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BoP estimates raised as current account swings to surplus

The Philippine central bank on Friday raised its balance of payment projections for this year and 2021 amid a prolonged coronavirus pandemic, as the country’s current account reverted to a $4.1-billion surplus in the third quarter.

The surplus came as the trade in goods deficit fell and net receipts of secondary income rose, making up for the lower net receipts of primary income and trade in services, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Last quarter’s current account surplus was a turnaround from the $456-million deficit in the third quarter of last year, but smaller than the $4.4-billion surplus in the second quarter.

“The latest BoP assessment for 2020 reflects the apparent bottoming out of the COVID-19 impact in Q2 2020,” the BSP said in a statement. “While recent external account figures remain below pre-pandemic trend and still in the negative territory, these are expected to improve from the first half of the year,” it added.

The payment position is expected to post a surplus of $12.8 billion in 2020, equivalent to 3.4% of economic output and higher than its previous estimate of P8.1 billion.

This reflects largely the $10.3 billion overall BOP position in the 10 months through October, supported by higher foreign borrowings by the National Government and lower merchandise trade deficit, the central bank said.

For 2021, the major BoP accounts are expected to show continued improvements but could still remain below pre-pandemic levels, the central bank said. “The overall BoP position is projected at $3.3 billion in 2021, attributed mainly to the expected moderation of the current account surplus next year.”

The central bank said it had raised its projected current account surplus to $8.4 billion, or equivalent to 2.3% of gross domestic product (GDP) this year from the $6-billion estimate in October.

This is expected to narrow to $6.1 billion or 1.5% of the economic output next year, higher the previous estimate of $3.1 billion or 0.8% of output.

The BSP expects a “sustained surplus in the current account over the medium term but one that is moderating as the economy recovers and imports also recover,” Deputy Governor Francisco Dakila, Jr. told an online news briefing.

Keeping more outflows than inflows might bode well for economic growth when imports were strong before the pandemic since the Philippines is a net importing country and has been posting a current account deficit in the past, said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc.

“This means that a surplus may not actually be good in a crisis and that the challenge is to get the economy moving again to a point when the current account settles in a healthy deficit,” he said in a Viber message.

BSP data showed the trade in goods deficit narrowed to $4.227 billion from $8.605 billion. Primary income fell by 15.7% from a year earlier to $1.061 billion, while secondary income rose by 4.1% to $7.28 billion.

In the nine months to September, the current account balance posted an $8.7-billion surplus from a $3-billion deficit a year ago, it said in a separate statement.

The central bank traced the surplus to a fall in the trade in goods deficit, offsetting the lower net receipts of trade in services, primary and secondary income.

The current account shows the country’s economic interaction with the rest of the world. It includes trade in goods and services, remittances from migrant Filipino workers, profits from Philippine investments overseas, interest payments to foreign creditors and gifts, grants and donations to and from abroad.

BoP remains in surplus for Q3

THE PHILIPPINES’ balance of payments (BoP) — a measure of the country’s transactions with the rest of the world — continued to post a surplus last quarter at $2.8 billion, more than three times the past year’s amount.

“The increase in the BoP position was underpinned by the reversal to a surplus of the current account, attributed mainly to the narrowing of the trade in goods deficit as imports of goods recorded a higher decline than exports of goods,” the BSP said.

The central bank traced the slowdown in merchandise trade to sustained risks and uncertainties during the pandemic.

This brought the nine-month BoP surplus to $6.9 billion, 24% higher than a year earlier. A surplus means more funds entered the economy.

The central bank kept its forecasts for cash remittances at a 2% decline this year and 4% growth next year as it expects improving global conditions, further reopening of sectors and the arrival of vaccines to benefit overseas Filipino workers’ employment prospects.

Foreign direct investments are projected to rebound with inflows of $7.5 billion, while foreign portfolio investments are expected to reach $3.5 billion in 2021 “in line with the consensus view of a recovery in investment sentiment given better global and domestic economic prospects next year,” the BSp said.

The outlook for the gross international reserves was raised to $105 billion by year-end from $100 billion estimated earlier. It also expects reserves to continue rising next year to $106 billion, up from the previous forecast of $102 billion. — Beatrice M. Laforga

BSP fully awards 28-day bills

The Bangko Sentral ng Pilipinas (BDP) fully awarded the short-term securities it offered on Friday on ample liquidity during the holiday season.

The central bank raised P80 million in 28-day debt paper as planned. The auction was more than 1.5 times oversubscribed as bids reached P141.25 billion.

This marked the 13th straight week that the central bank made a full award since it started selling its own securities in September.

“The sustained strong demand for the BSP deposit facilities amid the coming holidays supports the view that financial liquidity remains ample,” BSP Deputy Governor Francisco Dakila, Jr. said in a statement. “Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of market developments and liquidity conditions.”

Rates sought ranged from 1.68% to 1.7%, lower than 1.69-1.71% at last week’s auction. The one-month bills fetched an average rate of 1.6921%, down 0.64 basis point from 1.6985%.

Total tenders were also bigger than P117.1 billion last week.

“Demand seems to be sustained as liquidity in the financial system remained at ample levels, and the facility continues to complement the term deposit facility to mop up the excess and investors looking for less interest rate risk,” Security Bank Chief Economist Robert Dan J. Roces said in a Viber message. — Beatrice M. Laforga

Philippine external debt stock rises

The country’s outstanding external debt rose by 5.2% at the end of September from the previous quarter as companies and the government continued to borrow more from overseas amid a coronavirus pandemic, according to the Philippine central bank.

The foreign debt stock hit $92 billion as of end-September from $87.5 billion as of end-June, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Friday. The debt stock has gone up by a tenth this year.

The central bank traced the quarterly uptick to $2.8 billion in net loans obtained by private nonbank companies to boost their working capital, and the $2.4 billion government borrowing meant to boost its pandemic response.

Also pushing up the debt level were the weaker dollar against the peso and higher nonresident investments in Philippine debt securities issued offshore worth $294 million.

External debt refers to all types of borrowings by residents from nonresidents.

BSP Governor Benjamin E. Diokno said key external debt indicators show that the debt stock remained at prudent levels, with the gross international reserves reaching $100.4 billion as of end-September, which could cover short-term obligations by nine times.

The debt service ratio, which relates principal interest payments to exports of goods and receipts from services and primary income, rose to 7% last quarter from 6.4% a year earlier.

The total outstanding debt climbed to 25.3% as a share of overall economic output last quarter from 23.7% a quarter earlier.

“The ratio indicates the country’s strong position to service foreign borrowings in the medium to long-term,” Mr. Diokno said. The ratio of the country’s external debt to economic output remained one of the lowest in the region, he added. — Beatrice M. Laforga

BSP tightens reserve rules for lenders

The central bank has set a limit on the amount of loans to small and large businesses that lenders can count as part of their reserve requirement compliance, Governor Benjamin E. Diokno said on Friday.

In a statement, Mr. Diokno said total loans to micro-, small- and medium-sized enterprises (MSME) and large enterprises counted as alternative compliance with the reserve requirements were capped at P300 billion and P425 billion, respectively.

The limits, which were based on simulations, would ensure that the use of loans as an alternative compliance is consistent with local liquidity conditions and projected growth, he said.

BSP-supervised financial institutions should continue to avail themselves of the relief measures to sustain lending and financial support to viable MSMEs and large enterprises, Mr. Diokno said.

“Access to finance by these businesses will contribute to the recovery of the domestic economy and will help secure our envisioned path of sustainable and inclusive growth,” he added.

The central bank in April allowed lenders to use credit to MSMEs as part of their reserve requirement compliance to support lenders amid a coronavirus pandemic.

Once the limit has been reached before the end of 2022, the central bank would amend policies to close the validity of the relief measure. The rules allow banks to use these loans as part of their compliance until Dec. 29, 2022, unles closed earlier.

The cap on loans would not affect the rural banks because it is too high considering the sector’s asset base, Elizabeth C. Timbol, president of the Rural Bankers Association of the Philippines, said in a Viber message on Friday.

“Rural banks will continue to extend loans to MSMEs and utilize the regulatory relief on alternative compliance with the reserve requirement,” she said.

MSMEs make up 99% of all establishments in the country and employ more than 60% of the total labor force. — Beatrice M. Laforga

Peso weakens vs dollar

The peso on Friday depreciated further against the dollar on weak economic data after lower flows and higher bad loans.

The currency closed at P48.07 a dollar on Friday, 0.5 centavo weaker than a day earlier, according to data posted on the Bankers Association of the Philippines website.

The peso opened the session at P48.08 a dollar, weakening to as much as P48.085 and peaking at P48.055 against the greenback.

The total volume of dollars traded roes to $540.85 million from $498.1 million on Thursday.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., traced the weak performance to data showing foreign direct investments (FDI) had eased further, while banks reported higher bad loans.

“Offsetting positive factors for the peso are the expected seasonal surge in overseas Filipino workers’ remittances and conversion to pesos shortly before Christmas, narrower trade deficit data, weak US dollar versus major global currencies among 2.5-year lows recently,” he said in a Viber message.

FDI net inflows to the Philippines dropped by 12.3% from a year earlier to $523 million in September, according to the central bank. This was also 17% lower than $637 million in August.

The gross bad loan ratio rose to 3.69% as of end-October from 3.47% a month earlier and 2.2% a year ago. The ratio of soured loans was the highest since 2013.

The Bangko Sentral ng Pilipinas expects the bad loan ratio to rise to 4.6% by year-end. — Beatrice M. Laforga

DBP lists P21-billion bonds

State-run Development Bank of the Philippines (DBP) listed P21 billion worth of two-year peso-denominated bonds on Friday.

The bond sale which would support its lending activities to strategic sectors, President and Chief Executive Officer Emmanuel G. Herbosa said at the listing ceremony at the Philippine Dealing & Exchange Corp. (PDEx).

The debt paper fetched a coupon of 2.5%, the lowest coupon yield listed to date, he said. The two-year debt was issued on Friday and will mature on Dec. 11, 2022.

“With additional funds to be raised at our disposal for development initiatives, DBP can further support projects and investments that help generate employment, ensure access to basic goods and services, and address or mitigate a specific social issue to achieve positive social outcomes,” Mr. Herbosa said.

He added that the bank would sustain its lending programs to support sectors hit hard by the pandemic such as micro-, small- and medium-sized enterprises.

The state-run bank is among the main implementing agencies of the government’s relief programs during the pandemic, such as the interest rate subsidy program for loans obtained by local governments.

DBP had P761.5 billion in assets last year and was the country’s ninth biggest bank by assets. — Beatrice M. Laforga

Ayala energy unit says 2.27-B offer shares exempt from SEC registration

AC Energy Philippines, Inc. said on Friday that it had received confirmation from the securities regulator that the Ayala Corp. unit’s proposed stock rights offering is exempt from the registration requirement of the securities code.

The company is planning to offer up to 2,267,580,434 common shares at a price of P2.37 per share, it told the Philippine Stock Exchange. The offering consists of two rounds, and will be followed by a domestic institutional offer.

The first round will be offered on a pre-emptive rights basis to eligible shareholders who may subscribe to 1 share for every 1.11 common shares held as of record date.

During the mandatory second round, shares will be offered to shareholders who exercised their rights in the first round and who had signified their intention to subscribe to any unsubscribed rights shares.

Under the domestic institutional offer, the remaining rights shares will be sold by the joint lead underwriters to qualified buyers as defined in the 2015 Implementing Rules and Regulations of the Securities Regulations Code (SRC) at the same offer price.

Unsold shares will be taken up by the joint lead underwriters BPI Capital Corp. and China Bank Capital Corp.

AC Energy Philippines said the confirmation letter was issued by the markets and securities regulation department of the Securities and Exchange Commission. 

Section 10.1 (e) of the SRC exempts from the requirement of registration “the sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock.” 

On Friday, shares in the company slipped by 0.63% to P6.35 each. 

Del Monte Pacific turns around to net profit in three months to Oct.; shares rise over 9%

DEL MONTE Pacific Ltd. (DMPL) said attributable net profit was $21.9 million in the three months to October, turning around from a year-earlier loss of $37.35 million, following improved sales in the Philippines and the US.

In a disclosure on Friday, the food manufacturer said its sales during the second quarter rose 12% year on year to $623.5 million due to better figures in the United States (US) and the Philippines.

The company’s fiscal year bands in April, and the three months to October represent its second quarter.

US subsidiary Del Monte Foods, Inc. (DMFI) posted sales growth of 13% to $446.7 million due to stronger demand in the branded retail segment during the pandemic.

In the Philippines, sales rose 10% in dollar terms and 4% in peso terms, led by pineapple juice, meal mixes, and ketchup.

“Retail sales grew by a strong 13% despite a weak economy and high unemployment resulting from the pandemic. However, this was offset by the food service business which remained soft notwithstanding improvements over the first quarter,” according to the disclosure.

The company said Del Monte Philippines, Inc. (DMPI) posted a net income of $23.6 million.

“The strength of our brands and our products sought by consumers in the US and the Philippines, and improving sales in other Asian markets were at the centre of the robust performance for the quarter,” DMPL Managing Director and Chief Executive Officer Joselito D. Campos, Jr. was quoted as saying.

“We are razor-focused on managing costs while our solid fundamentals as a staple food business with trusted brands, and high quality, healthy and shelf-stable products will continue to drive our growth,” he added.

For the first half of its fiscal year, the company said attributable net profit was $18.6 million, a turnaround from a year-earlier $75.6 million loss.

Sales oduring the half rose 11% year-on-year to $1.04 billion, with DMFI accounting for 69% of the total at $714.9 million.

“The Philippines also generated increased sales of 15% and 10% in dollar and peso terms, respectively,” it said.

In October, the company announced that DMPI raised $134 million from an issue of fixed-rate bonds.

The oversubscribed issue consisted of three-year bonds priced at 3.484% rate and five-year bonds at 3.7563%.

Proceeds were used to refinance at a funding lower cost over longer maturities.

The company said it expects to return to profitability in the 2021 fiscal year.

“DMPL is well-positioned in this environment given its nutritious and long shelf-life products which enable consumers to prepare healthy meals at home and build their immunity amidst the pandemic,” it said.

On Friday, Del Monte Pacific rose 9.62% or 61 centavos to P6.95. — Revin Mikhael D. Ochave

PLDT sells Smart unit’s Makati HQ for $128 million

PLDT, Inc. has concluded the sale of the 37-storey Smart Tower in Makati City for $128 million to real estate development company DMC Urban Property Developers, Inc, according to commercial real estate services firm JLL in a statement Friday

In an e-mail, JLL, a unit of US-listed Jones Lang La Salle Inc., said its client, PLDT, will continue to occupy the building, which houses the headquarters of its wireless arm, Smart Communications, Inc., “for the next five years via an accompanying leaseback agreement.”

“The sale price represents the largest commercial real estate transaction completed in the Philippines in 2020,” it added.

The building, along Ayala Avenue, has a gross floor area of 38,000 square meters and 244 parking slots, JLL said.

In the statement, JLL Philippines Country Head Christophe Vicic said: “Investor appetite for grade A assets in the Metro Manila area has remained high throughout an unpredictable year.”

“The sale of the marquee Smart Tower reinforces the long-term confidence in the office market and the ambitions of corporate occupiers to reimagine their real estate holdings,” he added.

PLDT said last year it was planning to raise capital by selling company assets.

The company expects capital expenditure to hit P70 billion this year.

PLDT’s attributable net income in the third quarter rose 95% year-on-year to P7.41 billion, amid the rise in demand for digital or online services due to the pandemic.

PLDT closed up 0.38% at P1,335 on Friday.

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

SEC warns public against investment schemes offered by Cubebit 2.0, Alisurvey

THE Securities and Exchange Commission (SEC) warned the public against investment schemes run by Cubebit 2.0 and Alisurvey Advertisement Marketing Services, which it said are not authorized to make such offers.

In two separate advisories on its website, the SEC said the two entities are soliciting investment without licenses.

The SEC said the Cubebit 2.0 scheme promises “ridiculous rates of return with little or no risk.”

According to the regulator, Cubebit 2.0 claims to give investors the opportunity to earn passive income via a number of online trading platforms.

The SEC said Cubebit 2.0 is not registered with the commission and is not authorized to solicit, accept or take investment from the public.

“Cubebit 2.0 is also not registered either as a crowdfunding intermediary or a funding portal under SEC Memorandum Circular No. 14, Series of 2019 or the Rules and Regulations Governing Crowdfunding,” it said.

The SEC said Alisurvey Advertisement Marketing Services’ “Buy, Wait, and Earn packages” contitute an unlicensed solicitation of investment.

The SEC said Alisurvey trades in load and ticketing services, conducts online surveys, and makes and retails perfume.

The SEC said Alisurvey is registered as a partnership but is not authorized to solicit investment from the public.

“It has not secured prior registration and/or license from the commission,” the SEC said.

According to the SEC, the packages offered by Alisurvey guarantee profits of 16.67% in monthly rebates over twelve months, or an annual guaranteed profit of around 200%.

“The public must be wary that any promise of ridiculous rates of return with little or no risk is an indication of a Ponzi Scheme where monies from new investors are used in paying fake ‘profits’ to earlier investors,” the SEC said.

BusinessWorld sought comment from the two groups in the wake of the advisories.

In a Facebook message, the official page of Alisurvey said it has responded to the advisory and will comply with the SEC’s requirements.

“Still it is an advisory, and the SEC is getting our side regarding this matter,” Alisurvey said.

Cubebit 2.0 had not responded at of deadline time.

Unlicensed selling of securities constitutes a violation of Republic Act No. 8799 or the Securities Regulation Code, making Cubebit 2.0 and Alisurvey potentially liable for fines of up to P5 million or 21 years’ imprisonment, or both. — Revin Mikhael D. Ochave

National Home Mortgage wins approval to securitize loans

The Securities and Exchange Commission (SEC) approved Friday a plan by the National Home Mortgage Finance Corp. (NHMFC) to securitize more than 1,200 residential loans, which will be held by a special purpose trust.

Under the plan, NHMFC will sell 1,291 mortgages to BALAI Bonds 2 Special Purpose Trust (BALAI Bonds 2 SPT).

The trust will then issue P319.32 million worth of asset-backed securities, comprising P150 million Class A senior notes and around P169 million Class B subordinated notes.

“Proceeds from the issuance will then be used to pay NHMFC the purchase price for the residential loans,” the SEC said in a statement.

Land Bank of the Philippines (LANDBANK) will serve as the underwriter for the notes issue.

The BALAI Bonds 2 issue is exempt from registration, because the securities will be issued to 19 investors or less. Under the Securities Regulation Code, securities sold or offered for sale to less than 20 individuals in a year do not need to be registered.

The NHMFC’s new securitization plan follows an earlier transfer of P270.25 million worth of mortgages to BALAI Bonds 1 Special Purpose Trust in December.

The purpose of the securitization exercise is to free up funds for NHMFC to lend while also helping develop a secondary market for home mortgages. — Angelica Y. Yang

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