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Shares end higher as blue chips drive rebound

LOCAL SHARES ended the trading week with gains as some blue chips lifted the main index following profit taking earlier in the day.

The bellwether Philippine Stock Exchange index (PSEi) was up 36.87 points or 0.57% to close at 6,476.24 on Thursday. The broader all shares index was higher by 13.06 points or 0.34% to 3,799.16.

The market is closed for trading on Friday in observance of Independence Day.

“Philippine shares were bought up towards closing with continued strength on key index names, while some investors took some profit on other stocks,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

The PSEi spent earlier parts of Thursday’s trading in red territory, sinking as deep as 6,263.2 before it closed at its high for the day.

Select companies and index heavyweights were the main driver of the rebound. Top gainers for the day were Petroenergy Resources Corp. (+13.33%), DoubleDragon Properties Corp. (+11.11%) and Vivant Corp. (+9.84%). Blue chip companies that lifted the PSEi were Megaworld Corp. (+4.95%), Ayala Land, Inc. (+2.75%) and Globe Telecom, Inc. (+2.69%).

On the side of the losers, Bank of the Philippine Islands (-2.91%), GT Capital Holdings, Inc. (-2.58%), Metropolitan Bank & Trust Co. (-2.44%) and Robinsons Land Corp. (-2.10%) were some of the index members that tempered the PSEi.

Philstocks Financial, Inc. Research Associate Piper Chaucer E. Tan said while there has been profit taking at the beginning of trading, investors still respected the 6,000 psychological level on sustained optimism on the reopening of the economy.

He noted, however, that participation dropped on Thursday to a value turnover of P7.04 billion from P8.96 billion the previous day. Some 1.87 billion issues switched hands.

Sectoral indices had a mixed ending at the close of the market. Property climbed 51.70 points or 1.60% to 3,280.98, holding firms gained 60.69 points or 0.92% to 6,611.86; services added 5.45 points or 0.37% to 1,443.00; and industrials inched up 1.62 point or 0.02% to 8,129.56.

On the other hand, financials shed 17.84 points or 1.36% to 1,291.29 and mining and oil gave up 48.37 points or 0.91% to 5,212.53.

Decliners bested advancers, 117 against 72, while 51 names ended unchanged.

Foreign investors returned to selling. The market recorded net foreign outflows of P63.15 million from net foreign inflows of P318.79 million a day ago.

Meanwhile, the Dow and S&P 500 ended a choppy session lower on Wednesday after the Federal Reserve reassured investors of its support for the economy but projected a 6.5% decline in gross domestic product this year.

The Dow Jones Industrial Average fell 282.31 points or 1.04% to 26,989.99; the S&P 500 lost 17.04 points or 0.53% to 3,190.14; and the Nasdaq Composite added 66.59 points or 0.67% to 10,020.35.— Denise A. Valdez

Peso returns to P50:$1 level on Fed’s outlook

THE PESO sank back to the P50-per-dollar level on Thursday after the US Federal Reserve said economic recovery will likely come at a slower pace and as investors await announcements on new lockdown measures here at home.

The local unit finished trading at P50.195 per dollar, depreciating by 34.5 centavos from its P49.85 close on Wednesday, according to data from the Bankers Association of the Philippines.

The peso opened the session at P49.93 against the dollar. Its intraday weakest was at P50.20 while its strongest was at P49.80 versus the greenback.

Dollars traded fell to $974.24 million on Thursday from the $1.12 billion seen on Wednesday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said risk-off sentiment on the peso came after the release of the US Federal Reserve’s economic outlook.

“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.

Reuters reported that Fed Chairman Jerome H. Powell said it may take years to restore the 20 million in job losses so far since February.

“It is a long road. It is going to take some time,” Mr. Powell said. “We can use our tools to support the labor market and the economy and we can use them until we fully recover.”

He added that they are “not even thinking about raising rates” at this point.

Meanwhile, a trader attributed the peso’s decline to safe-haven demand for the dollar before the holiday.

“The peso weakened from dollar safe-haven demand ahead of the long weekend as the formal announcement of local quarantine policies were deferred to Monday,” the trader said in an e-mail.

Presidential Spokesperson Harry L. Roque said on Thursday that President Rodrigo R. Duterte will update the nation on the degree of community quarantine measures that will be imposed after June 15. — LWTN with Reuters

NEDA sees economy normalizing, 75% of companies now operating

THE National Economic and Development Authority (NEDA) said economic activity is heading “towards normalcy” despite expected further setbacks to growth in the second quarter.

In a Palace briefing Thursday, NEDA Acting Secretary Karl Kendrick T. Chua said the second quarter performance will be worse than the 0.2% contraction during the first quarter. He said the enhanced community quarantine (ECQ) first imposed over Luzon on March 17, took in most of the second quarter.

“’Yung ECQ natin, majority ay nasa second quarter. ‘Yung April and May of course will look really bad because the ECQ shut down 75% of the economy tapos ‘yung mga pwede lang lumabas ay ‘yung mga nasa essential sectors… kaya ang ating GDP projection for the second quarter will be worse than the first quarter (Most of the ECQ happened during the second quarter. April and May of course will look really bad because the ECQ shut down 75% of the economy and only the essential sectors were allowed to work… that is why our GDP projection for the second quarter will be worse than the first quarter),” Mr. Chua said.

He said that beginning this month, most industries will gradually reopen when most areas enter a more relaxed form of lockdown known as modified general community quarantine. Metro Manila, Pangasinan, Region 2, Region 3, Region 4-A, Region 7, Zamboanga City, and Davao City are under GCQ.

“At this point, mga 75% ‘yung bukas for business…so bumabalik towards normalcy ang ating ekonomiya (around 75% of businesses are open…so our economy is returning towards normalcy,” he said.

He added there will be more clarity on growth by the third quarter once quarantines are eased further. — Gillian M. Cortez

PSA jobless estimate deemed ‘conservative,’ real total could be 10-M unemployed

By Gillian M. Cortez, Reporter

THE number of unemployed Filipinos could be closer to 10 million rather than the official estimate of 7.3 million in April, a University of the Philippines professor said.

In an interview Sunday, Labor Professor Rene E. Ofreneo of the UP School of Labor and Industrial Relations (SOLAIR) said the Philippine Statistics Authority’s (PSA) 17.7% unemployment rate for April “could be conservative” as it may have not taken in the impact of the lockdown imposed to contain the COVID-19 (coronavirus disease 2019) outbreak.

“Kapag tinignan mo ang pagbagsak ng (If you look at the decline in the) Labor Force Participation (LFP) rate, I think the realistic number is 10 million unemployed,” he said.

Mr. Ofreneo added: “Unemployment will remain very, very high. I really think the total number of unemployed is roughly around 10 million…To have unemployment remaining at 10 million in the coming months will be a terrible problem.”

The 17.7% unemployment rate is a PSA record. The LFP, or the number of people working or actively seeking work as of April was at an all-time low of 55.6%.

Mr. Ofreneo said the number of unemployed will only increase within the next few months, adding: “The unemployment rate will remain high and the possibility of worsening unemployment will be defined by the deteriorating global environment.”

A global recession due to the pandemic will lead to reduced employment, possibly worse than the job losses caused by the 2007-2009 mortgage finance crisis. Disruptions in trade and the global supply chain have also weighed heavily on employment globally.

In the Philippines, the government’s economic managers said the economy will contract between 2% and 3.4% this 2020. The first quarter of 2020 saw a contraction of 0.2%, according to the PSA.

President Rodrigo R. Duterte imposed a Luzon-wide lockdown on March 17, which was extended twice and was followed by other lockdowns in other regions. On June 1, Metro Manila entered a more relaxed form of lockdown as the economy gradually reopened.

Another employment issue that needs to be addressed during the pandemic is the large number of displaced Overseas Filipino Workers (OFWs).

Mr. Ofreneo said: “We are in a situation for the first time that OFWs are losing their jobs around the world, not just in one country.”

The Department of Labor and Employment (DoLE) said last week that more than one million OFWs could lose their jobs by 2021 because of the COVID-19 crisis.

Mr. Ofreneo recommends that the government focus on programs that promote livelihood to generate large numbers of jobs. He added the government’s push for infrastructure will help employment but should be expanded to other communities and not concentrate solely on large-scale projects in highly urbanized areas.

“They have to focus on small but job-creating public works. They should focus on communities, on small roads, and barangay roads. They should focus on repairing small communities,” he said.

He added the focus should be on jobs, saying, “I don’t understand why they should focus on foreign investment and opening up the economy. What investment will come in during this situation?”

Mr. Ofreneo said as long as there is still no vaccine for COVID-19, the economy will be a long way from recovery to pre-crisis levels.

“This is the time for serious development studies. Returning to pre-COVID conditions is a dream right now,” he said.

Jacinto says telecom reform EO in final stages

NEWLY-APPOINTED Undersecretary Ramon P. Jacinto of the Department of Information and Communications Technology (DICT) said an executive order (EO) introducing “stronger reforms” in the telecommunications industry is now in its final stages.

Mr. Jacinto issued the statement after his department released the long-awaited rules governing the shared use of telecommunications towers.

Mr. Jacinto said he “supports” the Department Circular No. 8 signed by Secretary Gregorio B. Honasan II. The circular sets the policy guidelines on the co-location and sharing of telco towers for cell sites.

“Secretary Honasan is aware that there is a pending executive order that encompasses stronger reforms to maximize the benefit to the people,” Mr. Jacinto said.

“Most major reforms in the telecommunications industry have been undertaken via executive orders including EO 59 (Prescribing the Policy Guidelines for Compulsory Interconnection), EO 109 (Policy to Improve the Provision of Local Exchange Carrier Service) EO 436 (Prescribing Policy Guidelines to Govern the Operation of Cable Television in the Philippines) and EO 467 (Providing for a National Policy on the Operation and Use of International Satellite Communications in the Country),” he said.

He said the pending EO is in its final stages. “(The) guidelines that DICT released can be construed as an interim measure pending the release of the executive order.”

The common tower guidelines do not include the contentious proposals that would limit the number of common tower providers, and restrict current telecommunications companies from building their own towers.

Under the guidelines, mobile network operators or telcos may build new telecommunications towers, but they should “provide ample access slots” for other users and the DICT to “co-locate, mount or install their respective antennas, transmitters, receivers, radio frequency modules, radio-communications systems, and other similar active ICT equipment.”

Mr. Jacinto, who served as President Rodrigo R. Duterte’s adviser before he was transferred to the DICT, previously wanted to allow only two companies to build common towers.

TELCOS CAUTIOUS
Globe Telecom, Inc. said in a statement Thursday that it generally supports the creation of an independent tower industry complementing telcos “as this means more jobs for Filipinos other than providing much needed infrastructure to expand the coverage of mobile broadband networks especially in the unserved areas.”

However, it is “cautious” about the issuance, saying it is hoping that the new rules will not “create more bureaucracy or slow down further” the implementation of telecommunications infrastructure projects.

“The new guidelines must not result in an increasing capex of current industry players. Customers are best served when our investments are put to good use, specifically on technologically advanced active components of the network and not on passive assets,” it added.

PLDT, Inc. said it will have to study the new guidelines.

“Initially, we welcome the provisions in those guidelines that say telecoms operators will have the freedom also to set up their own towers in order to roll out their network,” PLDT Spokesperson Ramon R. Isberto said in a Laging Handa briefing Wednesday.

“But for the other provisions, you will have to excuse me at this point in time, our legal team is still reviewing it and we will come up with a clearer and more comprehensive position in a short while,” he added.

The DICT has pushed the concept of tower sharing to improve tower density, which is said to be one of the lowest in the region at 4,000 subscribers per tower. Allowing common towers means more than one telco can use a single tower, thereby increasing the number of subscribers being served.

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

PHL seen among worst-hit ASEAN economies due to extent of lockdown

THE Philippines could be among the worst-hit ASEAN economies with a projected contraction of 5% in 2020, second only to a projected decline of 6% for Singapore, Oxford Economics said.

It said the Philippines had one of the most stringent lockdowns with an outsized impact on tourism.

The projections were issued in a report, “Asia Pacific: How COVID-19 impacts vary across ASEAN.”

“On the domestic front, countries with more stringent lockdowns and a higher share of discretionary spending are likely to take a heavier toll. On the external front, a heavily trade-dependent economy such as Singapore and economies with large tourism sectors, notably Philippines and Thailand, will be hard hit,” it said.

Oxford Economics estimated that the foregone output due to lockdown measures in the Philippines is equivalent to 5.8% of gross domestic product (GDP) while the direct impact on tourism was about 12.6% of GDP.

The adverse impact on the Philippine economy based on these two factors is the highest in ASEAN-5 which is composed of Indonesia, Malaysia, the Philippines, Thailand and Singapore.

Oxford Economics measured the impact of the ongoing COVID-19 (coronavirus disease 2019) pandemic on domestic and external demand, as well as the impact of policy responses rolled out by the various governments.

Indonesia is projected to record a GDP decline of 2.7% this year, while Singapore is expected to take the steepest fall at 6%.

Metro Manila and some key cities were placed on the strictest form of lockdown for 10 weeks starting mid-March, before transitioning to more relaxed quarantine protocols.

Oxford Economics said all countries in the region have “proactively deployed monetary and fiscal policies” to mitigate the economic fallout but these are not enough to prevent recession.

“We think fiscal policy would be a more effective tool in this crisis, and while many countries delivered unprecedented fiscal packages, their fiscal impulse could be limited because a large share is earmarked for financial schemes as opposed to direct spending and revenue measures. Moreover, the wider fiscal deficits largely reflect weak revenue prospects rather than additional spending, limiting the direct economic boost,” it said.

For the Philippines, it forecast the government’s fiscal deficit to widen to more than 6% of GDP while the impact of fiscal support is expected to account for 1.7% of GDP.

“Progress in virus containment and policy space will influence the speed of economic rebound,” it added. — Beatrice M. Laforga

Natural gas consumption declines in first 5 months

NATURAL gas consumption declined year on year in the five months to May, according to the Department of Energy’s Ecosystems Research and Development Bureau (DoE-ERDB).

Gas consumption by power generation and industrial sectors was at 46,493.26 million standard cubic feet (mmscf), 9,500 mmscf lower year on year.

Natural gas output was 60,585.35 mmscf, down 7,807.23 mmscf from a year earlier.

Natural gas was the second-largest energy source for generators, next to coal. Between March and May, natural gas generated an average 2,390 hourly megawatts with a utilization level of 72.6%.

The Philippines’ sole indigenous gas producer, the Malampaya field, which accounts for 20% of the country’s electricity, is expected to be nearly depleted by 2027.

The Philippines plans to import liquified natural gas (LNG) as a substitute for the diminishing output of Malampaya.

The government has approved some proposals from domestic and foreign firms to put up LNG import facilities, including First Gen Corp.’s floating storage and regasification project in Batangas, which the DoE designated as an energy project of national importance.

The energy firm is still awaiting the DoE’s approval for its PCERM application (permit to construct, expand, rehabilitate, and modify) before starting construction. — Adam J. Ang

Online transaction complaints surge during lockdown

COMPLAINTS involving online transactions rose to 8,059 at the height of the lockdown from 985 in the three months to March, the Department of Trade and Industry (DTI) said.

“Less than 1,000…complaints received from January to March. But because everybody was at home during the height of the ECQ (enhanced community quarantine), April and May it has risen to 8,000,” Trade and Industry Undersecretary Ruth B. Castelo said during a virtual hearing of the House committee on trade and industry Thursday.

Ms. Castelo said that price-related complaints were the most reported by consumers during the lockdown.

“Price Act-related complaints, particularly on overpricing, substantially increased from 51 complaints received to 6,992 complaints. However, since the products involved, such as alcohol, face masks, etc., are not under the purview of the DTI, such complaints were endorsed to other agencies concerned such as the DoH (Department of Health) for appropriate action,” Ms. Castelo said in her presentation.

In the five months to May, complaints about online transactions amounted to 9,044. This is significantly higher than the 2,457 complaints in 2019.

The committee was discussing House Bill 6122 which seeks to establish an E-commerce Bureau to act as a “virtual one stop shop” for consumer complaints on internet transactions and protect them from fraudulent online sales.

Ms. Castelo said that the passage of the bill will help the department boost consumer confidence.

“It will help us resolve complaints, it will help us build consumer confidence in the government… it’s very important that consumers know that the government will take care of them,” she said. — Genshen L. Espedido

Agencies’ cash utilization rate declines in first five months

GOVERNMENT agencies’ cash usage rate was 78% in the first five months, much lower than the year-earlier level of 92%, the Department of Budget and Management (DBM) said.

The DBM tracks an indicator called Notices of cash allocation (NCAs) issued to line agencies, which is an authorization to spend allotted funds.

According to the DBM’s Status of NCA Utilization report, it said used cash allocations totaled P1.42 trillion out of, P1.82 trillion released in the five months to May, leaving unused NCAs of P400.399 billion.

The five-month rate was higher than the 63% logged in the four months to April.

In May, NCA usage was P333.061 billion, exceeding the P94.082 billion released that month. However, usage fell compared with April’s P445.89 billion.

In a text message, DBM Assistant Secretary Rolando U. Toledo said the NCA usage was higher than releases because the NCAs released in April cover the cash requirements for the second quarter.

In April, NCAs released hit P1.075 trillion with only P445.89 billion used.

“Subsequent releases in May (P94.08 billion) are then in addition to those released in April. Hence, cash utilization in May (P333.06 billion) includes those released in April,” Mr. Toledo added. — Beatrice M. Laforga

Global oil market will take time to hit supply/demand equilibrium

REBALANCING supply and demand in the oil market may take time as lockdown measures ease across the globe, according to Moody’s Investor Service.

The credit-rating firm in May cut its medium-term oil price outlook to $45-$65 per barrel (bbl) from the previous $50-$70/bbl, with a price recovery expected by early June as supply reductions match up with falling demand.

“We expect an uneven and prolonged rebalancing of the oil market,” it said, adding this will not trigger a broad review of oil-industry ratings.

A price recovery towards its projected range will depend on the pace of demand recovery and on “sustained” discipline in cutting production.

The Organization of Petroleum Exporting Countries (OPEC) and allied nations (OPEC+) on June 6 agreed to further extend production cuts of 9.6 million barrels per day (bpd) until the end of July to balance the oil market.

The group decided to cut output in April following a market crash as demand fell due to the impact of the coronavirus disease 2019 (COVID-19) pandemic.

Moody’s trimmed its price outlook for the North American benchmark West Texas Intermediate (WTI) to $30/bbl this year and $40/bbl in 2021. In April, prices at WTI fell to negative territory for the first time, meaning producers had to pay to store their oil during the glut.

Moody’s also reduced its price assumptions for the international benchmark Brent to $35/bbl for 2020 and $45/bbl for next year.

The low prices in 2020-2021 are “credit negative” for the oil sector, pressuring return on capital and future growth and delaying capital investment.

“Even as oil prices are recovering, financial risks will remain high, especially for smaller and lower-rated exploration and production (E&P) and oilfield services and drilling (OFS) companies,” Moody’s said.

Meanwhile, lower margins and product demand prompted global oil refiners to seek liquidity to shore up their working capital, “implying higher leverage despite a short-term gain in liquidity from issuing debt,” according to Moody’s.

“Any ratings impact from a refiner raising debt to supplement liquidity would depend on whether the increase in debt is temporary or permanent… Ratings implications would depend on how likely we believe the refiner will repay the new debt, including whether the company has publicly said it intends to do so,” the credit rating company said. — Adam J. Ang

BoC collection target slashed to P542 billion

THE Bureau of Customs (BoC) collection target for 2020 has been reduced to P541.703 billion with the severe economic slowdown expected to persist through the remainder of the year.

Customs Commissioner Rey Leonardo B. Guerrero issued Memorandum No. 113-2020 outlining the revised revenue target collections of all ports based on the estimates approved by the Development Budget Coordination Committee (DBCC) on May 12.

The latest target is 25.7% lower than the P730-billion target set earlier this year before the coronavirus disease 2019 (COVID-19) pandemic ground the global economy to a standstill.

Manila International Container Terminal (MICT) and Batangas ports were tasked to collect around half of the BoC’s port revenue this year.

MICT was set a target to collect P148.85 billion, or 27% of the total, followed by Batangas port with a P128.84-billion target which is around 24% of the total.

Port of Manila’s target was the third highest at P73.9 billion, followed by Limay port’s P42.7 billion, Ninoy Aquino International Airport’s P35.48 billion, Cebu port’s P26.7 billion, and ports in Cagayan de Oro and Subic at around P24 billion each. The port of Davao has been set a target of P22.79 billion.

Other ports’ targets are: P3.9 billion for San Fernando, La Union, P3.5 billion for Zamboanga, P2.6 billion for Iloilo, P1.5 billion for Clark, P1.1 billion for Tacloban, P482 million for Legaspi, P184 million for Aparri and P15 million for Surigao.

Last month, the DBCC projected government revenue at P2.61 trillion this year, lower than P3.14 trillion in 2019 and the P3.17 trillion forecast in March, on the back of the expected 2-3.4% contraction in the economy this year.

Citing preliminary data, the BoC said collections in May declined 48.4% year on year to P30.01 billion in May, 10% short of its P33.33-billion target.

This brought year-to-date collections to P210.18 billion, down 16.5% and missing the target of P213.5 billion. — Beatrice M. Laforga

COVID-19 infections may reach 40,000 this month — UP team

By Vann Marlo M. Villegas, Reporter

CORONAVIRUS infections may reach 40,000 by the end of June based on the rate of transmissions, according to a team of researchers from the University of the Philippines Diliman.

Guido David, a mathematics professor from UP and part of the OCTA Research team, said the reproduction number of the virus in the Philippines is about 1.2, meaning it continues to spread.

The Department of Health (DoH) reported 443 new coronavirus infections on Thursday, bringing the total to 24,175.

The death toll rose to 1,036 after nine more patients died, while 270 more patients have gotten well, bringing the total recoveries to 5,165, it said in a bulletin.

Of the new cases, 253 results were reported in the past three days, while 190 were reported late.

A reproduction number — the ratio of infections to recoveries — of less than 1 means there’s a flattening of the curve, he added.

In epidemiology, the idea of slowing a virus’ spread so that fewer people need to seek treatment at a time is known as flattening the curve.

Countries worldwide including the Philippines have imposed lockdowns and asked people to observe social distancing to slow the virus spread.

The curve researchers are talking about refers to the projected number of people who will get infected over time.

“The projection is 40,000 cases by June 30,” Mr. David said at an online news briefing. The reproduction number for Metro Manila is about 0.96.

Ranjit Singh Rye, a political science professor from UP and a fellow of the research team, said the government should scale up testing, tracing and treatment strategies.

He also said the government should take the reproduction number of the coronavirus seriously.

“It’s still a significant number, a number that the government must take seriously,” he said at the same briefing.

Mr. Rye said people should continue observing health protocols including wearing masks and practicing social distancing. The ideal testing capacity is about 15,000 daily.

The Department of Health said the country’s rated testing capacity is about 30,000 but the actual daily testing capacity is only 10,000 due to operational issues faced by laboratories.

“One could argue that we’re not testing enough but we have certainly improved our testing capability and capacity,” Mr. Rye said.

Meanwhile, Health Undersecretary Maria Rosario S. Vergeire said Health Secretary Francisco T. III had approved the guidelines for the expanded targeted testing.

The expanded coverage will include frontliners in quarantine facilities, village health emergency response teams, prison and jail employees and social workers.

Pregnant women, people who undergo high-risk operations, detainees, institutionalized persons, people undergoing dialysis, chemotherapy and radiotherapy and those with immuno-compromised conditions like people HIV will also be prioritized.

Other frontliners would only be tested if they had close contact with probable and confirmed cases, Ms. Vergeire said.

Those who are vulnerable to contracting the disease will be tested only upon recommendation by the attending doctor.

Ms. Vergeire also said that under the guidelines, a repeat test is not required for patients to recover and be sent home.

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