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Apple will remove thousands of unlicensed iPhone games in China

Apple Inc. will start removing thousands of mobile games lacking government approval from its App Store in China next month, closing a loophole that the likes of Rockstar Games have relied on for years.

Developers and publishers in China have been told that their iOS games will need licenses to continue operating from July, according to people familiar with the matter. The decision ends the unofficial practice of allowing games to be published while awaiting authorization from the country’s slow-moving regulators.

This has until now allowed games such as Grand Theft Auto, whose gory depictions of violence are unlikely to ever pass muster with Chinese censors, to be available within the country’s borders. China’s regulators require all games that are either paid or offer in-app purchases to submit for review and obtain a license before publication, and major Android app stores have enforced such rules since 2016. But unapproved games have flourished on Apple’s iPhone platform.

It’s unclear why Apple — a target of numerous regulatory clampdowns in the past — hasn’t moved as swiftly as other app stores in China, which are owned and operated by local mobile giants like Alibaba Group Holding Ltd. and Xiaomi Corp.

The latest approvals process took effect in 2019 amid confusion among industry players about the speed with which Beijing, known for months-long content reviews that may or may not lead to a monetization license, would process requests. For its part, Apple has begun ramping up oversight of its Chinese app store, removing two podcast apps earlier this month at China’s request.

Back in February, Apple reminded iOS developers in the country to obtain licenses for their titles by June 30. But it was only after prolonged uncertainty about enforcement that the iPhone maker explicitly told publishers that any unlicensed games after the deadline will be banned and removed from the local App Store, according to the people, who asked not to be identified because the matter is not public.

There’s no telling how long it will take to remove all unlicensed games once the change comes into effect. Chinese gaming blog Gamelook earlier reported Apple’s upcoming enforcement.

An Apple representative declined to comment.

China accounted for about a fifth of the $61 billion in digital goods and services sold via Apple’s App Store in 2019, making it the largest market after the US, the Analysis Group estimates. Apple takes a 30% cut from the majority of such transactions.

There are roughly 60,000 games on China’s iOS App Store that are either paid or contain in-app purchases, and at least a third of them don’t have a license, according to an estimate by AppInChina, which helps companies localize and publish their apps in the country.

“These companies will suddenly lose all revenue from what is typically their second-largest market after the US,” said AppInChina Chief Executive Officer Rich Bishop. His firm received three times its usual volume of inquiries about game licenses over the past week, he added.

Apple’s new effort highlights the Chinese government’s tightening grip on gaming. Citing concerns about the proliferation of addiction among minors and the dissemination of offensive content, regulators now adopt a much stricter and slower review process than before they temporarily halted all approvals in 2018.

While big local players like Tencent Holdings Ltd. and NetEase Inc. have adapted their existing cash cows and can respond to censors’ demands in the development of new games, smaller developers and publishers lack the same resources. Many of them have started attaching a single license to multiple games with similar gameplay, logos or heroes, though the government is aware of the practice and cracking down on it as well.

Imported games are under particularly tight scrutiny, and the App Store loophole served as a last resort for getting some of them distributed in China. Plague Inc., which mimics the spread of an epidemic, had topped the download charts on China’s App Store for weeks during the country’s COVID-19 lockdown. But the unlicensed title was pulled in March after Chinese regulators deemed it to have “illegal” content, according to its developers.

Neither of the remaining options for small game developers appears particularly enticing. They could switch their revenue model to in-app advertising, which is not covered by the same approval process. Or they can team up with big publishers like Tencent to obtain licenses, though that would involve giving up some measure of autonomy, while Tencent itself is more interested in well-known franchises. — Bloomberg

SparkUp Entrep Series: Thriving Amidst Crisis

Join the discussion of Lope Doromal, IBM Philippines chief technology officer; Roland Ros, Kumu founder; Miko David, David and Golyat co-founder; and Gorby Dimalanta, BukidFresh co-founder and head of business development moderated by Santiago Arnaiz BusinessWorld digital platform editor in the first leg of SparkUp Entep Series with the theme, “Future-Proof: Thriving Amidst Crisis”.

#BUSINESSWORLDINSIGHTS x #SPARKUPENTREPSERIES is made possible by Globe, SM Supermalls, BusinessWorld, www.olern.com and The Philippine STAR with the support of IdeaSpace Foundation, Impact Hub Manila, Kickstart Ventures, QBO Innovation Hub and StartUp Village.

Pandemic propels old-school bond traders towards an electronic future

LONDON — The mammoth bond market has long been the old-school bastion of the financial world, but the COVID-19 pandemic has cast a light on its future — and it looks electronic. Well, mainly.

At the height of the market panic in March, Seattle-based Brandon Rasmussen, a senior fixed-income trader at $300 billion asset manager Russell Investments, had a client order to sell $2.5 billion worth of US Treasuries.

He found, though, that such a transaction was near-impossible in a highly volatile market that made no exceptions for even one of the world’s most sought-after assets.

Dealers refused to quote prices by phone, adding to the stress of executing a large order without distorting the market.

The solution Mr. Rasmussen eventually settled on was to break the order up into smaller chunks and process them electronically — something he may not have considered a few weeks earlier.

“The feedback that we got from dealers was that they were not quoting on the phone. They couldn’t do that, they couldn’t keep up with that,” he said. “I think what this crisis has shown is that really if you weren’t trading electronically, you should be trading electronically.”

His experience illustrates how the volatility caused by the crisis, along with a new remote mindset of working from home, has pushed more traders to go digital in a market that has historically lagged stocks and forex in electronification.

That trend is reflected in the business on electronic bond-trading platforms.

For example MarketAxess, one of the biggest players, enjoyed record trading volumes in March. At rival Tradeweb, average daily turnover hit a record aggregate $1 trillion in that month, a more than 41% year-on-year increase.

Meanwhile MTS, part of the London Stock Exchange Group , said it won several large asset managers in Europe as clients during the crisis.

Yet traders stress that dealers and clients speaking to one another will long remain a key component of the industry, especially at times of heightened volatility.

Even as Mr. Rasmussen went electronic to push through his trade, for example, he was also talking to buyers to agree “switches” — swapping one type of US bond for another to share risk.

The jump in electronic trading activity coincided with both a rush into government bonds as the coronavirus sparked demand for safe-haven assets, and then a sharp selloff as investors sold their most liquid assets to make up for losses elsewhere.

LIQUIDITY AND TRANSPARENCY

Electronic trading — where transactions are carried out using software on online platforms, rather than via dealer-client “voice” trades — can carry major benefits for the $100 trillion-plus world of government and corporate debt.

Regulations such as MiFID II in Europe to improve transparency have also boosted electronic trading.

For one, traders executing deals can quickly gauge market depth on their screens, freeing time for more complex trades. For another, it offers lower costs for investors; two dealers estimated it to be 10%-30% cheaper than traditional voice trades.

Nonetheless, while most bond industry players acknowledge that much of the future is digital, many have been reluctant to go fully electronic.

Around 45% of the European fixed-income market is electronically traded, versus 38% a year ago, consultancy Greenwich Associates estimates. In the $6.6 trillion-a-day currency market, 90% of spot trading is conducted digitally.

However the COVID-19 crisis is accelerating the electronification of the bond market, according to industry players.

Many such as Tony Rodriguez, US-based head of fixed income strategy at Nuveen Asset Management, said a need for greater liquidity had boosted electronic trading activity.

“A lot of trades were pushed electronically because of greater liquidity and transparency — so the crisis pushed what was already in place,” he said.

Andrew Falco, global head of FX and fixed income trading at Fidelity International in London credits electronic trading with allowing connectivity in a market suddenly dispersed by remote working.

This kind of technology enabled the transition from working in an office to working from kitchen tables, he told Reuters.

He said some lessons had been learned about this last year when Fidelity’s Hong Kong team struggled to work in the office because of the unrest roiling the city.

“So for us in 2020, we finessed the e-trading home set-up and ensured it worked well, whether it was in HK, Shanghai, Dublin or the UK,” he added.

‘IMAGINE THIS 25 YEARS AGO’

For the banks who provide dealer and execution services, though, the electronic shift may be eating into fixed-income revenues; during the March quarter, earnings from bond trading at the world’s biggest 12 banks remained below levels seen in 2014, research firm Coalition calculates.

But they too are accelerating the push to digital services, particularly for the automation that helps them when volatility spikes.

JPMorgan, for instance, uses an algorithm to help generate price quotes on its forward FX platform, which includes bonds, fielding “hundreds of thousands of enquiries” and transacting “thousands of trades a day” during the crisis, said Tom Prickett, co-head of EMEA rates at the bank.

Another big player, Goldman Sachs, said clients ramped up calls for the electronification and automation of companies’ bond sales, until now a slow process conducted manually.

“The crisis revealed some of those shortcomings in bright lights,” said David Wilkins, Goldman’s head of FICC execution services in EMEA.

Investors and traders acknowledged that digital technology had been a savior during the pandemic, a view expressed across a host of industries.

“Imagine something like this happening 25 years ago, when e-mails didn’t exist, electronic communication was not really there,” said Zoeb Sachee, head of euro linear rates trading at Citibank who oversees government bond trading in European markets.

THE OLD AND THE NEW

But, for the foreseeable future at least, the bond market is likely to encompass the old and the new: technology as well as traditional trading models based on dealer-client relationships.

Traders of European investment-grade corporate bonds during the crisis often negotiated deals by phone before using a platform to settle, according to an International Capital Market Association (ICMA) report.

“Bond markets are very much relationship-driven and I don’t see how that goes away,” said report author Andy Hill.

This was echoed by Mr. Falco at Fidelity.

“The view that we felt as a team was that we would use technology where we had confidence in the price that we could see on the screen, and when we didn’t have the confidence in the price, we would execute manually.” — Reuters

BUSINESSWORLD INSIGHTS: Enabling LGUs in the New Normal through Digital Payments Acceptance

How can LGUs easily embrace digital payments? How can they benefit from this?

Watch the first session of BusinessWorld Insights: A Three-part Online Forum Series presented by PayMaya and the USAID E-PESO Project with the theme, “Enabling LGUs in the New Normal through Digital Payments Acceptance”.

This online event is supported by the Department of the Interior and Local Government, the Anti-Red Tape Authority, Union of Local Authorities of the Philippines (ULAP) and the Management Association of the Philippines (MAP).

Budget gap hits P202 billion in May

GOVERNMENT tax collections slumped in the first five months of the year, as the lockdown pushed back tax payment deadlines several times. — REUTERS

THE national government recorded a P202.1-billion budget deficit in May, as spending continued to rise while revenues slumped to multi-year lows amid the pandemic.

The Bureau of the Treasury (BTr) reported Tuesday the government’s budget balance swung to a P202.1-billion deficit from a P2.6 billion surplus in May 2019. However, this was narrower than the P273.88-billion budget gap in April.

The budget gap ballooned to P562.2 billion in the first five months of 2020, from the P809-million deficit a year ago. The January to May deficit already exceeded the P558.3-billion budget gap recorded in 2018, but still below the record high of P620-billion shortfall last year.

The government’s economic team is projecting the budget deficit to hit P1.612 trillion this year or 8.4% of gross domestic product (GDP).

In May, revenues plunged 52.25% to P151.5 billion. BTr data showed last month’s revenues were the lowest since the P138.95 billion generated in February 2016.

Tax revenues declined by 45.34% to P145.2 billion in May. The Bureau of Internal Revenue (BIR) saw a 44% drop in collections to P114.4 billion, while the Bureau of Customs (BoC) generated 47% lower revenues at P30.8 billion. Other offices did not generate any taxes in May, compared to the P2.6 billion they generated in May 2019.

“The agency’s (BIR) weak performance was still due to the effect of the prolonged enhanced community quarantine which prompted the Bureau to further extend its deadline for tax filing and payments to June 14, 2020,” the Treasury said.

Non-tax revenues also slid by 87.8% in May to P6.3 billion, with BTr’s income decreasing by 93% to P2.4 billion. Other offices generated only P3.9 billion in May, down 76%.

Meanwhile, spending climbed by 12.38% to P353.6 billion in May from P314.7 billion a year ago, and 23% lower than the P462 billion spent in April.

BTr said the increase was largely due to the disbursement of the second tranche of the Small Business Wage Subsidy program.

Primary expenditures, spending net of interest payments, rose 13.65% to P335.3 billion in May.

Interest payments dipped 6.69% to P18.4 billion last month.

FIVE-MONTH SLUMP
In five months to May, state revenues fell 16.1% to P1.102 trillion from P1.314 trillion a year ago.

Total tax collections stood at P891 billion in January-May, 24% lower than the P1.17 trillion last year. Broken down, BIR’s collections slipped by 25.84% to P674 billion, while Customs’ collections were 16.37% lower at P211 billion. Other offices generated P6.7 billion, down 34% year on year.

On the other hand, non-tax revenues grew by 47.6% to P211.4 billion in the five-month period, largely due to huge dividends remitted by state firms to the BTr. The Treasury’s total revenues surged 123% to P172 billion during the period.

Year-to-date spending rose by 26.63% to P1.665 trillion.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the 12% rise in state spending in May was “a disappointment,” as expenditures were lower on a month-on-month basis. Last month’s spending dropped by 23% from April’s level.

Mr. Mapa expects the budget deficit to widen further as the government ramps up spending to help mitigate the impact of the coronavirus pandemic on the economy, while revenues may continue its decline on dampened business activity.

“We contend however that the better metric and measure of the fiscal health of the economy is the deficit-to-GDP ratio. At the current year-to-date level, the deficit-to-GDP ratio stands at roughly 3%, well-below the DoF (Department of Finance) threshold of 9% of GDP with seven more months to go before the end of 2020,” he said via e-mail on Tuesday.

He said the deficit-to-GDP ratio provides a “more holistic view” of the country’s fiscal health.

“Increasing spending may indeed translate into a wider deficit but targeted spending to get the economy back on its feet would also address the GDP part of the deficit-GDP equation. Growing the economy faster than the deficit can expand will translate to incomes rising faster than debt and a true situation of fiscal sustainability,” he said.

“Choosing to withhold spending to keep the deficit in check may lead to a downward spiral in terms of economic momentum that can force the deficit-GDP ratio to surge as incomes crater,” he added.

Officials estimated the Philippine economy will shrink by 2-3.4% this year. — Beatrice M. Laforga

National government fiscal performance (May 2020)

National government fiscal performance (May 2020)

THE national government recorded a P202.1-billion budget deficit in May, as spending continued to rise while revenues slumped to multi-year lows amid the pandemic. Read the full story.

National government fiscal performance (May 2020)

Aboitiz Group to cut jobs

By Denise A. Valdez, Reporter

THE Aboitiz Group is laying off employees as a way to cope with the financial impact of the coronavirus disease 2019 (COVID-19) pandemic.

In an e-mail to BusinessWorld, Aboitiz Group said the company has conducted a review of its operations amid the challenges posed by the current crisis.

“Part of the review (of operations) is the rationalization of its workforce, where, regrettably, several team members will be affected by their service ending on July 31, 2020,” the company said.

“They will receive a substantial separation package to support them through this transition,” it added.

The Aboitiz Group did not respond to questions on how many employees will be affected.

Aboitiz Equity Ventures, Inc. (AEV), the listed holding company of the Aboitiz Group, posted a 42% drop in net income to P2 billion in the first quarter due to operational disruptions from the pandemic-induced lockdown.

Its power arm Aboitiz Power Corp., which made up for 55% of its net income, contributed 43% less to AEV’s first-quarter earnings at P1.6 billion. The decline is attributed to power outages and lower selling prices.

“This was not an easy decision for the Aboitiz Group to make but one that had to be done as it has not been spared by the health and economic crisis,” the company said about the layoffs.

“It is still not clear on how long the COVID-19 pandemic will last but we share everybody’s hope that a vaccine will be developed soon,” it added.

The government reported some 7.25 million Filipinos were already jobless in April, up by 4.98 million year on year.

Last month, the Labor department said some 10 million workers may lose jobs this year due to the pandemic.

Shares in AEV at the stock exchange fell P1.35 or 2.73% to P48.15 each on Tuesday.

Financial markets less volatile now; risks remain

The financial system remains stable, even as it reacts to the continued uncertainty from the coronavirus crisis and global recession. — REUTERS

DESPITE continued uncertainty, the local financial market is not as volatile as it was at the onset of the crisis in March, according to the Financial Stability Coordination Council (FSCC).

This as the FSCC assured the health of the financial markets is a top concern for policy makers amid the pandemic.

“We are not as volatile as what we used to be two months ago, but there is some level of elevation (of risks) that we need to focus on,” Bangko Sentral ng Pilipinas (BSP) Assistant Governor Johnny Noe E. Ravalo said in an online briefing.

“Unlike the global financial crisis in 1997, Asian financial crisis, or the 1929 Great Depression, COVID is not a hit on the financial market, but straight to the real economy,” he added.

In March, the stock market saw increased volatility amid the coronavirus disease 2019 (COVID-19) outbreak. The Philippine Stock Exchange Index (PSEi) plunged by 13.34% on March 19, but has since recovered. On Tuesday, the PSEi closed 0.78% lower at 6,297.78.

The FSCC, composed of regulatory bodies as well as key institutions such as the BSP and the Department of Finance, released its latest Financial Stability Report on Tuesday.

“We want to ensure the sustained health of the financial system to serve the financial needs of the public as well as be an anchor for our ongoing recovery efforts,” FSCC Chairman and BSP Governor Benjamin E. Diokno said in an online briefing.

In its report, the FSCC acknowledged the macroeconomic difficulties and strain on the health infrastructure faced by the Philippines amid the pandemic.

“Yet despite this and the commensurate increase in risk premiums and heightened risk aversion, there is no reason to believe that the local financial market is in a state of instability. Not yet,” it said.

“The caveat is offered because one cannot tell yet how the public health issue will be resolved and how the corresponding stress points of eroded incomes and suspended business activities will be handled… Risk pressures will continue to build because debts will be increasingly difficult to service, banks will find it harder to source new deposits, and risk perceptions draw in further risk perceptions.”

In the medium term, the FSCC said macroprudential network stress tests should be institutionalized, alongside the completion of the Systemic Risk Crisis Management Framework.

“The former provides a periodic check-up, covering both financial institutions and (non-financial corporations), in testing for vulnerabilities in the system. The latter is a pre-emptive initiative to organize the handling of future outbreaks of systemic risks so that the authorities respond rather than react to the emerging vulnerabilities,” it said.

Mr. Diokno said the crisis management framework should not be taken as a sign of “imminent vulnerability.”

“We fully understand that the best use of crisis management framework is when it is not in use, but we will be fully prepared when the times call for it,” he said.

As the national government takes on massive relief programs to cushion the impact of the pandemic, the FSCC noted this “will certainly mean higher debts, much less fiscal space.”

“Ultimately though, taxes will have to adjust intergenerationally to make up for the gap. This is a policy issue that, for the moment, is pushed down the road but is unlikely to be avoided,” it added. — Luz Wendy T.Noble

NEDA eyes private sector help with nat’l ID registration

The government is targeting to enroll “most” Filipinos in the national ID system before President Rodrigo R. Duterte steps down in end-June 2022. — REUTERS

THE National Economic and Development Authority (NEDA) is looking to work with the private sector to speed up the implementation of the national ID system.

NEDA Acting Secretary Karl Kendrick T. Chua said he proposed that the Philippine Statistics Authority (PSA) adopt a “two-track system on registration” of individuals in order to expedite the program’s implementation.

The PSA is the main implementing agency for the national ID system.

“What I’m working now with the PSA is to have a two-track system on registration, so this is still an idea, it is not final. But the original idea is for the government, through the PSA, to do the registration,” he said during the forum arranged by the Carlos P. Romulo Foundation and Makati Business Club, Inc.

Now, Mr. Chua is proposing the government and the private sector work together in registering Filipinos into the national system. He did not give additional details.

“I’m proposing to the PSA to consider a parallel track wherein we’ll also engage the private sector so that number one, we have two groups working together (and) complementing each other. Number two, we have a backup plan in case one is slower or there are problems especially around the virus,” Mr. Chua said.

Sought for comment, PSA Chief Claire Dennis S. Mapa said the proposal is being discussed with NEDA.

In the same forum, Roberto R. Romulo, chairman of the Carlos P. Romulo Foundation, said having the private sector participate in national ID registration could fast-track the implementation.

“I would suggest perhaps that you should engage the private sector supporting you in this endeavor and maybe that can accelerate the process,” Mr. Romulo said.

Mr. Chua said the “immediate challenge” is how to swiftly conduct a large-scale registration, while meeting the minimum health standards to prevent the spread of the coronavirus.

“We are working on how to operationalize the national ID registration but at the same time, meet the health standards. (This) will entail a slightly higher budget and more effort on our part to make it safe as possible,” he said.

According to Mr. Chua, the government targets to have the first five million household heads registered this year. Full-scale registration is scheduled to start in November, a month later than the initial October schedule.

Mr. Chua said bidding for four out of the five components of the procurement packages needed for the implementation of the national ID is ongoing. He said the last component is expected to be awarded in August.

“The next step once it is awarded, is to customize it for the Philippines. The schedule for the enrollment or registration of the first five million household heads is November,” he said.

The government is targeting to enroll “most” Filipinos in the national ID system before President Rodrigo R. Duterte steps down in end-June 2022.

The implementation of the national ID system is one of the reforms needed to boost the digital economy, according to Mr. Chua, on top of streamlining requirements, relaxing barriers to market entry, and passing key legislations such as amendments to the Public Service Act.

He said the Philippines is one of the top countries in terms of internet usage but adoption of digital technology lags behind peers.

For instance, Mr. Chua said the size of the country’s e-commerce retail market only accounts for 0.5% of ASEAN’s $35-billion total in 2015. — Beatrice M. Laforga

Market seen bracing for earnings data

By Denise A. Valdez, Reporter

BPI SECURITIES Corp. is seeing the market trading sideways in the near-term until companies report their second-quarter earnings next month in what it anticipates to be the bottom of contraction even as the coronavirus pandemic continues.

But the brokerage remains to project the benchmark Philippine Stock Exchange index (PSEi) to land at around 6,200 by the end of the year.

In a virtual briefing Tuesday, BPI Securities President and CEO Hermenegildo Z. Narvaez said investors are currently on wait-and-see mode, hence the loss of momentum of the PSEi over the past days.

“I think the likelihood is we’ll probably trade sideways in the meantime. I think investors are going to wait and see what’s going to come out in terms of second quarter earnings, and obviously, they want to see how the [coronavirus] case count will progress,” he said.

He said the market has “pretty much recovered” half of the losses it saw at the start of the pandemic. From falling to a historic low of 4,623.42 on March 19, the PSEi has worked its way up and has been trading in the 6,000 level since June 2.

However, from a rapid escalation at the start of the month to reach as high as 6,583.84 on June 9, the PSEi has tempered its movement over the past days, and ended Tuesday’s session at 6,297.78, down 49.65 points or 0.78% from a day ago.

Mr. Narvaez said the primary concern of investors right now is the increasing number of coronavirus disease 2019 (COVID-19) cases in other countries, which hit above 9.1 million confirmed cases across the globe on Tuesday.

The Philippines also continues to see an uptrend in COVID-19 cases, which stood at 30,682 cases as of Monday.

Mr. Narvaez said investor sentiment may likely remain dampened for the near-term, and the market will keep moving sideways until companies report their second quarter earnings next month.

“We are close to the time when companies are going to start announcing second quarter results. I would expect that around mid-July and late July, you’ll start to see a lot of announcements. And as we’ve pointed out, the second quarter will probably be the bottom in terms of overall earnings contraction. So that’s something to watch out for,” he said.

He also said there might be a correction that will spill over until August with the announcement of second quarter corporate earnings.

For its full-year PSEi forecast, BPI Securities maintains an index target of 6,200 by yearend, which Mr. Narvaez said “implies some downside for the market in the near-term.”

The brokerage recommends sectors that may be more resilient amid the stay-at-home environment, such as those in the manufacturing, retail and telecommunications sectors. Its stock picks are Century Pacific Food, Inc. (CNPF), Puregold Price Club, Inc. and PLDT Inc.

Chelsea Logistics posts P345-M loss, expects recovery

CHELSEA LOGISTICS and Infrastructure Holdings Corp. posted an attributable net loss of P345.08 million for the first quarter, a reversal of the P138.71-million profit it recorded in the same period last year.

“The first quarter heralds the start of the traditional peak season but the Group’s financial performance was severely impacted, first by the Taal Volcano eruption and then by the enhanced community quarantine (ECQ) driven by the global COVID-19 pandemic,” the group said in a statement on Tuesday.

In a regulatory filing, the group posted a gross revenue of P1.61 billion in the first quarter, a slight growth of 0.89% from P1.60 billion it reported in the same period last year.

Chelsea Logistics’ shipping business saw an improvement of 2% to P1.51 billion. Revenues from the group’s passage business soared by 39% to P413 million.

“[This] is mainly due to the recent consolidation of The Supercat Fast Ferry Corporation, serving new routes and more passengers,” the group said.

Moreover, tugboat operations contributed P86 million to the group’s revenues, 6% higher than the previous year’s P82 million.

However, revenues of the logistics segment of the group’s business declined by 10% to 106 million “due to the restricted movement of goods caused by the Taal Volcano eruption and then by the government-imposed ECQ.”

First quarter’s operating profit also declined by 90% to P40 million, which the group attributed to its “limited operations due to the ECQ implemented in mid-March which is historically the start of the shipping industry’s peak season.”

Chelsea Logistics President and Chief Executive Officer Chryss Alfonsus V. Damuy was quoted as saying: “We are certain that our capital investments will bear fruit going forward. In the pipeline we have investments which are expected to generate significant cashflows: there are two vessels to be delivered this year, our 2.5-hectare logistics warehouse will be completed by the first quarter of next year and will boost capacity.”

“We will also be soon seeing infrastructure seaport and airport modernization projects in Davao that will make meaningful contributions in the future and generate additional revenue streams. All these are vital to the Philippine economy and will remain necessary for a long time,” he added.

Mr. Damuy also acknowledged that the challenges brought about by the coronavirus pandemic will not disappear overnight and may persist into the second quarter.

“We do remain confident that with our strategic plans to combat the crisis, and with our existing resources, capacity, fixed assets and strong market share, the Chelsea Group will spring back to recovery and move faster towards the new normal,” he said.

On Tuesday, shares in Chelsea Logistics went down 5.08% to close at P3.92 apiece. — Arjay L. Balinbin

Gov’t makes full award of 5-year bonds

THE GOVERNMENT fully awarded the reissued five-year Treasury bonds (T-bonds) it auctioned off on Tuesday despite a climb in yields amid strong demand.

The Bureau of the Treasury (BTr) borrowed P30 billion in reissued five-year T-bonds as programmed out of total bids worth P80.581 billion, which was more than two times bigger than the initial offer.

The average rate for the five-year notes increased by 50.6 basis points to 3.182% on Tuesday from the 2.676% seen in the May 27 auction. The yield was still lower than the 2.969% rate for the five-year papers at the secondary market.

National Treasurer Rosalia V. de Leon said demand for the papers remained strong as the rate stayed within the level quoted at the secondary market.

“(The BTr made a full award as it) received strong offer at rates hovering around secondary level,” Ms. De Leon told reporters via Viber, adding they did not open the tap facility.

A bond trader said the average rate fell within market expectations, noting the slight increase was an indication that participants are already searching for higher yields.

“The range was quite expected given the action in the past few days. Market is pricing in a possible jumbo bond issuance. This auction showed market demand for yield pickup,” the trader said via Viber on Tuesday.

Earlier this month, Ms. De Leon said they will continue to monitor market conditions for a possible jumbo bond issue.

The last time the BTr offered retail Treasury bonds was in February when it raised a record P310.8 billion in three-year papers.

The Treasury raised a total of P223.71 billion this month via the sale of government securities; P151.3 billion in Treasury bills via weekly auctions and P75 billion in T-bonds that were offered fortnightly.

The total exceeded the P170-billion program set for this month but was slightly lower than the P246.3 billion raised in May, which was also against a P170-billion plan.

The Treasury is expected to release its July borrowing program this week.

The government borrows from local and foreign sources to fund its budget deficit which is now seen to hit 8.4% of gross domestic product. — Beatrice M. Laforga

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