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Rate cuts seen boosting consumer, business confidence

The unexpected 50 basis point (bp) reduction in benchmark interest rates is being positioned as a measure to restore consumer and business confidence, the Deprtment of Finance said.

Finance Secretary Carlos G. Dominguez III said in an online forum organized by Bloomberg that to mitigate the adverse impact of the pandemic on the economy, bringing back confidence of consumers is of ”utmost importance.”

“We’ve seen that we have to bring back confidence to our bankers, (and) we have to bring back confidence to our consumers because our economy is about 70-75% consumption- driven,” Mr. Dominguez told said at the Emerging Market Debt: A Roadmap Beyond COVID-19 webcast late Thursday.

He was responding to Bloomberg Economics Senior Executive Editor Stephanie Flanders who inquired about the unexpected 50-bp reduction delivered by the Monetary Board (MB) earlier that day. Mr. Dominguez is a member of the MB.

“It is of utmost importance that we bring back the confidence of our public in spending again,” Mr. Dominguez said, noting that Governor Benjamin E Diokno would be a more authoritative.

The Bangko Sentral ng Pilipinas (BSP) Monetary Board surprised the markets late Thursday by reducing policy rates by 50 bps, bringing current rates to record lows of 2.25%, 2.75 and 1.75% for overnight reverse repurchases, lending and deposit facilities, respectively

The new rates took effect Friday.

So far this year, the MB has reduced benchmark interest rates by a total of 175 bps to help cushion the impact of the pandemic on the economy.

BSP Governor Benjamin E. Diokno said Thursday that the rate action was taken in response to the severe economic downturn worldwide, and noted that inflation has been benign.

Only three out of 13 economists polled by BusinessWorld last week forecast a rate cut at this MB meeting.

The BSP increased its inflation forecast for 2020 to 2.3% from 2.2%, which remained within its 2-4% target range.

The economy contracted by 0.2% in the first quarter.

The government’s economic team is projecting a 2-3.4% contraction in 2020 due to the fallout from the pandemic and lockdowns.

“We see that our economy is going to be hit hard. We will shrink by maybe about three and a half percent this year. But we’re ready for a big bounce back next year,” Mr. Dominguez said. — Beatrice M. Laforga

DoTr orders 40% discount on shipping rates for food cargoes

Transportation Secretary Arthur P. Tugade has ordered shipping lines to offer at least a 40% discount off regular shipping rates for shipments of food and a quota of 12% of the ship’s capacity for such cargoes.

Department Order No. 2020-007 was issued by Mr. Tugade on June 24 and was published in newspapers Friday.

The Department of Transportation (DoTr) said the discounted rates and cargo quota are intended to “help ensure the viability of food production and delivery thereof in line with the government’s mandate to provide food security for the people.”

The 12% quota is to be observed on a per-voyage basis and applies to shipments of agricultural and food products.

The agricultural and food products are defined as raw or processed commodities meant for human consumption, excluding water, salt and additives.

Another department order, 2020-008, issued the same day and also published Friday, creates a shippers’ protection office to address complaints about the industry’s rates, charges and practices.

The new office will assist shippers, both international and domestic, who encounter “unreasonable fees and charges imposed by international and domestic shipping lines.”

The creation of the office is deemed a temporary emergency measure during the emergency “to protect people from the impact and effects of exorbitant and unreasonable shipping fees resulting in increased prices for domestic consumers.” — Arjay L. Balinbin

Game plan for tourism revival is locals-only

Provinces that are reopening their tourist attrcations are focusing on domestic visitors initially, with Boracay only allowing guests from the immediate region, Tourism Secretary Bernadette Romulo-Puyat said.

Ms. Puyat estimated that 50% of tourism establishments in areas under modified general community quarantine can now operate.

The governor of Aklan province and the mayor of Malay, Aklan, have indicated their intention to open the resort island of Boracay only to visitors from the Western Visayas.

“Gusto raw nila slow but sure yung pagbukas (They want to open slowly but surely),” she said at the Laging Handa briefing.

Ms. Puyat also said the governors of Palawan and Bohol, which are both under eased quarantine conditions, intend to open their provinces for domestic tourism first.

“So sa domestic tourism pa nga lang…pwede nang unti-unti na magkakatrabaho ang ating tourism stakeholders at mabubuhay ang turismo (Domestic visitors will do for now as the industry slowly returns to work),” she said.

Ms. Puyat noted that tourism accounted for 12.7% of gross domestic product in 2018, with 10.8% of that total generated by domestic tourism.

The government is also studying a strategy of “travel bubbles,” which would allow visitors from low-infection countries like New Zealand and Australia to directly visit some destinations with international airports.

“We have 12 international airports. May options sila (they have the option) to fly (directly to) zero-COVID destinations,” she said.

In 2019, the Philippines took in 8.26 million international visitors, breaching the 8.2 million target.

“But of course (arrivals are) very hard to predict for this year because of all the different travel restrictions,” she said. — Vann Marlo M. Villegas

Rediscount rates lowered after rate cut

The central bank’s rediscount rate has been lowered to reflect the latest adjustment in the benchmark interest rates.

“The rediscount rate for loans under the peso rediscount facility has been set at 2.75%, regardless of loan maturity (i.e., 1 to 180 days) effective June 26,” the Bangko Sentral ng Pilipinas (BSP) said in a statement Friday.

The 2.75% rediscount rate reflects the record low lending rate of 2.75% after the BSP reduced key policy rates by another 50 basis points Thursday.

Overnight reverse repurchase as well as deposit rates were likewise trimmed to 2.25% and 1.75%, respectively.

The temporary reduction of the term spread on peso rediscounting loans relative to BSP’s overnight lending rate to zero will be effective until July 17 and form part of the central bank’s economic relief efforts. It is subject to changes by the Monetary Board.

The BSP rediscount facility allows banks to access additional liquidity by pledging their collectibles as collateral.

Banks may use the fresh cash – in peso, dollar or yen – to grant more loans for corporate or retail clients and service unexpected withdrawals. — Luz Wendy T. Noble

Home price growth accelerates in first quarter

Home prices grew in the double digits in the first quarter, the Bangko Sentral ng Pilipinas (BSP) said.

According to the central bank’s Residential Real Estate Price Index home prices rose 12.4% in the January to March period, much faster than the year-earlier 3.3% pace.

The rate of growth also outstrips the 10.2% year-on-year rise recorded in the three months to December.

The index gauges the average change in home prices across building types and locations and provides the BSP an insight into the property market, bank exposure to which is regulated.

Bank lending to the real estate sector is capped at 20% of their loan portfolios, including residential and commercial properties.

Price growth for duplexes, accounting for 0.3% of new housing units reported, was 38.3% during the quarter, reversing the 8% drop a year earlier.

Condominium prices rose 23.6%, against the year-earlier rate of 10.9%.

Townhouse prices rose 5.5%, easing off from the year-earlier growth rate of 9.8%. Prices of single-detached homes increased 7%, reversing a year-earlier 1.5% decline.

Home prices in Metro Manila rose 18.3%, compared with the rate of 8.5% for homes in the provinces.

In the National Capital Region, a 28% rise in condominium prices offset the dec;ne in prices of duplexes (-35.3%), single detached/attached houses (-6.5%), and townhouses (-5.2%).

Outside the capital, prices of all types of housing increased, led by duplexes (61.2%), townhouses (9.4%), single detached/attached houses (8.4%), and condominiums (5.5%).

In 2019, home price growth averaged 6.08%, against a 2.95% rise in 2018.

Colliers Philippines Research Manager Joey Roi H. Bondoc. said the increase in home prices reflects carry-over demand from 2019.

“For the condominium market in Metro Manila, there has been pent-up demand starting 2016. The demand for condominium units is outpacing the supply whenever (a building) is launched,” he said by phone.

Colliers International has said it expects land values in Metro Manila to fall by as much as 15% by the end of 2020 due to the disruptions caused by the pandemic. — Luz Wendy T. Noble

Gov’t plan to import 300,000 MT of rice abandoned

THE Philippine International Trading Center (PITC), an arm of the Department of Trade and Industry (DTI), has abandoned plans to import 300,000 metric tons of rice via government-to-government (G2G) deals, following talks with the Department of Agriculture (DA).

The import plan was budgeted for P7.45 billion and was intended to boost supply during the lean months of July and August.

In a statement Friday, Trade Secretary Ramon M. Lopez said that under Republic Act No. 11203 or the Rice Tariffication Law (RTL), the PITC is tasked with carrying out any directive from the DA to import rice on a G2G basis.

Mr. Lopez said the government’s initial decision to import rice came after a negative assessment of available supply after Vietnam banned rice imports.

“Earlier computations from the DA showed a threat to the targeted level of buffer stock following the Vietnam ban on rice exports in April,” Mr. Lopez said.

However, Vietnam Prime Minister Nguyen Xuan Phuc lifted the ban and made a commitment to assist the Philippines in securing its supply at the request of President Rodrigo R. Duterte.

Imports account for 7% to 14% of the Philippines’ total rice requirement, with Vietnam supplying over 90% of Philippine imports

“With the lifting of the rice export ban of Vietnam, we can expect more comfortable buffer stock levels moving forward,” Mr. Lopez said. — Revin Mikhael D. Ochave

Rice seed storage practices cited as an issue in crop quality

THE INBRED rice seed currently being handed out to farmers is designed to be planted right away, and improper storage in the event of delays could affect the quality of the crop, the Philippine Rice Research Institute (PhilRice) said.

The government is currently distributing seed as part of the mandate of the Rice Competitiveness Enhancement Fund (RCEF).

In a statement, RCEF Project Management Office Project Development Officer Julian C. Macadamia said planting delays may include typhoons or insufficient water, which could lead to moisture accumulation on improperly-stored seed.

“The certified inbred seeds given to the beneficiaries must be immediately planted. However, should farmers be unable to plant the seeds right away, they must ensure proper storage to maintain its quality,” Mr. Macadamia said.

Mr. Macadamia said that seed can be stored six to eight months in high-quality storage facilities.

PhilRice said a proper seed storage facility should be waterproof, aerated, and free of rats, birds, and insects.

The storage area should also be clean inside and out to prevent the re-entry of moisture.

Mr. Macadamia encouraged farmers to inspect their stocks at least once a week to detect pest infestation, physical damage, or staining caused by water. Certified inbred seed should also be kept apart from agricultural chemicals, fertilizer, or cement.

Also, “very long storage also lowers seed germination rate. If farmers or local government units aren’t able to immediately plant the seed, we encourage them to inform our office so we can allocate the seed to other areas with more immediate need,” Mr. Macadamia said. — Revin Mikhael D. Ochave

Stocks end higher as rate cut brings optimism

By Revin Mikhael D. Ochave

THE LOCAL MARKET closed the week in green territory as investors reacted positively to Thursday’s decision by the Bangko Sentral ng Pilipinas (BSP) to cut interest rates, analysts said.

The benchmark Philippine Stock Exchange index (PSEi) rose 73.58 points or 1.2% to close at 6,191.84, while the broader all-shares index went up 30.17 points or 0.83% to close at 3,631.15.

In a mobile phone message, PNB Securities, Inc. President Manuel Antonio G. Lisbona said that the market responded favorably to the unexpected rate cut by the central bank.

“The BSP’s unexpected rate cut late yesterday encouraged investors to buy into the market, as lower rates are intended to stimulate economic activity,” he said.

On Thursday, the Monetary Board cut the rates of BSP’s overnight reverse repurchase, lending, and deposit facilities by 50 basis points to 2.25%, 2.75%, and 1.75 respectively – all new record lows.

For Philstocks Financial, Inc. Research Associate Claire T. Alviar, the interest rate cut brings market optimism despite the coronavirus disease 2019 (COVID-19) pandemic.

“The rate cut of BSP spurs optimism in the market since it is helpful for the businesses as it lessens the cost of debt which could cushion the impact of COVID-19,” she said.

However, Ms. Alviar noted that the market moved sideways during intraday trading as investors assessed the decision of the central bank.

“The assessment was because further stimulus could also mean that it expects deeper contraction or more damage in the economy, amid rising COVID-19 cases in the country. Also, rate cuts can only do so much, particularly that demand remains weak,” she said.

All sectoral indices ended as gainers on Friday.

Services picked up 27.66 points or 2.02% to 1,394.5; holding firms climbed 85.84 points or 1.35% to 6,444.47; financials increased 13.89 points or 1.13% to 1,238.96; mining and oil rose 50.54 points or 0.98% to 5,169.86; industrials improved 51.55 points or 0.68% to 7,627.07; and property went up 14.48 points or 0.47% to 3,048.32.
Advancers bested decliners 99 to 91, while 54 names went unchanged.

Net foreign selling was at P862.97 million versus P662.42 million the previous day.

“Foreigners remained net sellers today, which implies that domestic participants helped keep the index afloat,” Timson Securities, Inc. Head of Online Trading and Trader Darren Blaine T. Pangan said in a mobile phone message.

Value turnover stood at P5.3 billion with 1.08 billion issues switching hands, compared with P6.75 billion with 1.34 billion on Thursday.

“Technically, the PSEi is sitting above its 100-day moving average line. We’ll have to observe if this dynamic support area is respected next week,” Mr. Pangan said.

“The market respected the 6,000 to 6,130 support levels. We expect the market to continue consolidating for the next sessions,” Mr. Lisbona said.

Altus debuts on local bourse for ‘future ventures’

By Adam J. Ang

Altus Property Ventures, Inc. (APVI), a former unit of Robinsons Land Corp. (RLC), made its debut in the local stock market on Friday by way of introduction, or without immediately offering its shares publicly.

The real estate company applied with the small, medium and emerging board of the Philippine Stock Exchange in 2019 to list its total issued and outstanding common shares of 100,000,000 by way of introduction via RLC’s declaration of a property dividend to its shareholders. The local bourse approved its listing on June 26.

“We are delighted to have this new avenue for growth. APVI’s listing allows us to pursue business opportunities, unlocking possibilities for future ventures,” APVI Chairman and President Frederick D. Go said in a statement.

The company claimed it has a “stable” cash flow providing “a solid base and a steady source of funds for potential business expansion and other investments.”

APVI, which is incorporated in 2007, currently runs the north wing of Robinsons Place Ilocos mall in San Nicolas, Ilocos Norte.

The mall’s rooftop solar installation, which is a part of its sustainability efforts, helped in rationalizing the company’s operational expenses.

“APVI will also retain its profitable position by capitalizing on environmental, economic, and social programs in the Philippines,” it said.

Listed conglomerate JG Summit Holdings, Inc. said in a stock exchange disclosure that it now owns 60.97% of APVI’s total outstanding capital stock upon receiving 60,972,361 shares.

APVI sees benefits from synergies with its affiliates, “drawing upon the expertise and experience of RLC and the JG Summit Group.”

Meanwhile, the Securities and Exchange Commission approved RLC’s plan to offer P10 billion of fixed-rate bonds with an oversubscription option for P10 billion, expecting to net up to P19.75 billion in proceeds.

The company is offering the bonds at face value and it has the discretion to offer them in two series: Series C bonds that are due in 2023 and Series D bonds that are due in 2025.

RLC expects to earn P9.87 billion from these bonds, or up to P19.75 billion should there be oversubscriptions.
The proceeds will be used to partially fund its capital expenditure budget until next year. It will also use them to repay short-term loans maturing in the latter half of 2020.

The fixed-rate bonds were rated PRS Aaa by the Philippine Rating Services Corp.

The credit rating means RLC is expected to have an “extremely strong” capacity to meet its financial commitment. The bonds were also given a stable outlook, meaning it is expected to hold for the next 12 months.
The bonds will be listed and traded on the Philippine Dealing & Exchange.

RLC tapped BDO Capital & Investment Corp., BPI Capital Corp., China Bank Capital Corp., First Metro Investment Corp. and Standard Chartered Bank as joint lead underwriters and bookrunners for the offer.

PCC sets exemption for public-private ventures from notification rules

By Arjay L. Balinbin

The Philippine Competition Commission (PCC) on Friday issued rules for the exemption of joint venture projects cleared by the National Economic and Development Authority (NEDA) from compulsory merger notification.

The antitrust body detailed in a memorandum circular the application procedures for the exemption of joint venture projects from the required merger notification.

In a statement, PCC Chairman Arsenio M. Balisacan said: “The PCC has been continuously streamlining its processes in support of the government’s push to ease doing business.”

“Significantly, PCC’s issuance of these rules is aligned with the government’s relief, recovery and resiliency efforts, which direct the speedy roll-out of critical infrastructure projects in response to the current crisis,” he added.

The competition authority noted that the joint venture guidelines of NEDA cover all agreements between private entities and government-owned or -controlled corporations, government corporate entities, government instrumentalities with corporate powers, government financial institutions, and state universities and colleges.

“Under the circular, PCC will conduct a competitive assessment of the joint venture project in parallel with the approval process of the implementing agency or NEDA’s Investment Coordination Committee. This will expedite the rollout of key development projects that would otherwise undergo the regular merger review only after they have been awarded to the private sector proponent,” the commission said.

“This, in effect, exempts the government agency and the private entity from notifying the commission of the joint venture upon signing of a definitive agreement,” it added.

The commission said further that the government agency may apply for a certificate of project exemption on behalf of the prospective bidders or proponents.

The commission said it would provide inputs on the project documents and assess how the joint venture project might affect competition in the relevant markets.

“Should competition concerns arise in the review, PCC may require the prospective bidders to undertake specific commitments to address them,” it said.

If the implementing agency adopts the commission’s inputs in the final project documents, it will issue a certificate of project exemption in favor of the prospective winning private sector participant, it added.

“Failure to follow the requirements under the circular, the government agency and the winning private sector participant are required to file their notifications under the regular merger review process,” the competition authority said.

Power utilities to cover costs of renewable energy users’ meters

The Energy Regulatory Commission (ERC) said distribution utilities should shoulder the cost of renewable energy certificate meters and its installation to qualified end-users.

In a statement on Friday, the regulator said it had passed a resolution clarifying some provisions in the amended net metering rules after stakeholders raised them.

It was made clear that power utilities will be covering the cost of meters for qualified renewable energy users, as well as their installation, while the wiring cost from the facility to the meter will be taken on by the user.

Only end-users who wish to install a renewables facility on their premises will cover the cost of the meter and its installation.

The ERC also clarified that the meters must be installed at a connection point or at least near it.

If defined qualified participants of the net-metering program with “good credit standing” as those “with no unsettled or outstanding obligation with the distribution utility at the time of the application.”

“We have clarified certain provisions in the amended net-metering rules by providing explicit definitions, conditions, or situations and to avert varying interpretations by the stakeholders,” ERC Chairperson and Chief Executive Officer Agnes VST Devanadera said.

The net-metering program was enforced in 2013, as mandated by Republic Act No. 9513 or the Renewable Energy Act. It allows ordinary electricity consumers to generate electricity for their own consumption and sell any excess generation to the distribution grid.

Last year, the regulator amended the program rules to address stakeholders’ concerns.

With the clarifications, the ERC expects more end-users to be encouraged in participating in the program.

“Qualified end-users will be empowered with the program as they are ensured of a sustainable power supply and they also help decongest the power grid,” Ms. Devanadera said. — Adam J. Ang

Axelum earnings plunge by almost half

Axelum Resources Corp. saw its net income declined by almost a half in the first quarter as disruptions caused by the global pandemic weighed down on its domestic and export businesses.

The listed coconut products manufacturer in a stock exchange disclosure on Friday said its earnings dropped by 47% in the first three months of the year to P120.9 million, compared with P226.4 million it reported in the same period in 2019.

“After posting the highest level of profitability in our history last year, our growth momentum was interrupted by the outbreak of the COVID-19 health pandemic, which caused significant economic disruptions in most parts of the world,” Axelum President and Chief Operating Officer Henry J. Raperoga said in a statement.

Axelum’s topline decreased by 6% to P1.20 billion in the January-March period from P1.28 billion in the same months a year ago.

It claimed it was able to sustain its profitability with only a “marginal” decline in sales. “While [operational] costs were elevated, this was a result of extraordinary measures that were undertaken to address the current situation,” it said.

The coconut exporter said it is seeing stability in input prices as the government further eased its quarantine policies.

Intending to proceed with targeted spending, Axelum said its long-term prospects remained “intact” as its performance is steadily improving since the start of the pandemic crisis.

For example, the company is still on course to produce and deliver at least 25 million liters of coconut water for Vita Coco this year.

“Our long-term view on the coconut industry opportunity remains intact and our business plan remains the same with enough flexibility to cushion the prolonged effects of COVID-19. We shall keep growing our business organically and selectively consider acquisitions,” Mr. Raperoga said.

Last week, the company decided to redirect P1 billion out of the P4 billion proceeds from its initial public offering to debt repayment. The portion was originally intended for its strategic acquisitions and distribution network expansions. — Adam J. Ang

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