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Hot money reverses to net inflow in October

MORE foreign capital entered than left the country in October to yield a net inflow after two months of outflows, the central bank reported on Friday.

Foreign portfolio investments — also known as “hot money” because of the ease by which these funds enter and leave the economy — saw a net inflow of $104.53 million last month, reversing the $231.71 million net outflow in September as well as the net $67.83 million that left the country in October last year, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed.

This trimmed the ten-month tally to a net outflow of $1.225 billion, a turnaround from last year’s $93.89-million net inflow.

The central bank sees $4 billion in hot money net inflows this year.

Outflows in October hit $1.148 billion, going beyond the $1.02 billion seen last year.

This was surpassed by gross inflows which amounted to $1.253 billion, which improved from the $952.6 million which poured into the country in October 2018 but was lower than the $1.301 billion which entered the country in September.

The bulk or 81.9% of hot money flows went into securities listed in the Philippine Stock Exchange, which were mainly channeled into holding firms, banks, property companies, retail companies, as well as food, beverage and tobacco firms.

“The United Kingdom, the United States, Singapore, Luxembourg, and Malaysia were the top five investor countries for the month, with combined share to total at 73.9%,” the BSP said in a statement.

The central bank pointed towards domestic and international developments for the month including “progress on the US and China trade discussions; initial public offerings by firms in the industrial and services sectors; the BSP’s decision to reduce the reserve requirement ratio for universal/commercial and thrift banks by 100 basis points; and further slowdown of headline inflation to 0.8% in October from 0.9% in September” as factors that affected October’s hot money flows.

Sought for comment, analysts attributed the inflows to the US-China trade deals as well as the the renewed interest in emerging markets.

“Most currencies in EM (emerging markets) Asia rallied versus the US dollar in Oct[ober] driven by positive headlines on US-China trade negotiations. Foreign portfolio flows in local bond and equity markets also underpinned their notable gains. Hot money was also the catalyst for PHP’s outperformance making local rice producers even compete harder versus already cheap imports,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said in a text message.

“A major driver was the potential trade agreement or “Phase 1” between the US and China that has previously roiled global markets into much uncertainty. Aside from this, the domestic developments have underpinned renewed interest in emerging markets such as declining inflation and easing interest rates in the Philippines,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a text message.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said: “net foreign investment inflow…[was] due to improved global market risk appetite after resumption of US-China trade talks, no-deal Brexit averted three-month Brexit extension. Widely expected [US] Fed[eral Reserve] cut also improve global market sentiment.” — Luz Wendy T. Noble

AMA Rural Bank employees refuse to turn over records to PDIC

CLAIMS of depositors of the closed AMA Rural Bank of Mandaluyong, Inc. will be delayed as the bank refuses to turn over its records to the Philippine Deposit Insurance Corp. (PDIC).

Last week, PDIC took over the liquidation of AMA Rural Bank of Mandaluyong after the Bangko Sentral ng Pilipinas (BSP) ordered the bank’s closure on Nov. 7.

The payment of insured deposits, which was initially scheduled around Nov. 22-29, will be delayed unless the bank’s employees comply, PDIC Executive Vice Pressident of Receivership and Liquidation Sector Ma. Ana Carmela L. Villegas said.

“Since then, the bank employees refused to account for and turn over to the PDIC the records under their individual accountabilities. Without these records, the PDIC will be unable to immediately pay the claims of depositors for insured deposits,” Ms. Villegas told reporters during a press conference in Makati City on Friday.

She said demand letters were issued to employees on Friday and they were given 24 hours upon receipt to comply.

She added that under Republic Act. No. 3591 or the PDIC Charter, refusal to turn over or destroying or tampering bank records are considered as criminal acts and are punishable with imprisonment.

PDIC Senior Vice President of the Deposit Insurance Sector Romeo M. Mendoza Jr. said since they are dealing with public’s money, the bank’s cooperation is very important to ensure they will pay the correct amount to right account holders.

In a statement sent days after their closure, AMA Rural Bank of Mandaluyong said it will contest the BSP’s order as they are “fit to operate in every capacity” and will seek ways to resume full operations.

Citing available data, Ms. Villegas said the bank has 8,434 accounts as of end-June, with P1.4 billion worth of total deposits — P1.3 billion of which are insured.

“The PDIC will not hesitate to use the full force of the law to safeguard the interest of the depositing public,” she said.

She also assured that if the bank will not cooperate, the state deposit insurer will have “alternative methods” to restructure the records and determine the amount of claims needed but it will take time to reconcile.

Depositors with valid deposits and claims shall be paid up to the maximum deposit insurance coverage of P500,000. — Beatrice M. Laforga

Peso inches higher on dovish Fed

THE PESO moved sideways on Friday as the US Federal Reserve hinted it is done with rate cuts for the year and as the market looked for more solid developments in the US-China trade talks.

The local unit closed at P50.65 against the greenback on Friday, stronger by three centavos from its P50.68 finish on Thursday, according to data from the Bankers’ Association of the Philippines.

However, the peso depreciated by 16 centavos from its close of P50.49 on Nov. 11.

The peso opened at P50.6 to a dollar. Its weakest point for the day was at P50.55, while its intraday best was at P50.67 against the greenback.

Dollars traded on Friday slipped to $1.116 billion from $1.17 billion recorded on Thursday.

One trader said the peso moved sideways as there was “no big moving headline”.

“Trading was sideways manner today as not much happened. It remains to be headline tone and we still see uncertainty on the US-China,” the trader said in a phone call on Friday.

Meanwhile, another trader said markets followed the speech of key officials from the US Federal Reserve on Thursday night.

“The trading was guided by last night’s development when three Fed members spoke, and with Fed Chair[man] [Jerome C.] Powell] reiterating the US economy is still relatively healthy implying they won’t cut rates anymore for the rest of 2019,” the second trader said in a phone call.

China and the United States are holding “in-depth” discussions on a first phase trade agreement, and cancelling tariffs is an important condition to reaching a deal, the Chinese commerce ministry said on Thursday.

The degree of tariff cancellation should fully reflect the importance of a ‘phase one’ agreement, ministry spokesman Gao Feng told a regular briefing.

“China has emphasized many times that the trade war began with additional tariffs and should end with the cancellation of additional tariffs,” said Mr. Gao.

Meanwhile, Federal Reserve Chair Jerome Powell on Thursday said the risk of the US economy facing a dramatic bust is remote, partly because the record-long expansion is notable for not having pockets of overheating activity.

Mr. Powell, appearing before US lawmakers for a second day, reiterated his view that the current expansion appears to be on a sustainable footing, with few indications of an imminent downturn despite risks from the long-running US-China trade war, a slowdown in business investment and weakness abroad.

“The US economy is the star economy these days,” Mr. Powell told the House of Representatives Budget Committee. “We’re growing at 2%, right in that range, more than any of the other advanced economies are growing. There’s no reason that can’t continue.”

The Federal Open Market Committee is set to hold its last policy setting meeting on Dec. 18-19.

The US economy is in its 11th year of expansion, although growth this year has slowed from 2018 when the Republican tax cuts fed an acceleration in activity. In the third quarter, the economy grew at a 1.9% annualized pace, down from 3.4% in the comparable period a year earlier. — L.W.T. Noble with Reuters

Main index ends flat on US-China negotiations

THE MAIN INDEX ended flat on Friday as investors continued to take cues from the trade negotiations between United States and China.

The 30-member Philippine Stock Exchange index (PSEi) dipped 0.75 point to close at 7,932.96 on Friday. The broader all-shares index likewise shed 5.92 points or 0.12% to 4,751.81.

“Philippine stocks fell as worries lingered regarding the US-China trade talks progress,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a mobile message.

Reuters reported Thursday that the two countries are moving closer towards signing a trade deal, citing White House Economic Adviser Larry Kudlow, who said the two countries are in constant communication.

“The mood music is pretty good, and that has not always been so in these things,” Mr. Kudlow was quoted as saying in the report.

However, CNN reported on the same day that the negotiations have “reached a rough patch,” citing unnamed sources familiar with the matter.

Wall Street indices were mostly flat after the developments. At the end of Thursday’s trading, the Dow Jones Industrial Average dipped 0.01%, the S&P 500 inched up 0.08% and the Nasdaq Composite lost 0.04%.

Over in Asia, markets ended mixed on Friday. Japan’s Nikkei 225 and Topix indices gained 0.70% and 0.73%, respectively, as South Korea’s KOSPI index climbed 1.07%.

However, Hong Kong’s Hang Seng index ended flat with a 0.01% uptick, while China’s Shanghai SE Composite index fell 0.64%.

Back home, financials was the lone sectoral index that climbed, adding 12.63 points or 0.66% to end at 1,920.85.

The rest of the indices declined: mining and oil by 167.36 points or 1.87% to 8,742.14; property by 18.59 points or 0.44% to 4,119.84; industrials by 38.83 points or 0.38% to 10,082.34; holding firms by 13 points or 0.16% to 7,810.42; and services by 0.42 point or 0.02% to 1,547.47.

Value turnover picked up to P6.85 billion on Friday from P4.18 billion a day ago, with 760.22 million issues changing hands.

Decliners outpaced advancers, 109 against 61, while 63 names were unchanged.

Net foreign selling totalled P404.88 million, slightly lower than Thursday’s P496.57 million. — DAV

Public sector partners with startup community to launch nationwide PH Startup Week

The world is set to witness the first large-scale collaboration of the Philippines’ startup community from November 18 to 22 with the Philippine Startup Week 2019 (PHSW19). Themed “Showcasing the Filipino Startup Community to the World”, the PHSW19 is a collaboration by the Department of Science and Technology (DOST), the Department of Trade and Industry (DTI), the Department of Information and Communications Technology (DICT), QBO Innovation Hub, and various private agencies.

“As the first-of-its kind collaboration for Filipino startups, the Philippine Startup Week is more than just a gathering, it’s a celebration and a recognition of how far Filipino startups have come and how further they can go. It’s a testament to the government’s commitment to invest in ideas that have the potential to become the country’s next big time successful companies,” says DOST Secretary Fortunato T. dela Peña.

The weeklong celebration features a series of events simultaneously happening across the country, including a three-day main summit, five-day conference, and over 50 nationwide breakout community events that will showcase the Philippines as a rising startup nation.

Just recently, President Rodrigo Duterte signed the Republic Act No. 11337, or the Innovative Startup Act, cementing the government’s commitment to building the Philippines as a startup hub.

DTI Secretary Ramon M. Lopez highlights how Filipino startups are crucial to the country’s economy by bringing in investments, providing job opportunities, and contributing to a community’s development. “With the Innovative Startup Act and Philippine Innovation Act, which are both supporting the startup community, we are optimistic that these will help in making the Philippines as one of the leading countries in developing disrupting startup concepts.”

“We have a strong potential in this area especially that Filipinos are creative, innovative, and know how to keep up with changing technology and use it in finding solutions to societal problems,” Sec. Lopez said. “We want to build an entrepreneurship ecosystem that will push for innovation through more internet platforms and more new business models.”

According to DICT Secretary Gregorio Honasan II, the signing of the Innovative Startup Act is just the first step. “We’re seeing more collaborations happening in the future,” he said. “We are excited to bring all the innovative startups in the country to meet fellow startup founders, share and learn from their success stories, and showcase the power of technology and innovation.”

Building a community of inspired innovators

QBO Innovation Hub, the country’s first public-private initiative for startups created through a partnership between IdeaSpace, J.P. Morgan, DOST, and DTI, will spearhead the events and activities happening during PHSW19 by bringing together the best of the best in their respective fields.

Startup founders and aspiring entrepreneurs who will participate at PHSW19 will get access to a myriad of networking opportunities, learning sessions, and interactive activities.

“The PHSW19 is a nationwide celebration and so we’re inviting the entire Filipino startup community to come together, grow together, and move our country’s startup scene towards its golden era,” said QBO Innovation Hub President Rene Meily. “Here you can showcase not just your startup but also your pride as a Filipino entrepreneur.”

The PHSW19 will start on November 18 with multiple community events in Metro Manila hosted by various partner companies. The three-day main summit is set from November 20 to 22 at the Crowne Plaza Manila Galleria, Ortigas City which will host three main events: DOST’s “TBI Summit”, DICT’s “Tech Advantage”, and DTI’s “Slingshot” which will also be held in Dumaguete on November 19 and in Bohol on November 21.

Happening simultaneously are other regional events in Pampanga for a discussion on the basics of Intellectual Property Law on November 18; Butuan for an ideation and pitching competition on November 19 and an open house with Navigatu on November 20; Baguio with “BAG-haven: Building Baguio’s Startup Ecosystem” on November 20; Laguna’s “Innovation Next: Creative Arts and Technologies towards Social Innovation” on November 21; Cagayan’s “BIZcovery: Ideation and Technology Pitch Competition” from November 20 to 21; and “Innovating Iloilo: Iloilo Startup Founders Circle Huddle” in Iloilo on November 22.

For the full schedule of events and to participate in the upcoming PHSW19, visit https://www.phstartupweek.com/ or email hello@phstartupweek.com.

Shangri-la mall’s Gourmet Fest back this weekend

SHANGRI-LA Plaza brings the Gourmet Fest back for a second year with 27 restaurants presenting “the many textures and flavors of [the mall’s] well-curated gastronomic selections,” according to a press release.

“Last year, we got good feedback from our food tenants and our customers with some of our customers asking why we don’t do this more often, so we decided to bring it back,” Lala Fojas, executive vice-president and general manager of Shangri-La Plaza during its launch on Nov. 14.

The food festival runs until Sunday, Nov. 17.

Several tenants from last year’s festival have come back for seconds: Italian restaurant Balboa, Japanese restaurants Sumo Sam and Akira, and Vietnamese restaurant Zao, among others.

Ms. Fojas said that they strive to offer a selection of cuisines from around the world and thus included in the festival are Mediterranean cuisine from Arya, Filipino-Spanish cuisine from Corazon, and Thai food from Thai BBQ and Lemongrass.

Chicken and biscuits for those who want a more familiar and comforting fare are available from Kettle.

For those who want to end their food journey with something sweet, crepes from Le Creperie might do the trick. The EDSA Shangri-La Hotel Bakeshop is also offering chocolates and bread.

Coffee lovers can sample local coffee from Bo’s Coffee Primo or the tried and tested beans from Figaro, while tea lovers can get their fix at Yi Fang.

The Shangri-La Plaza Gourmet Fest runs until Nov. 17 and at the mall’s Grand Atrium. The mall is located in Mandaluyong City. For more information, call 8370-2500 local 597 or visit its social media pages. — ZBC

In pursuit of the ideal investment funds

CFA Society Philippines awards PHL’s Best Managed Funds

By Bjorn Biel M. Beltran, Special Features Writer

The Philippines is still on track to meet its economic targets this year, expanding at a rapid 6.2% gross domestic product growth in the third quarter on the back of bigger government expenditures and robust household spending.

Bolstered by such growth, the local investment community is bursting with activity. In the Philippine Stock Exchange’s 2018 stock market investor profile report, total accounts had reached 1,089,443, 25.4% higher than the 868,810 accounts in 2017. Much of this was due to a 60.9% increase in the total number of online accounts to 625,763 in 2018 from 388,864 a year before.

It stands to reason that many more Filipinos are learning to invest this year. Filipinos are in a great position to take their financial security into their hands, but with the investment landscape as vast and as daunting as it is, newbie investors can easily get lost.

This is one of the reasons why the Chartered Financial Analyst (CFA) Society Philippines is continuing and refining its Best Managed Funds of the Year Awards to recognize institutions that deliver the highest returns and the best value to investors, in spite of different volatilities.

Held at the SMX Convention Center Pasay, the annual event aims to uphold the standards for professionally-managed funds and to acknowledge the institutions which have exemplified the global standards in the finance and investment industry.

“Now on its third edition, the best managed fund of the year continuously work toward recognition of the funds that have consistently performed well looking at both the funds’ returns and risks. To highlight CFA Society Philippines’ commitment to promote standards that protect investors, additional points were accorded to firms that are compliant with the asset manager code of conduct,” Rizchelle S. Manaog, CPAE, program director at the CFA Society, told BusinessWorld.

Consistency and transparency

The winners were assessed by the CFAP Fund of the Year Committee, which reviewed the financial institution’s submission of investment information and fact sheets. What differentiates the Best Managed Funds of the Year Awards is that the committee used the Sortino ratio of each fund based on its five-year and three-year track record to evaluate the best returns for investors.

The Sortino ratio differentiates negative volatility from total overall volatility by using the asset’s standard deviation of negative returns, called downside deviation, instead of the total standard deviation of portfolio returns.

“To me, a well-managed fund is something that consistently delivers value to investors. Investors get the returns that they need without exposing them to unnecessary risk,” Mark Jasson C. Ilao, CFA, CIPM, said.

“The awards were designed to capture that kind of value proposition. For the side of the fund managers, it’s like a badge that they can refer to say that they’re doing something right. On the part of the clients, it assures them that their money is in the right hands,” he added.

Mr. Ilao added that the awards were created partly to emphasize the professional ethical standards that the CFA Institute stands for: that is, creating an environment where investors’ interests come first, markets function at their best, and economies grow. The awards also give investors a baseline to become more aware of the track record of the available funds and the institutions that offer them.

Jerome Go, CIPM, pointed out that there is a tendency for funds to take on additional risks that go beyond the limit of their fund’s investment mandate in a bid to get higher returns, which ultimately hurts the investors in the long run.

“In a way, it’s unethical because you are violating your duties to the client. Each return has a corresponding risk. You’re lucky if you get higher returns by taking unnecessary risks, but if you look at the whole investment cycle those risks will catch up with you. It’s a violation of your duties to your customers. You’re lucky if you turn a profit, but what if you don’t?,” he said.

To further encourage funds to strive for an ideal of consistency and prudence, the CFA Society also added a bonus to institutions that followed the Asset Managers’ Code, which outlines the ethical and professional responsibilities of firms that manage assets on behalf of clients.

These principles and provisions address six broad categories: (1) loyalty to clients, (2) investment process and actions, (3) trading, (4) risk management, compliance, and support, (5) performance reporting and valuation, and (6) disclosures.

As the Philippine economy grows and technology makes investing more accessible to the public, Mr. Go and Mr. Ilao hope that more attention is given to institutions and investment funds that not only provide great returns, but also consistently provide what is best for the public.

“Consistency is one of the things that investors look at. The tendency of people is to chase the winners, not realizing that more often than not these winners are just one-time outperformers. I think it’s better to pay attention to funds and institutions that deliver consistent results over time. They might not be the highest performers year-in year-out, but their consistency is always there,” Mr. Ilao said.

“If more customers start to invest, it will generate more revenues for companies and the companies can hire more people to undergo financial training and invest in better education for the public. It’s a beneficial loop,” Mr. Go added.

The Best Managed Funds of the Year

The CFA Society Philippines gave awards in seven categories, both in peso-denominated and dollar-denominated funds. Only the funds accessible to the public or retail investors were considered.

Here are this year’s winners:

MEDIUM TERM BOND refer to funds using fair value profile and loss valuation purely (FVPL) with maturity duration up to five years.

Peso Medium-Term Bond — Metrobank, Metro Max 3 Bond Fund

Dollar Medium-Term Bond — Asia United Bank, Gold Dollar Fund

LONG TERM BOND refer to funds using FVPL but with maturity duration greater than five years.

Peso Long-Term Bond — United Coconut Planters Bank, Peso Bond Fund

Dollar Long-Term Bond — Chinabank, Dollar Fund

EQUITIES refer to investments that were kept in cash for liquidity or rebalanced with other portfolios. In this award category, only actively managed equity funds were eligible to participate.

Peso Equity Fund — ATRAM, Alpha Opportunity Fund

Dollar Equity Fund — BPI, Global Equity Fund-of-Funds

BPI also bested others on the Balanced Funds Peso category with its BPI Balanced Fund. The mandate for balanced funds (using FVPL) is to invest in a diversified portfolio of bonds and stocks with investment in stocks up to a maximum of 40 to 60% of the fund.

“True to the vision of CFA Society Philippines to advocate integrity and excellence in the investment industry, we are proud to announce this year’s winners for best managed funds,” Cristina Arceo, president and chairman of CFA Society Philippines, said.

“The awards are testament to institutions which put primary importance on caring for the investors’ interests. By pursuing this mission, we help strengthen investors’ trust in the investment industry to achieve a well-functioning capital market and sustain our country’s economic progress,” she added.

BSP stays policy, cuts inflation forecast

By Luz Wendy T. Noble

THE BANGKO SENTRAL ng Pilipinas on Thursday kept monetary policy steady — as signaled earlier and expected by the market — and further cut its inflation forecast for the year.

The BSP’s Monetary Board (MB) maintained benchmark interest rates for overnight reverse repurchase, as well as overnight deposit and lending at four percent, 3.5% and 4.5%, respectively, describing current settings as “appropriate” in the face of weak global economic prospects on the one hand, as well as “firm private domestic spending and sustained progress in policy reforms” that “will serve as a buffer against external headwinds.”

“This is supported by the benign inflation outlook and a firm outlook for domestic economic growth. At the same time, a prudent pause in monetary adjustments will enable the cumulative 75-basis point reduction in policy rates as well as the cut in reserve requirement ratios to continue working their way through the economy,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a briefing Thursday afternoon.

After raising benchmark interest rates by a total of 175 basis points last year in the face of successive multi-year-high inflation rates, the BSP has cut these rates by a cumulative 75 bp so far this year.

After a cumulative 200 bp cut in banks’ reserve requirement ratio (RRR) last year, the BSP has also so far cut RRR by a total of 400 bps in 2019, bringing down the reserve requirements for big banks and thrift banks to 14% and four percent by December, respectively, while rural banks’ RRR will go down to three percent.

BSP Governor Benjamin E. Diokno hinted in previous interviews with ABS-CBN News Channel and Bloomberg that the central bank is “likely done” with rate cuts for this year.

The BSP will conduct its eighth and last policy review for 2019 on Dec. 12.

Asked what would prompt the BSP to resume reducing rates next year, Mr. Dakila replied: “As we always emphasize, we remain data-driven.”

“… [F]actors to be considered will be if you would have to look at the inflation outturn again in relation to the target and then determine what would be the main reason behind the deviation.”

After clocking in multi-year highs to average 5.2% last year which was the fastest in a decade, headline inflation has been on a steady downtrend this year, averaging 2.6% in the 10 months to October against the BSP’s 2-4% target range for 2019.

INFLATION FORECAST SLASHED
Mr. Dakila said on Thursday that monetary authorities further slashed their forecast average for the year to 2.4% from the 2.5% downgraded outlook adopted in September.

At the same time, they kept their inflation forecast for 2020 and 2021 at 2.9%.

“Upside risks to inflation over the near term emanate mainly from potential volatility in oil prices amid the African Swine Fever outbreak on food prices and from potential volatility in oil prices amid geopolitical tensions in the Middle East,” Mr. Dakila said.

“At the same time, weak global economic prospects continue to temper the inflation outlook, as uncertainty over trade policies weigh on global economic activity and demand.”

For Alex Holmes, Asia economist at Capital Economics, “The decision by the central bank in the Philippines to leave its main policy rate unchanged at 4.00% today came as no surprise, and we expect the central bank to leave interest rates unchanged for the rest of 2019.”

“But with growth set to disappoint and inflation likely to remain weak, we expect more easing next year,” Mr. Holmes said in a note sent to reporters.

ING-NV Manila Senior Economist Nicholas Antonio T. Mapa said in a note: “Given a possible miss on the growth objective, we expect Governor Diokno to come out swinging in 2020 with up to 50 bps worth of policy rate cuts to help bolster growth momentum…”

“Although the exact timing may still be in question, we are confident that any form of adjustments, both policy and operational, will be guided by data and will be effectively communicated to the markets.”

Gross domestic product (GDP) growth has only lately begun to pick up from last semester’s muted 5.5% average due to subdued government spending in the wake of late national budget enactment. GDP expansion sped to 6.2% last quarter as a pickup in state expenditures added to the impetus from strong household spending. That fueled the three-quarter average to 5.8% against the government’s 6-7% goal for 2019. Socioeconomic Planning Secretary Ernesto M. Pernia has said the economy will have to grow by 6.7% this quarter if it is to hit the lower end of the government target.

Sought for comment, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a mobile phone message: “There may still be some leeway to ease monetary policy way of a further cut in local policy rates especially after the [US] Fed[eral Reserve] cut… but this could be deferred to the coming months, especially in 2020.”

Meanwhile, Security Bank Corp. chief economist Robert Dan J. Roces said in a text message: “BSP anticipates positive outcome from these cuts with looser credit, meaning more people can borrow at lower interest rates and expansion of the money supply from the RRR cuts that leads to inflation.”

“The government in effect sees more money in circulation which will stimulate the economy, and ultimately result in more money available for spending and is a function of a strong economy.”

Fitch Solutions upgrades PHL growth outlook on stronger state spending

FITCH SOLUTIONS raised its Philippine economic growth forecast, citing stronger economic expansion in the third quarter on faster government spending and strong household expenditures.

Fitch Solutions now sees Philippine gross domestic product (GDP) growth this year at six percent, from 5.8% previously, on the back of a “strong rebound in government expenditure and the continued reliance of household confidence.”

At the same time, it maintained its 2020 growth forecast at 6.1%.

The government has GDP growth targets of 6-7% this year and 6.5-7.5% for next year.

“Looking ahead, government consumption looks set to have a buoyant Q4 and rising domestic confidence is likely to result in continued strength in Philippine private demand. Following the mid-term elections in May, in which President Rodrigo [R.] Duterte secured an even stronger majority, and the early passing of the 2020 budget, we expect public sector expenditure to be a key contributor to maintaining the economy’s positive domestic demand story,” Fitch Solutions said in a Nov. 14 report.

Philippine GDP grew by 6.2% in the third quarter after a muted 5.5% average last semester, taking the year-to-date pace to 5.8%.

“With domestic consumption equivalent to around 77% of the Philippine economy, strength in these areas are key to the overall economic rebound,” Fitch Solutions said.

It also noted that “[b]oth business and consumer expectation surveys [of the central bank] point to strong domestic demand in the final quarter of 2019, with consumer confidence also signalling a more positive outlook for 2020.”

“We believe this is likely in part due to the impact of government stimulus, but also low inflationary pressures and the delayed feed-through effect of the Bangko Sentral ng Pilipinas’ easing measures,” the credit rater said in its report.

Among risks ahead, Fitch Solutions said it expected base effects from last year’s successive multi-year-high inflation rates “to fade over the coming months and also… a possible prolonging of delays in capital investment into 2020 should external demand remain weak.” — Luz Wendy T. Noble

Oct. automobile sales highest so far this year

MOTOR VEHICLE sales in the country continued their recovery in October as the industry recorded its “highest monthly sales” so far this year, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) reported on Thursday.

Automotive sales have been growing since February, except for a seasonal dip in August.

Data jointly released by the groups showed that overall sales rose 3.8% to 34,397 units in October from 33,150 vehicles in the same month last year, and by 8.1% from 31,820 units sold in September.

CAMPI President Rommel R. Gutierrez described the latest growth clip as a “much-needed boost” for the industry to hit its target for the year. “The current market demand for vehicles along with creative and aggressive sales promotion efforts give us a positive outlook as we aim to sustain the growth trend for the remaining months of the year,” he said in a statement. “We remain positive that our industry target for the end of the year will be achieved as all brands remain committed to provide innovative mobility solutions to the Filipino people.”

Mr. Gutierrez last year projected a 10% sales growth for full-year 2019. Vehicle sales of CAMPI and TMA members dropped for the first time in seven years in 2018, with total sales falling 16% year-on-year to 357,410 units.

Year-to-date, both groups have so far sold 301,761 units, 2.53% more than the 294,311 vehicles sold in 2018.

Auto sales in October last year saw a 9.2% year-on-year drop after higher automobile excise taxes took effect earlier that year.

Broken down, this year’s October sales of commercial vehicles — which accounted for 70.69% of the total — went up by 2.6% to 24,314 units from 23,706 a year earlier. Asian Utility Vehicle sales rose 40.2% to 4,780 vehicles from 3,409 units, while light commercial vehicle sales dropped 3.3% to 18,271 vehicles from 18,896 units.

Passenger cars saw 6.8% sales growth to 10,083 vehicles from 9,444 a year earlier.

Year-to-date, commercial vehicle sales went up 3.8% to 211,361 units, while passenger car sales dropped 0.2% to 90,400 units.

Toyota Motors Philippines Corp. continued to have the biggest market share with 47.69%, selling 16,403 vehicles in October or 9.9% more than the 14,927 units sold a year ago.

It was followed by Mitsubishi Motors Philippines Corp. with 16.01% market share, even as sales dropped by 8.3% to 5,508 units from 6,004 a year ago.

Nissan Philippines retained the third spot with 10.75% market share as vehicle slipped 0.2% to 3,697 in October from 3,703.

Suzuki Philippines Inc. came next with 6.41% market share, growing sales by 11.8% to 2,206 units from 1,974.

Ford Motor Company Phils. Inc. followed with 4.78% market share, with sales up 1.1% to 1,643 from 1,625. — Jenina P. Ibañez

ADB approves $300-M loan for Philippine LGU support

THE ASIAN DEVELOPMENT BANK has approved a $300-million loan from the Asian Development Bank (ADB) to help local government units (LGUs) improve public services and revenue collections as well as reduce the cost of doing business, the regional lender said in a press release on Thursday.

The loan covers the first segment of the Local Governance Reform Program (LGRP).

“The ADB program under LGRP is helping the government provide LGUs with the tools and skills necessary to deliver high-quality public services in an accountable and cost-effective manner,” the statement quoted Robert Boothe, ADB Public Management specialist for Southeast Asia, as saying.

While the program’s final framework was not immediately available, an ADB concept paper published in November last year that spelled out the initial draft of the program showed this segment will support improvements to Republic Act No. 7160, or the Local Government Code of 1991; increasing local autonomy over natural resource revenues; harmonization of rates of local fees and charges; adoption of a new subnational public financial management (PFM) financial reporting platform and establishment of an electronic compendium of local PFM rules and issuances. The loan may also be used to fund a local financing and debt framework or an LGU disaster risk financing framework.

Under the implementation arrangements, the Department of Finance will act as the loan’s executing agency, while the Department of Budget and Management, Department of the Interior and Local Government, and Bureau of Local Government Finance will be the primary implementing agencies.

In 2017, the Philippine government established a three-tiered Standardized Examination and Assessment For Local Treasury program to ensure that local treasury officers are skilled and competent to manage resources.

It also adopted an online LGU client rating system for business permit application and releasing to encourage citizen feedback on LGU performance and service delivery. “Such measures are helping to raise the country’s overall attractiveness for private sector investment,” ADB said.

“ADB supports the Philippine government’s goal of creating a high-trust society, where citizens have confidence in the capacity of local government institutions to deliver services to communities and provide a simpler business environment for private enterprises,” Jose Antonio Tan III, director for Public Management, Financial Sector and Trade at ADB’s Southeast Asia Regional Department, said in the same statement.

“A healthy business environment will lead to more jobs and strengthen the local economy.”

ADB has 68 members, of which 49 are Asian countries.

In October, ADB announced that it plans to invest at least $2.5-3 billion annually to reach $12.1 billion in 2019-2022.

The lion’s share or nearly 60% of the total lending program in that period is meant to finance transportation projects like roads, railways, bridges and elevated pedestrian walkways. — Beatrice M. Laforga

Ayala to invest $237M in Myanmar’s Yoma Group

AYALA CORP. (AC) is investing up to $237.5 million in Myanmar’s Yoma Group, marking the biggest investment by a Philippine company in Myanmar.

AC announced the landmark deal in a statement yesterday, where it said it is taking a 20% stake in both of Yoma’s holding companies — Yoma Strategic Holdings Ltd. and First Myanmar Investment Public Co. Ltd.

Yoma Strategic is listed in Singapore and has interests in property development, construction & piling services, project management and design services.

First Myanmar Investment, on the other hand, is listed in Myanmar and is in the business of financial services, healthcare, real estate and tourism.

AC will become the second-largest shareholder of these two companies, after the Pun family. AC President and Chief Operating Officer Fernando Zobel de Ayala will be nominated to the board of the two companies.

AC Chairman and Chief Executive Officer Jaime Augusto Zobel de Ayala said the partnership with the Yoma Group gives the Philippines’ oldest conglomerate a chance to ride on Myanmar’s growth trajectory.

“We have always believed that ASEAN has massive potential to reap the benefits of Asia’s rise in the global economy. Ayala can definitely move closer to this aspiration by working with a respected and diversified conglomerate in the region,” he said in the statement.

Last month, AC’s power unit AC Energy, Inc. announced plans to form a 50-50 joint venture with Yoma Strategic to develop around 200 megawatts (MW) of renewable energy in Myanmar.

Once finalized by next year, the joint venture is looking to hold at least a 50% stake in Yoma Micro Power (S) Pte. Ltd., a micro power plant and mini-grids builder in Myanmar.

AC said it is keen on tapping Myanmar’s “under-penetrated market” which has been recording a gross domestic product (GDP) growth of more than 6% year-on-year over the past three years. Myanmar’s location — sitting between India and China — is also a factor.

“We are confident that by leveraging our own capabilities and experiences over the last 185 years, Ayala’s partnership with the Yoma Group could certainly help improve the lives of people in Myanmar through purposeful business,” AC President and Chief Operating Officer Fernando Zobel de Ayala said in the statement.

Yoma, chaired by tycoon Serge Pun, has expanded beyond real estate by partnering international companies entering Myanmar. It holds the KFC franchise from Yum Brands Inc and has a joint venture with Mitsubishi Motors Corp. to distribute the Japanese automaker’s vehicles.

“This partnership reflects Ayala’s faith in the future of Myanmar,” Mr. Pun, executive chairman of both FMI and Yoma Strategic, said in the statement.

Earlier on Thursday, Yoma Strategic reported a net loss of $44.2 million its the second quarter through September, versus a profit of $18.8 million a year earlier.

AC posted an attributable net income of P46.16 billion in the first nine months of the year, almost double from last year, due to higher returns from its power, banking and telecommunications units. — Denise A. Valdez with report from Reuters

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