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[B-SIDE Podcast] Investing 101: Coronavirus and the Philippine stock market

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The Philippine stock market is trying to recover from its worst drop in eight years. Due to COVID-19, the outlook of the economy is dim and the future is uncertain. According to Philstocks Financial senior research analyst Japhet Tantiangco, there is a silver lining to this volatile situation. In this episode, Mr. Tantiangco takes BusinessWorld reporter Denise A. Valdez through the basics of the stock market and explains how the right strategy will reward neophyte investors who can stomach risk. Recorded remotely on April 20. Produced by Nina M. Diaz, Paolo L. Lopez, and Sam L. Marcelo.

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Soccer-MLS opens up training fields for individual workouts

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Players will be able to use outdoor team training fields for solo workouts from next Wednesday, Major League Soccer said on Friday as the sport takes its first steps towards a return to action following the shutdown forced by the COVID-19 pandemic.

Like most North American sport, MLS shuttered operations mid-March and a league wide moratorium on group and team training remains in place through May 15.

Players will not be allowed access to club facilities, including locker rooms, gyms or training rooms.

MLS emphasized that all individual workouts, which are voluntary, must be conducted in compliance with detailed health and safety protocols in consultation with medical and infectious disease experts.

Even just getting back onto the pitch will not be easy.

Teams must first submit to MLS a club-specific plan that outlines how the team will implement protocols.

Individual workouts will be staggered with each player getting a designated parking spot to maintain maximum distance between vehicles.

Players and staff will be screened with temperature checks on arrival and must wear personal protective equipment coming on and off the field, which will be divided into four quadrants with a maximum of one player per quadrant. (Reporting by Steve Keating in Toronto. — Reuters

Gov’t changes mind, bans church and work meetings

By Gillian M. Cortez, Reporter

The government on Friday backtracked on its decision to allow religious and work-related gatherings under a relaxed lockdown in some areas of the country, after some lawmakers and local officials objected to it.
An inter-agency task force discussed the policy and decided to keep the ban on all public gatherings, presidential spokesman Harry L. Roque said at a news briefing.

Some lawmakers and local officials earlier said religious and work meetings could spread the novel coronavirus.
The Department of Health reported 284 new infections on Friday, bringing the total to 8,772.

Eleven more patients died, raising the death toll to 579, DoH said in a bulletin. Forty-one more patients have gotten well, bringing the total recoveries to 1,084, it added.

Mr. Roque earlier said people attending religious services and work-related meetings must observe social distancing to prevent the coronavirus disease 2019 (COVID-19) from spreading.

Minimum health standards must also be met including wearing face masks and shields and hand sanitation, he added.
Under the rules, social distancing of at least a meter between passengers of public transportation will be enforced.

Low- and medium-risk areas will be placed under a more relaxed lockdown starting May 1.

High-risk areas such as Metro Manila, Central Luzon except Aurora, Calabarzon (Cavite, Laguna Batangas, Rizal and Quezon), Pangasinan, Benguet, Iloilo, Cebu and Davao City will remain under the stricter enhanced community quarantine until May 15.

Bacolod was also included in high-risk areas as proposed by provincial officials.
The movement of people under the general community quarantine will be limited to accessing basic needs and work in permitted industries, Mr. Roque said on Thursday.

Starting May 16, all decisions to impose, lift or extend a community quarantine in provinces, highly-urbanized cities and independent component cities will be made by the inter-agency task force, according to a copy of the rules.

Provincial governors may impose, lift or extend the quarantine in cities and municipalities upon the concurrence of the relevant regional counterpart body of the task force.

Local chief executives of cities and municipalities may also impose, lift or extend the enhanced community quarantine in villages, upon the concurrence of the relevant regional counterpart body of the task force.

President Rodrigo R. Duerte locked down the entire Luzon island on March 17, suspending work, classes and public transportation to contain a COVID-19 outbreak. He has extended this twice — first by two more weeks until April 30 and by two more weeks until May 15 for some parts of the island.

Gov’t allows POGOs to partially resume operations

The government gave the green light for Philippine offshore gaming operators (POGOs) and their service providers to resume partial operations amid the enhanced community quarantine (ECQ) in Metro Manila, the Philippine Amusment and Gaming Operations Corp. (PAGCOR) said on Friday.

In a statement on Friday, PAGCOR Chairman and CEO Andrea D. Domingo said the Inter-Agency Task Force on Emerging Infectious Diseases (IATF-EID) approved the regulator’s recommendation to consider POGOs as part of the business process outsourcing (BPO), a sector that has been exempted from strict lockdown protocols.

She said only 30% of POGOs’ workforce will be allowed to operate per shift, provided that they have work permits and have tested negative from the coronavirus disease 2019 (COVID-19).

“Even with the partial resumption of POGO operations, we will put premium on the safety of their employees, and the gaming industry as a whole. While we recognize their huge contributions to nation-building, and their great viability as a funding source in these difficult times, we still have to practice extra precaution in striking a balance between health and economic benefits,” Ms. Domingo was quoted as saying.

Before being allowed to resume operations, POGO service providers will have to settle all their taxes with the Bureau of Internal Revenue (BIR) and all other obligations with PAGCOR as of March.

The BIR earlier estimated around P27-billion worth of tax liabilities have not been collected from POGOs.

The online gambling firms will also have to pay the minimum guarantee fee that could reach P300-350 million for the month of April even with no operations, according to Ms. Domingo in a separate radio interview.

She said POGOs will also have to pay the salaries of their Filipino direct employees, estimated at over 31,600, for the month of April and during the days of operation.

POGOs will also implement safety measures such as provision of shuttle services, temperature checks at the office, maintain social distancing, proper sanitation and disinfection, as well as mandatory use of face masks.

“Meanwhile, employees who have confirmed COVID-19 cases, including those who are suspect or probable cases will not be allowed to work. The vulnerable groups, including the sick, immunocompromised, seniors, pregnant women, and those with co-morbidities will not be deployed,” the PAGCOR statement read.

Ms. Domingo said PAGCOR will notify the firms by Monday, and POGO service providers expected to resume operations a week after as they have to meet the requirements first.

POGO employees, whether Filipinos or foreign nationals, should first be tested for COVID-19 and must obtain a negative test result from a testing facility duly-registered with the Food and Drugs Administration.

The company should also establish an isolation room for employees who may start to exhibit COVID-19 symptoms.

Meanwhile, the Accredited Service Providers Association of Pagcor (ASPAP) said its members will comply with the strict conditions of the government.

“To stress a point – POGOs are offshore gaming operators, while POGO service providers are typical Philippine-based BPO companies that are purely paid service fees,” ASPAP said.

Earlier, PAGCOR’s net income plunged 49.8% to P777.44 million in the first quarter from P1.55 billion in the same period last year after casino activities were banned during the lockdown which started in mid-March.

Ms. Domingo has said revenues can recover once the operations are allowed to resume. — Beatrice M. Laforga

Government debt rises in March

The national government’s outstanding debt reached P8.177 trillion as of end-March due to higher issuances of domestic securities, the Bureau of the Treasury (BTr) said.

In a report released Thursday evening, the BTr reported the national government’s debt stock increased by P11.82 billion or 0.1% to P8.177 trillion as of end-March from P8.165 trillion as of end-February. The March figure was also 4.8% higher than P7.8 trillion in March 2019.

Of which, 67% or P5.512 trillion were sourced domestically, while 33% or P2.664 trillion were from external creditors.

The domestic debt stock inched up 1.2% from P5.45 trillion as of end-February and 6.1% higher compared to P5.197 trillion seen in March 2019.

BTr attributed the increase to net issuances of government securities worth P63.07 billion.

External debt as of end-March slipped 1.89% to to P2.664 trillion from P2.716 trillion a month prior, but was 2.3% higher from P2.605 trillion a year ago.

“For March, the decline in external debt was due to the P44.18 billion net repayment of foreign loans and the P7.02 billion collective effect of exchange rate adjustments on both dollar- and third-currency denominated debt,” the national treasury said.

The government is looking at a borrowing mix of between 70:30 and 72:28 Ñ still in favor of domestic lenders to minimize foreign exchange risks and volatility Ñ from its initial target of 75:25 ratio.

Meanwhile, the national government’s guaranteed obligations declined 0.5% month-on-month to P481.82 billion as of end-March, largely due to the P1.92 billion worth net redemption of local and foreign guarantees made.

Broken down, 53% or P254.832 billion were domestic guarantees, while 47% or P226.989 billion were from external sources.

ADJUSTMENT

Meanwhile, the 2019 debt-to-gross domestic product (GDP) ratio was adjusted downwards to 39.6% using 2018 as the base year compared to the 41.5% reported previously using 2000 prices.

With 2018 as the new base year, last year’s debt stock relative to the economy hit a record-low, slightly declining from the previous years’ levels of 39.9% in 2018, 40.2% in 2017 and 2016, and 42.7% in 2015.

The Duterte administration’s economic team has set a 46.7% debt-to-GDP target this year, which can be translated to 44.95% if rebased using 2018 prices, according to National Treasurer Rosalia V. de Leon.

Using rebased year, the 2019 GDP was revised to six percent from 5.9% previously.

However, the Development Budget Coordination Committee (DBCC) has yet to release its revised macroeconomic assumptions using the rebased GDP. — Beatrice M. Laforga

Deadline for payment of local taxes extended

The Department of Finance (DoF) has extended the deadline for the payment of taxes, fees and charges to local government units (LGUs) as relief for Filipinos affected by lockdown measures around the country.

Department Circular No. 002-2020 dated April 23 extended the deadline to June 25 for payment of all local taxes, fees and charges as of March 25, with no interest, surcharges and penalties. This is in line with Republic Act No. 11469 or the Bayanihan to Heal as One Act.

In a letter to Department of Interior and Local Government Secretary Eduardo M. Año, Finance Secretary Carlos G. Dominguez III said it was the department’s view that RA 11469’s Section 4 (z) is to be “liberally construed to include all LGUs.” 
 
Mr. Dominguez said the DoF issued the circular to provide a “uniform adoption and implementation” by all LGUs of the extension, after only 146 local governments adopted such measures.

The DoF said the counting of the period to pay local taxes, fees, and charges will also be suspended.

“In the event that an LGU had already extended the deadlines prior to the effectivity of RA 11469, such deadlines shall be deemed modified with the period set forth herein. Any further extension thereof shall be authorized in accordance with the provisions of RA 7160 (Local Government Code),” the circular read.

The DoF also said that “no interest, surcharge or any form of penalty shall be applied on any local tax, fee or charge accruing on or due and demandable” during the extension.
 
However, all previous delinquencies will be due and the accrual of interest, penalties and surcharges will begin after the extension.
 
DoF also ordered local treasurers and assessors to postpone plans to issue written authorities on examination of books of accounts and business records; activities on appraisal and assessment of real properties; posting of notices of delinquencies, warrants of levy and advertisements of auctions; as well as “pursuing administrative or judicial action for the enforcement and/or collection of local taxes, fees, or charges.” — Beatrice M. Laforga

Companies lose P700B on lockdown

By Beatrice M. Laforga
Reporter

BUSINESSES have suffered about P700 billion in revenue losses so far as strict lockdown measures to contain the spread of the coronavirus disease 2019 (COVID-19) forced companies to halt operations since mid-March, the National Economic and Development Authority (NEDA) said on Thursday.

“Based on the surveys we gathered, the effect of COVID-19, primarily because of the ECQ (enhanced community quarantine), is some P700 billion,” NEDA Acting Secretary Karl Kendrick T. Chua said at a Foreign Correspondents Association of the Philippines (FOCAP) online briefing.

NEDA has conducted three surveys with about 44,000 total responses. The surveys assessed the impact of the pandemic and ECQ on micro, small and medium-sized enterprises (MSMEs); agriculture and fisheries; and consumers.

NEDA Undersecretary Rosemarie G. Edillon in a mobile phone message said the P700-billion losses were from businesses including those in the agriculture sector.

Mr. Chua said the NEDA is preparing more surveys that will assess the impact of the coronavirus crisis on larger enterprises.

NEDA has yet to release the official survey results.

Based on the country’s P18.6-trillion gross domestic product (GDP), Mr. Chua estimated that the economy stands to lose about P1.1 trillion if the economy fails to grow this year.

In a March 19 report, NEDA estimated a cumulative loss of P428.7 billion to P1.35 trillion in gross value added (in current prices), equivalent to 2.1 to 6.6% of nominal gross domestic product (GDP) this year.

At that time, NEDA said a one-month lockdown in Luzon may result in a loss of gross value added of P298 billion to P1.1 trillion, and job losses of 61,000 to 1 million.

The one-and-a-half month Luzon-wide lockdown has brought over 70% of the Philippine economy to a standstill and forced many businesses to temporarily close or scale down. The strict lockdown was extended until May 15 in Metro Manila and other outbreak hotspots, while some provinces will gradually ease restrictions starting today (May 1).

Q1 GROWTH
Meanwhile, Mr. Chua said there is a “good potential” that the first-quarter GDP could post a growth.

However, downside risks may drag this to a lower-than-expected print largely due to “exogenous shocks” that happened in January-March, the NEDA chief added.

These “shocks” include the eruption of Taal Volcano in late January, the lockdown in China and travel bans that dampened trade and tourism, as well as the start of the Luzon-wide ECQ in mid-March.

‘”We have a good potential to see a positive growth [in the first quarter], but we shouldn’t be surprised if the numbers are not to our best favor,” Mr. Chua said.

First-quarter GDP data will be released on May 7.

Mr. Chua sees the economy bouncing back in the second half as more parts of the country gradually ease lockdown restrictions to a general community quarantine (GCQ), where nonessential businesses can reopen provided they observe safety protocols.

“May 1, you will see many provinces transfer from the ECQ status to the GCQ status, that is I think a very clear indication that we are getting towards the end of the tunnel,” he said.

“I think there is a strong possibility of a rebound by June, so that we can begin with the recovery phase and we will prepare for that very well in the coming weeks,” he added.

But Mr. Chua said the government will take a “very conservative and careful” approach in terms of opening up the economy to avoid a second wave of COVID-19 cases.

“We already know the regrets of some countries in the region and the world when they opened up too soon, so we would rather be conservative, and use this time wisely to prepare the health sector, flatten the curve and get ready. So when we do actually fully open up, we will never regret, and we will not see a spike or second wave [of infections],” he said.

Economic managers have said GDP growth may be flat this year at best, or contract by 1% at worst.

Inflation likely slowed further in April — Diokno

HEADLINE INFLATION likely eased further to settle between 1.9% and 2.7% in April, with downside risks mainly coming from plunging oil prices, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Thursday.

“The progressive fall in inflation will continue,” Mr. Diokno said in a Viber message to reporters, citing the inflation estimate range from the BSP Department of Economic Research.

Headline inflation settled at 2.5% in March, down from the 2.6% print a month prior to mark the second consecutive month of easing prices. This brought the year-to-date average to 2.7%, which is within the 2-4% target of the BSP.

Mr. Diokno said earlier this week that inflation could average at 2% this year, down from the previous forecast of 2.2% given in March.

The Philippine Statistics Authority (PSA) will report April inflation data on May 5.

The plunge in global oil prices may have offset upside risks to inflation last month, according to the central bank chief.

“The collapse in oil prices is expected to moderate inflationary pressure coming from higher prices of rice and other food items along with upward adjustment in electricity rates in Meralco (Manila Electric Co.)-serviced areas,” Mr. Diokno said.

“Looking ahead, BSP will remain watchful of economic and financial developments here and abroad to ensure that monetary policy settings remain consistent with price stability conducive to a balanced and sustainable economic growth,” he said.

Oil prices have plunged since early March as demand collapsed amid the coronavirus disease 2019 (COVID-19) pandemic. US oil prices even slid into negative territory in mid-April.

But oil rebounded later in the month after some members of the Organization of the Petroleum Exporting Countries vowed to cut production by 10 million barrels per day starting May.

Meanwhile, the farmgate price of palay, or unmilled rice, rose 4.7% week on week to P17.48 per kilogram in the first week of April, with prices down 6.5% year on year, according to the PSA.

In its weekly update on palay, rice and corn prices, the PSA said the average wholesale price of well-milled rice rose 2.96% week on week to P38.59 per kilogram while the retail price went up 2.19% to P42.40.

The average wholesale price of regular-milled rice jumped 2.39% to P34.14 per kilogram while the average retail price increased by 1.35% to P36.86.

On the other hand, consumers in Metro Manila will likely see higher electricity bills in April, Meralco said early last month.

Meralco said the overall electricity rate rose by P0.1050 per kilowatt-hour (kWh) to P8.9951/kWh from March’s P8.8901/kWh. Households consuming 300 kWh, 400 kWh, and 500 kWh could expect their monthly bills to rise by P31.50, P42.00, and P52.50, respectively.

The central bank last month cut benchmark rates by 50 basis points in an off-cycle meeting to support economic activity amid the COVID-19 outbreak, saying a slower inflation outlook amid falling oil prices is supportive of this dovish stance.

This brought the key rate or the overnight reverse repurchase rate to 2.75%. Accordingly, interest rates for the central bank’s overnight deposit and lending facility have been trimmed to 3.25% and 2.25%, respectively. These rates are the lowest on record and also since the BSP shifted to an interest rate corridor in 2016.

Mr. Diokno earlier this week said further monetary easing through rate cuts and reduction in banks’ reserve requirement ratios remain on the table to ensure economic stability amid the COVID-19 crisis. — L.W.T. Noble

Amid volatility, PSE to implement 3-level circuit breaker system

By Denise A. Valdez
Reporter

THE Philippine Stock Exchange, Inc. (PSE) said it will begin adopting a three-level circuit breaker system that will trigger a trading halt when certain thresholds are breached, as intense market volatility continues amid the coronavirus crisis.

The local bourse operator on Thursday released new guidelines for a multi-level circuit breaker that will be triggered each time the PSE index (PSEi) falls by a certain level.

The rules, which will take effect on May 4 (Monday), were approved by the Securities and Exchange Commission (SEC).

“Our first step to address this (market) volatility was to reduce the lower static threshold of securities from 50% to 30%. We followed this up with the addition of two circuit breaker levels to give the entire market a breather when these are triggered,” PSE President and Chief Executive Officer Ramon S. Monzon said in a statement.

The Level 1 circuit breaker is based on the original policy introduced during the 2008 global financial crisis. A 15-minute trading halt is automatically implemented when the PSEi drops by at least 10% from the previous session’s level.

For Level 2, there will be an automatic 30-minute trading break when the PSEi falls by at least 15% from the previous day’s close.

Level 3 circuit breaker is tripped if the PSEi plunges at least 20%, halting trade for an hour.

As the coronavirus disease 2019 (COVID-19) pandemic worsened in March, the circuit breaker was triggered three times in four trading days. This prompted the PSE to amend its rules to align with multi-level guidelines in regional markets.

“These will enable the PSE to better manage extraordinary volatility arising from fears over the COVID-19 pandemic,” Securities and Exchange Commission Chairperson Emilio B. Aquino added.

The trading breaks are emergency volatility-control tools meant to help investors digest any activity that may be causing massive selling in the market.

Each level of the circuit breaker may only be triggered once a day.

In case the higher level is exceeded first, the lower level circuit breaker can no longer be triggered on that day.

Also, the circuit breaker level may only be tripped at a specific time before the market’s pre-close. On regular trading days when the market closes at 3:30 p.m., Level 1 may only be triggered until 2:55 p.m., Level 2 until 2:40 p.m., and Level 3 until 2:10 p.m.

Since the PSE is currently observing shortened trading hours and closes at 1 p.m., the Level 1 circuit breaker may only be triggered until 12:25 p.m., Level 2 until 12:10 p.m., and Level 3 until 11:40 a.m.

The PSE has extended the implementation of shortened trading hours for the duration of the enhanced community quarantine. The market will open at 9:30 a.m. and close at 1 p.m. until May 15.

Equity Trader Aniceto K. Pangan from Diversified Securities, Inc. said the revision of the circuit breaker rules will “somewhat mitigate the effects of volatility in the market and give enough time among investors to rationalize on their investment.”

Philstocks Financial, Inc. Research Associate Claire T. Alviar said this will help curb panic selling, as the trading breaks will “give time for traders to calm, so market’s losses for that day may lessen.”

“By temporarily halting the trading, it gives traders more time to digest the news, if there’s any, and evaluate the impact of it in the specific stock, so it provides more time for the investors to think whether the stock is overvalued or already at bargain level,” she said.

“Given this, it may build more investor confidence and trust in the market,” Ms. Alviar added.

The PSEi gained 56.74 points or 1% to close at 5,700.71 on Thursday.

Dollar reserves hit record $89 billion as of March

By Luz Wendy T. Noble
Reporter

THE country’s gross international reserves (GIR) rose to a record $88.99 billion as of end-March, providing support to the economy amid the coronavirus disease 2019 (COVID-19) crisis.

The dollar reserves were 0.91% up from the $88.187 billion as of end-February, and 6% higher than the $83.61 billion logged as of end-March 2019, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP) released on Thursday.

The GIR level as of end-March was higher than the $86-billion target set by the central bank for the whole year.

“We confirm that the preliminary GIR level of $89 billion as of end-March is an all-time high. However, please note that the level cited is preliminary only,” the BSP Department of Economic Statistics said in a statement on Thursday.

The month-on-month increase in reserves reflects the National Government’s net foreign currency deposits and the central bank’s foreign exchange operations and income from investments abroad.

However, the inflows were partially offset by payments for foreign debt.

The end-March GIR, which serves as a buffer for liquidity shocks, is equivalent to “7.9 months’ worth of imports of goods and services and payments or primary income.”

This is also equivalent to 5.3 times the country’s short-term external debt based on original maturity, and 3.8 times based on residual maturity.

Based on preliminary data, the BSP’s gold reserves, which forms part of the country’s reserve buffer, stood at $8.015 billion as of end-March. However, it was lower than the $8.214 billion logged a year ago.

Special drawing rights — which refer to the amount that the country can tap from the International Monetary Fund (IMF), was also maintained for the second month at $1.174 billion, though lower than the $1.182 billion seen a year ago.

Meanwhile, gains from foreign investments increased to $76.684 billion from the $75.861 billion seen as of end-February and the $71.409-billion level from a year ago.

On the other hand, reserve position stored with the IMF settled at $578.7 million as of end-March, slightly down from the $586.3 million in the previous month but higher than the $524.6 million seen as of end-March 2019.

Foreign currency deposits were at $2.541 billion, marginally down from the $2.548 billion as of end-February but higher than the $2.282 billion as of end-March 2019.

“The decline in the reserve position in the Fund may have come from transactions that the government may have had and resulted in the government essentially drawing from the said reserve, and the foreign exchange decline may have come from the government’s debt payment obligations during the previous month,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said, noting that the GIR levels remained strong despite this.

Net international reserves (NIR), which refer to the difference between the BSP’s GIR and total short-term liabilities, also increased by $810 million to $88.99 billion as of end-March.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the ample reserves have continued to support the economy during the pandemic, as shown by the peso’s resilience.

“Our strong macroeconomic fundamentals have put the country in a good position to respond to this pandemic; primarily the strength and stability of the peso can be attributed to the hefty reserves the BSP has built prior to the outbreak,” he said in an e-mailed response.

For his part, ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said that the healthy buffer kept by the central bank will do well to “address temporary bouts of surge-demand for foreign exchange.”

The GIR may continue to reach record levels in the near term given the current transactions of the government with various sources in an effort to cushion the impact of COVID-19, according to Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

“For the coming months, the GIR could still post new record highs in view of proceeds from the government’s foreign borrowings from multilateral and commercial sources, continued investment gains of residents from US/global bonds and from gold,” he said in an e-mail.

PSEi may hit 6,600 by yearend — BPI

BPI Securities Corp. is downgrading its 2020 projection for the Philippine Stock Exchange index (PSEi) to 6,600 from its initial estimate of 9,000 due to the coronavirus disease 2019 (COVID-19) pandemic.

In a statement on Thursday, the brokerage arm of Ayala-led Bank of the Philippine Islands (BPI) said the PSEi may land within the 6,200 to 6,600 range by year’s end because of all economic effects brought by measures to contain the virus.

The PSEi closed at 5,700.71 yesterday and has stayed within the 5,300 to 5,900 range for the past month.

BPI Securities President and Chief Executive Officer Hermenegildo Z. Narvaez said breaking into the 6,600 level is still possible by end-2020 with the anticipated U-shaped recovery of the economy in 2021.

He noted as a base case scenario, BPI Securities expects the global economy to recover to its 2019 level next year.

“Some sectors are probably doing better than others. Consumer manufacturing generally has been good… As for retail, I think a lot of retail companies derive their revenues from the supermarket-side of the business. So the near-term outlook has been positive,” he was quoted as saying.

He also identified telco as one of the compelling industries in the near term because of the surge in internet demand given the work-from-home scheme across sectors.

But looking beyond the near term, Mr. Narvaez warned investors of sustained volatility in the market due to uncertainties on the lockdowns and a possible correction in the US market.

“If you’re taking a six to 18 months’ view, I still think that these levels are going to be good. That said, you have to be prepared for volatility, because the economic numbers are going to be quite grim,” he said.

“Obviously, it will take a while, in our view, before we find a vaccine. And only until we actually find a vaccine will people become more comfortable about traveling and resuming normal operations… These are some of the things we have to be wary of,” he added. — Denise A. Valdez

AEV income falls 42%

ABOITIZ Equity Ventures, Inc. (AEV) on Thursday reported that its net income plunged by nearly a half in the first quarter as the income share from its power arm declined.

In a stock exchange disclosure, the listed holding company said its net income declined by 42% to P2 billion in the period from P3.5 billion recorded in the same quarter in 2019.

The company saw non-recurring losses of ₱262 million in January-March period, lower compared to ₱334 million from the same period in 2019, “due to unrealized foreign exchange losses from the revaluation of dollar-denominated assets.”

Excluding this, the company’s core net income for the quarter is ₱2.3 billion. Meanwhile, it posted a 5% decrease in earnings before interest, tax, depreciation, and amortization (EBITDA) to P11.8 billion.

Power accounted for most of the listed firm’s total net income at 55%, followed by banking and financial services (46%), food (2%), infrastructure (1%), and real estate (-4%).

Aboitiz Power Corp. contributed P1.6 billion to the company’s income, 43% lower compared with the P2.8 billion it shared in the same period last year.

The energy firm also saw a 43% decrease in its net income to P2.1 billion from P3.6 billion in the previous year, dragged down by outages of its two power generation units, Therma South, Inc., and GNPower Mariveles Coal Plant Ltd. Co., and lower selling prices during the first three months of the year.

Its generation and retail businesses, which make up 65% of its income, earned P1.9 billion in the quarter, while its distribution estate saw an 8% increase in income to P1 billion.

UnionBank of the Philippines, Inc. saw its income share to AEV rise by 23% to P1.3 billion from P1.1 billion earlier.

This came as it reported a 22% increase in its net income to ₱2.6 billion in the quarter from ₱2.2 billion in the preceding year, attributed to revenue growth from its net interest income which grew by 47% to P6.8 billion.

AEV’s non-listed food units, Pilmico Foods Corp., Pilmico Animal Nutrition Corp., and Pilmico International Pte. Ltd., lowered their income contribution by 56% to P60 million from P137 million previously.

Gains from Pilmico International, which saw its net income grew by 116% to P297 million due to the expanded overseas investments of Gold Coin Management Holdings Ltd., were outweighed by a net loss from the other two subsidiaries.

Aboitiz Land, Inc. and other AEV real estate units reported a collective net loss of P110 million, higher compared to P44 million in losses in 2019.

Aboitiz Land chipped in P508 million in the holding firm’s revenues, lower by 24% from last year, as many of its construction projects were forfeited and the progress of on-going projects were slow following the eruption of Taal Volcano in January and the enhanced community quarantine (ECQ) due to COVID-19 (coronavirus disease 2019) since March.

Infrastructure unit Republic Cement & Building Materials, Inc. brought in P61 million to AEV, compared to P32 million in loss it recorded last year, lifted by the strong demand in January and February.

“The strong showing of our banking and financial services and food units have helped shore up our operational performance, underscoring the resilience provided by a diversified portfolio,” AEV President and Chief Executive Officer Sabin M. Aboitiz said in a statement.

“This same resilience will also help us face headwinds from COVID-19,” he added.

On Thursday, shares in AEV were unchanged at P41.50 each, while shares in AboitizPower were down 0.36% to P27.40 apiece and those of UnionBank were up by 0.65% to P53.90 each. — Adam J. Ang

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