Filipino brand pushing ‘green beauty’

June 15, 2020 | 12:03 am

“GREEN BEAUTY” using products that are not harmful to one’s health and the planet is what one local company is pushing for with its range of soaps.

Diwatang Maria, a local start-up brand that blends science and a passion to give Filipinos access to effective and sustainable skincare, submits to the ethos of “green beauty,” which generally promotes products that are non-toxic and not harmful. It emphasizes the absence of harsh synthetic elements in its products.

“We offer high-quality and locally made organic soaps that help your skin achieve that healthy glow to which the diwatas (fairies) are known for,” shared Ma. Concepcion Macalintal, founder and CEO of Diwatang Maria.

She founded Diwatang Maria in 2018 after seeing the need to provide beauty products that would not only help consumers attain the results they want, but are also organic, safe to use, free from harmful and toxic ingredients, and safe for the environment.

“People are starting to realize the importance of natural or organic products. This Green Beauty movement is more than a practice that was adopted just recently… [it] is growing as consumers are being empowered by the fact that there can be a better and safer choice,” said Ms. Macalintal of the direction they want to chart.

Also providing a push for Diwatang Maria is its desire to promote the use of locally made organic goods and show that Filipino-made products are at par with international brands.

To introduce itself to the market, Diwatang Maria released three soaps, namely Maria Makiling, Maria Sinukuan, and Maria Cacao.

Maria Makiling, whose name was taken from the sacred protector of Mt. Makiling, combines papaya enzyme and Kojic acid, an organic compound derived from fungi and the malting of rice which is known to be effective in improving the appearance of melasma and hyperpigmentation. It also uses coconut oil and aloe vera to prevent acne and blemishes.

Maria Sinukuan, meanwhile, contains oatmeal kernel and colloidal oatmeal that help one’s skin be free from irritation and itching. It is meant for sensitive skin and contains papaya enzyme, glutathione, and Kojic acid. The soap also contains coconut oil and aloe vera, which together with oatmeal, form a trio of antibacterial and anti-inflammatory factors.

The chocolate-scented Diwatang Maria Cacao, contains oatmeal kernel, colloidal oatmeal, and shea butter. The powerful moisturizing effect of this trio helps delay ageing and boosts the production of collagen.

To further promote green beauty and cater to the growing Philippine market, Ms. Macalinta is looking for distributors or resellers.

“We are offering exciting packages for those who want to be our partners in the business. Let’s take advantage of earning at the comfort of our homes since most of the people now prefer work-from-home arrangements,” she said.

Diwatang Maria is available on Lazada and Shopee. For more information, check http://www.diwatangmaria.com or its Facebook page ( www.facebook.com/diwatangmariaph/) and Instagram account (diwatangmariaph). — Michael Angelo S. Murillo

Honda gears up for VIRTUAL in August

June 15, 2020 | 12:03 am

IN AUGUST, Honda Cars Philippines, Inc. (HCPI) will launch an online facility it calls VIRTUAL@Honda — a platform “specially tailored for HCPI’s sales and after-sales services.”

In a release, HCPI said that the portal will offer contactless service for the processing of a car purchase, maintenance scheduling, or repairs, a “part of Honda’s continuous efforts in creating a better and safer customer journey with the onset of the new normal brought about by the COVID-19 pandemic.”

The company added that customers will be able to perform the following features of the VIRTUAL@Honda “right in the safety and comfort of their homes.”

• Visit Online

• Inspect models inside out with a 360-degree feature

• Reserve a vehicle and service appointment

• Test drive schedule

• Unit availability query

• Access accounts

• Live chat with a sales consultant

Customers also have the option to speak with dealership staff through virtual communication. Averred HCPI President Masahiko Nakamura, “With the current global pandemic and in view of these uncertain times, HCPI’s priority is the safety of our customers. With this, the soon-to-be launched Virtual Dealership Online Transaction is our alternative solution to provide contactless dealer processes for our customers.”

For more information, visit Honda Cars Philippines’ official website at www.hondaphil.com.

Gov’t debt yields end flat

June 15, 2020 | 12:02 am

YIELDS on government securities (GS) ended mixed last week as investors tracked auction results amid the lack of fresh leads.

GS yields, which move opposite to prices, went up by an average of 0.7 basis point (bp) week on week, according to Philippine Dealing System’s PHP Bloomberg Valuation Service Reference Rates published on June 11.

“Yields saw healthy upward correction week-on-week especially some of the long-end securities due to lack of positive leads and as riskier assets’ gains pick up,” First Metro Asset Management, Inc. (FAMI) said in an e-mail.

For Security Bank Corp. First Vice-President and Head of Wholesale Treasury Sales Carlyn Therese X. Dulay: “Rates were sideways to slightly higher [last week] after the Treasury bill (T-bill) auctions [last] Monday and Tuesday were several times oversubscribed and after a headline on the possibility of additional supply from the BTr (Bureau of the Treasury) was released,” she said in a separate e-mail.

The BTr fully awarded P28 billion in T-bills on Monday, up from the programmed P20 billion, as total tenders reached P96.026 billion or nearly five times the initial offer. This prompted the BTr to open the tap facility to offer another P10 billion in one-year instruments.

On Tuesday, the BTr made a full award of the reissued Treasury bonds (T-bonds) at P30 billion as planned. Total bids for the auction spiked to P124.201 billion, making the offer more than four times oversubscribed. The tap facility was also opened to offer another P20 billion to accommodate the excess demand.

All tenors of the T-bills and T-bonds fetched lower rates.

At the secondary market, yields on the 91-, 182-, and 364-day T-bills were down by 3.9 bps, 4.5 bps, and 4.2 bps, respectively, to fetch 2.033%, 2.126%, and 2.412%.

Yields at the belly of the curve went up except for the 2-year T-bonds, which recorded a marginal decline of 0.6 bp to 2.490%. Meanwhile, the 3-, 4-, 5-, and 7-year debt papers saw their yields go up by 0.2 bp (2.584%), 1.9 bps (2.676%), 4.5 bps (2.788%), and 8.2 bps (3.055%).

At the long end, the 10-year T-bonds saw their rates go up by 2.3 bps, yielding 3.290%. Yields of the 20- and 25-year T-bonds also went up by 2.4 bps and 1.1 bps to 4.163% and 4.272%.

“[The] market may continue to trade sideways with a slight upward bias in the absence of catalysts and as BSP (Bangko Sentral ng Pilipinas) hints for a pause in easing interest rates in its upcoming Monetary Board meeting on June 25,” FAMI said.

“The gradual comeback of term deposit and reverse repurchase facilities will provide better guidance for short-term interest rates while still copious liquidity in the market will prevent any strong pullback in yields across the curve,” it added.

“Expect levels to remain rangebound [this] week as the market waits for more leads,” Security Bank’s Ms. Dulay said. — Jobo E. Hernandez

Coronavirus clouds financial outlook

June 15, 2020 | 12:02 am

By Marissa Mae M. Ramos, Researcher

THE SPREAD of the coronavirus disease 2019 (COVID-19) in the first quarter has put a damper on the performance of financial markets for the rest of the year.

The first two months of the year saw “mixed developments,” according to the Bangko Sentral ng Pilipinas (BSP) with the effects of Taal Volcano eruption in January being counterbalanced by a thawing of relations between China and the US over trade issues.

Even with increasing concerns over the spread of the virus, which originated in China, outlook on financial markets remained positive. In February, Japan’s Rating and Investment Information, Inc. upgraded the Philippines’ credit rating to “BBB+,” a step away from the “A” rating targeted by the government. Later that month, Fitch Ratings changed its rating outlook on the Philippines to “positive” from “stable”, indicating its rating could be potentially upgraded.

Moreover, the BSP has said the country’s manageable inflation environment allowed room for a “preemptive reduction” in key interest rates to support market confidence. Aside from the policy rate, the central bank also said it is on track to cut the reserve requirement ratio (RRR) for banks to a single digit, in line with those of neighboring economies.

The quarter also saw the BSP’s Monetary Board slashing policy rates by 25 basis points (bps) and 50 bps in Feb. 6 and March 19, respectively. It also reduced the RRR of universal and commercial banks by 200 bps to 12%.

“At the start of the year, the outlook of the banking industry was largely positive. The banking system had just come off a record year of profitability, with net income rising by 28.4% year-on-year, a growth rate not seen since 2013. Banking system resources were likewise trending towards a strong growth path, while liquidity and capital buffers were maintained at levels beyond domestic and global standards,” the BSP said in an e-mail.

The central bank added that the outbreak of COVID-19 in March and the resulting implementation of the lockdown in Luzon island “posed a significant challenge” to the performance of domestic financial markets.

“Indicators covering the debt, equity and foreign exchange markets strongly reflected the uncertainty brought about by the outbreak as well as its repercussions on the global economy (e.g., the large drop in the price of oil), with substantial declines noted in the values of indices, the widening of swap points, and increased volatility noted toward the end of March. The higher demand for liquidity by bank depositors and borrowers may have likewise decreased banks’ own appetite for investments as banks strove to bolster their cash positions to ably meet client requirements,” the BSP said.

The local transmission of COVID-19 has prompted the government to put the entire island of Luzon on lockdown starting March 17. Local financial markets were closed before resuming trading two days later.

In the equities market, investors rushed to the exits once trading resumed with the barometer Philippine Stock Exchange index (PSEi) closing by 711.95 points or 13.34% lower to 4,623.42 on March 19 — its largest-ever one-day drop in both points and percentage.

The PSEi closed the quarter at 5,321.23, down by 31.5% compared to the previous quarter’s marginal 0.5% rise.

Similarly, debt paper auctions conducted in the first quarter saw robust demand. Treasury-bill (T-bill) auctions conducted in the January-March period saw total subscription amounting to around P599.8 billion, around 2.2 times the P275-billion aggregate offered amount.

Treasury-bond (T-bond) auctions during the period had a total subscription amount of P438.3 billion, 1.5 times more than the offered amount of P284 billion.

In the secondary bond market, domestic yields were higher by a range of 5.8 bps for 182-day T-bill to 73.1 bps for the two-year T-bonds compared to end-December 2019 levels. On the other hand, yields fell for the 20-year (-9.8 bps) and 25-year (-15 bps) debt papers. On average, yields were higher 33.64 bps during the reference period, according to the PHP Bloomberg Valuation Service Reference Rates published on the Philippine Dealing System’s website.

Meanwhile, the peso averaged P50.83 against the dollar in the first quarter, appreciating 0.39% from the previous quarter’s average of P51.03-to-a-dollar, BSP data showed.

The lockdown largely contributed in the decline in economic output in the first quarter. During the period, Philippine gross domestic product (GDP) declined by 0.2%, ending 84 straight quarters of growth.

On the other hand, headline inflation averaged 2.75% in the first quarter, faster than the 1.6% in the previous quarter, but still fell within the BSP’s then target of 2-4% percent and the now-revised target of 1.75%-3.75% for the year.

VIRUS TO DRIVE MARKETS
With a cure and vaccine far from sight, analysts expect volatility in the financial markets to linger in the coming quarters.

“The global and local macro/corporate data we will see in [second quarter of 2020] would ascertain the severity of the pandemic’s economic impact. Real economic indicators of manufacturing, services, unemployment, inflation, etc. will probably settle to the worst thresholds since the Great Depression in the 1920s,” said Philippine National Bank (PNB) economist Jun Trinidad in an e-mail.

“With data depicting the cyclical bottom, market investors may sense that this is a good opportunity to start accumulating oversold financial assets. However, lacking a post-COVID, v-shaped macro recovery,… financial assets are unlikely to recover materially and may persist in oversold territory for much of [the third-quarter],” he added.

For Bank of the Philippine Islands (BPI) Chief Economist Emilio S. Neri, Jr., volatility in the financial markets “may persist in the coming months given the uncertainties surrounding COVID-19.”

“Another round of stock market sell-off may happen if economies don’t re-open in the next six months. Moreover, emerging market currencies may depreciate if global exports and remittances decline substantially,” he said.

“Even if the quarantine is lifted, fears over the possibility of coronavirus infection may continue to curb the demand for goods and services… The lack of consumer spending will most likely squeeze the cash flow of businesses, both big and small,” Mr. Neri added.

The reduced economic activity would likely lead listed firms to cut or halt altogether dividends.

“Many companies worldwide have already decided to reduce if not totally eliminate dividends in able to conserve cash and help strengthen the financial positions as they maintain a more conservative stance as part of being prudent amid the challenging economic and business conditions… Some companies locally and worldwide have also reduced capital spending for 2020…,” Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said.

Below is the summary of analysts’ outlooks for each of the key markets:

EQUITIES MARKET
BSP: [S]tock market movement and volatility could be affected by the uncertainty over the duration and subsequent impact of the COVID-19 pandemic and the implementation of the extended community quarantine (ECQ).

However, some improvement may be seen due to bargain-hunting and the possibility that areas affected by the COVID-19 under ECQ will be placed under a general community quarantine (GCQ)… Under a GCQ, some companies can start operating again, and consequently, may start to recover, along with the economy.

BPI’s Mr. Neri: So far, we haven’t really seen the full impact of the coronavirus on the economy and it’s possible that current valuations don’t reflect the actual damage brought by the outbreak. Hence, volatility in the local stock market will most likely persist in the coming months.

RCBC’s Mr. Ricafort: The PSEi has already consolidated at the 5,000 levels for more than a month already and appeared to have bottomed out…

Gains in the local financial markets, including the PSEi, could still be driven by relatively low interest rates, increased liquidity in the financial system/economy, massive stimulus measures that help spur greater economic activities as well as further gains in the financial markets.

Nicholas Antonio T. Mapa, ING Bank NV-Manila Senior Economist: Slight improvement from the March swoon.

Ruben Carlo O. Asuncion, UnionBank of the Philippines, Inc. Chief Economist: [With fixed income being preferred over the equities market, companies would] increase capital from the debt market over the equity market. Due to uncertainties in the economy brought by the pandemic, the equity market is seen to remain lower than the pre-COVID-19 levels.

FIXED-INCOME MARKET
BSP: We expect the bond market to improve in the coming months, supported by the liquidity-enhancing measures deployed by the BSP… Market liquidity has improved in recent weeks and primary market participation has increased following the deployment of liquidity-enhancing measures by the BSP. Nevertheless, investors have continued to show a preference for shorter-dated securities given the uncertainties surrounding the current pandemic.

PNB’s Mr. Trinidad: Fixed income markets would continue to outperform although it would remain a crowded trade particularly in the short duration segment of the curve. The market awaits Treasury’s move to issue in the belly up to the long end of the curve.

BPI’s Mr. Neri: Bond yields may decline further and track the policy rate. However, additional borrowing by the government as part of its COVID-19 response may exert upward pressure on yields.

RCBC’s Mr. Ricafort: Fundamentally, easing trend in inflation partly due to relatively lower global oil prices among 18-year lows has already driven local interest rate benchmarks, especially long-term tenors, to the lowest levels in at least 3.5 years.

Possible further cuts in local policy rates and on banks’ RRR could support a relatively low-interest rate environment… Increased market liquidity locally and globally could help sustain a relatively low-interest rate environment, especially if interest rate/bond yield benchmarks in the US and in other developed countries remained near record low levels at near zero percent or even negative…

ING Bank’s Mr. Mapa: Yields to remain pressured lower as the bevy of liquidity weighs on rates. Liquidity is all dressed up with nowhere to go but the government securities market.

UnionBank’s Mr. Asuncion: Fixed income might be preferred over Equities due to the series of rate cuts and increasing liquidity from RRR rates.

FOREIGN EXCHANGE (FX) MARKET
BSP: For Q2 2020, the peso should continue to reflect emerging demand and supply conditions in the FX market. As such, the impact of weaker inflows on the side of the country’s current account (i.e., decline in exports and capital inflows) should be offset by favorable investor sentiment over the strong position of the economy (relative to other emerging economies) in terms of debt management and FX cover. Furthermore, the peso and financial markets should benefit from the ample policy support coming from the fiscal and monetary authorities.

PNB’s Mr. Trinidad: [Peso] is likely to stay on its prevailing range, if not probe P50, on the back of import compression as broad-based economic activity stalls and likely emergence of a current account surplus.

BPI’s Mr. Neri: Imports and local demand for dollars may remain weak in the coming months. However, remittances may contract this year and push the exchange rate higher.

RCBC’s Mr. Ricafort: The US dollar/peso exchange rate has recently declined to among the lowest levels in two years at 50 levels, despite increased global market volatility, amid record-high gross international reserves equivalent to about eight months’ worth of imports or more than the acceptable international standard of 3-4 months… The peso exchange rate has also performed relatively better compared to other Asian currencies amid the improved economic and credit fundamentals of the country in recent years as manifested by improved credit ratings well into the investment-grade spectrum.

ING Bank’s Mr. Mapa: [Peso] enjoys appreciation pressure on subdued trading volume. Corporate demand to return once lockdowns lifted and import demand to rise, which could pressure [peso] to weaken.

UnionBanks’s Mr. Asuncion: Currently, the peso has been exhibiting strength, and the year-long outlook has been changed from that of depreciation to that of appreciation. The Philippine economy is perceived to be financially strong using certain variables such as public and foreign debt as % of GDP, the cost of borrowing money, and ample foreign currency reserves. These variables have helped the Philippines be seen from a position of strength even amidst the COVID-19 pandemic.

Quality rice seed promoted for wet-season planting

June 15, 2020 | 12:02 am

THE Philippine Rice Research Institute (PhilRice) recommended that farmers use high-quality seed to ensure good yields during the wet season.

In a statement, PhilRice Plant Breeding and Biotechnology head Dr. Oliver E. Manangkil said that crops from high-quality seed grow, mature, and ripen uniformly, resulting in a 10% or more increase in yield.

To prevent yield loss, Mr. Manangkil called for the use of high-quality seed, ‘relatively pure’ and free from visible seed-borne diseases.

PhilRice said that field pests and diseases are prevalent during the wet season.

Mr. Manangkil said that high-quality seed also has at least an 85% germination rate and lower content of weed seed.

“Seeds play a huge role in achieving good harvest and income, as they are basically the foundation of any crop. Using high-quality seeds is one of the most fundamental strategies for farmers to be competitive,” Mr. Manangkil said.

Mr. Manangkil encouraged farmers to buy seed from accredited growers to ensure quality.

However, if there are no accredited growers in an area, PhilRice said that farmers may source their seed from fellow farmers whose fields have demonstrated uniform crop growth.

“Farmers can also produce their own high-quality seeds by following proper procedures in rouging and removing off-types,” Mr. Manangkil said. — Revin Mikhael D. Ochave

Zara’s latest fashions will be a post-COVID-19 hit

June 15, 2020 | 12:02 am

By Andrea Felsted, Bloomberg Opinion

Don’t be fooled by red replacing black as this season’s color at Zara-owner Inditex SA.

The Spanish fast-fashion behemoth reported its first loss since it went public in 2001 after shutting stores during COVID-19 lockdowns worldwide. But nimble retailers will still prosper as economies open back up again, and Inditex is among them. In fact, with a big investment plan to bolster online sales, the company could well emerge even stronger than before the pandemic.

The world’s largest fashion retailer is also aggressively overhauling its store network to focus on more muscular flagships. It has already been closing smaller outlets, while opening fewer, larger stores for the past few years. This will accelerate over the next two years, with between 1,000 and 1,200 stores closed, many belonging to Inditex brands other than Zara, such as Pull&Bear, Oysho, and Stradivarius. The aim is to transfer their profit contributions to bigger shops or online.

There are important costs related to that transformation. The first-quarter net loss of 409 million euros ($465 million) included a 308 million-euro charge for closing stores. And Inditex hasn’t been completely insulated by the retail dislocation. Net sales fell 44% in the three months from Feb. 1 to April 30 due to the coronavirus impact.

But Inditex’s business model came into its own during the pandemic. Most garments are ordered within the fashion season, and the company, which gets about two-thirds of its revenue from Europe, has kept its supply chain tight. About 60% of products come from manufacturers in Spain, Morocco, Portugal, and Turkey.

In early March, the company scaled back purchases when it saw how the pandemic was developing. In early May, it sped them up again to make sure it had enough playsuits and flimsy blouses on hand for June and July. The strategy worked. Inditex actually ended the first quarter with 10% less stock, an impressive feat when other retailers have been saddled with a mountain of unsold spring and summer garments.

At the same time, its online business thrived thanks to efforts including the introduction of radio-frequency-identification technology that tracks where every maxi dress and balloon-sleeve blouse is. This enables online orders to be fulfilled from wherever the stock is, be that in warehouses or stores. As my Bloomberg News colleagues have noted, when shops were closed, Inditex was able to redeploy stock to its digital business. Online sales rose 95% year-on-year in April.

To capitalize on this trend, Inditex will spend 1 billion euros between now and 2022 to bolster its internet sales, and a further 1.7 billion euros upgrading its stores and further integrating them with its digital platform. Shops will become distribution hubs as well as places that customers can browse and buy products in real life. The aim is for more than 25% of sales to come from digital channels by 2022, up from 14% in 2019.

Despite its strengths, Inditex has not been immune from the pre-COVID-19 pressure on the apparel retail sector, with women generally buying fewer clothes and cheaper rivals, such as Boohoo Group Plc and Associated British Foods Plc’s Primark chain, nipping at its heels. That means the strategic blueprint for the next few years is not without risk.

Zara is not the cheapest clothes retailer, and in tougher economic times the chain could prove too pricey for some cash-strapped consumers. What’s more, it could be a tricky time for Inditex to put its faith in big flagships if people emerging from lockdown shun larger stores, malls, or city centers. And rivals are not giving up. Even fusty British retailer Marks & Spencer Group Plc said it aimed to speed up its supply chain, including using factories closer to its UK market.

But thanks to its strong balance sheet, Inditex should be able to stay ahead. The company had net cash of 5.8 billion euros at the end of the first quarter. While COVID-19 has upended retail, some things should stay the same, including Inditex’s superstar status.

Safer after-sales transactions with MG Online Garage Service

June 15, 2020 | 12:02 am

BRITISH-BRED auto brand Morris Garages (MG) is exerting the utmost effort to guarantee the safety of both customers and staff as it reopens its dealerships. One of its relevant programs is the MG Online Garage Service. Through this, “clients can now consult with accredited MG after-sales service professionals who can conduct remote vehicle diagnosis over video chat. This service allows MG Philippines’ after-sales professionals to make quick, informed opinions on vehicles, without requiring the client to physically go to a dealership.”

It also lets MG service professionals assess whether or not a client is eligible for the MG Mobile Garage home service, which allows a certified MG technician visit a client to do work on a vehicle right in the customer’s garage. MG said in a release that its technicians “are also trained to practice social distancing and practice safety and hygiene precautions even when making house calls and other such trips outside of dealerships.”

To schedule a video consultation and vehicle diagnosis with the MG Online Garage Service, customers may send a message to reachus@mgmotor.com.ph, call the 24/7 MG hotline at (02) 5328-4664, or send a message through the My MG App.

All MG dealerships nationwide encourage clients to book ahead before visiting by calling or using the My MG mobile app to schedule appointments. “This will ensure that the needs of each client are fulfilled while adhering to the global recommendation to practice safe social distancing and limiting the amount of people in dealerships at any given time,” said MG.

Customs bureau, PayMaya roll out payment system

June 15, 2020 | 12:02 am

THE Bureau of Customs (BoC) has teamed up with e-wallet service company PayMaya Philippines, Inc. for an online payment system to collect, transmit and remit Customs fees, charges, duties and taxes.

BoC and PayMaya, along with the Bureau of the Treasury (BTr) and the Development Bank of the Philippines (DBP), inked a memorandum of agreement on Friday allowing the use PayMaya’s digital services for both local and cross-border payments.

In a press release on Sunday, the partners said the services include online checkout using credit or debit cards and payment of bills via PayMaya’s application, One POS terminal, QR (quick response) code and Smart Padala Centers bills payment.

BoC said the partnership also covers the payment of client service fees and the deposit of the collected fees and other payments to the DBP.

All collections and payments made in and deposited by PayMaya will be remitted to a BTr-BoC-PayMaya clearing account.

BoC is then required to submit to the BTr office a list of deposited collections (LDC) on the daily remittance of Customs fees to the clearing account.

“The LDC report shall be prepared by the collection district who issued order of payment and validated by the Bureau of Customs-Revenue Accounting Division, (BOC-RAD) based on the detailed reports generated/submitted by PayMaya using its payment collection service,” it said.

The BoC said it would continue to adopt measures necessary to facilitate and minimize disruption to the supply chain during the crisis.

In October last year, the Bureau of Internal Revenue (BIR) partnered with PayMaya to allow its users to settle tax payments via the application. — Beatrice M. Laforga

Audi holds factory warehouse sale anew

June 15, 2020 | 12:01 am

FIRST HELD early last year, the successful Audi Factory Warehouse Sale sales promotion event runs anew until July 31, 2020.

Audi Philippines promises more than P1 million in discounts on select models, as well as huge savings on the rest of the lineup. The company said in a release that this is made possible through the support of Audi AG. Offered in the promo are the Audi A4 1.4 TFSI, A6 2.0 TFSI and A8 3.0 TFSI MHEV sedans; the RS4 Avant TFSI; and the Q2 1.0 TFSI, Q3 1.4 TFSI, Q5 2.0 TDI, Q5 2.0 TFSI and Q8 3.0 TFSI MHEV SUVs. All are 2020 models.

Included with all vehicle purchases made through the Audi Factory Warehouse Sale 2.0 promo is the Audi Clean disinfection package, which assures that all vehicles are thoroughly sanitized with advanced cleaning materials before release customers. The move adheres to Audi Philippines’ implementation of stringent sanitation and safety protocols, which prioritize the health of the company’s clients, guests, and work force.

Among the measures which Audi Philippines has put in place to ensure this are the strict observance of all hygiene and social distancing practices; wearing of PPE suits by sales executives when dealing with clients; appointment-basis showroom and service center visits; disinfection of all vehicles that enter and leave the company’s facilities; and regular and thorough cleaning of the premises. For more information, call 0917-813-9064, 0917-806-2946, or 0917-935-4111.

Peso to drop on second wave fears

June 15, 2020 | 12:01 am

THE PESO is likely to weaken this week amid risk-off sentiment due to worries over second wave infections that could affect the economy.

The local unit closed trading at P50.195 against the dollar on Thursday, retreating by 34.5 centavos from its P49.85 finish on Wednesday, according to data from the Bankers Association of the Philippines.

It also depreciated by 39.5 centavos from its P49.80-per-dollar close on June 5.

The peso succumbed to the dollar after the grimmer economic outlook of the US Federal Reserve, Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said.

“The peso exchange rate closed weaker after latest signals from the US central bank that the US economic recovery may take realistically much longer,” Mr. Ricafort said in a text message.

Fed Chairman Jerome H. Powell on Wednesday said the economic damage caused by restrictions due to the coronavirus may impede the United States’ recovery for years, Reuters reported.

Mr. Powell said they will use their tools to support the market and economy towards recovery and added they are “not even thinking about raising rates at this point”.

Aside from Fed’s latest signal, there are also heightened fears of a possible second wave of infections, a trader said.

“They’re starting to have fear for second wave of infections. So this creates risk-off sentiment,” the trader said in a phone call.

RCBC’s Mr. Ricafort said investor sentiment this week will be guided by the government’s decision on the quarantine measures to be imposed after June 15 and the spread of the virus.

“Major catalysts would include any further relaxation of lockdowns locally and the trend in local new cases,” he said.

President Rodrigo R. Duterte is expected to announce his decision related to the community quarantine today, the same day the measures imposed on May 15 are set to end.

Areas in the country are currently either under modified general community quarantine or general community quarantine.

Mr. Ricafort added that the remittance data released late Friday will likely affect market sentiment.

Cash remittances from overseas Filipino workers fell by 4.7% to $2.397 billion in March from the $2.514 billion a year ago, central bank data showed.

The 4.7% decrease is the first contraction since the -2.9% in June last year and the worst decline since the -9.8% in March 2018, which was amid high inflation and a weak P52-per-dollar level exchange rate.

The Bangko Sentral ng Pilipinas said in its latest estimates released Thursday that cash remittances will likely decline by 5% this year versus the 2% growth it forecasted in May and the baseline 3% estimate in November.

Aside from the announcement on the lockdown, the trader said investors will also track developments in the US market.

“There is already a risk-off in the US [market] because of worries about the second wave. Will this risk-off sentiment continue?” the trader said.

For this week, Mr. Ricafort said the peso could move within the P49.95 to P50.35 levels versus the dollar while the trader gave a forecast range of P50.00 to P50.50. — L.W.T. Noble with Reuters

Coronavirus casts shadow on bank stocks

June 15, 2020 | 12:01 am

By Mark T. Amoguis, Assistant Research Head

ANALYSTS were mixed on the prospects for owning bank stocks as the coronavirus disease 2019 (COVID-19) pandemic puts a damper on earnings.

On a quarter-on-quarter basis, the bellwether Philippine Stock Exchange index (PSEi) declined 31.9% in the first quarter this year from a 0.5% growth in the previous quarter and a 6.1% growth in the first quarter of 2019.

The financial subindex — which included the banks — tanked 34.3% in the first quarter, a stark contrast from a 3.3% growth the previous quarter and a one-percent decline in the first quarter last year.

This double-digit decline was mirrored across all the listed banks’ stock price performance during the period, which was largely brought about by the pandemic that sent the Philippine economy to a standstill. On a quarter-on-quarter basis, share prices were lower by range of 45.1% for Security Bank Corp. (ticker symbol: SECB) to eight percent for the UnionBank of the Philippines, Inc. (UBP).

“A big factor in the first quarter for the banks, as well as the broad market, was the uncertainty… brought about by the COVID-19 pandemic and how long it would last,” said China Bank Securities Corp. Research Director Rastine Mackie D. Mercado.

“Moreover, the implementation of the enhanced community quarantine (ECQ) may have weighed on the listed banks’ performance for [the first quarter] as business disruptions may impact the quality of loan portfolios (i.e., potential increase in nonperforming assets) — putting downward pressure on profitability as credit costs mount (higher provisions),” he added.

Mandarin Securities Corp. Research Analyst Zoren Philip A. Musngi said store closures and reduced business activity during the quarter led to expectations of a rise in loan payment delinquencies and possible bankruptcies.

“As seen in first-quarter earnings, banks have mostly doubled their loan loss provisions,” Mr. Musngi said.

“The sell-off in financial markets also led to losses to many trading desks and portfolios, which affected some banks’ non-interest income side,” he added.

To contain the spread of COVID-19, the government ordered a lockdown for the entire Luzon island in mid-March, effectively closing the majority of businesses and suspending public transportation.

“Despite the pandemic, some mid-size banks were able to have double digit growth in net income, driven by lower funding costs and robust trading gains. This was made possible by the recent cut in policy rates and reserve requirement by the BSP (Bangko Sentral ng Pilipinas),” Philippine National Bank (PNB) Research Department Senior Equity Research Analyst Wendy B. Estacio and Equity Research Analyst Marco R. Mauleon said.

During the first quarter, the BSP slashed key policy rates by a total of 75 basis points (bps) — 25 bps on Feb. 6 and 50 bps on March 19. It fired off another 50-bp cut to interest rates last April 16, bringing borrowing costs to record lows since the BSP shifted to an interest rate corridor in 2016 as well as completely scaling back the 150-bp hike implemented by the BSP in 2018 to arrest rising inflation.

As of this writing, the overnight reverse repurchase rate stands at 2.75%, while overnight deposit and lending rates are at 2.25% and 3.25%, respectively.

The BSP’s Monetary Board likewise slashed the reserve requirement ratio (RRR) of universal and commercial banks by 200 bps in a bid to boost liquidity. The Monetary Board has authorized BSP Governor Benjamin E. Diokno to reduce the RRR of up to 400 bps for this year.

The RRR for big banks now stands at 12%, while those for thrift and rural banks were maintained at four percent and three percent, respectively. Liquidity boost for smaller banks came through the 400-bp reduction in the minimum liquidity ratio for stand-alone thrift and rural banks to 16% until the end of the year.

Meanwhile, the country’s universal and commercial banks booked a P50.44-billion net income in the first quarter, 1.82% higher than the P49.54 billion posted in the first quarter of 2019, BSP data showed.

Net interest margin (NIM) — a ratio that measures banks’ efficiency in investing their funds by dividing annualized net interest income to average earning assets — continued to improve to 3.58% in the first quarter of the year from 3.44% in the final three months of 2019 and 3.29% in the first quarter last year.

Meanwhile, the provision for credit losses on loans and other financial assets ballooned 180.3% year-on-year to P23.35 billion in the first three months of the year.

‘MIXED BAG’
Despite positive earnings performance in the first quarter, prospects for banks remain uncertain according to analysts.

“It’s a mixed bag for banks. For the first two-and-a-half months, banks are doing okay. However, the world drastically changed in the last few days of the quarter due to the “Great Global Lockdown,” I.B. Gimenez Securities, Inc. Research Head Joylin F. Telagen said.

“[O]n conservative note, banks also recognized higher provisions that tempered/affected the bottom line in general,” she added.

Some analysts point to UBP’s and Security Bank Corp.’s (SECB) financial performance during the quarter as both posted double-digit growth in net incomes despite recording higher loan loss provisions.

UBP’s stock performance had outperformed its banking peers and the index so far this year, said Mandarin Securities’ Mr. Musngi.

“We think this can be attributed to the bank’s robust internet/mobile banking app and infrastructure that they have steadily grown over the past years,” he added.

For PNB’s Ms. Estacio and Mr. Mauleon, “Arguably, the ECQ has become an advantage for [UBP] in a competitive standpoint as customers were compelled to embrace digital platforms to address their financial needs. As a result, UBP, being one of the most digitally focused banks in the country, was able to convert its existing customers towards digital platforms and even generate new customers.”

The Aboitiz-led bank’s net income jumped 22% to P2.64 billion during the first quarter from P2.16 billion last year. The potential impact of COVID-19 has also been factored in as UnionBank boosted its provisions for loan losses to P1.3 billion, 7.6 times higher than the P174.6 million it allotted in January to March 2019.

Meanwhile, SECB posted a net profit of P2.89 billion during the quarter, 21% higher than P2.38 billion last year. Its provisioning soared 19-fold to P5.69 billion compared to P295.28 million in 2019’s comparable three months.

“This was attributed to the bank’s strong top-line as NIM expanded by 129 bps year-on-year to 4.68% coupled with higher trading gains,” said PNB’s Ms. Estacio and Mr. Mauleon.

Justin Lawrence J. Tembrevilla, research head at Unicapital Securities, Inc., said all of the banks under its coverage — which includes BDO Unibank, Inc. (BDO), Metropolitan Bank & Trust Co. (MBT), Bank of the Philippine Islands (BPI), SECB, and East West Banking Corp. (EW) — achieved revenue growth amid sustained momentum in core lending and deposit-taking activities.

“[T]heir bottom-line growth tells a different story,” Mr. Tembrevilla said.

“What separated the ‘Big Three’ from their mid-tier counterparts is that BDO, BPI, and MBT needed to book higher provisions to be able to service their heftier portfolio, in stark contrast to the leaner portfolio of mid-sized banks,” he added.

OUTLOOK
For Piper Chaucer E. Tan, client engagement officer and research associate at Philstocks Financial, Inc., the increase in provisions for loan losses puts a dampener for listed banks’ earnings this year.

“This will pull the net income of the banks, thus shrinking its EPS (earnings per share), which is a major consideration of market investors for the profitability portion and valuation of the stock,” he said.

For PNB’s Ms. Estacio and Mr. Mauleon: “We expect higher provisions to drag banks’ earnings this year, particularly those with higher exposure to retail and SMEs segments. However, these may be offset by expansion in banks’ margins due to lower funding costs,” they said.

For China Bank Securities’ Mr. Mercado, “it’s too early to ascertain the extent of loan loss provisioning moving forward.”

“[B]anks that continue to beef up their loan loss provisions are likely to see more tempered bottom line growth rates this year as this is treated as an expense line item for banks. Thus, the larger the provisions are, the bigger its impact down the line,” he explained.

Mr. Mercado added that while the dovish moves from the BSP have provided a positive impact on the banks’ profits, the outlook for the year “will mostly be determined by banks’ guidance on nonperforming loans and credit costs.”

Unicapital’s Mr. Tembrevilla said the latest monetary decisions from the central bank should help banks tread the challenges in the next quarters.

“Trading gains could arise as we are still in a low interest rate regime, giving banks some opportunities to unwind their investment securities portfolio,” he said.

Mandarin Securities’ Mr. Musngi said the impact of the pandemic and the resulting lockdowns on loan demand remains uncertain even with monetary easing, especially as businesses scale down their expansion plans and consumers take a conservative view on spending.

“Banks that have robust Internet and mobile banking capabilities will likely see better results compared to those that are sticking to traditional banking,” Mr. Musngi said.

“We advise clients to stay away from banks for now as it is still uncertain how much the coronavirus pandemic will negatively impact the economy going forward,” he added.

For I.B. Gimenez Securities’ Ms. Telagen: “I’m more generally neutral to bearish/negative to the sector and will change to buy once I see earnings are picking up and the global economy started to recover. Currently, due to uncertainties, I focus on top banks.”

Coronavirus slams West Africa’s cashew market, some crops left to rot

June 15, 2020 | 12:01 am

ABIDJAN/DAKAR — Olivier Gore-Bi took out loans to ready his 12-acre cashew farm in Ivory Coast for harvest. He is now leaving some of his crop to rot after the COVID-19 (coronavirus disease 2019) pandemic accelerated a fall in prices in the world’s top cashew-farming region to unprofitable lows.

In the first few months of a normal year, over 55% of all cashews would be harvested by farmers in West Africa, dried and shipped in raw form to Asian processors before being sold to consumers worldwide.

But this year, the pandemic was hitting the sector just as West Africa’s cashew marketing season was meant to kick off.

Prices for raw cashews, which were already under pressure from excess supply in the last few years, tumbled after processing slowed in Asia and border closures in March stopped major buyers flying to West Africa from Vietnam and India.

With the majority of consumers outside the continent, the longer-term outlook for West Africa’s cashew sector will hinge on how key markets recover from the pandemic.

Singapore-based Olam International, the world’s leading raw cashew nut trader, said epidemic-related global supply chain delays and reduced consumer demand had dampened the market.

Olam Cashew President Amit Khirbat told Reuters that global prices are expected to stabilize at current levels for the foreseeable future as lockdown restrictions are lifted and demand gradually returns.

But for farmers like Gore-Bi, “This year is a catastrophe,” he said by phone from the central Ivorian region of Marahoue where he cultivates the nuts that are eaten as snacks or used in curry dishes, and desserts.

Ivory Coast saw international contracts fall to $900, some 35% lower than the start of the season, its cashew board told Reuters, citing a lack of buyers and slowdowns in Asia.

“Nobody is buying so it’s not worth tiring oneself with the harvest,” Gore-Bi said. Four other Ivorian farmers said they felt the same.

Gore-Bi stopped harvesting in late April after his cashews fetched only around 200 CFA francs ($0.34) per kg, less than half of what he was meant to receive as a state-guaranteed minimum.

A dozen cashew farmers, local buyers or government and trade officials in Ivory Coast, Ghana, Guinea-Bissau, Senegal and Gambia told Reuters the COVID-19 crisis had disrupted the market, but the fallout varied across the region.

Continental industry body the African Cashew Alliance has warned that Africa’s raw cashew exports this year could fall up to 30% below 1.2 million tons exported last year, while output may be up to 10% below around 2 million tons produced in 2019 as disillusioned farmers leave some crops unharvested.

Ivorian cashew board director Adama Coulibaly agreed output would be hit, but said it was too early to predict by how much. The country’s 2020 forecast has already fallen 10% to around 720,000 tons due to a lack of rain.

Measures to contain the virus also hampered flows of harvested cashews in the region.

A dusk-to-dawn curfew in Senegal shortened the time available to dry nuts. A new cashew cargo facility at Gambia’s airport idled due to the halt in air traffic and a regional lockdown in Ghana made it harder to deploy workers, according to officials and traders.

Some West African rural communities, whose livelihoods depend on what they earn from cashews during the lean season, are feeling the pain.

In the tiny coastal country of Guinea-Bissau, where cashews account for around 90% of export revenue and are the only source of income for 650,000 households, the government has given emergency funds to banks to support the sector.

Some Bissau farmers are distilling extra rum from unsold nuts, according to the farmers’ association.

But the situation is less gloomy elsewhere. Buying has picked up slightly in Ghana and production is expected to reach the forecast 140,000 tons, agricultural ministry official Anim Jerry Jacob told Reuters.

In April, prices for farmers had fallen over 56% to 3.5 Ghanaian cedi ($0.6140) per kg, he said.

Wayne Tilton, Africa director for Red River Foods, one of the largest cashew importers for the United States, said the crisis’s impact on Ghana’s cashew sector had been less bad than he had feared. Ghanaian farmers are receiving higher prices at the tail end of this season than at the same time last year, he said.

The crisis has warped dynamics on the consumer end in unprecedented ways. The mass cancellation of weddings in India meant demand plummeted for the cashew-based sweets traditionally offered as gifts, said Dhruv Dalmia, whose family’s business exports nuts from West Africa.

Conversely, US cashew imports for consumption jumped 18% year on year in January-April, trade data shows. Panic-buying is credited for the welcome boost, but the trend is expected to reverse in the second half of 2020 given the surge in unemployment to 30 million people.

“Are they going to be running out and buying cashews? Probably not,” Mr. Tilton said.

Red River Foods’ forward US sales for the third quarter are lower than in the same period of 2019, he said, without giving exact figures. — Reuters

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