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BSP chief Diokno says he’s happy where key rate is

PHILIPPINE CENTRAL BANK Governor Benjamin Diokno said the monetary easing implemented against the coronavirus was appropriate, and that further action will depend on the economic recovery.

“Right now, we’re happy where the current policy rate is,” Mr. Diokno said on Wednesday in an interview with Bloomberg. Monetary authorities are ready to use all the tools at their disposal, but are likely to do so only if “there’s more bad news.”

As lawmakers debate fiscal stimulus measures, the Bangko Sentral ng Pilipinas (BSP) has done much of the heavy lifting in terms of virus relief. Monetary authorities have cut the benchmark interest rate this year by 125 basis points to 2.75%, lowered the ratio of funds lenders must hold in reserve by 2 percentage points, eased rules on bank capital and reserves and deployed a bevy of measures to stabilize the bond market.

Mr. Diokno said negative interest rates are “out of the question” for the Philippines, adding that “some governments would want to have positive real rates.” Economic activity should pick up as businesses open, but there’s a risk that people will stay at home for fear of catching the virus, Mr. Diokno said.

President Rodrigo Duterte has begun loosening a lockdown on the capital region that has been among the world’s strictest. With activity slowing sharply in recent months, the Philippine economy faces its deepest contraction in three decades this year.

Policy makers are scheduled to meet again on the key rate on June 25.

The Bangko Sentral is leaving it up to the country’s Treasury to make use of additional repurchase agreements with the government.

Mr. Diokno also said moves made by the central bank have funneled an estimated P1.1 trillion ($21.9 billion) into the financial system, with bond-buying activities in the secondary market accounting for just a “small” portion of that.

The central bank participates in the foreign exchange market “only to smooth the fluctuations;” the strength of the peso and other regional currencies is “because of the weaker dollar.” — Bloomberg

AC Energy group puts up A$777-million bid for Australian renewable company

By Adam J. Ang

A COMPANY controlled by AC Energy, Inc. has offered A$777 million to take over an Australia-listed renewable energy firm in a deal that could further boost the Ayala group’s clean energy capacity.

Listed conglomerate Ayala Corp. told the stock exchange on Wednesday that UAC Energy Holdings Pty. Ltd. had acquired a 12.82% stake in Infigen Energy Ltd. for A$90.4 million.

Separately, Infigen disclosed to the Australian Securities Exchange on Wednesday that UAC intends to buy more shares at A$0.80 each apart from its already acquired stake. UAC said in a press release that the off-market takeover bid implies an equity value of A$777 million for 100% of Infigen.

“Our investment into Infigen reflects our confidence in the prospects for renewable energy in Australia. Investing into an operating renewable energy portfolio helps us meet our corporate and sustainability objectives. We are excited to support Infigen as it continues to expand in this sector,” AC Energy Chairman Fernando Zobel de Ayala said in a statement.

AC Energy’s parent Ayala Corp. said the investment is part of its energy unit’s aim to bolster renewables capacity by 2025.

“The investment in Infigen is a crucial move forward for AC Energy’s regional expansion as it remains committed to its goal of exceeding 5GW (gigawatts) of attributable capacity, with 50% of energy generated from renewables, by 2025,” the listed conglomerate said in a disclosure to the Philippine Stock Exchange, Wednesday.

Ayala expects the affiliate company’s offer to be a “months-long process.” The bid is subject to approval from the Australian Foreign Investment Review Board and the acceptance of Infigen’s security holders.

“The acquisition of interest in Infigen by UAC strengthens both AC Energy’s and UPC\AC’s commitment to provide low-cost power in Australia by expanding its operating portfolio and enabling the sale of energy through retail channels,” the company said.

Infigen develops, generates, and sells renewable energy. It owns and operates 670 megawatts of wind farms in Australia, along with gas, battery, and contracted assets.

UAC is 75% owned by AC Energy. The remaining 25% is held by UPC\AC Renewables Australia, a joint venture of the Ayala unit and UPC Renewables Australia.

“The Infigen investment is highly complementary to our previous investments in UPC\AC Renewables Australia, where we are already developing a large portfolio of renewable energy assets,” AC Energy President Eric T. Francia said.

The joint venture is currently developing four renewables projects in Australia.

“We have ready access to capital and significant renewable energy expertise that will position us well to support Infigen’s pipeline of projects and focus on much needed renewable energy investment and associated employment in Australia,” UAC Chairman Anton Rohner said in a press statement.

On Wednesday, shares in Ayala Corp. rose by 1.82% to close at P755.50 each.

Cebu Landmasters maintains P10-billion capex for 2020

By Denise A. Valdez, Reporter

CEBU Landmasters, Inc. (CLI) is leveling its budget for capital expenditures (capex) this year with last year’s P10 billion spending as it tempers aggressiveness for land acquisition.

In an online briefing on Wednesday, CLI Chairman and Chief Executive Jose R. Soberano III said the company is focusing on rolling out 12 more projects in the second half of the year, which would raise its 2020 launches to a total of 14 projects.

This pipeline would add P19.4 billion worth of projects to the company’s inventory, which is currently down to around P10 billion.

“Because of these 14 projects that we have laid down for 2020, including the two that we have launched already and the 12 that we are definitely launching by the second half, we could see (our capex this year) around (the same range as last year’s P10 billion),” Mr. Soberano said.

“There’s going to be not much but there’s still going to be a significant amount that we will have to expense in terms of capex. Why is it going to be just about the (same) number? Because mainly there is going to be not much aggressive acquisition to be expected for the remaining months,” he added.

Mr. Soberano said CLI has “enough on its plate,” as it has 108 hectares of property in its landbank which it would use for new developments that will be rolled out in the next three to four years.

The company currently has 40 ongoing projects in various stages of development and about 27 projects in the pipeline based on the properties it has acquired.

“With the inventory that we have lined up for projects mainly for the residential market in 2020, particularly the second half launches, and even those landbank that we have already acquired to serve the mixed-use and hospitality project lines, there is no need for Cebu Landmasters to do some major acquisitions this year,” Mr. Soberano told stockholders in an online meeting.

CLI booked an attributable net income of P572.23 million in the first quarter, lower by 4% from a year ago, as its costs and expenses grew faster than the 13% rise in revenues to P2.11 billion.

The company is projecting its bottomline this year to be plus or minus 10% of the P2.01 billion it recorded in 2019. Mr. Soberano said this is a “very guarded optimistic posturing,” noting support may come from a private equity play that CLI is currently exploring.

“We…are already negotiating with some private equity investors, or even listed companies who have approached us, on what possibilities that we could have in the coming months, which equity play we hope to be able to realize within the second half of 2020,” he said.

Amid the economic decline due to the coronavirus disease 2019 (COVID-19) pandemic, CLI remains hopeful that demand for its projects will be sustained because of the housing backlog in the Visayas and Mindanao regions.

“Even with the slowdown, there is a strong demand for housing, especially in VisMin,” Mr. Soberano said. “There might be readings that things will turn cold, especially from the OFW (overseas Filipino workers) market, but yet we in Cebu Landmasters are able to still generate interest from buyers.”

Mr. Soberano credits the company’s digitalization infrastructure for its sustained operations during the lockdown period, during which time it was able to record P2 billion worth of reservation sales.

Shares in CLI at the stock exchange gained 15 centavos or 4.11% to P3.80 each on Wednesday.

ABS-CBN’s Lopez willing to give up US citizenship

By Genshen L. Espedido, Reporter

ABS-CBN Corp.’s Chairman Emeritus Eugenio Gabriel L. Lopez III said during a joint hearing at the House of Representatives that he would give up his American citizenship if it “came down to conflict of interest” regarding his management of the network.

Asked by Anakalusugan Party-List Rep. Michael T. Defensor if he considered renouncing his American citizenship, Mr. Lopes replied: “Yes, I have considered it. But you know, the way I see it, I am first and foremost Filipino. I will live and die in the Philippines, that has certainly been the family’s position. If it came down to conflict of interest, I would give up my US citizenship in a minute.”

Meanwhile, the majority of lawmakers who questioned his citizenship were convinced that he is Filipino.

Justice Undersecretary Emmeline Aglipay-Villar said that Mr. Lopez never lost his Filipino citizenship despite being born in the US and holding an American passport.

“Ang kanyang paggamit ng US passport ay hindi dahilan para mawala ang kanyang Filipino citizenship. At ang hindi niya pagkakaroon ng Philippine passport ay hindi rin dahilan para hindi siya maging Pilipino,” she said during the joint hearing of the House committees on legislative franchises, and good government and public accountability.

(His use of a US passport is not a reason to lose his Filipino citizenship. And his not having a Philippine passport is also not a reason for him not to be a Filipino.)

Albay Rep. Edcel C. Lagman said that Mr. Lopez’s citizenship is a non-issue because he is “undeniably a natural born Filipino citizen.”

“I submit that the allegation that former ABS-CBN President and Chairman Eugenio Lopez III is an American citizen is a non-issue because he is undeniably a natural born Filipino citizen, having been born of a Filipino father as well as a Filipino mother. No amount of interpellations would change this overriding and unalterable fact,” he said.

Despite acknowledging Mr. Lopez’s Filipino citizenship, Ako Bicol Party-List Rep. Alfredo A. Garbin questioned whether a dual citizen can own a mass media company.

“Gabby Lopez is a natural born citizen, but he is also an American citizen by principle applied in American law. Ang tanong ho ba, whether a dual citizen can own a mass media company?” Ako Bicol Party-List Rep. Alfredo A. Garbin said.

Mr. Lopez’s lawyer Mario L. Bautista said the 1987 Constitution does not prohibit a dual citizen from owning a media company.

“Ni minsan po, wala po kaming narinig na question o reklamo from the SEC (Securities and Exchange Commission) or from the DoJ (Department of Justice), who are vested the jurisdiction, authority, and most importantly, the expertise with respect to the nationalization law. Wala pong nagsasabi sa amin na kapag dual citizen ka, ‘di puwede,” he said.

(Not once have we heard of a question or complaint from the SEC or the DoJ, who are vested the jurisdiction, authority, and most importantly, the expertise with respect to the nationalization law. We have never been told that a dual citizen is prohibited.)

The two panels were tackling Mr. Lopez’s citizenship to aid their decision whether to give a new franchise to ABS-CBN. The 1987 Constitution states that media companies should be 100% Filipino-owned.

The next hearing on the network’s franchise will tackle the issue on Philippine Depositary Receipts (PDRs). Solicitor General Jose C. Calida’s quo warranto petition claimed that the network violated the constitutional prohibition on foreign ownership of media when it issued PDRs to foreigners through ABS-CBN Holding Corp.

The House committees will convene again on June 8.

Stylish masks made with Mindanao weave

DAVAO CITY — With face mask now a must-have accessory, fashion designer Wilson Niñofranco Limon has taken the opportunity to help meet demand while continuing his advocacy of promoting local craftsmanship.

“The prints that we use for the #MaskofHope were from my previous collections,” he said via messenger.

Mr. Limon, along with three needleworkers, produce three-layered “washable, reusable, and breathable” face masks made from neoprene fabric with patterns from Mindanao’s ethnolinguistic groups.

Among the mask designs are the Manata which is inspired by the inabal, a traditional textile of the Bagobo-Tagabawa made from abaca; Flanek, a print from Mr. Limon’s Spring Summer 2015 collection, which features the bayanihan (community) spirit of the B’Laan; and the Stellar pattern from the T’Boli.

“This project is very close to my heart. It takes me back to where I started… Stellar is a fashion design competition that I joined way back year 2016. It was my first win also,” Mr. Limon said.

Twenty percent of the mask sales go to the indigenous communities through the Wimler Organization for Bagobo weavers, Lake Sebu Indigenous Women Associations, Inc., the Ateneo de Davao University Community Engagement and Advocacy Council, and the Lamlifew Tribal Women’s Association.

The masks are priced at P499 each, P899 for two masks, P1,149 for three, and P1,500 for four, exclusive of shipping costs.

Since launching in mid-May, Mr. Limon said most of the orders have been from Davao City and Manila, and they are hoping to meet international orders soon. Orders can be placed through the link https://forms.gle/LRbxgv4HHQnC71396 and through Mr. Limon’s facebook page @ninofranco.ph. — Maya M. Padillo

Pandemic delays delivery of Chelsea Logistics’ passenger ferry from Japan

By Arjay L. Balinbin, Reporter

Chelsea Logistics and Infrastructure Holdings Corp. on Wednesday said the scheduled delivery of its new roll-on/roll-off passenger ferry from Japan in April had been “deferred” due to the coronavirus pandemic.

“We still have two ships in the pipeline that are due for delivery. One actually was due last April 21, but was deferred because of the COVID-19 situation,” Chelsea Logistics President and Chief Executive Officer Chryss Alfonsus V. Damuy said during the company’s annual stockholders’ meeting on Wednesday.

Mr. Damuy was referring to the 97.78-meter MV Starlite Venus that has a carrying capacity of 740 passengers, 22 buses, and six trucks. The brand-new passenger vessel was built by Japan-based shipbuilder Kegoya Dock Co., Ltd.

In a news release in January, Chelsea Logistics said the M/V Starlite Venus would bring its fleet “to a total of 74 vessels, consisting of 22 roll-on/roll off passenger vessels, 11 fastcrafts, 9 cargo ships, 16 tankers, 13 tugboats, and 2 floating docks through its subsidiaries Chelsea Shipping Corp., Starlite Ferries, Inc., Trans-Asia Shipping Lines, Incorporated, and Supercat Fast Ferry Corporation.”

Mr. Damuy said the listed shipping and logistics company is also awaiting the arrival of a 123-meter ro-ro passenger vessel from Japan’s Fukuoka Shipbuilding Co. Ltd. He said the vessel is “coming in the second quarter 2021.”

Chelsea Logistics is continuously looking at other opportunities to get “a better ship,” Mr. Damuy said.

“It only depends on the price and the timing on when we will bring the ship,” he added.

He also explained that once such ships are deployed, it will “take a year” for them to “mature on the revenue side.”

‘NEW NORMAL’ OPPORTUNITIES
Mr. Damuy said the company is “packaging some specialized service” as it sees that there are “more opportunities coming in when things start to go back to normal.” He said the coronavirus pandemic has caused an increase in demand for logistics services.

“[We are] exploring other opportunities out of this pandemic,” he noted.

As for the company’s partnership plans, he said: “We’ve been talking to various people, domestic and foreign operators for a possible partnership to bring value to business. However, these discussions are still in initial stages.”

The Dennis A. Uy-led firm’s net loss ballooned by 51% to P832 million last year as the company suffered from its share in the losses of some units and expenses for new vessels and a warehouse complex.

VLF 2020: A nostalgia trip

PLAYWRIGHT Jay Crisostomo’s entry to this year’s Virgin Labfest theater festival, Dapithapon, tackles the struggles of student life and adolescence.

The play follows three senior high school boys who all have to confront their greatest fears in one day: flunking out of school, impossible parental expectations, and an unhealthy infatuation with a teacher. They cling to one another and try to preserve their friendship before they are parted.

Mr. Crisostomo said that the play is a “slightly autobiographical story” of his time in school.

“All the main characters were based on friends from school. Iba lang ‘yung mga pangalan (Names were just altered),” he told BusinessWorld during a Zoom interview on June 2.

Aside from the story being a trip down memory lane, “I want [the show] to be a reminder [for others] to keep that youthful vigor, even if we have to face the real world and ‘be adults’,” he said.

TRANSITIONING TO FRAMES
Thanks to the ongoing COVID-19 (coronavirus disease 2019) pandemic, Dapithapon and the other plays in this year’s Virgin Labfest (VLF) — the Cultural Center of the Philippines’ theater festival which focuses on new, unstaged one-act plays — are going to have live streamed performances on the VLF YouTube page.

A comic book’s panels is what influenced the Dapithapon team’s approach to telling the play’s story online.

“It’s been a grueling process for us to ask actors to go into certain frames,” Director Sigmund Roy Pecho said, citing that the actors navigate themselves in their own spaces depending on the required shot.

“Perhaps it’s difficult for some to call it theater since we are not in the same space and do not have an audience to interact with,” he added.

The production will also include anime reactions to the show.

“Malayu-layo na ‘yung narating natin, pero malayo pa ‘yung babaybayin natin (We have come a long way, but we have a long way to go,” Mr. Pecho said on the challenges of working in the new medium.

The play’s cast members are Peewee O’Hara, Quiel Quiwa, Khayl Sison, Ina Azarcon-Bolivar, and Jerome Dawis.

Dapithapon will stream live on June 14, 3 p.m., and June 27, 5 p.m.

Aside from the plays and staged readings, viewers can also catch the VLF Playwright’s Fair online with this year’s playwrights talking about their work on June 11-14, 17-20, 25-27 at 8 p.m. Meanwhile, the Virgin Labfest 2020 Writing Fellowship Program will culminate in an online staged reading of the fellows’ works on June 28 at 2 p.m. and 5 p.m.

For more details and show schedules, visit https://www.facebook.com/culturalcenterofthephilippines/ and https://www.facebook.com/thevirginlabfest/, or join https://www.facebook.com/groups/VLFTambayan/. — Michelle Anne P. Soliman

SEC flags Financial Breakthrough, One Market Global investor scheme

THE Securities and Exchange Commission (SEC) has flagged two groups offering investment opportunities to the public without secondary licenses from the commission.

In advisories on its website, the corporate regulator named The Filipino Financial Breakthrough Program/Financial Breakthrough Program (Financial Breakthrough) and One Market Global (OMG) as entities soliciting investments without authorization.

Through its investigation, the SEC said it found that Financial Breakthrough is running its investment scheme through Facebook, enticing the public to open an account and follow several steps to earn up to P125,400.

Opening one account would cost P18,660 and seven accounts would cost P130,620. Investors would then be entitled to a sign up bonus of P12,000, a referral bonus of P11,550, a pairing bonus of P16,800, an additional bonus of P33,600 if he/she gets to enroll four persons, a P1 million insurance by AXA, and free products from Royale Business Club, Inc.

The SEC said offering these bonuses in exchange of an investment is equivalent to offering securities, which in order to be legal, has to be registered with the SEC.

The SEC said Financial Breakthrough does not have a record of registration with the commission, nor does it have a license to solicit investments and sell securities, therefore its operation is violating the Securities Regulation Code.

In the case of OMG, the SEC said the group operates through a Facebook page and a YouTube uploader under the name “Pambansang Samaritano.” Both platforms offer opportunities for passive income, specifically, a return of 5.88-6% daily or 176–353% for 30 to 60 days.

OMG claims to be trading in the foreign exchange market, and offers referral bonuses for members that would get to invite more investors. Promotion materials from the group claim one could earn up to P627.75 million through referrals.

The SEC said OMG does not have records with the commission, and is therefore unauthorized to be running an investment business. While it claims to be registered with the Department of Trade and Industry under the name “On. Ma. Glo. Marketing,” OMG is violating the Securities Regulation Code with its operations.

“The public is advised not to invest or stop investing in any investment scheme being offered by any individual or group of persons allegedly for or on behalf of (the identified companies…),” the SEC said.

As a penalty, salesmen, brokers, dealers or agents that acted on behalf of Financial Breakthrough or OMG may be fined up to P5 million, imprisoned for up to 21 years, or both. — Denise A. Valdez

Global remittances may still grow; limited virus toll on some nations

GLOBAL REMITTANCE inflows could still grow this year, although some countries and sectors may see some impact from the pandemic, UniTeller said.

“In the past, remittances have been resilient but COVID-19 has been very different,” UniTeller CEO Alberto Guerra said in an online briefing on Wednesday.

“Corridors like Vietnam and the Philippines have not been affected as much, also Mexico. In particular, some countries in Latin America have been affected more,” he said.

The World Bank in April said global remittances could fall by 20% as the pandemic has affected economic activity in many countries due to lockdowns that have caused shutdowns of different industries.

Mr. Guerra said that the World Bank’s projection is “aggressively pessimistic” and will depend on various factors, including the country and industry sources for remittance inflows. He said the projected drop has not been observed so far, noting that some countries have seen declines but some have also seen growth.

“If you are going to ask me if Philippine remittances will go down by 20%….no, [it will not],” he said.

Bangko Sentral ng Pilipinas (BSP) data showed cash remittances to the Philippines in February grew by a slower pace of 2.5% year on year to $2.301 billion compared to the 6.6% expansion in January when inflows totaled $2.648 billion.

The BSP has already cut its growth projection for remittances to 2% this year from its 3% forecast before the virus hit.

Mr. Guerra said there will be varied impact depending on the source of remittances.

“Remittances coming from Hong Kong, Singapore, from the Middle East have been affected more than those from North America,” he said.

Aside from the pandemic, the decline in oil prices due to falling demand has affected some Middle East economies, which could in turn affect remittances from workers there.

“From Europe, we also have a mixed perspective — remittances from Spain, Italy, they have seen more impact more than other countries,” he added.

According to Mr. Guerra, industries that will be “dramatically hit” will be those in construction, cruise lines and travel-related industries, among others.

Meanwhile, he said those working in basic services as well as the healthcare sector will feel a minimal impact.

Lockdowns and political tensions have also affected remittances in the short term, Mr. Guerra said. In the case of domestic helpers in Hong Kong, he said although they continue to receive wages, the current turn of events has rendered them unable to go out to remit money.

Meanwhile, Mr. Guerra also said more migrant workers are opting to send remittances through digital means. He said many remittance companies have seen faster growth in online transactions versus traditional ones.

“The pandemic will just continue that process to grow…,” he said. — L.W.T. Noble

London phone boxes serve up coffee after lockdown

LONDON — Two of London’s famous red telephone boxes have been reborn as a coffee stall, and the owners say the lack of inside space that was a drawback when they opened a week before lockdown could now be an asset in a socially distanced capital. Couple Loreinis Hernandez and Sean Rafferty said Amar Cafe, which operated out of two adjacent disused phone boxes in west London, was trading for just a week before the city shut down at the end of March due to the COVID-19 (coronavirus disease 2019) pandemic. The easing of restrictions this week prompted them to reopen the café, which specializes in coffee from Hernandez’s native Colombia. “It was always going to be takeaways and maybe it might be better now for us because people would prefer to be outside, sitting in the park.” While stocks are good for a few weeks, at least, Rafferty and Hernandez are hopeful that the lockdown restrictions in the South American country do not prevent future deliveries. — Reuters

ERC urged to probe Iloilo power failures

PANAY Electric Co., Inc. (PECO), the former franchise holder of Iloilo City’s power distribution, has called the attention of the Energy Regulatory Commission (ERC) to look into how its rival MORE Electric and Power Corp. has been handling electricity distribution during the lockdown period.

In a virtual briefing Wednesday, PECO said it had filed with the regulator on May 22 a supplemental motion for reconsideration appealing, among others, to investigate the hours-long power outages that have beset the city in May under MORE’s watch.

“We are hoping that the ERC will call us for a hearing, or if not, resolve immediately our supplemental motion for reconsideration, given the escalating complaints of the consumers of Iloilo,” PECO legal counsel Estrella C. Elamparo told reporters.

In the motion, it also reiterated its right to due process when it was not informed of the ERC’s March 5 decision granting a provisional certificate of public convenience and necessity (CPCN), revoking PECO’s provisional authority to operate as a distributor.

“This is still undergoing evaluation,” ERC Spokesperson Floresinda B. Digal said when asked about an update on PECO’s request.

The 97-year-old electricity utility cited the two 13-hour maintenance operations of the Razon-led power distributor on May 17 and 30 in Jaro district and Iloilo City proper, respectively.

Last month, MORE conducted maintenance works after the findings from Meralco Industrial Engineering Services Corp. (Miescor) suggested the immediate upgrade of PECO’s facilities. It was in February when the utility started taking over the assets of the former power distributor.

“This is what happens when you force major upgrades within a short span of time, rather than spreading it out over a period of time [and] checking your records what [were] previously replaced, which lines are previously upgraded, and only upgrading what needs to be upgraded as of the moment,” Marcelo U. Cacho, PECO head of public engagement and government affairs, said in the briefing.

Mr. Cacho also cited other instances of power interruptions during MORE’s maintenance of feeder lines, as well as consumers’ complaints on alleged inaccurate electricity billings and the replacement of meters without their consent.

The Jaro substation is servicing 100,000 to 150,000 electricity consumers, while the substation at the city proper energizes 50,000 households.

The ERC reminded Iloilo City consumers in a May 6 advisory that they should pay their bills to MORE starting the March billing period.

Meanwhile, PECO has submitted a motion for reconsideration with the city government after it revoked the company’s business permit in May, citing its lack of CPCN and franchise.

Ms. Elamparo said the two supposed requirements were never required.

The ERC had granted PECO a provisional authority to continue its operations before its 25-year franchise from the government ended on May 25, 2019.

The legal battle between the two power utilities is far from over as cases are still pending with the ERC, Iloilo Regional Trial Court, Cebu Court of Appeals, and the Supreme Court. — Adam J. Ang

Yields on 7-day deposits slip on demand

YIELDS ON the central bank’s term deposits inched down. — BW FILE PHOTO

YIELDS on the central bank’s term deposit facility (TDF) dipped on Wednesday as oil prices continued to correct amid renewed demand.

Tenders for the seven-day notes offered by the Bangko Sentral ng Pilipinas (BSP) on Wednesday amounted to P328.68 billion, higher than the P170 billion on the auction block and also surpassing the P273.755 billion in bids seen last week for the P150 billion up for grabs.

Banks asked for yields ranging from 2.25% to 2.2525%, a narrower margin compared to the 2.25% to 2.254% seen the previous week. This caused the average rate of the seven-day deposits to settle at 2.251%, down by 0.06 basis point from the 2.2516% logged on May 27.

“The results in the TDF auction reflect the market’s continued interest for BSP’s deposit facilities amid ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The TDF is the central bank’s primary tool to shore up excess liquidity from the financial system and to better guide market interest rates.

Offerings of the 14- and 28-day term deposits remain suspended. The BSP halted offering term deposits in mid-March to support the banking system amid the imposition of the lockdown measures.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the continued strong demand for the TDF shows investors are searching for higher yields as they park their excess funds. He said the lower rates came amid a correction in the global oil prices.

“The consistent marginal easing of the 7-day TDF auction yield may be partly attributed to the fact that global oil prices recently corrected higher to the highest levels in nearly 3 months, that could limit any further easing on inflation,” Mr. Ricafort said in a text message.

Oil prices saw some recovery in May after succumbing to negative territory in April. This, as demand picked up after the gradual reopening of some economies and as major oil exporters committed to cut down production by 10 million barrels per day.

Mr. Ricafort said the decline in the average rate was marginal as its yield continued to inch closer to the headline inflation print.

“Any rate lower than inflation will be considered negative net interest rate considering also that there is a 20% withholding tax on interest rate income,” he said.

Headline inflation in April settled at 2.2% on the back of lower food and oil prices, the Philippine Statistics Authority (PSA) reported last month. This is slower than the 2.5% in March as well as the three percent recorded in April 2019.

Meanwhile, May inflation likely settled at 1.9% to 2.7%, the BSP Department of Economic Research said, giving a point projection of 2.3%. A poll by BusinessWorld among 17 economists yielded a median estimate of 2.2%, with analysts citing higher prices of some food items and fuel as upward pressures.

The PSA will report the official May inflation data on June 5. — L.W.T. Noble

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