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PSE proposes to exempt some funds from lock-up on shares

THE Philippine Stock Exchange (PSE) wants to exempt alternative investment funds (AIF) or their investment firms from lockup rules on shares, provided that they invested in a company prior to its initial public offering (IPO).

“The exchange proposes to exempt shares issued to AIFs or their investment arm within the 180-day period prior to the IPO at a price lower than the IPO from the application of the [existing] lockup rule,” the PSE said.

Current lockup rules state that shareholders who acquired shares 180 days before a company’s public offering or listing date are subjected to a lockup period of at least 365 days from their full payment. This, provided that the shares were transferred and fully paid for at a price lower than its IPO or listing price.

“The shares of AIFs or their investment arm arising from the exercise of their conversion or subscription rights may be subject to lockup and restrict them from making an IPO exit,” the local bourse explained.

Under the PSE’s proposal, shares issued to AIFs or their investment arm will be exempted from the lockup rule as long as the shares issued are “convertible securities, warrants, options or similar instruments” that have been transferred and fully paid for by the AIF or its investment arm at least 365 days before the offer (holding period).

The exception will apply if the AIF or its investment arm is entitled to convert holdings or subscribe to underlying shares during the entire holding period.

It will also be exempted if the AIF or its investment arm plans to sell the exempted shares during the company’s IPO.

Allowing AIFs and or their investment firm to conduct secondary offers during the IPO will make more shares available to IPO investors. This would also prevent a large-scale divestment and as well as a sharp decline in share price.

“Shares of the AIF or its investment arm, which are covered by this exemption but are not sold during the IPO, shall be subject to the 365-day lockup,” the PSE said.

The PSE explained that it wanted to revise the rules to allow AIFs or their investment arm to reinvest proceeds of the secondary offering in other firms that could be applying for listing, “potentially setting off a chain of listings and AIF-backed IPOs.”

“The inherent characteristic and purpose of an AIF or its investment arm is to exit when the investee company has already stabilized its operations or when it goes public,” the exchange said.

Comments and requests for clarification on the proposal will be accepted by the PSE via ogc@pse.com.ph until April 9. — Keren Concepcion G. Valmonte

It’s 2021, why is buying clothes online still so hard?

By Alex Webb and Andrea Felsted

IF the lockdowns of the past year introduced millions of people to the ease of online shopping, they also underlined some e-commerce pain points: clothes that don’t fit, returns that take ages to process, groceries that arrive nearly expired, and tiresome customer service. If online retailers want to retain customers when physical stores reopen, these are problems they’ll need to solve.

In the US alone, consumers spent $192 billion more online in 2020 than they did a year earlier. E-comm stocks have benefited accordingly: In the US, furniture seller Wayfair, Inc.’s shares jumped almost 10-fold over the past 12 months, online stylist Stitch Fix, Inc. is up 250%, and Farfetch Ltd. has gained almost 700%. Amazon.com, Inc. surged 62%. In the UK, Asos Plc. went up 340%.

These valuations will be hard to justify if there’s a big swing back to brick-and-mortar stores. Digital winners should be thinking about ways to improve their customers’ experiences — from using data to help people choose the right items to streamlining the process of returning and exchanging.

Clothing is perhaps the trickiest sector. A lot of clothes shopping had already migrated online before the pandemic. In the UK, for example, 18% of textile, clothing and footwear sales were made online in Jan. 2020, according to the country’s Office for National Statistics. Although this grew to 50% a year later, it doesn’t mean we’ll all continue clicking for clothes.

Online clothing sales last year rose far less than did food and beverages, consumer electronics, personal care, and home furnishings, according to eMarketer. That’s partly because people were leaving the house less often, but it also has to do with longstanding challenges in matching people to the correct sizes. This was less of an issue during lockdown (sweatpants always fit), but it will resurface as a pain point once people start needing new clothes.

Imagine you want to buy new sneakers. You order a $100 pair from Nike, Inc. but they’re too small, so you return them and order the next size up. That second pair, however, won’t be dispatched until the initial order arrives back at the warehouse. At this stage, it’s been a week since you first ordered the shoes, Nike now has $200 of your money and you still don’t have a pair that fits. For many people, this is far more cumbersome than heading to one’s local store, where you can try on three pairs in 10 minutes and head home with your new shoes.

Companies can learn from those that specialized in online selling before the pandemic. Take Stitch Fix. It sends an array of outfits to its customers based on their style preferences, and they only pay for what they decide to keep (so there’s no waiting around for refunds). The company takes scores of measurements of each item — for instance, it measures the size of men’s shirts in 15 different places — so they have an accurate sense of the fit. That lets them fine tune each article of clothing to the body measurements provided by customers. Returns then become primarily a question of taste rather than fit.

The surge in online shopping during the pandemic means that retailers now have a lot more data to tailor their offerings and respond to customer preferences, according to Oliver Wright, head of consultancy Accenture, Inc.’s consumer goods practice. In luxury goods, for example, that means knowing exactly what VIP customers might like and messaging them when their favorite designer has a new collection in.

Once stores open, online companies will have to think harder too about recreating the in-person shopping experience.

In luxury, part of the joy of visiting boutiques is the attentive service you receive. At a Chanel or Louis Vuitton store, for example, a salesperson caters to your every need, finding exactly the right product for you, taking payment seamlessly and wrapping your item sumptuously. It’s not uncommon to be served champagne and other treats when splashing out on bling.

However, Bain & Co. estimates 30% of the personal luxury goods market will be online by 2025. How high-end groups are adapting may be instructive for other retailers.

Some are going all in to replicate store-based services online, with virtual styling sessions and presenting jewelry and watches on Zoom. Luxury online retailer Matchesfashion tries to provide a personal touch by including a note in every package from the person who packed the order. Others are embracing a hybrid model: Burberry Group Plc has a “social store” in Shenzhen, which has an exclusive section that shoppers can access only if they’ve engaged enough with the brand in store, online or through WeChat.

Companies can also find creative ways to use physical space. Boutiques could be used for super-speedy delivery to online VIP customers, for example. Matchesfashion already has a townhouse in the lush London neighborhood of Mayfair, which it uses for personal shopping sessions and special events.

Online shopping boomed in 2020 when people were forced to buy everything from home. To maintain momentum, retailers will need to smooth out a few wrinkles so that customers stick around when it becomes a choice. — Bloomberg

AboitizPower aims for bigger share of renewables in 10-year target

ABOITIZ POWER Corp. said on Friday that it intends for renewables to have a bigger share in its power generation portfolio in the next 10 years, as the company shifts its focus towards environmental sustainability.

“We will pursue our international aspirations with focus on renewable energy in high-growth geographic markets. Ultimately, we aim to transition our portfolio base into an aspirational target of 50-50 Cleanergy and thermal capacities,” AboitizPower President and Chief Executive Officer Emmanuel V. Rubio told reporters in a virtual media briefing on Friday.

By the end of 2020, the firm’s Cleanergy portfolio had a share of 21%, while its thermal capacity accounted for 79%. Cleanergy is AboitizPower’s brand for clean and renewable energy (RE).

Mr. Rubio explained that the firm was committed to growing its Cleanergy portfolio to “support the government’s effort in building the country’s renewable energy market to address climate-related risks and to contribute to global sustainability goals.”

He said the firm reached 4,429 megawatts of net attributable capacity by the end of last year after adding the Bataan-based supercritical coal-fired plant GNPower Dinginin Ltd. Co. to its portfolio.

AboitizPower will continue to serve the energy needs of the country by growing its generation portfolio, Mr. Rubio said, but “with a significant shift” to environmental sustainability in the next decade.

The firm’s 10-year target also includes the doubling of its current fleet size, and the selective building of baseload capacities for either coal or gas options.

Mr. Rubio said that AboitizPower’s growth strategy will be underpinned by its digital transformation.

“We are excited about our ‘DigitalLeap’ flagship projects, which include, among others, remote plant operations, the convergence of information and operational technologies; next generation energy trading capabilities; advanced metering infrastructure and digital transformation of our HR processes,” he said.

Last month, AboitizPower said that it had turned to data science and artificial intelligence to accelerate the productivity of its business units in the banking, power, food, infrastructure and real estate segments.

AboitizPower is the listed holding company for the Aboitiz group’s investments in power generation, distribution, retail electricity and other related services. It has ownership interests in nine distribution utilities, which collectively supply electricity to franchise areas in 18 cities and municipalities across the country.

Shares of AboitizPower in the local bourse improved by 2.33% or 55 centavos to finish at P24.20 apiece on Friday. — Angelica Y. Yang

Big fashion companies lag behind on green targets

THE 15 largest listed fashion companies are lagging behind when it comes to meeting the social and environmental targets of the Paris climate agreement and UN Sustainable Development Goals, a new report by the Business of Fashion said on Monday.

The Business of Fashion, an online publication about the fashion industry, analyzed in its report publicly disclosed information from the five biggest companies by revenue in three categories — luxury, sportswear, and high street fashion, including Kering, Adidas, H&M and others.

The fashion industry is under increasing pressure from consumers and governments to clean up its act. Statistics cited by the World Economic Forum show that the industry is responsible for at least 4% of global greenhouse gas emissions.

The Business of Fashion’s report scored companies out of 100 in their progress towards meeting 16 targets which would align their performance with the UN Sustainable Development Goals and Paris Agreement on emissions, waste, workers’ rights, water, and materials.

It also ranked the companies on transparency, or how much information about a company’s practices was currently available.

Kering ranked top with 49 points and Under Armour ranked lowest at nine points. The average score for the companies was 36 points.

The report found the companies were more likely to disclose information on targets than concrete actions towards fulfilling them.

“Opaque working practices and fuzzy definitions of what constitutes ‘good’ progress complicate matters further, creating a woolly picture of where the industry is at and what steps are required for it to clean up its act,” the report said.

Kering and Nike performed best on transparency, while PVH Corp, Levi Strauss, and VF Corp. ranked highest on their efforts to reduce emissions.

Under Armour scored lowest on all rankings except workers’ rights, where LVMH ranked one point lower.

Scores for Hermes, LVMH, and Richemont averaged lower than high street fashion companies H&M, Indite, Gap and Levi Strauss across the six categories — emissions, waste, workers rights, materials, and transparency.

On average overall, the companies performed worst on waste and workers’ rights. Uniqlo owner Fast Retailing, Under Armour, and Richemont reported the lowest average score across the six targets.

Kering sustainability chief Marie-Claire Daveu said the company was proud of the recognition given by Business of Fashion. Asked about the fact that the report highlighted all companies were falling short of targets, she recognized that sustainability was a “long, never-ending journey.”

Adidas said it was working closely with its partners to achieve climate neutrality in its operations by 2025 and throughout its supply chains by 2050.

Other companies cited did not immediately respond to a request for comment.

A panel of 12 sustainability experts advised on the methodology for the Business of Fashion’s report. — Reuters

Malls shut non-essential shops in stricter lockdown

VARIOUS malls have announced that only essential shops will be operating as Metro Manila and its neighbouring provinces are placed under strict lockdown.

The government on Saturday announced that Metro Manila, Bulacan, Cavite, Laguna, and Rizal will be under enhanced community quarantine (ECQ), the strictest form of lockdown, from March 29 to April 4.

Under this lockdown, medical goods and services, agriculture, and delivery services may operate at full capacity, while essential goods companies, the media, and Department of Transportation-accredited work can operate at 50%.

Pharmacies, banks, telecommunications, real estate, energy, airlines, outsourcing, export, and machinery repair firms can operate with a skeleton crew.

Shopping center operators like Ayala Malls said that only supermarkets, pharmacies, banks, and restaurants with take out and delivery services will be operating as they comply with government requirements.

Vista Mall, Robinsons Malls, Megaworld Lifestyle Malls, and SM Supermalls added that convenience stores, hardware stores, and other essential shops will continue to run.

SM and Ayala Malls offered free parking for customers during the period.

“Please also be guided that only our restaurants at the mall perimeter areas will be open for delivery and takeout services,” Ayala Malls added.

Some malls included their store hours, with Vista Mall, SM Malls and Robinsons Malls saying that they will be open from 10 a.m. to 5 p.m. Robinsons said its supermarkets will be open from 7 a.m. to 6 p.m., while Vista Mall said its supermarkets and AllHome stores will be open from 8 a.m. to 5 p.m.

“Our commitment to ensuring the safety and well-being of our employees, partners, and patrons remain by adhering to the prescribed precautionary measures set by the Department of Health and LGUs (local government units),” Vista Mall said. — Jenina P. Ibañez

T-bill rates may decline

RATES of Treasury bills (T-bills) on offer on Monday will likely go down after Metro Manila and nearby areas were placed under the strictest restriction measures again for one week amid surging virus cases.

The Bureau of the Treasury (BTr) is set to raise P20 billion via the T-bills on Monday, broken down into P5 billion each in 91- and 182-day debt papers and P10 billion in 364-day securities.

A bond trader said the average yields for the short-term debt could drop by 10-15 basis points (bps), while Noel S. Reyes, first vice-president and chief investment officer at Security Bank Corp., expects rates to move sideways or slightly lower.

Kevin S. Palma, peso sovereign debt trader at Robinsons Bank Corp., said the one-week enhanced community quarantine (ECQ) enforced in the so-called “National Capital Region (NCR) Plus bubble” will drive demand for government securities and pull down rates.

“GS yields have bounced off their year-to-date highs taking cue from lower US Treasury yields week on week coupled with strong demand for safe assets locally after the reimposition of ECQ in the nation’s capital,” Mr. Palma said in a Viber message on Sunday.

NCR and Bulacan, Cavite, Laguna, and Rizal will be under strict lockdown starting Monday to April 4 (Sunday), coupled with an 11-hour curfew between 6 p.m. to 5 a.m.

The tighter restrictions mean movement will be limited to essentials only, with operations of most establishments reduced and mass gatherings banned.

President Rodrigo R. Duterte decided to reimpose the strictest lockdown classification after the recent spike in coronavirus disease 2019 (COVID-19) cases in the country. The Health department reported 9,595 new infections on Saturday, bringing the number of active cases to 118,122 so far.

Meanwhile, the yield on the benchmark 10-year US Treasuries inched up to 1.67% on Friday from 1.63% the day before. Week on week, the rate fell by 7 bps from 1.74% on March 19, based on the data posted on the US Treasury’s website.

The BTr made a full award of the T-bills offered last week from P64 billion in total bids, even as rates continued to climb across the board.

Broken down, the Treasury borrowed P5 billion as planned via the 91-day papers, with total tenders reaching P12.572 billion. The three-month papers yielded an average rate of 1.336%, up than the 1.232% fetched during the March 15 auction.

It also raised P5 billion as programmed from the 182-day instruments as the tenor attracted P22.638 billion in bids. The six-month papers’ average yield climbed to 1.718% from 1.527% previously.

Lastly, it made a full P10-billion award of the 364-day T-bills it offered from P28.798 billion in bids. The one-year securities were quoted at an average rate of 1.997%, up from the previous rate of 1.99%.

Security Bank’s Mr. Reyes said the yield curve has flattened in the past two days, which shows the rate of short tenors could ease further while longer tenors will see some recovery.

“This ECQ adds to slower economic recovery and increased uncertainty and favors government securities which have corrected higher in terms of yields in recent weeks,” Mr. Reyes said.

The BTr wants to raise P160 billion from the local bond market this month, broken down into P100 billion in T-bills to be offered weekly and P60 billion via fortnightly auctions of Treasury bonds.

The government is looking to borrow P3 trillion this year from domestic and external lenders to help fund its budget deficit seen to hit 8.9% of gross domestic product. — Beatrice M. Laforga

Spectacular: 5,000 pack Barcelona rock concert after COVID tests

BARCELONA — Music fans in Barcelona hugged, danced and sang along at a sold-out rock concert on Saturday night after taking rapid COVID-19 tests in a trial that could revive the live music industry in Spain and beyond.

Some 5,000 fans at the show for Spanish indie band Love of Lesbian had to wear masks but social distancing was not required in the Palau Sant Jordi arena.

“It was spectacular. We felt safe at all times. We were in the front row and it was something we’d missed a lot,” said publicist Salvador, 29, after the show. “We are very proud to have had the chance to take part in this. We hope it’ll be the first of many.”

In surreal scenes after a year of social distancing, fans danced up close to one another, but the sea of faces covered in masks showed that things were not quite back to normal.

Health controls at the entrance delayed the start of the concert, but could not dampen the celebratory spirit.

“Welcome to one of the most exciting concerts of our lives!” lead singer Santi Balmes told the crowd to a roar of cheers.

The government-approved concert served as a test for whether similar events will be able to start up again.

“It will be safer to be in the Palau Sant Jordi than walking down the street,” concert co-organizer Jordi Herreruela told Reuters earlier on Saturday.

Pre-concert testing at three Barcelona locations was carried out by 80 nurses wearing full personal protective equipment. Some people winced as nurses swabbed their noses.

By midday, three out of 2,400 people already screened had tested positive and one had come into contact with a positive case, said Dr. Josep Maria Libre, a doctor who oversaw the testing. They were unable to attend the concert and would get a refund.

Attendees received their antigen test results in 10 to 15 minutes via an app on their phones. The test and a mask were included in the ticket price.

“I believe today we have made one thing a reality which is to show the world that culture is safe,” said Ramon, a 49-year-old fan. — Reuters

PAL to airlift 1M doses of Sinovac vaccines from Beijing on Monday

FLAG CARRIER Philippine Airlines (PAL) will airlift one million doses of Sinovac vaccines from Beijing, China on Monday, its spokesperson announced.

“One million doses of Sinovac vaccines will be airlifted by PAL from Beijing to Manila on March 29 (tomorrow). We will be utilizing our A330 aircraft for this all-cargo charter undertaking,” PAL Spokesperson Cielo C. Villaluna said in a statement on Sunday.

PAL’s first all-cargo vaccine flight to Manila from Beijing was on March 24. It carried 400,000 doses of Sinovac vaccines.

“Philippine Airlines looks forward to ferrying once again to Manila these vital goods that will enable the Philippine government to continue the momentum of the country’s vaccination program,” PAL said.

The flag carrier also said it would continue to operate its domestic and international flights while awaiting new guidelines from the Department of Transportation regarding the government’s decision to reimpose the enhanced community quarantine (ECQ) policy in Metro Manila, Rizal, Bulacan, Cavite, and Laguna.

The ECQ would take effect on March 29 (12:01 a.m.) until April 4 (11:59 p.m.)

PAL said the Department of Transportation would be working on the official guidelines for the aviation sector.

On Saturday, budget carrier Cebu Pacific said it would continue to operate its domestic flights as scheduled until April 4.

“Only essential travel is allowed at this time,” the budget carrier said in an e-mailed statement.

Cebu Pacific announced on March 23 the cancelation of a total of 36 domestic flights from March 25 to April 4, including flights from Manila to Boracay, Lagazpi, Cauayan, Cebu, Pagadian, Ozamiz, Iloilo, Puerto Princesa, Kalibo, Naga, and Virac.

Flights were canceled because of the stricter guidelines in the NCR (National Capital Region) Plus, where only essential travels are allowed, until April 4, 2021.

On Friday, PAL said a total of 75 international flights from March 26 to April 5 were canceled, including flights from Dammam, Tokyo, Osaka, Singapore, Fukuoka, Dubai, and Hong Kong to Manila.

PAL said it needed “to comply with the continuing restrictions that limit the maximum number of passenger arrivals from international flights to 1,500 a day for all airlines combined into Manila until 8:00 a.m. of April 19.”

Both PAL and Cebu Pacific advised affected passengers to rebook their flights, request refunds or store the amount of their tickets in a travel fund. — Arjay L. Balinbin

No disruption seen to farm logistics during ECQ

AGRICULTURE Secretary William D. Dar said farming and food logistics are not expected to be disrupted by the one-week enhanced community quarantine (ECQ) declared over Metro Manila and nearby provinces.

Mr. Dar told BusinessWorld by mobile phone that there are no restrictions on the movements of food and agricultural inputs.

“Farming and fishing will continue. Let us just observe all health and quarantine protocols,” Mr. Dar said.

At a briefing Saturday, the President’s spokesman Herminio L. Roque, Jr. announced that President Rodrigo R. Duterte approved the recommendation of the Inter-Agency Task Force to place Metro Manila, Bulacan, Cavite, Laguna, and Rizal under the strictest form of quarantine between March 29 and April 4.

ECQ imposes a curfew between 6 p.m. and 5 a.m.

Mr. Roque said mass gatherings of more than 10 people will also be banned for the period, including religious gatherings for the Easter holiday.

Mr. Dar said food remains sufficient to supply the locked-down population.

He added that food producers and farmers transporting their products during the lockdown only need to present identification cards (IDs) and food passes that the government issued earlier in the pandemic.

“There is enough food. Food producers just need to present their IDs and food passes,” Mr. Dar said.

Last year, quarantines raised the level of food wastage in the farms because produce could not be brought to market. — Revin Mikhael D. Ochave

Chinese apps join celebs in backlash against Western fashion brands over Xinjiang

BEIJING —  China’s top ride-hailing app dropped Swedish fashion retailer H&M from its listings as Chinese celebrities stopped endorsing foreign labels in a growing uproar over Western accusations of forced labor in Xinjiang.

H&M faced a public backlash in China when social media users in the country circulated a statement the company made last year announcing it would no longer source cotton from Xinjiang after reports of the use of forced labor by Uighur Muslims.

Western governments and rights groups have accused authorities in the farwestern region of detaining and torturing Uighurs in camps, where some former inmates have said they were subject to ideological indoctrination.

Beijing denies the accusations and describes the camps in question as vocational training centers which help combat religious extremism.

Search results for H&M in the Didi Chuxing ride-hailing app for all of China’s major cities yielded no results on Friday. The company did not immediately respond to a request for comment.

The backlash against H&M caused Chinese e-commerce giant Alibaba Group Holding Ltd., shopping app Meituan and the maps app for search engine Baidu, Inc. to each remove the Swedish retailer from their listings.

Other overseas brands, including Burberry Group PLC, Nike, Inc., and Adidas AG have also faced an online blowback for making similar statements regarding their sourcing of cotton in Xinjiang.

The Human Rights section of H&M’s website hmgroup.com on Friday no longer carried the link to the 2020 statement on Xinjiang. The statement could still be accessed through the page’s direct address.

Statements expressing concern about or intolerance of forced labor in Xinjiang previously seen on the websites of Inditex, VF Corp., PVH and Abercrombie & Fitch were no longer available on Thursday.

Following enquiries by Reuters, VF Corp. pointed to a statement on a separate section of its website that said it did not source from Xinjiang. A Google cache showed the statement had been added in the last four days. VF did not respond to a question asking why the statement had been moved.

PVH, Inditex, and Abercrombie & Fitch did not respond to a request for comment.

“We have to stand by the brands keeping statements condemning slavery and shame those who are taking them down. This is a defining moment for these brands,” said French MEP Raphael Glucksmann, one of 10 EU (European Union) individuals sanctioned by China who has run social media campaigns calling on retailers to stand against forced labor in Xinjiang.

“Consumers in Europe need to place counter pressure on companies retracting their statements.”

CHINA CELEBS DROP BRANDS
A message on the Chinese Weibo account of the German fashion house Hugo Boss said on Thursday that it would “continue to purchase and support Xinjiang cotton.” Hugo Boss said on Friday that it was not an authorized post, and had been deleted accordingly.

In an e-mail to Reuters on Friday, company spokeswoman Carolin Westermann said that an undated English-language statement on its website stating that “so far, HUGO BOSS has not procured any goods originating in the Xinjiang region from direct suppliers” was its official position.

The cotton row has spilled over into the entertainment world, with Chinese celebrities dropping several foreign retail labels, including six US brands such as Nike.

New Balance, Under Armour, Tommy Hilfiger, and Converse, owned by Nike, have come under fire in China for statements saying they would not use Xinjiang cotton.

Other brands affected include Adidas, Puma, and Fast Retailing’s Uniqlo.

“I can confirm that Uniqlo’s Chinese brand ambassadors have terminated their contracts,” said a Fast Retailing spokesperson.

“Regarding cotton, we only source sustainable cotton and this has not changed.”

At least 27 Chinese movie stars and singers have declared in the past two days that they would stop cooperating with foreign brands.

Their decision was widely praised by Chinese internet users for being patriotic and trended high on the popular Twitter-like microblog Weibo.

“I have bought these kinds of products in the past and this situation doesn’t mean that I will now throw them away, destroy them or something like that,” said graduate Lucy Liu outside a Beijing shopping mall. “What I’ll do is just avoid buying them for the moment.”

Beyond the fashion and retail industry, China sanctioned British organizations and individuals on Friday over what it called “lies and disinformation” about Xinjiang, days after Britain imposed sanctions of its own.

“China is firmly determined to safeguard its national sovereignty, security and development interests, and warns the UK side not to go further down the wrong path,” the Chinese Foreign Ministry said. “Otherwise, China will resolutely make further reactions.”

The sanctions are the latest sign of deteriorating relations between London and Beijing, including China’s crackdown on dissent in the former British colony of Hong Kong, which had been guaranteed its freedoms when it returned to Chinese rule in 1997. — Reuters

BSP to remain on guard against external shocks

THE CENTRAL BANK will remain on guard against external shocks as the pandemic stretches on, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Friday.

“The BSP will continue to adopt policies that will strengthen the economy’s resilience to external shocks,” Mr. Diokno said in his special message at the 16th Philippine Dealing System Annual Awards Night held virtually on Friday evening.

“These will include maintaining a market-determined exchange rate, sustaining a comfortable level of reserves, and keeping the country’s external debt manageable,” he added.

The peso closed at P48.49 versus the dollar on Friday, gaining nine centavos from its P48.58 finish on Thursday. However, it has weakened by 46.7 centavos from its P48.023 close on Dec. 29, the last trading day of 2020.

Meanwhile, the gross international reserves stood at $109.082 billion as of end-February, rising by 23.7% from the year-ago level of $88.187 billion. The country’s dollar reserves stood at a record $109.8 billion at end-2020 and are expected to increase to $114 billion by end-2021.

Ample foreign exchange buffers protect the country from market volatility and ensure it is capable of paying its debts in the event of an economic downturn.

External debt increased 17.8% to $98.488 billion in 2020 from a year earlier and was the highest since at least 2012, based on central bank data. This was equivalent to 27.2% of the country’s gross domestic product, rising from the 22.2% ratio in 2019.

Mr. Diokno said they will also remain vigilant of emerging risks within the financial system.

“The BSP will intensify its monitoring and surveillance over its supervised institutions to ensure that they remain responsive to emerging risks and to promote the continued soundness, stability, resilience, and inclusivity of the banking system,” he said.

The central bank left its key interest rate unchanged at a record low on Thursday, as it supports an economy whose recovery is at risk from a renewed surge in coronavirus disease 2019 (COVID-19) infections.

The Monetary Board kept the overnight reverse repurchase rate at an all-time low of 2% for a third consecutive meeting. Rates for the overnight lending and deposit facilities were also maintained at 2.5% and 1.5%, respectively.

The central bank has kept policy settings steady since its December meeting, but Mr. Diokno has said they will respond accordingly when the need arises, especially if rising inflation produces second-round effects.

Headline inflation reached 4.7% in February, the highest since the 5.1% in December 2018.

The central bank chief also said on Wednesday that 2021 is “too early” for the BSP to unwind the easy policy it implemented at the height of the pandemic as the economy is still recovering. He said there is a need to maintain monetary policy accommodations for the BSP’s price and financial stability objectives.

The Financial Stability Board met on March 23 to review the monetary authorities’ response to the pandemic.

“Third-party institutions all agree that the unprecedented interventions of financial authorities softened the impact of COVID-19,” the central bank said in a statement on Friday.

“There are indications that the global economy is now recovering at a pace faster than initially anticipated, although financial stability authorities suggest that the socioeconomic dislocations are still significant,” it added. — L.W.T. Noble

Riding the roads of change

Ultimately, COVID-19 appears to be speeding up change in the auto industry

By Bjorn Biel M. Beltran, Special Features Writer

THE WORLD has received a shock like no other with the outbreak of the COVID-19 pandemic, and car makers all over have been feeling the pressure.

In fact, according to data from global management consulting firm McKinsey & Company, it is estimated that the top 20 manufacturers in the global auto sector have seen profits decline by approximately US$100 billion in 2020, a roughly six-percentage-point decrease from just two years ago — a drop in profitability that might take years to recover.

Yet even before this great upheaval, the auto industry had been in the midst of rapid development and change. The pace of technology had sped up innovation in the industry for years, and with car manufacturers constantly looking for a competitive edge, the future of mobility looks very different from how it was previously imagined.

A RACE FOR INNOVATION
The digital revolution has ushered in an era of hyper-speed connectivity, and no longer is it limited to interpersonal communication. Utilizing technologies such as the Internet of Things and 5G, vehicles of the future can have access to a wealth of information by communicating with one another on the road, sharing data on things like the environment and weather conditions.

Such data could be used to prevent collisions, alert the driver to potential hazards, and even provide car makers design feedback on their models. The information could then be analyzed to optimize the manufacturing process of future cars.

The connectivity also allows for smart gadgets and cars to communicate with one another, allowing drivers to remotely control their vehicle functions with their mobile devices. Conversely, dashboards are becoming more and more sophisticated, allowing for easy playback of media from phones, laptops, and even smartwatches.

That’s not all. Other consumer trends are exerting their influence on the auto industry, particularly trends revolving around convenience and accessibility. Car subscription services are on the rise alongside ridesharing services as more consumers demand mobility solutions without the burden of a mortgage. Automakers are in the unique position of learning how to balance these new business models to meet the ever-changing expectations of their customers and meet their own revenue goals.

Sustainable mobility has also become a significant driver of change. Due to the increased availability and a positive consumer sentiment, electric vehicles are becoming more popular. Indeed, EV sales are poised to hit their highest level on record in 2021, according to the car shopping experts at Edmunds, with data showing that EV sales made up 1.9% of retail sales in the United States in 2020. Edmunds analysts expect this number to grow to 2.5% this year.

REIMAGINING THE FUTURE AFTER COVID-19
Such trends, along with the massive disruption brought about by the pandemic, have meant a time of rapid change in the development of the global automotive industry, even affecting such things as the process in which consumers buy their cars.

With the world on lockdown, consumers have had no choice but to use online sales channels in conducting their business. According to a recent McKinsey digital sentiment analysis, in Europe, the use of digital channels has increased by an average of 13 percentage points. Growth in online channels is high for every country surveyed, but the biggest boost has occurred in Germany, which has seen the use of digital channels jump 28 percentage points in response to the COVID-19 crisis. Moreover, 72% of first-time users in Germany and 70% of regular users are planning to continue engaging online even after the crisis subsides.

However, previous surveys by McKinsey have found that automotive players were uncertain about using digital channels to market their products. A 2019 Digital Quotient analysis, which is a McKinsey method for evaluating an organization’s overall digital maturity, revealed that the average automotive business has a clear need to digitize, with the industry earning a below-average score compared with other business-to-business players.

Consumer preferences are also changing. Surveys show that due to the economic downturn caused by the pandemic, more people are choosing to go for short-term, subscription-based services that do not tie up significant capital.

“On-demand mobility is on the rise,” McKinsey reported. “The COVID-19 crisis has reinforced the existing trend toward greater flexibility, as customers hesitate to commit to large-scale investments and want flexibility in a fast-changing world.”

“The automotive industry has reached a fork in the road: one path leads to reinvention and success, while the other maintains the current status quo. Business leaders will only have a brief window of opportunity to reimagine their core operations. To ensure their survival and success now and in the future, it’s time for automotive industry players to act,” it added.