is crucial in making the country attractive for trade and investment needed during the public health and economic crisis.

“We call for continued efforts to promote and improve anti-corruption, transparency, and overall good governance measures,” he said in a mobile message.

Recent investigations into alleged corrupt activities in various government agencies have not yet been included in recent data compiled by Transparency International, but the organization nevertheless said that short-term anti-corruption campaigns are not likely to affect the score.

Transparency International recommended that oversight institutions be strengthened through sufficient resources and independence. It added that there must be transparent government contracting, guaranteed access to data on spending, and good conditions for the media and civil society to hold the government accountable.

“Sadly, these are areas that the administration has failed to promote,” Ms. Atienza said.

Infrastructure spending down in 2020

January 29, 2021 | 12:32 am

The aggressive infrastructure push is expected to help the economy recover faster this year. — *PHILIPPINE STAR/MIGUEL ANTONIO N. DE GUZMAN*

INFRASTRUCTURE SPENDING reached P681 billion in 2020, 22.7% lower than the previous year (P881.7 billion) but exceeded the downscaled P609-billion target by 12%, it said on Thursday.

State spending on infrastructure projects reached P276.1 billion in the fourth quarter, 27.89% smaller than the P382.9 billion spent during the same period in 2019, based on the data provided by Budget Assistant Secretary Rolando U. Toledo citing preliminary data.

In an online press conference, Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said infrastructure spending in the fourth quarter surpassed the P225.5 billion target by 22.4%.

Mr. Toledo said the data for the fourth quarter included the National Government’s total spending on infrastructure, plus the infrastructure components of transfers to local government units and subsidies or equities to government-owned and -controlled corporations (GOCCs).

The government slashed the budget for infrastructure projects last year, as it realigned funds for the pandemic response.

The target infrastructure investment fell to 4.5% of gross domestic product (GDP) in 2020, from the 5.4% ratio in 2019.

For this year, the budget for the sector is expected to reach P1.2 trillion, or equivalent to 5.9% of GDP.

“With a multiplier of 2.27, meaning every peso spent creates another P1.27, some 1.7 million jobs can be created to accelerate the recovery. Timely implementation of infrastructure projects will have the biggest impact on our recovery prospects,” said Mr. Chua during the press conference.

The aggressive infrastructure push is expected to help the economy recover faster. Economic managers are targeting a 6.5-7.5% growth this year.

Mr. Chua said the extended validity of the 2020 budget will also help boost spending.

Emilio S. Neri, Jr., the lead economist at the Bank of the Philippine Islands (BPI), noted the government’s underspending, especially in infrastructure, poses a downside risk to the 2021 rebound.

“With businesses still struggling, the lack of fiscal support and public construction may stall the recovery and dampen the demand for capital goods,” Mr. Neri said in a note to journalists on Thursday.

Think tank Oxford Economics said the state should further relax quarantine restrictions to allow infrastructure projects to resume, barring another big coronavirus outbreak.

Aside from limited resources, construction work was hampered by ongoing mobility and travel restrictions, as well as health safety protocols. — Beatrice M. Laforga

BSP looks to social media to gauge sentiment

January 29, 2021 | 12:31 am

THE CENTRAL BANK is considering analyzing internet articles and social media posts as a gauge of sentiment to boost policy making, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.

The BSP’s economic research team is studying the use of text analytics to monitor uncertainties in financial markets, he said in a live-streamed briefing on Thursday.

“Integrating these indicators into economic surveillance allows for a comparative study of economic activities before and during the pandemic. This also enables multilevel analysis across major cities in the country,” Mr. Diokno said.

Policy uncertainty indexes are being developed by tracking down the frequency and combination of words over time, BSP Department of Economic Research Senior Director Zeno R. Abenoja said.

“The technique can also be used to scrape information and formulate indices from social media accounts. We look at possible indices on sentiment, again, also to gauge as a proxy for activity, even as we await the release of standard macroeconomic and financial variables,” Mr. Abenoja said.

“We hope that this will provide useful information to supplement and complement existing macroeconomic indicators as well as to further improve the traditional statistics that we generate for the Philippine economy,” he added.

The monetary authority has adopted mobility data from Google and Apple, Inc. in sectoral and growth analysis, said Mr. Diokno, who returned from medical leave.

While mobility indicators showed economic activity is still below pre-pandemic levels, the BSP chief said it has been “gradually closer to baseline” after dropping from March to April due to the lockdown.

“Mobility data offer much potential in providing inputs for policy making. Indeed, the adoption of these high-frequency indicators was particularly useful under the New Economy,” Mr. Diokno said.

Meanwhile, Mr. Diokno said they have requested the National Economic and Development Authority and the Philippine Statistics Authority to generate monthly unemployment data rather than quarterly data.

“Starting February, we will now have [monthly] data which to me is crucial for a developing country like us,” Mr. Diokno said.

The governor has earlier said they will remain accommodative by keeping benchmark rates low in the next quarters until the economy is back to its growth level of about 6.5% to 7.5% and unemployment is down to a 5% range.

The jobless rate in October stood at 8.7%, representing 3.813 million unemployed Filipinos. This already eased from the 10% unemployment rate in July and the record 17.6% in April. — Bloomberg with L.W.T.Noble

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