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Citigroup considering divesting some Asia-Pacific consumer units

CITIGROUP, INC. is weighing divesting certain retail banking units in the Asia-Pacific Region, including those in South Korea, Thailand, the Philippines and Australia. — REUTERS

CITIGROUP, INC. is studying options for slimming down the firm’s sprawling international consumer operations as part of incoming Chief Executive Officer Jane Fraser’s efforts to simplify the bank.

The company is weighing divesting certain units across retail banking in the Asia-Pacific region, including those in South Korea, Thailand, the Philippines and Australia, according to people familiar with the matter. No decisions have been made, any divestitures could be spaced out over time and the New York-based firm could ultimately decide to keep all its existing international operations, said the people, who asked not to be identified discussing internal deliberations.

“As our incoming CEO Jane Fraser said in January, we are undertaking a dispassionate and thorough review of our strategy, including our mix of businesses and how they fit together,” Jennifer Lowney, a spokeswoman for the bank, said Friday in an e-mailed statement. “As you would expect, many different options are being considered and we will take the right amount of time before making any decisions.”

Citigroup climbed after Bloomberg reported the possible divestitures on Friday. Shares rose 3.6% for the day, the biggest gain in six weeks, to close at $65.78.

Citigroup’s Asia consumer business, which reaches far beyond the region, spans 17 markets — 12 in the Asia-Pacific area and five in Europe, the Middle East and Africa. The unit is home to 16 million credit-card accounts and more than 400,000 wealth-management customers.

The firm also is reviewing consumer operations in Mexico, though a sale there is less likely, according to one of the people. The company operates there as Citibanamex, the second-largest bank in the country, with nearly 1,400 locations, making it Citigroup’s largest branch network.

Combined, the Asia and Mexico consumer units had average assets of $161 billion last year. They normally contribute more than 40% of Citigroup’s global consumer-bank earnings.

Offloading the international consumer franchise would simplify Citigroup’s business at a time when the firm is under strict orders from regulators to clean up internal infrastructure and controls. The Office of the Comptroller of the Currency and the Federal Reserve criticized the bank late last year for shortcomings in its technology.

Facing years of costly regulatory work, Ms. Fraser has vowed to take a thorough look at each Citigroup unit as part of a broad strategic review.

“We’re taking a clinical look at our strategic positioning, assessing which businesses can attain leading market positions in a much more digitalized world,” Ms. Fraser told analysts on a conference call last month. “I believe there is value to unlock by simplifying the firm.”

FRASER’S HISTORY
Playing a role in Citigroup’s deliberations is whether the bank would be able to find a willing buyer for each unit, according to two of the people familiar with the review. The bank would probably have to sell to local banks in each of the countries, they said.

It’s familiar territory for Ms. Fraser. Less than a year after Citigroup named her head of Latin America in 2015, she led the company’s sale of retail-banking and credit-card operations in Brazil, Argentina and Colombia.

At the time, the move came as a shock. The Argentina unit had opened in 1914, when it was the bank’s first non-US branch. But Ms. Fraser argued that Citigroup wouldn’t be able to make the investments it needed to achieve proper scale in the three countries.

“It was a tough decision from a history point of view, but it was a relatively easy one from a strategic point of view,” Fraser said in a 2018 interview with CNN. “After the crisis, US banks weren’t allowed to acquire other banks, so we watched the local banks rolling up their retail-banking franchises and consolidating. We grew, but nothing like as fast as you could inorganically.”

Even after those sales, Ms. Fraser and outgoing CEO Michael Corbat have been adamant they’d like to keep the firm’s consumer operations in Mexico, despite facing repeated calls to offload the unit. In 2016, the two announced the bank would embark on a four-year, $1-billion investment in Citibanamex to improve the unit’s technology and upgrade its branches.

ASIA FOCUS
Citigroup’s operations in Asia are led by Peter Babej, who previously headed up the lender’s business of advising banks and other financial institutions on mergers and acquisitions. The bank plans to maintain its wealth-management franchise in the region, according to one of the people.

The company often looks to the Asia consumer business for ideas that will shape the future of its US operations, as it did with its most recent partnering with Alphabet, Inc.’s Google on a new checking account. Still, Citigroup has said publicly that customers rarely use some of the bank’s 224 branches across the region for transactions.

The firm instead has been focused on building out its wealth-management arm in the region and recently opened its largest wealth-advisory hub in Singapore, a 30,000-square-foot (2,800-square-meter) space, with room for more than 300 relationship managers and product specialists. The firm has said it’s hoping to double its market share and increase the number of clients there by a percentage in the double digits in coming years.

“We see a great opportunity for us to serve the growing affluent segment in Singapore, and believe in the need to continue enhancing our client value proposition by investing in this new wealth hub,” Brendan Carney, CEO of Citibank Singapore Ltd., said in a statement last year. “As we continue to grow our business, we will look to open more of such hubs in the future.” — Bloomberg

Fintech skills now in high demand, PayMaya says

THE transformational impact of the coronavirus pandemic on how Filipinos access financial products and services has increased demand for financial technology (fintech) skills, digital payments firm PayMaya Philippines, Inc. said.

“We actually compete for talent with global companies, not just with those based in the Philippines,” PayMaya Philippines President Shailesh Baidwan told BusinessWorld in a recent e-mail interview.

“Jobs in fintech are in high demand because of the massive growth of the digital payments space worldwide,” he noted.

There has been a widespread adoption of digital and cashless payments among consumers, merchants, and even government services due to the public health crisis.

Cashless payments reached a tipping point in 2020, where over 50% of online shopping transactions in the country are now paid via cashless means, Mr. Baidwan said.

More products and services will be made available on PayMaya’s platforms, he said when asked about the company’s plans for 2021.

“With the planned rollout of the national QR standard this year, they can also expect PayMaya to help them get up to speed and be able to accept QR payments from a variety of sources once it’s been made available,” he added.

The company also targets to support firms for their marketing promotions and payroll disbursements through its cashless solutions.

The company now sees signs of recovery in some previously affected sectors.

“By building an online presence and adopting digital technologies to enhance customer experience, more businesses can follow suit. Meanwhile, some areas have seen a big boost such as retail and e-commerce,” Mr. Baidwan said.

The Department of Trade and Industry is hoping to increase e-commerce enterprises from a base of 500,000 to 1 million by 2022.

PayMaya has said it expects the value of transactions on its platform to reach P1 trillion by 2023.

PayMaya is a subsidiary of Voyager Innovations, Inc., the digital arm of PLDT, Inc.

Voyager’s portfolio, aside from the PayMaya e-wallet and app for consumers, includes PayMaya Enterprise for end-to-end merchant-acquiring solutions and Smart Padala, which has over 37,000 partner agent touchpoints nationwide.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Arjay L. Balinbin

Pork deliveries from provinces to Metro Manila in full swing

SOME 3,907 live hogs and 37,389 kilograms (kg) of pork were delivered to Metro Manila on Feb. 20 as the government tapped available supply in the provinces in a bid to fend off an inflation crisis headlined by rising pork prices.

In a report on Feb. 20, the Department of Agriculture (DA) said some 2,679 live hogs were sourced from Calabarzon (Cavite, Laguna, Batangas, Rizal, and Quezon) and were delivered to public markets in Quezon City, including Q-Mart, Farmers Market, Novaliches, and Fairview.

According to the DA, the carcasses were distributed to public markets in Caloocan City, Quezon City, and the Manila districts of Sampaloc and Tondo, among others.

The DA said that as of Feb. 20, a total of 62,257 live hogs and 345,229 kg in carcass form have been transported to Metro Manila since the implementation of the price ceiling on pork products on Feb. 8.

Calabarzon accounted for 30,938 live hogs, followed by Mimaropa (Mindoro, Marinduque, Romblon, and Palawan) at 7,564, Western Visayas 7,117, and Soccsksargen (South Cotabato, Cotabato, Sultan Kudarat, Sarangani, and General Santos) 5,455.

For pork in carcass form, the DA said Central Luzon shipped 314,497 kg, followed by Bicol Region at 22,722 kg, and Zamboanga Peninsula at 7,800 kg.

President Rodrigo R. Duterte signed Executive Order (EO) No. 124 on Feb. 1 which capped pork prices after supply pressures caused by the decimation of the hog population due to African Swine Fever (ASF).

Under EO 124, the retail price of pork shoulder (kasim) was set at P270 per kg, pork belly (liempo) P300 per kg, and whole chicken P160 per kg.

The DA delayed the implementation of the price ceiling to Feb. 8 to provide the hog industry a grace period to adjust its stocks.

Edwin G. Chen, President of the Pork Producers Federation of the Philippines, Inc. said the price ceilings should be lifted and more funds should be given to pork producers instead, to help them recover from ASF.

“The price cap should be lifted and the suggested retail price for pork should be set at P330 to P360 per kg,” Mr. Chen said in a mobile phone message.

Mr. Chen said the DA should help pork producers restore their herds after ASF.

“DA’s efforts should be focused on procuring piglets and giving them to backyard raisers to strengthen repopulation efforts,” Mr. Chen said. — Revin Mikhael D. Ochave

Should I stay or should I go? Here are the relationship factors people ponder when deciding whether to break up

WHERE do you see yourself in five years? It’s a standard job interview question, but it’s an even better question to ask yourself about your relationship.

The person you talk to, date, move in with, get engaged to, marry, break up with or divorce — it’s all up to you. You’re in the driver’s seat regarding your relationship’s trajectory.

Most of the time, you probably cruise along on autopilot, maintaining the status quo. Every once in a while, though, something disrupts that equilibrium and you seriously ponder your relationship’s fate.

At some point, most people find themselves facing the complicated decision of whether to stick with it or call it quits. While there’s lots to consider when you’re pondering your own situation, maybe it would be helpful to know how others deal with these important life decisions. Recent research, including my own in the field of relationship science, has explored how people make these choices.

It feels as if there could be as many reasons someone would decide to maintain or end a relationship as there are relationships.

To learn more about what people actually consider, psychology researchers Samantha Joel, Geoff Macdonald, and Elizabeth Page-Gould asked over 400 individuals who were questioning their own relationship: “What are some reasons someone might give for wanting to stay with or leave their romantic partner?”

Out of all the specific circumstances, 50 common themes emerged.

People came up with 27 broad reasons for staying. These focused on key relationship components such as attraction, physical and emotional intimacy, and support. People were reluctant to lose the time and effort they had already invested and were fearful of being alone. They considered pluses, such as the desirable aspects of their partner’s personality and how much fun they had together. They also factored in practical issues, including potential family disruption and financial implications.

Participants also suggested 23 general reasons to leave. These included many of the same themes as the reasons to stay, but focused on the negative side — things like a partner’s problematic personality, acts of deception or cheating, emotional distance, lack of support, and insufficient emotional or physical intimacy.

Listing these themes is one thing. How do individuals factor them into real-life decisions of whether to stay or go? To find out, the researchers did a follow-up study with over 200 people who were contemplating breaking up or getting a divorce.

Roughly half of these participants reported feeling, on balance, more inclined to stay in the troubled relationship. That makes sense — inertia is powerful. Staying often takes the least effort.

However, those same exact people simultaneously had an above-average inclination to leave, meaning they rated themselves as leaning toward breaking up. See the problem? Participants were motivated to stay with their partner at the same time they were motivated to end things. And this ambivalence was very common.

That relationship doubts are so common and people are often conflicted about what to do are what make this kind of research potentially helpful. It lends some order to the chaos by helping to identify what’s most important.

Relationship decisions are rarely as clear cut as “should I stay or should I go?” Instead, people experience subtle shifts in their commitment that build up over time. What contributes to these variations in commitment?

Relationship researchers Laura Machia and Brian Ogolsky sought to find out by interviewing participants in stable relationships. At each of eight monthly interviews, 464 participants indicated how serious their relationship was by rating how likely it was they’d marry their current partner — “0% if they were certain they would never marry their partner or never thought about marriage, and 100% if they were certain they would marry their partner in the future.” Each time their “commitment to wed” percentage shifted from one interview to the next, researchers asked why.

Participants expressed a lot of reasons for commitment fluctuations — 13,598, to be exact. The researchers distilled them down to 14 key themes. The most influential reasons were positive and negative characterizations of the partner and relationship. These included direct statements about the partner — such as “he was fun, considerate and kind” — or about them as a couple — such as “we were drifting apart.” As you’d expect, positive statements related more to increased commitment, while negative statements were associated with declines.

The next-most-mentioned reason was circumstances — unforeseen events or experiences such job loss, a partner becoming ill or needing to move. Interestingly, this kind of life change could either increase or decrease an individual’s commitment to the relationship. This finding is further evidence that events by themselves — say, a worldwide pandemic — aren’t the sole determinant of a relationship’s fate. A couple’s existing dynamics play a large role too.

Out of all the possible reasons that nudged people up or down the commitment scale, there was one that stood out as actually predicting whether a couple would break up: cheating. As much as other factors made people feel more or less likely to consider marriage, involvement with another dating partner was the one true relationship-killer.

In the other direction, the study also identified one factor that increased commitment and pushed relationships closer toward marriage: positive disclosure. That’s what psychologists call it when you share information with each other that encourages positive feelings, which in turn supports your relationship. Think exchanging stories about your childhoods, getting to know each other on a deeper level, or sharing good news. These kinds of disclosures strengthen relationships.

Relationships are complicated, and no one knows for sure what the future holds. It’s hard to know what the best decision is if you’re thinking about whether to stay with a partner or move on. The best relationships have their issues, while the worst relationships still have their virtues. While you don’t want to get stuck with an awful partner, you also don’t want to be unnecessarily harsh on what could be a great relationship. Maybe knowing what others consider important factors can help you make your own best choice. — Reuters

 

Gary W. Lewandowski, Jr. is a Professor of Psychology at Monmouth University

Suzuki PHL deploys 3 Super Carry units to Marikina City

TO HELP with the Marikina City government’s demands for mobility, Suzuki Philippines, Inc. (SPH), lent out three Super Carry units. The vehicles were turned over last Feb. 6 at the Legislative Building. The event was headed by Marikina City Councilor Loreto “Coach Elvis” Tolentino, Jr., Suzuki ANC Group General Manager Francis Tayo, and Suzuki Auto Marikina Branch Head Edmundo Gutierrez, Jr. Suzuki recently opened a dealership in the city.

The local government of Marikina will be able to use the Super Carry units in three different trims (UV, pickup, and FilCab). Each provides distinct functionalities and capabilities.

Powered by a highly efficient engine, the Carry is designed and engineered for quality performance. Backed by more than 40 years of Suzuki compact truck experience in the harshest environments, these units are expected to be of service to the LGU and its people. For more information about Suzuki visit http://suzuki.com.ph/auto/, like it on https://twitter.com/SuzukiAutoPH and follow on Instagram via @suzukiautoph.

SEC plans to go digital on report submissions

THE Securities and Exchange Commission (SEC) has developed an online submission tool (OST) that will allow corporations and partnerships to digitally and remotely file annual reports to limit in-person transactions amid the health crisis.

The OST, which the agency is seeking the public to comment, is proposed to be used beginning this year’s filing season.

In a draft memorandum circular released on Friday, the corporate regulator has also set the proposed schedule and guidelines for the online submission of reports. The proposals are now waiting for public comment.

The OST may be used to submit audited financial statements and general information sheet (GIS). It may also be used for the submission of sworn statement for foundation, general form for financial statement, special form for financial statement, affidavit for non-operation, and affidavit of non-holding of annual meeting during the preliminary implementation of the facility.

“The initiative operationalizes Section 180 of Republic Act No. 11232, or the Revised Corporation Code of the Philippines, which mandates the SEC to develop and implement an electronic filing and monitoring system,” the SEC said in a statement.

The project is also developed with the guidance of Republic Act No. 11032, otherwise known as the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, which urges government agencies to ease transactions and reduce procedures.

Enrollment for the OST will be open beginning March 15.

Corporations and partnerships must sign-up through an online application form and submit required documents. Representatives are required to present a copy of a board resolution authorizing them to submit documents for the corporation or partnership and a special power of attorney.

All stock corporations, and their branch and representative offices and regional headquarters, and foreign corporations’ regional operating headquarters are required to use the online platform this year. Nonstock corporations will still be allowed to submit reports in person.

“Nonstock corporations, meanwhile, will still have the option to submit their reports over the counter this year. By 2022, the Commission will require all nonstock corporations to enroll in and submit their reports through the OST,” the commission said in a statement.

Law, consultancy, and other firms involved in services with corporations and partnerships may also use the platform.

Instructions on the format of reports will be provided by the OST.

“For the GIS, for instance, a filer must submit the accomplished but unsigned form saved as a multipage portable document format (PDF), as well as the high resolution scan of the signed and notarized document saved as a multipage PDF,” the SEC said.

Reports will be reviewed for verification and quality assurance. Once accepted, a QR code will be sent to the filers.

Non-confidential reports may be accessed through an online portal on the OST once it has been sent to the concerned department.

The SEC said it would no longer require hard copies of reports submitted to the online platform.

“The OST supports the Commission’s commitment to sustainable practices by minimizing its paper trail, reducing energy consumption, and promoting the role of corporations in achieving the United Nations Sustainable Development Goals and AmBisyon Natin 2040,” the commission said.

Once the OST is fully implemented, submissions sent via e-mail, courier, and office drop boxes will no longer be accepted.

The corporate regulator’s offices outside Metro Manila will only accept hard copies of reports if there are errors encountered during online enrollment or submission. The authorized filer should present a copy of the error notice generated by the OST.

Corporations should submit their GIS within 30 days after their annual meetings.

For the annual financial statement submissions, corporations will follow a schedule based on the last digit of their SEC registration or license number. Those with registration numbers ending with 1 are required to submit within June 1 to 30; with 2 within July 1 to 31; with 3 or 4 within Aug. 1 to 31; with 5 or 6 within Sept. 1 to 30; with 7 or 8 within Oct. 1 to 30; with 9 or 0 within Nov. 1 to 30.

For corporations with fiscal years not ending on Dec. 31, submission of their annual financial statements should be done within 120 days from the end of their respective fiscal years.

Corporations audited by the Commission on Audit (CoA) meanwhile may submit beyond the filing schedule, as long as an affidavit and a letter from CoA vetting the timely submission of financial statements and documents to the agency will be presented. — Keren Concepcion G. Valmonte

NIA blacklists construction firm after Central Luzon project falls behind schedule

THE National Irrigation Administration (NIA) has blacklisted Green Asia Construction and Development Corp. after a project it was working on in Central Luzon failed to meet key progress milestones.

NIA said in a statement that Green Asia was the contractor for the rehabilitation of structures associated with the Casecnan Multipurpose Irrigation and Power Project, with its works valued at P296.93 million. The project is located in Gapan, Nueva Ecija and San Miguel and San Ildefonso, Bulacan.

According to NIA, Green Asia was found to have recorded negative slippage on its work schedule of at least 15%, which is sufficient basis for contract termination under Republic Act No. 9184 or the Government Procurement Reform Act.

“The contractor is suspended/disqualified from participating in all government procurement for the period of one year, starting Feb. 08, 2021 until Feb. 07, 2022,” NIA said.

It added that Green Asia’s performance security of P89.08 million was forfeited. — Revin Mikhael D. Ochave

Samantha Bernardo gets virtual send off for Miss Grand International 2020

THE BINIBINING Pilipinas Charities, Inc. (BPCI) gave a special virtual send-off to Binibining Pilipinas – Grand International 2020 Samantha Bernardo on her quest to capture this year’s Miss Grand International crown. Participating in the online program held on Feb. 19, were the reigning Binibining Pilipinas queens and members of the press. Ms. Bernardo’s mother also made a surprise online appearance to wish her luck on the international pageant which will be held in Bangkok, Thailand on March 27. Bernardo is a spokesperson of Malaria Free Philippines, which partners with the Department of Health and Kilusan Ligtas Malaria to fully eradicate malaria in the country by 2030. She will be carrying this advocacy as she competes in the international pageant and aims to acquire the country’s first-ever Miss Grand International title. She  is set to leave for Bangkok on February 24, 2021. The virtual send off program can be viewed on Facebook https://www.facebook.com/realbbpilipinas/videos/278340590303140/ or Youtube https://www.youtube.com/watch?v=7RmZWMk7i7k.

Shell to provide engine oils, lubes to Foton PHL

FOTON MOTOR Philippines, Inc. (FMPI) has partnered with Pilipinas Shell Petroleum Corp. (Pilipinas Shell) to maximize the utility of the former’s commercial vehicles through the use of Shell’s world-class petroleum products.

The partnership, whose inking was held at the FMPI Assembly Plant in Clark, Pampanga, involves Pilipinas Shell providing FMPI with a lineup of products including its most advanced engine oils and lubricants. The deal is expected to “strengthen the capabilities of Foton light commercial vehicles as well as its medium- and heavy-duty trucks in terms of efficiency, extended engine life and reliability, while ensuring a cleaner and safer environment.”

FMPI said it chose Shell for six reasons: Quality (having the technology to keep units in best condition and tiptop performance), affordability (offering great value for investments from entrepreneurs to individual customers), network (having an easily accessible network of retail stations and service centers), strong commitment (unwavering determination and vision to provide after-sales support and first-rate products to customers), trusted brand (with over a century of experience, Shell offers exceptional expertise and quality), and topnotch support (furnishing strong commitment to more powerful and productive performance through cooperative services).

Pilipinas Shell is one of the leading fuel retail players in the country and aims to continue providing quality products and trusted service to more Filipino motorists across the archipelago.

Investors weigh Jollibee earnings, Yoshinoya deal

By Lourdes O. Pilar, Researcher

INVESTORS took notice of Jollibee Food Corp.’s net profit in the final three months of 2020, but remained lukewarm on its joint venture to operate and expand the local unit of Japanese beef bowl restaurant Yoshinoya.

Data from the Philippine Stock Exchange showed a total of 4.69 million Jollibee shares worth P842.87 million were traded from Feb. 15 to 19, making it the 17th most actively traded stock last week.

The share price of the homegrown fastfood giant closed at P179.90 apiece on Friday, up by 0.7% from a week ago. Year to date, the stock lost 7.5%.

“Jollibee was among the active stocks [last] week after it turned around to a positive earnings in the fourth quarter last year despite challenges,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.

“Also, its plan of expansion in the International Markets at more than P12 billion plus a partnership with a well-known Japanese food company, Yoshinoya, as catalyst for growth going forward,” Mr. Pangan added.

Smashburger and The Coffee Bean & Tea Leaf, which have been a drag to its income, are expected to contribute to its growth this year, he said.

Philippine National Bank Senior Equity Research Analyst Jonathan J. Latuja said Jollibee’s activity last week was driven by earnings results disclosed last Monday.

However, he said that the Yoshinoya joint venture announcement did not have a “meaningful impact” on Jollibee’s share price, which ended 0.3% lower on Tuesday.

Jollibee’s fourth-quarter attributable net income declined by more than a third to P2.05 billion year on year, but reversing three consecutive quarters of net losses caused by the pandemic.

For the full year, Jollibee swung to an attributable net loss of P11.50 billion last year from P7.30 billion in net income in 2019.

In a separate disclosure last week, the fastfood giant said that it would enter into a 50/50 joint venture with Yoshinoya International Philippines, Inc. to operate and expand the Japanese restaurant chain in the country.

Jollibee disclosed to the exchange that the two would establish a 50/50 joint venture, which will be the Philippine franchisee of Yoshinoya.

To add to the three operating Yoshinoya stores in the country, the venture plans to put up an additional 50 stores in the long term.

“Its joint venture with Yoshinoya will further boost its bottom line as it will complement the delivery especially needed in this pandemic situation,” Mr. Pangan said.

With more than 2,000 stores worldwide, Yoshinoya is the latest addition to Jollibee’s quick service restaurant chains, which include Greenwich, Chowking, Red Ribbon, and Mang Inasal as well as global franchise brands such as Burger King, PHO 24, Panda Express, Smashburger, The Coffee Bean & Tea Leaf.

As of end-2020, Jollibee’s store count reached 5,824, of which 3,217 are in the Philippines and 2,607 abroad.

“With the move to further ease in restriction plus rollout of vaccines, we can expect Jollibee to weather the challenges going forward, especially after a turnaround performance in the fourth quarter last year despite the challenges brought about by the pandemic,” Mr. Pangan said.

For this week, he placed the stock support at P175.60 while resistance at P202.00.

Mr. Latuja gave Jollibee’s 12-month discounted cash flow-based target price at P188.80 per share.

Yields on gov’t debt climb on inflation expectations

By Marissa Mae M. Ramos, Researcher

YIELDS on government securities (GS) climbed last week on market expectations of faster inflation in the coming months.

GS yields, which move opposite to prices, went up by an average of 8.64 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates as of Feb. 19 published on the Philippine Dealing System’s website.

At the secondary market, the yield on the 364-day Treasury bills (T-bills) increased by 6.4 bps to 1.4963%. On the other hand, the 91- and 182-day T-bills saw their yields decline by 12.49 bps (to 0.8495%) and 8.84 bps (1.0605%), respectively.

Rates at the belly of the yield curve picked up, with the two-, three-, four-, five-, and seven-year debt papers closing the week higher by 13.26 bps (1.9958%), 17.46 bps (2.3448%), 20.79 bps (2.6379%), 23.26 bps (2.8712%), and 25.23 bps (3.1365%), respectively.

At the long end, the 10-year Treasury bonds (T-bonds) gained 17.51 bps to finish at 3.289%. Meanwhile, the rates of the 20- and 25-year T-bonds declined by 1.9 bps (4.0466%) and 5.65 bps (4.0171%), respectively.

“Reason for the uptick really is elevated inflation that is feared may extend for a number of months,” Security Bank Corp. Chief Investment Officer for Trust and Asset Management Group Noel S. Reyes said in an e-mail.

“Transport cost will be high with oil near $60, but at the end of January, it was only at $52. Peso was also weaker in the second half of February which can add to import costs,” Mr. Reyes said.

The peso closed at P48.45 against the dollar on Friday, lower by 40.6 centavos compared with a week ago.

Meanwhile, headline inflation picked up to 4.2% in January, the fastest pace recorded in two years or since January 2019’s 4.4% due to faster increases in the prices of food and transportation.

The Bangko Sentral ng Pilipinas raised its average inflation forecast for this year to 4% from 3.2% previously.

Mr. Reyes added that the government’s offering of three-year retail Treasury bonds (RTB) is “looking to be a large issue as the government is not capping the size yet.”

The government sold an initial P221.218 billion in three-year RTBs at the rate-setting auction on Feb. 9, with total bids reaching P284.183 billion. The debt papers fetched a coupon rate of 2.375%, 200 bps lower than the 4.375% rate quoted for the RTBs sold in February 2020. The offering is set to run until March 4, unless closed earlier.

Meanwhile, a bond trader likewise pointed to heightened inflation expectations as a primary factor for last week’s yield movement, but added that the market also reacted to the volatility in US Treasuries.

“Catalysts [this] week would be the budget balance and the final amount of money that can be raised by the BTr in the RTB offering. If they are not able to raise money now, the market may take it as a sign that it will have to issue more,” the trader said via Viber.

Security Bank’s Mr. Reyes expects government debt yields to continue increasing in the coming weeks.

“[T]he curve is still on a steepening path that even the T-bills auction may succumb to a widening trend and come out higher by 5 to 10 bps,” he said.

RCEF capable of offsetting Rice Tariffication law income losses

FARMERS have exaggerated the revenue losses resulting from rice tariffication, a government think tank said, adding that any such losses can be made up for by properly-targeted use of the industry modernization fund.

The Philippine Institute for Development Studies (PIDS) estimated the average income lost by poor families due to the Rice Tariffication law at P2.1 billion a year in the 2022-2024 period.

This is widely divergent from the estimates provided earlier by the Federation of Free Farmers, which claims that farmers lost P40 billion in the first year of the law, while consumers saved P232 million with the fall in retail prices after imports were liberalized.

“Rice tariffication ultimately causes an increase in income poverty, across a variety of measures, geographic categories, and time. However, the increase in income poverty comes in small increments and diminishes over time,” PIDS said Friday in a policy note, “Does rice tariffication in the Philippines worsen income poverty and inequality?”

Republic Act (RA) No. 11203 or the Rice Tariffication Law signed in 2019 liberalized rice imports but imposed a tariff of 35% on shipments of Southeast Asian grain, which will provide capital for the Rice Competitiveness Enhancement Fund (RCEF), which will finance the modernization of the industry.

PIDS said the law resulted in lower farmgate palay prices and rice retail prices, with the former affecting the incomes of households that depend on rice farming.

It said cash transfers and other financial assistance under the RCEF should be sufficient to offset the estimated foregone income of farmers at P2.84 billion or less each year.

“This amount is far below the P60 billion, which is the minimum amount allocated for the Rice Fund under RA 11203. The Rice Fund even exceeds the total income difference cumulating over the 12-year scenario, which is equivalent to only P16.8 billion. Therefore, if properly targeted, the Rice Fund budgeted in the tariffication law is more than enough to offset the impact of tariffication on income poverty,” it said.

The government allocates P10 billion to the RCEF each year for six years starting 2019 to help farmers buy affordable seeds, operate farm machinery, have better access to credit and improve their technological know-how.

“Further research is needed to look into the Rice Fund programs and their impact on the rice industry at the grassroots (farm operators, farmworkers, and other entrepreneurs and workers in the value chain),” PIDS said. — Beatrice M. Laforga