BAIPHIL Market Watch – 08 Sept 2016

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BAIPHIL MARKET WATCH

08 Sept

2016

Legend Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE

PHILIPPINES

Financial Rates Current Previous

USD/PHP 46.6900 46.6000

30-D PDST-R1 1.2106% 1.4589%

91-D PDST-R1 1.2375% 1.2006%

180-D PDST-R1 1.8821% 1.7696%

1-Y PDST-R1 2.5929% 2.6521%

10-Y PDST-R1 3.4279% 3.4298%

30-D PDST-R2 1.2056% 1.2137%

91-D PDST-R2 1.2101% 1.2021%

180-D PDST-R2 1.8821% 1.7518%

1-Y PDST-R2 2.5929% 2.6521%

10-Y PDST-R2 3.4044% 3.4268%

Stock Index Current Previous

PSEi 7,619.10 7,719.18

Market Cap (Php Trillion) 12.595 12.738

Total Value (Php Billion) 10.266 7.687

PSEi Performers Closing % Change

Top Gainers

MRC Allied Incorporated 0.156 9.86%

Boulevard Holdings, Inc. 0.107 9.18%

Alliance Select Foods Intl 0.93 8.14%

Top Losers

Medco Holdings, Inc. 1.09 -12.08%

Seafront resources Corp. 2.26 -9.60%

Manila Mining Corp 0.012 -7.69%

ASIA-PACIFIC

Stock Index Current Previous

NIKKEI 17,012.44 17,081.98

HANG SENG 23,741.81 23,787.68

SHANGHAI 3,092.41 3,090.71

STRAITS 2,893.65 2,896.55

SET 1,487.20 1,496.90

JAKARTA 5,381.35 5,372.10

Currency Exchange Current Previous

USD/JPY 101.8100 101.4700

USD/HKD 7.7556 7.7551

USD/CNY 6.6625 6.6700

USD/SGD 1.3468 1.3451

USD/THB 34.6300 34.5740

USD/IDR 13,085.00 13,126.50

REST OF THE WORLD

Stock Index Current Previous

FTSEuro First 300 1,379.45 1,374.89

FTSE 100 6,846.58 6,826.05

DAX 10,846.58 10,687.14

CAC 40 4,557.66 4,529.96

DOW JONES 18,526.14 18,538.12

S&P 500 2,186.15 2,186.48

NASDAQ 5,283.93 5,275.91

Various Current Previous

EUR/USD 1.1240 1.1244

GBP/USD 1.3338 1.3424

Gold Spot (USD/oz) 1,344.90 1,348.70

Brent Crude(USD/bbl) 48.55 47.36

3-M US Treasury Yield 0.33% 0.30%

10-Y US Treasury Yield 1.54% 1.54%

30-Y US Treasury Yield 2.24% 2.24%

PHILIPPINES

The local equities market was on a three-day losing streak after foreign investors continued taking profit amid valuation concerns. The

PSEi fell 1.30% to 7,619.10. All sectors were in red except Mining and Oil (+0.13%). Largest losses were seen in the Property Sector,

which posted a 2.44% decline. Market breadth was negative again, as decliners (125) outnumbered advancers (65) while 43 were unchanged. Total value turnover was at Php 10.27 billion. Foreign investors were net sellers at Php 2.68 billion.

In the local fixed income space, yields declined on average, tracking overnight movement in the overseas markets, following the lower-than-expected ISM print in the US dampening expectations of interest rate hikes. Yields declined 2.09bps on average, led by the 5-basis point decline in the belly. The long-end also decreased, down 2.3 bps. The short-end bucked the trend, increasing by 1.8 bps

DoD. The peso weakened against the US dollar following the flow of capital out of the local equities market. The USD/PHP fell by nine (9)

centavos or 0.19%, closing at 46.690. Ample liquidity in the financial system continues to support the Bangko Sentral ng Pilipinas (BSP) auction for term deposit

facility (TDF), which remained oversubscribed for the fourteenth consecutive week on Wednesday. The P10-billion, seven-day

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facility garnered P33.319 billion of bids at an average yield rate of 2.5 percent. Bids for the P80-billion, 28-day facility reached P162.644 billion at an average yield rate of 2.521 percent. "It was still oversubscribed because of ample domestic liquidity in the financial system,"

said Guian Angelo Dumalagan, market economist at Land Bank of the Philippines. "Moving forward, the rates of term deposits ar e still expected to increase gradually," he said. The TDF is a central bank tool to manage liquidity or money in the financial system. Under the facility, banks and trust entities bid for the interest rates with which the BSP will pay for them to park their excess funds for seven or 28

days in the central bank vaults. The 30-minute auction is held once a week at 9:20 a.m., with a minimum placement of P10 million. "The 28-day tenor fetched a higher average rate of 2.521 percent, aligned with the BSP's plan to lift money market rates closer to 3 percent, which is the mid-point of the interest rate corridor," Dumalagan noted.

A further hike in the volume of term deposit facility (TDF) being offered by the Bangko Sentral ng Pilipinas is likely

as Wednesday’s auction was again oversubscribed. Banks and trust institutions tendered P196 billion—P162.6 billion for the P80

billion in 28-day term deposits, and P33.3 billion for the P10-billion seven-day facility. For the 28-day facility, the BSP accepted a yield ranging between 2.5 and 2.525 percent, while the accepted yield remained at 2.5 percent for the seven-day. “The results of the auction today are not unexpected. There is room to further increase the auction size going forward so that more funds could migrate f rom the ODF

to the TDF,” BSP Governor Amando M. Tetangco Jr. said in a text message to reporters, referring to the overnight deposit facility. “An adjustment in the RRR can be considered down the road when, among others, more funds have migrated to the TDF and if credit conditions warrant,” Tetangco added, referring to the reserve requirement ratio. Last week, Tetangco said they have been seeing gains in

mopping up excess liquidity in the system through the weekly TDF auctions as part of the implementation of the interest rate corridor (IRC). BSP Deputy Governor Diwa C. Guinigundo also last week said they saw three more months before interest rates move more decisively towards the policy rate. Since June, the BSP has been holding weekly TDF auctions under the IRC, aimed at mopping up excess

liquidity and tempering volatility in market rates by moving them towards the policy rate of 3 percent. The BSP had made operational adjustments ahead of the implementation of the IRC. The overnight lending facility—the upper bound of the corridor—was cut to 3.5 percent from the former repurchase (RP) facility of 6 percent, while the policy rate or reverse repurchase (RRP) facil ity had been

converted into overnight, with its rate cut to 3 percent from the previous RRP facility of 4 percent. The BSP kept the overnight deposit facility or the former special deposit accounts (SDA) rate of 2.5 percent, which serves as the lower bound of the corridor. The BSP will also offer a total of P90 billion—P10 billion in seven-day term deposits and P80 billion in 28-day—on Sept. 14 and 21, the latest

advisory on its website showed. The country's foreign exchange reserves climbed to a record high of $85.89 billion in August, the Bangko Sentral ng Pilipinas

said Wednesday. Gross international reserves in August were higher than the revised end-July 2016 GIR of $85.51 billion. The rise in foreign exchange reserves was due mainly to the central bank's foreign exchange operations, revaluation adjustments in its gold holdings and foreign currency deposits by the national government, the central bank said in a statement. Forex reserves in August can cover 10.5

months worth of imports and is equal to 4.3 times the country's short-term foreign debt based on residual maturity, the BSP said. The central bank expects to end 2016 with reserves of $84.8 billion, from $80.67 billion last year. For next year, reserves are forecast to rise to $86.3 billion. It expects the country to again post a current account surplus this year despite the risk of capital outflows on higher interest

rates in the United States. The central bank’s foreign exchange (FX) swaps amounted to $3.6 billion in July, bulk of which have residual maturity of up to

one month. Based on Bangko Sentral ng Pilipinas (BSP) data, transactions brought in a small amount of $10 million with up to three months maturity. About $3.597 billion have residual maturity of one month. FX swaps, which are short and long positions in forwards and futures in foreign currencies vis-à-vis the peso, have maturities of up to one month and three months, to one year. The long

positions in July were higher compared to June’s $2.98 billion with tenors of up to one month, but lower in the three-month maturity or $160 million in June. The FX swaps have been showing some activity since end of the first quarter. The BSP uses its swap positions to unwind or release foreign currency into the system as a defensive mechanism against speculative flows and as tool to intervene in the exchange

market. However in terms of size, the swaps have been on a decline for the past three years when the amount was in the $10-billion range back in 2013. This is because the country’s US dollar reserves have been slow at increasing levels compared to previous years . As of end-July, the country’s gross international reserves or GIR amounted to $85.5 billion. The BSP earlier announced that the GIR level is

adequate to cover 10.5 months’ worth of the country’s imports of goods and payments of services and income. It is also equiva lent to six times short-term external debt based on original maturity and 4.3 times based on residual maturity. For 2016, the BSP is keeping a conservative GIR projection of $82.7 billion which is minus revaluations. Including revaluations, which are changes in a coun try’s foreign

exchange rates or adjustments in the currency value, the projection is $85 billion. Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the peso has the leeway to “absorb” exchange rate

shocks coming from the external sector. Tetangco said there is enough foreign exchange liquidity to manage and contain market rate volatility, and “enough (policy) tools” to “address such ‘noise’ in onshore markets, to calm (and) keep market behavior in check.” “Specifically, we have room to allow the exchange rates to absorb some of these near-term shocks or provide foreign exchange liquidity

under our flexible exchange rate policy,” Tetangco told a Euromoney forum on Tuesday. “Moreover, we could also adopt targeted macroprudential tools to bring about a more fundamental change in market behavior.” Tetangco reiterated that with a benign inflation outlook, the BSP “has room to keep its policy rates steady to provide a further anchor for stability.” Last August the BSP adopted its most

recent foreign exchange policy liberalization to encourage the public to transact foreign exchange needs more with banks. Tetangco said risks that could “unsettle” the local market in the short-term through financial market volatility include the policy actions of advanced economies such as the US, specifically the timing of the Federal Reserve’s next interest rates increase. The rate movement in Japan and

Europe are also closely watched. “As the markets digest any pronouncements from advanced economies’ policy makers, we will continue to experience a toggling between ‘risk on’ and ‘risk off’ market behavior, which always creates ‘noise’ in financial markets, ” said Tetangco. Another vulnerability source is the “shifts in Chinese economic policies – from a growth model that relies on exports and fixed investments

to one which is driven by domestic demand, and to a more market-oriented (and weaker) RMB,” he added. These shifts could further slow Chinese growth.

The Bureau of Treasury has set a 10-day roadshow for retail treasury bonds after it raised P65 billion from an auction of the securities aimed at small investors. "Immense liquidity" in the financial system drove demand for the retail bonds, the first such offering under President Rodrigo Duterte, said Mari Toni Bautista, a vice president at CFA Society Philippines. Proceeds from the bond issue will be used to help fund Duterte’s ambitious plan to overhaul the country’s creaking infrastructure by raising spending on roads, bridges and

transport terminals to 7 percent of gross domestic product.

Construction activity in the country rose 20.2 percent in the second quarter due primarily to an increase in residential buildings, the Philippine Statistics Authority (PSA) reported. Based on approved building permits during the period, the total number of

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constructions during the reference period reached 39, 635, up from 32, 974 in the same period last year. The number of residential buildings being built rose 23.7 percent to 30,366 in the second quarter from 24, 543 in the same period last year. All types of residential

constructions registered two-digit expansions during the period: residential condominiums (48.4 percent), other residential (42.4 percent), duplex/quadruplex (24.2 percent) and single-type houses (25.5 percent). Construction of non-residential constructions rose 15 percent to 4,548, from 3,956 recorded during the same period a year ago. All types of non-residential constructions exhibited two-digit growths, led by

other non-residential which registered a 70.3 percent increase. Permits for additions to existing structures rose 11.2 percent to 1,444 in the second quarter from 1,298 recorded during the same period of 2015. Likewise, alteration and repair of existing structures with 3,277 grew 3.1 percent from 3,177 recorded a year ago. The bulk of these construction projects—60 percent—were situated in Region IVA

(CALABARZON), Region VII (Central Visayas), Region III (Central Luzon), National Capital Region and Region XI (Davao Region). In terms of value, the total number of approved construction projects in the second quarter of 2016 was placed at P116.9 billion, up 48 percent from P70 billion in the same period last year. Residential constructions valued at P50.8 billion rose 38.3 percent from P36.7 billion

recorded during the same quarter of 2015. The significant increases in the construction value of other residential, residential condominiums, duplex/quadruplex and single houses pulled up the total value of residential constructions. Construction value of non-residential buildings amounting to P58.7 billion was up 69 percent compared to P34.7 billion registered during the second quarter of 2015.

This was attributed to the upswing in the construction value of commercial, agricultural, industrial, and institutional buildings. The value of alteration and repair of existing structures estimated at P5.9 billion was up 6.2 percent in the second quarter of 2016 compared with P5.6 billion recorded in 2015. On the other hand, addition to existing structures valued at P1.5 billion fell 23.8 percent from P2 billion recorded

during the same period in 2015. Increased construction activity was reflected in the increased importation of durable goods in June. Socioeconomic Planning Secretary Ernesto Pernia said strong construction activity is seen to boost spending on durable equipment and capital goods.

The amount of proposed investments approved by the Board of Investments (BOI) reached P210.37 billion in the first seven

months of 2016, up 98 percent from P106.08 billion a year earlier. "The investment pledges were generated from 192 projects with

total estimated job generation of 37,487 expected at full operations," BOI said in a statement on Wednesday. The board attributed the increase to big-ticket power and infrastructure projects such as the Limay Premier Power Corp., GMR Megawide Cebu Airport Corp., Light Rail Manila Corp. (LRMC), and two renewable energy projects – the Bayog Wind Power Corp., with a generating capacity of 150

megawatts (MW), and the 60MW Cordillera Hydro Electric Power Corp. “Investments coming in are in sectors that will elevate our competitiveness, such as in power and infrastructure,” said Trade Undersecretary and BOI Managing Head Ceferino Rodolfo. Approved projects in electricity, gas, steam, and air conditioning contributed the biggest share at P108.06 billion, followed by construction at P31.90

billion and real estate activities at P26.76 billion. Approved investments in the manufacturing sector reached P18.66 billion while transportation and storage projects totaled P13.32 billion. Region 3 got the highest investments approvals worth P44.32 Billi on or 21 percent of the total. “Dispersion of investments in the region had also changed. NCR usually receives the highest amount of investments,

but now, investments are dispersed as other regions take the lead in attracting more investments,” Rodolfo said. The National Capital Region (NCR) followed with committed investments worth P37.05 billion. Significant investments were also directed to Regions IVA, VII, XII, I, Negros Island, and CAR. The BOI noted Singapore topped the list of foreign country investors in the first seven months, with

investments worth P9.83 billion or 27 percent of the total foreign investments approved during the period. Netherlands came in second at P7.12 billion, followed by South Korea at P6.42 billion, Japan at P5.69 billion, and the British Virgin Islands at P2.02 bill ion. Trade Secretary and BOI Chairman Ramon Lopez expects investment pledges to further grow on the back of sound economic fundamentals. “ ...

The government is pursuing a number of strategic investment policy and promotion initiatives in a bid to further strengthen i ts efforts in attracting a massive flow of domestic and foreign investments in the country, particularly those that would bring in new technology,” Lopez said. " ... If the economic provisions of the Constitution will be amended, greater foreign equity in sectors that are crucial to improving the

competitiveness of industries such as infrastructure and utilities like telecommunications, roads, ports, and airports, may be allowed,” he noted. The BOI is looking at linking the Philippine Economic Zone Authority and other ecozone locators with domestic MSMEs (micro, small, and medium enterprises) as suppliers of raw materials, intermediate parts, and components.

The Duterte administration has unveiled a P1-trillion nationwide pipeline of railway projects, most of which will be located in

Luzon and Metro Manila where traffic congestion was at its worst, apart from urban centers in Cebu and Mindanao. The

administration also committed to “redouble” infrastructure improvement such that the government plans to roll out five more road maps aimed at sustaining economic development, Socioeconomic Planning Secretary Ernesto M. Pernia said Wednesday. The plan was included in the Department of Transportation’s (DOTr) detailed submission to Sen. Grace Poe, who is heading the committee on public

services, in line with the government’s request for special powers to combat the traffic crisis in the capital district. All told, 14 train projects valued at P1.07 trillion were named in the 64-page document. Some of these, like the Light Rail Transit Line 1 extension to Cavite and capacity expansion at the Metro Rail Transit Line 3, have been bid out by the previous Aquino administration. However, a good deal more

have yet to be implemented or rolled out. According to an indicative timeline, all but one train project—a proposed 14-kilometer subway line linking business districts in Metro Manila—would be finished by the time the Duterte administration ends in 2022, assuming special powers were granted. The subway line, the single-biggest component on the list with a project cost of P219 billion, would be done by the second

quarter of 2023, the DOTr said. Of the train projects, 11 are located in Luzon, with many of these aimed at providing easier access to and from Metro Manila. New projects in Luzon were the LRT Line 4, a 19-km line from Taytay in Rizal to Ortigas Avenue; LRT Line 6, a 19-km train from Niyog in Cavite to Dasmariñas also in Cavite; the 35-km PNR North Commuter line from Tutuban to Malolos, Bulacan; and

another 55-km PNR North extension from Malolos to Clark, Pampanga. There was also a PNR South Line running 72-km from Tutuban to Los Baños, Laguna, as well as the LRT-2 East and West extension lines. The DOTr also named a Line 5a, which is a railway “spur line” to the Makati central business district using an existing tunnel. The agency also detailed a 25-km Cebu rail project costing P98 billion,

including right of way, a 25-km Central Philippine Rail, also with a total project cost of P86 billion, and a 20-km Mindanao Rail project, which would cost P79 billion. “The previous government has worked hard to accelerate infrastructure development in the Philippines and the Duterte administration is redoubling efforts to achieve quantum improvement in infrastructure, including energy requirements,” Pernia

said in his speech at The Philippines Energy and Infrastructure Finance Forum 2016 organized by Euromoney. Pernia, who is also the director general of the National Economic and Development Authority (Neda), noted that the Neda Board during the Aquino admin istration approved 115 projects, 94 of which were infrastructure projects, worth a total of P1.64 trillion. “These are, indeed, exciting times as we

continue to move forward even faster and witness a major infrastructure boom in the Philippines. Needless to say, the new government aims to do the same. We are determined to build on gains of past administrations and ensure that public interest, especially that of the poor and disadvantaged, is at the heart of the government’s plan and projects,” Pernia said. “We are working to accelerate annual infrastructure

spending toward 5 percent of the GDP [gross domestic product] in 2017 and perhaps even hitting 7 percent in subsequent years in order to rapidly deal with our infrastructure deficit. The public-private partnership (PPP) modality of investment will continue to play a key role,” the Neda chief added. Pernia also noted that 10 infrastructure projects are up for approval of President Rodrigo R. Duterte at the Neda Board

meeting that the President will chair later this month. The proposed projects are the North-South Railway’s south line; phase 2 of the Philippine Coast Guard’s Maritime Safety Capability Improvement project; Edsa Metro Manila Bus Rapid Transit; Plaridel Bypass Toll

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Road; Metro Manila Flood Management; Bicol International Airport passenger terminal building; new Bohol Airport construction and sustainable environment protection project; Eastern Visayas Regional Medical Center modernization; Gov. Celestino Gallares Memorial

Hospital project in Bohol; and Inclusive Partnerships for Agricultural Competitiveness project. A deadly explosion in Davao City and a subsequent declaration of a state of national emergency will have a “limited” impact on

the Philippines’ debt rating, debt-watcher Moody’s said Wednesday. "The near-term sovereign credit impact of these developments is limited as we do not expect them to change economic and fiscal policies or outcomes," Moody's said in a statement. "However, if recent events lead to prolonged uncertainty around security or economic policy, such a development would eventually dampen business confidence and, consequently, economic outcomes," it said. The weekend bomb attack on a busy night market in Davao City left 14 people

killed and 67 others wounded. The "state of national emergency" to suppress "lawless violence" will allow soldiers to join police patrols.

Moody's however expressed concern that President Rodrigo Duterte’s bloody war on drugs could divert government’s focus away from ensuring the passage of economic reforms in Congress, Moody’s said. Moody's cited legislation to speed up public -private partnership projects, rationalization of fiscal incentives for business, amendments to the central bank charter and easing of restrictions on foreign

ownership in business. The Philippines has what it takes to accelerate its growth momentum anchored on rising private investment and public spending

on infrastructure, allowing the country to reduce reliance on remittances that are threatened by weak oil prices and a global debate on immigration. During the Euromoney Philippines Investment Forum in Bonifacio Global City on Tuesday, David Mann, Standard Chartered Bank’s chief economist for Asia, said the growing contribution of investment to gross domestic product (GDP) may provide a

“key source of extra growth” outside the money sent home by overseas Filipinos and the business process outsourcing industry -- the two main pillars of the Philippine economy. Capital formation accounted for 19.3% of GDP in the second quarter of 2016, higher than the 15% registered a year ago, according to data from the Philippine Statistics Authority (PSA). “People know what are the right things to do to boost growth. It’s all about that implementation of existing plans, knowing what can be delivered. If it’s investment and infrastructure, if you

provide it, they will come,” Mr. Mann said. Remittances face headwinds from the impact on host economies -- especially in the Middle East -- of weak oil prices and the “mega-trend” of nations tightening immigration rules that can slow the deployment of Filipinos overseas, Jollibee Foods Corp. Chief Financial Officer Ysmael V. Baysa said. “The positive side is putting an urgency into really developing the local

economy because the era of good growth of OFW [remittances] may not last long because of what’s happening in different parts of the world,” Mr. Baysa said. Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. said in his speech that the Philippines continues to offer a “convincing case for investment and sustained growth” marked by solid fundamentals and muted inflation. The

country’s GDP expanded by an annual 6.9% last semester, putting within reach the 6-7% official target for the entire 2016. “The Philippines is a destination not only for flighty capital. The Philippines is more importantly a destination for serious investment,” Mr. Tetangco said. But Diwakar Gupta, vice-president for the Asian Development Bank’s private sector and cofinancing operations, tagged infrastructure, which

enables access to social services critical to lift standards of living, as one the nagging key constraints to growth. Address ing infrastructure bottlenecks will enable the country to make investment one of the economy’s major growth drivers, thereby unlocking the potential of other sectors like agriculture, whose contribution to the economy has been reduced to roughly a tenth though it still accounts for a third of the

labor force, Philippine Competition Commission Chairman Arsenio M. Balisacan said. “What that says is the problem goes far beyond agriculture and that is our inability to create opportunities for labor trapped in agriculture... If you succeed in doing that [addressing infrastructure], you create a dynamic structural transformation where you move labor from low productivity areas to highly productive

sectors,” Mr. Balisacan said. Budget Secretary Benjamin E. Diokno said the administration of President Rodrigo R. Duterte is pursuing an expansionary fiscal policy designed to make room for increased public spending on infrastructure and social services. “The planned deficit-to-GDP ratio may appear scary for some but I can assure you, it is manageable, appropriate and sustainable,” Mr. Diokno said, referring to

2017’s planned 3% ratio from this year’s 2.7% program. More foreign firms are keen on getting a piece of the action in one of Asia’s fastest growing economies, known in the past as a difficult place for investments. Metro Pacific Tollways Corp. President Rodrigo E. Franco said its P27.9-billion bridge project in Cebu drew interest from 18 foreign contractors. “For the first time in my working career, money is not an

issue. It’s about political will, clarity, level playing field and being liberal in terms of ownership and operation,” said Michael T. Rodriguez, managing director at Macquarie Infrastructure and Real Assets. The government must work on simplifying rules, easing restrict ions on foreign ownership and establishing a record of stability and predictability to attract more foreign direct investment, said Adam Stapledon,

partner at Allen & Overy. “A lot of positive signals has been sent. Disregard the noise or these headline risks,” said Michae l T. Toledo, head of the media bureau of the MVP Group of Companies, referring to Mr. Duterte’s controversial statements, the latest of which was his strong comments against US President Barack Obama and flip-flops on a number of issues. “These are just speed bumps. At the end of the day,

foreign investors are seeing a very determined government, a government that means business, a government that is decisive.” The Executive is looking to convene a meeting with Congressional leaders within the next two months to lobby for the speedy

passage of the government’s priority measures such as tax reform and the creation of a Housing department, the country’s Budget chief said. Budget Secretary Benjamin E. Diokno told reporters that the government wants to call the first Legislative Executive Development Advisory Council (LEDAC) under the Duterte administration soon. “We are planning to call a LEDAC meeting if not this month, next month,” Mr. Diokno said on the sidelines of the Euromoney Philippines Investment Forum yesterday. “Dapat talaga kino-convene ’yung LEDAC para mabilis ’yung Congressional action. (We have to convene the LEDAC for swift congressional action.)” Among

the bills Malacañang wants passed are those creating a Department of Housing and Local Development, emergency powers for the

Executive to solve traffic congestion in Metro Manila, the P3.35-trillion national budget for 2017, right-sizing the bureaucracy, and the tax reform package. The Executive under President Benigno S. C. Aquino III had just two LEDAC meetings during his term held in 2011. Instead, Malacañang forwarded a list of 29 priority bills to Congress leaders which it had wanted passed. The list was used by House and

Senate leaders during their monthly caucuses to reconcile each chamber’s priority legislation. In his keynote speech, Mr. Diokno said the Duterte administration wants a tax reform law passed by March 2017 the latest. “We will reform the tax system to make it more equitable, efficient and competitive in the region. We are optimistic that reforms will be in place at the end of the year at best and at worst sometime in

first quarter of 2017,” Mr. Diokno said at the forum held at the Shangri-La The Fort in Taguig City. The Finance department is finalizing details of a comprehensive tax reform package which it will send to the House of Representatives and Senate for consideration and approval. Initial plans include lowering personal and corporate income taxes to a maximum of 25% from the current top rates of 32% and

30%, respectively. In turn, a plan to increase excise taxes on fuel is expected to generate P130.5 billion in additional revenues, seen to help offset expected losses of P174 billion from the income tax cuts. “I am for flexible tariff on oil. Kung mag-hit na naman ng $100 [a

barrel] and above (If oil price hits $100 and above), I think we should consider lowering tax,” Mr. Diokno said when asked whether the

higher duties will be kept should oil prices recover. Other revenue-offsetting measures include rationalizing fiscal incentives and placing a limit on the duration of these perks, lifting deposit secrecy laws to allow the Bureau of Internal Revenue to better go after tax evaders, and additional duties on sugary and fatty foods and drinks.

The Department of Agriculture insists a plan to remove quantitative restriction (QR) on rice imports will be disastrous to local

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farmers. “The Filipino rice farmers are not ready yet for the lifting of the QR mainly because of negligence on the part of the government in the past,” Agriculture Secretary Emmanuel Piñol said. He said Filipino rice farmers could not yet compete with neighboring rice-producing

nations should the government finally decide to lift import restrictions on rice. In the Philippines, the cost of producing palay (unmilled rice) is around P10-12 per kilo as against the P6 to P10 per kilo in Vietnam and Thailand. “We need at least two years to improve the average rice production per hectare to at least five to six tons and lower the cost of production per kilo to a maximum of P8,” Piñol said. “Until such

time these are achieved, lifting the QR would be disastrous to the Filipino rice farmers,” he added. On the contrary, National Economic and Development Authority (NEDA)-Agriculture, Environment and Natural Resources director Mercedita Sombilla said farmers have remained disadvantaged even with the current implementation of the QR. “Even with the QR, farmers were never that much

advantaged, especially the small rice farmers who are net consumers of rice for most part of the year and hence have to face the same higher rice prices,” Sombilla said in an email to The STAR. “If you look at and compare price trends, you can note that while both farm gate and retail prices increased, the latter increased relatively faster than the farm gate prices widening the gap between farm gate and retail

prices,” she added. Sombilla said support must be given to small farmers to boost their yields as the Philippines eventually moves to a no QR regime. “The lifting of the QR should necessarily be supported with produc tivity enhancing initiatives to help farmers overcome the possible initial negative impact but which should be aimed to improving their condition as quickly as possible,” Sombilla said. She said the

government should depend on technologies that are in advanced stages of development, including climate-smart technologies that are more resilient to severe and extreme climate conditions which should be done in areas that are conducive to cultivating rice. Apart from this, Sombilla said new investment in irrigation expansion and rehabilitation of existing systems is also critical in increasing yields and will

be beneficial in adapting to climate change and improving food security. “Transport facilities should be greatly improved to overcome current logistics difficulties. They could also help get farmers move into the supply-value chain processes and partner with private agri-business,” she added. Meanwhile, state rice importer National Food Authority (NFA) said it was ready to abide by any decision that

would be reached with respect to the QR lifting. “It’s hard to comment right now. We’ll just take the decision and abide by the policy,” NFA Public Affairs spokesperson Angel Imperial said.

The proposed P2,000-increase in the monthly pension of Social Security System (SSS) retirees, vetoed by former President Benigno Aquino III, inched closer to becoming a law in the 17th Congress on Wednesday after the House committee on government enterprises and privatization approved it. The panel approved Bayan Muna party-list Rep. Carlos Isagani Zarate’s motion

for the omnibus approval of the 15 pending measures for the SSS pension hike during a hearing attended by state pension fund officials. Aquino vetoed the proposed measure last January, saying the SSS would rack up a deficit of anywhere from P16 billion to P26 billion yearly if the proposed P2,000-increase in the pension of each retiree becomes a law. The state pension fund is projected to shell out P56

billion each year for some 2 million pensioners if the bill is enacted. During the hearing, SSS Vice President Gregory Ongkeko warned lawmakers that increasing the pension by P2,000 will shrink the fund’s actuarial life from 2042 to 2025. Surigao del Sur Rep. Prospero Pichay said that while the bill might be popular among voters, it is more important to consider the state pension fund’s life. “This is a

popular bill. If I’m running for senator, I will support this. But what's important is the survival of the fund,” he said. Zarate, one of the authors of the approved bill, expressed hope that the measure would be swiftly approved at the plenary following its passage at the committee level. He said senior citizens have long been waiting for their pension to increase. "We hope that the Senate version would also be

expedited so that President Duterte can sign this long awaited measure before the year ends,” Zarate said. To better protect not only insurers but also their policy holders, the Insurance Commission has required insurance players to put

in place anti-fraud plans. Such plans will allow both life and non-life insurance firms to detect fraud early on and put a stop to fraudulent activities, Insurance Commissioner Emmanuel F. Dooc said in a statement Wednesday. “The concept of mandating the submission of an insurer anti-fraud plan was developed to encourage insurers to proactively fight insurance fraud. It is necessary that all insurance

companies are ready to combat insurance fraud for its own protection and for the welfare of its stakeholders. To adequately protect itself from the risks posed by insurance fraud, every insurance company should have an appropriate framework in place to prevent, monitor and investigate its occurrence,” Dooc said. “Each anti-fraud plan should include measures to protect the company from policyholder and claims

fraud, intermediary fraud perpetuated by an ordinary insurance agent, general agent, insurance brokers, management company of a consortium and adjusters, and from internal fraud including those committed by the director, manager or any other officers of employees,” Dooc added.

Bangladesh has formally filed its claim to the $15 million forfeited last month by a Manila court, while authorities attempt to

recover around $19 million more, seven months since the biggest cross-border money laundering case rocked the Philippine

financial system. The Department of Justice (DoJ) has filed a claim to the money on behalf of the Bangladesh government last Aug. 26, the Finance department said in a statement. A Manila trial court ruled on Aug. 30 that the Justice department’s petition was “sufficient in form and substance,” it added. The court gave the Office of the Solicitor General 15 days to comment on Bangladesh’s claim for the funds

before it issues a decision. The DoJ is helping Bangladesh recoup the funds under mutual legal assistance, as the Philippines and Bangladesh are signatories to the United Nations Convention on Transnational Organized Crimes. Bangladesh Ambassador to the Philippines John Gomes confirmed the development, adding that a ruling could come out “any time but definitely by this month.” To recall,

hackers reportedly crafted the transfer of $81 million from the Bangladesh Bank’s account at the New York Fed to four RCBC accounts in its Jupiter St., Makati branch on Feb. 5. The money was then withdrawn and transferred to casinos, a portion of which was through cash deliveries by remittance firm PhilRem Service Corp. A forfeiture case has been filed by the Anti-Money Laundering Council and part of the

Bangladeshi money was recovered after a junket operator surrendered them. The court forfeited the money on July 7 in favor of the national government, with the amount currently stored at the Bangko Sentral ng Pilipinas’ vault in its headquarters in Manila . Finance Secretary Carlos G. Dominguez III recently held an hour-long meeting with Mr. Gomes in Makati City. They were joined by DoJ Chief State

Counsel Ricardo V. Paras III, BSP Deputy Governor Nestor A. Espenilla Jr., Anti-Money Laundering Council (AMLC) Executive Director Julia Bacay-Abad, Finance Undersecretary Maria Edita Z. Tan, and Department of Foreign Affairs Director Jeffrey P. Salik from the South and Central Asia Division. Mr. Dominguez assured full support from the Duterte government in recovering Dhaka’s money, although noted

that any moves will have to go through the Philippines’ legal processes. During the meeting, AMLC’s Ms. Bacay-Abad said they are “still working on” recovering $17 million believed to remain with remittance firm PhilRem Service Corp., which delivered portions of the $81-million sum in cash to Solaire Resort and Casino, where the money trail eventually vanished. Some $2.3 million (P107.35 milli on) worth of

chips voluntarily frozen by Solaire may also be subject of a forfeiture case, DoJ’s Mr. Paras said. A c ivil forfeiture case seeks the confiscation of any money and assets believed to have been acquired through illegal means such as theft, terrorism, or kidnapping, as defined under Republic Act 9160 or the Anti-Money Laundering Act of 2001. Assets that may be seized by the court include cash,

monetary instruments, parcels of land, personal property, and those found under a “related web of accounts” linked to the source of ill-gotten wealth. Another round of meetings is scheduled later this month as Bangladesh Finance Minister Abul Maal Abdul Muhith would be visiting Manila from Sept. 28-29.

The Securities and Exchange Commission (SEC) has approved a plan by Ty family-led conglomerate GT Capital Holdings to raise

BAIPHIL Market Watch – 08 Sept 2016

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up to P12 billion from an offering of non-voting perpetual preferred shares to the public. Based on documents from the SEC, the conglomerate plans to offer at least 8 million perpetual preferred shares at an issue price of P1,000 per share. This will allow GT Capital to

raise at least P8 billion from this offering. The offering can be upsized by up to 4 million preferred shares in case of oversubscription, bringing the maximum issuance to P12 billion. A perpetual preferred stock has no maturity date and will continue paying dividends indefinitely until the issuer, GT Capital, exercises its option to redeem the shares. GT Capital expects to use proceeds from the offer to

refinance by the fourth quarter of this year previous acquisitions that were earlier paid through bridge financing. Part of the proceeds will likewise be used for other strategic acquisitions. In October last year, the conglomerate availed of P9 billion from Philippine National Bank, Security Bank, Bank of the Philippine Islands and the Development Bank of the Philippines.

SM Investments Corp. (SMIC) plans to raise as much as P50 billion through a retail bond offering this year, to bankroll its

expansion plans. "There is a plan to issue a retail bond before the end of this year. It's still being worked out and subject to SEC

(Securities and Exchange Commission), PSE (Philippine Stock Exchange) approval," Jose T. Sio, SMIC Chief Finance Officer (CFO), told reporters on the sidelines of the launch of the Miriam College-Henry Sy Sr. Innovation Center on Wednesday. Sio noted the issue size would be close to P50 billion, but the final amount has yet to be finalized. "It'll be about around that figure." SMIC would use the proceeds

from the bond issues in various ways. "It will be more for supporting our subsidiary, the capitalization of our subsidiary, and the expansion," Sio said. Current market conditions have compelled the company for a longer maturing bond float. "The Philippine market is liquid, and we'd like to see a tenor of about seven to 10 years," Sio noted. SMIC reported a P15.0-billion net income in the first six months of the year,

up 11 percent from a year earlier on the back of election-related spending. SMIC is primarily in the business of retail trading, property development, financial services.

Globe Telecom maintained the top credit rating for its P17 billion worth of bonds, according to Philippine Rating Services Corp. (PhilRatings). PhilRatings said in a statement that its PRS Aaa issue credit rating was assigned to Globe’s debt, signaling a healthy balance sheet, good business prospects and minimal risk of default. It said the outstanding bonds consisted of P10 billion bonds issued in

June 2012, with P4.5 billion due in 2017 and P5.5 billion due in 2019, and P7 billion bonds issued in July 2013, with P4 bill ion due in 2020 and P3 billion due in 2023. In its statement, PhilRatings said it considered Globe’s sustained profitability, “solid” market position with “strong brand recognition”, new product offerings and the favorable industry outlook. Globe is one of two of the country’s ma jor providers of

mobile communication, fixed line telephony and broadband services. It has about 61.3 million mobile subscribers, 1.1 million home broadband subscribers and 1.2 million landline subscribers, including those from its subsidiary, Bayan Telecommunications Inc . (Bayan). It had a 48.7-percent share of the mobile market as of June this year, compared to 44.9 percent at the end of 2015. The report also cited

Globe and rival PLDT’s recent joint acquisition of San Miguel Corp.’s telecommunications unit for close to P70 billion. The main target was SMC’s valuable radio frequencies, which remained unused for years. The SMC deal, however, lured the scrutiny of the antitrust body Philippine Competition Commission (PCC) due to its implications to the telco competitive landscape. “Given Globe’s sol id financial

performance and standing and even with the pending issue in relation to the PCC, PhilRatings has assigned a rating outlook of stable to Globe’s credit rating,” PhilRatings said. “The encouraging growth prospects for the Philippine economy are seen to bode well for Globe’s well-positioned and growing businesses.” From Aug. 8 to Sept. 5, 2016, Globe launched a consent solicitation exercise relating to its

outstanding P17 billion in fixed-rate bonds, which are set to mature in 2017, 2019, 2020 and 2023. The purpose was to seek the bondholders’ consent for its proposed amendment to maintain a higher limit of consolidated debt to equity of 2.5:1 (from the existing limit of 2:1) and to align debt to equity definitions with current Philippine Financial Reporting Standards.

The government is being urged to come up with a master plan on how to redirect cargo flow from Manila to Subic, as a solution

to ease the traffic congestion caused by trucks in Metro Manila. International Container Terminal Services, Inc. (ICTSI) Senior Vice-

President and Head of Asia Pacific Region Christian R. Gonzalez said he would like to see more cargo enter the Subic Bay International Terminal Corp. (SBITC) given its lower costs and royalties, but noted that diverting the flow of goods may not be that simple. “It needs to be looked at with all the stakeholders involved. We can’t gut check decisions without looking at all portions of the chain. For example, I like to

talk about the port. I don’t know anything about trucking. I don’t know anything about warehousing. I don’t know the challenges that they face. There must be certain issues that they have that also constrain their ability to support Subic vis-a-vis Manila. So that needs to be studied,” he told reporters at the sidelines of the Management Association of the Philippines International CEO Conference 2016 on

Tuesday. Mr. Gonzalez pointed out the Subic port, which has a 600,000 Twenty-foot Equivalent Units (TEU) capacity, but currently utilizes less than a third or “below” 200,000 TEUs. As of 2015, he said an estimated 100,000 TEUs have gone to Subic port from Manila and Central Luzon. “If you look at potential cargo in Region 3, Bataan, Bulacan, Northern Metro Manila and some parts of Rizal, you’re

probably talking today another 150,000 or 200,000 TEUs on top of what it’s already doing,” he said, when asked how much more cargo can potentially be transferred to Subic. However, Mr. Gonzalez said it is still not clear when the Subic port would be able to operate at full capacity, noting how growth in other regions is not as fast as that in Metro Manila. However, he said that “cost efficiency,” among many

other concerns, may discourage firms from using the Subic port. “If somebody is going to Manila, they’re going to Manila for a reason. And that reason is cost efficiency. They’re not going to Manila if it’s more expensive for them. So there’s a reason why, for them, going to Subic is more expensive. The government’s role is to figure out what it is. It’s not the port. It could be docking, warehousing, tolling, it could be

price of the drivers, it could be fuel, I don’t know,” Mr. Gonzalez said. “If the government wants to talk to me about this, I’m happy to join any discussion. But I’ve never really seen a unified master plan.”

ASIA-PACIFIC

Japanese stocks fell on Wednesday after exporters and other cyclical shares took a hit on a strengthening yen as weak U.S. service

sector activity reduced the chances of a near-term interest rate increase by the U.S. Federal Reserve. Given the strength in the service

sector has been making up for softness in U.S. manufacturing in the past year or so, the data was a blow to the case for the Fed to raise interest rates as soon as this month. The Nikkei ended 0.4 percent lower at 17,012.44. The broader Topix index dropped 0.2 percent to

BAIPHIL Market Watch – 08 Sept 2016

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1,349.53, while the JPX-Nikkei Index 400 fell 0.3 percent to 12,119.24.

China stocks were little changed on Wednesday, with falls in consumer and healthcare shares offset by gains in infrastructure and raw materials firms, as Beijing vowed to step up fiscal policy efforts to support the economy. China's State Council, or cabinet, also said it would encourage policy banks to extend more credit and reaffirmed the government's commitment to reducing overcapacity, in a notice

published late on Tuesday. The CSI300 index fell 0.1 percent, to 3,340.82 points at the end of the morning session, while the Shanghai Composite Index gained 0.1 percent, to 3,092.41 points. The infrastructure sector rose 0.7 percent while an index tracking raw material stocks gained 0.3 percent, as investors expect the government to approve more infrastructure projects, boosting demand for goods from

cement to steel. Environment-related stocks, including Zhejiang Weiming Environment Protection and Beijing Capital , also saw a robust rally amid a determined push by China's policymakers to combat pollution.

Hong Kong's benchmark share index slipped on Wednesday, snapping a four-day winning streak, but an index tracking Hong Kong-listed Chinese shares continued to advance as more money flowed in from mainland investors. The Hang Seng index ended down 0.2 percent at 23,741.81, while the China Enterprises Index gained 0.3 percent to 9,970.19, rising for a fifth straight day. Most sectors fell, with

IT and telecom stocks leading the decline. Chinese money continues to flow into Hong Kong stocks in large volume under the Sh anghai-Hong Kong Stock Connect scheme, as investors seek to front-run a similar cross-border link, between Shenzhen and Hong Kong, expected to be launched in November.

Most Southeast Asian stock markets treaded carefully on Wednesday as investors kept to the sidelines ahead of key meetings of

the Bank of England and the European Central Bank. Asian stocks hit one-year highs after surprisingly weak U.S. services sector

activity put paid to already slim chances of an interest rate hike by the Federal Reserve as early as this month. Malaysia was flat ahead of a central bank policy meeting where it is expected to keep its benchmark rate unchanged as the economy is seen to be coping with global market volatility in the wake of Britain's June Brexit vote. The country's exports in July fell the most since May 2015, data released earlier in

the day showed, hurt by a slowdown in major trading partner China, weak oil prices and slumping demand for the country's commodities. Thai shares rose 0.8 percent with financials leading the gains, while consumer non-cyclicals battered Vietnam shares.

Oil prices inched lower on Wednesday as market participants remained skeptical that producers will reach an agreement to freeze output to rein in a global supply glut. London Brent crude for November delivery was down 4 cents at $47.22 a barrel by 2018 EST, after settling down 37 cents on Tuesday. NYMEX crude for October delivery was down 8 cents at $44.75, after settling up 39 cents on

Tuesday. Oil prices hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilizing the oil market, but they have since fallen due to the mounting uncertainty over a deal. The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia will hold informal talks in Algeria on Sept. 26-28, but many in the market are skeptical a deal will happen. Saudi

Arabia's Foreign Minister Adel al-Jubeir said on Tuesday it would go along with a freeze in oil output if other producers agreed one but cautioned that Iran, which is aiming to raise output to pre-sanction levels, could foil any attempt to limit output. Iran, however, signaled on Tuesday it was prepared to work with Saudi Arabia and Russia to prop up oil prices as it began to bargain with OPEC on possible

exemptions from output limits. On demand, traders said Genscape data showed a draw of some 700,000 barrels last week at the C ushing, Oklahoma, delivery hub for U.S. crude futures. U.S. commercial crude inventories likely fell by 100,000 barrels last week after rising for two straight weeks, a preliminary Reuters poll showed on Tuesday. Gasoline stocks likely fell by 500,000 barrels, while distillate stocks are

forecast to have increased by 1 million barrels, the poll showed. The American Petroleum Institute is set to release the weekly oil data on Wednesday, delayed a day from usual due to the Labor Day holiday on Monday.

Australia’s economy expanded an annual 3.3 percent in the second quarter, driven by higher government spending, even as weak inflation spurred the central bank to cut interest rates twice in the past four months. Gross domestic product rose 0.5% from the previous three months, when it gained a downward revised 1%; economists predicted 0.6%. The economy expanded 3.3% from a year

earlier, matching estimates. Expansion was driven by 1.9% increase in government spending, adding 0.3 percentage point to growth. The report confirms Australia’s 25th recession-free year and is a fillip for Prime Minister Malcolm Turnbull in a parliament where his side holds a razor-thin majority; it’s also a welcome entry-point for incoming central bank Governor Philip Lowe as he tries to conjure up some inflation.

Still, Wednesday’s data is only a rear-view snapshot of Australia’s economy, in a period when iron ore gains and the jobless rate largely held their ground. The economy has been bolstered by a surge in government spending, particularly at the state and local government levels, as investment by industries outside mining started to show green shoots last quarter. This suggests the Reserve Bank of Australia’s

efforts to steer a handover to non-mining sources of growth could be working after years of easy policy and a 25 percent depreciation in the currency from its mining boom peak. Wednesday’s data saw the economy’s annual expansion exceeded its 30-year average of 3.2 percent. It also showed:

The household savings ratio held at a revised 8%

The terms of trade, or export prices relative to import prices, rose 2.3% QoQ

Household spending rose 0.4%, adding 0.2 percentage points to growth Australia’s transition is relying on industries like tourism and education that are among the most sensitive to the currency’s fluctuations.

Uncertainty over the U.S. Federal Reserve’s plans to tighten has propped up the Aussie against the dollar, as well as zero and negative rates and vast bond-buying programs in Europe and Japan that make even Australia’s record-low rate attractive. The Aussie is up more than 10 percent since mid-January. Australia’s underemployment rate is also running high, as a surge in part-time workers -- many of

whom want more hours -- flatters the jobless level. RBA Governor Glenn Stevens, in his final policy statement after holding the benchmark rate steady Tuesday, signaled some doubts on the labor market. “In Australia, recent data suggest that overall growth is continuing, despite a very large decline in business investment, helped by growth in other areas of domestic demand and exports. Labor market indicators

continue to be somewhat mixed, but suggest continued expansion in employment in the near term.” Malaysia's central bank kept its key interest rate at 3.00 percent on Wednesday as expected, saying growth remains on track

despite projections of tepid exports for the rest of the year. Bank Negara Malaysia (BNM) said domestic demand remains the key driver for growth, with private consumption and private investment expanding at a faster pace and supported by wage and employment growth. "Overall, the economy is projected to expand within expectations in 2016, and to remain on a steady growth path in 2017" the

central bank said in a statement. Eleven of 12 economists in a Reuters poll had forecast no change to the overnight policy rate (OPR). Economists were surprised by BNM's cut of 25 basis points at its last meeting, on July 13. That was Malaysia's first rate reduction in seven years.

BAIPHIL Market Watch – 08 Sept 2016

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REST OF THE WORLD

European shares rose on Wednesday, taking a benchmark index close to eight-month highs, helped by some well-received

company results and the prospect of more monetary stimulus from the European Central Bank. The STOXX Europe 600 index

finished up 0.3 percent at 350.46 points, near its highest level since January, although the index remains down by 4 percent so far in 2016. European stock markets were propped up as euro zone bond yields fell on bets that the ECB, which meets on Thursday, will announce further policy easing measures. Lower bond yields and negative interest rates have hit returns on bonds and cash, driving

investors over to the better returns available from stocks, although negative rates may also affect the profitability of European banks. U.S. stocks ended little changed on Wednesday, though the Nasdaq eked out another record high close, as investors assessed

the outlook for U.S. interest rates. Investors have been weighing the likelihood of a rate hike this month from the Federal Reserve, with recent economic data including last Friday's weaker-than-expected jobs report suggesting the U.S. central bank could hold off for now. The Fed said on Wednesday afternoon in its Beige Book report of anecdotal information that the U.S. economy expanded at a modest pace in

July and August, but there was little sign that wage pressures are being felt beyond highly skilled jobs. The Dow Jones industrial average was down 11.98 points, or 0.06 percent, to 18,526.14, the S&P 500 lost 0.33 points, or 0.02 percent, to 2,186.15 and the Nasdaq Composite added 8.02 points, or 0.15 percent, to 5,283.93, a record high close. Advancing issues outnumbered declining

ones on the NYSE by a 1.68-to-1 ratio; on Nasdaq, a 1.52-to-1 ratio favored advancers. About 6.5 billion shares changed hands on U.S. exchanges, compared with the 6.0 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Small businesses in Britain remain confident about the economic and political landscape following the historic vote in June to leave the European Union, according to a survey by research firm BDRC Continental. Early responses from a third quarter survey of 4,500 small and medium-sized companies (SMEs) show little sign of any drop in confidence according to BDRC. A survey taken during the

second quarter of the year as the EU referendum took place, showed that 13 percent of the SMEs rated the current economic climate as a major barrier to business while 10 percent rated political uncertainty as a major barrier. Those figures were unchanged from the first quarter. Within the overall figures however, larger SMEs with 50-249 employees did show increasing concern about the economy, BDRC

said. Britain's economy on Monday showed its clearest sign to date of bouncing back from the initial shock of the June referendum outcome, as data firm Markit said the country was unlikely to enter a recession in the July-September period. BDRC Continental said its surveys dating back to 2011 show a continuing decline in appetite for external funding, with small businesses preferring to s elf-fund. That

sentiment could change in the coming months, according to Shiona Davies, director at BDRC. "Brexit has the potential to change the business context. For now, most SMEs are reporting 'business as usual', albeit there are signs of concern amongst some specif ic groups," she said. BDRC's findings are used by the government to inform policy making, the company said.

German industrial production posted its steepest fall in 23 months in July, data showed on Wednesday, in a further sign that

Europe's largest economy is set for a slowdown. Wednesday's data, published one day after a surprisingly weak rise in industrial

orders, added to concerns that the German economy is losing steam as lower demand from emerging markets such as China and concerns about the consequences of Britain's decision to leave the EU are weighing on exports. "Companies in the industry sector continue to adopt a wait and see approach because of sluggishness in the global export markets," the Economy Ministry said in a

statement. Industrial output fell by 1.5 percent on the month, the data showed, confounding the consensus forecast in a Reuters poll for an increase of 0.2 percent. A 1.8 percent rise in output in the construction sector and a surge of 2.6 percent in energy output were not enough to offset a 2.3 percent fall in manufacturing, the data showed.

U.S. job openings surged to a record high in July, but a lag in hiring suggested employers were struggling to find qualified

workers to fill the positions. The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on

Wednesday also pointed to tightening conditions in the labor market, which could spur faster wage growth. JOLTS, is one of the job market metrics on Federal Reserve Chair Janet Yellen's so-called dashboard. It was published ahead of the U.S. central bank's Sept. 20-21 policy meeting at which the Fed is widely expected to leave interest rates unchanged. Job openings, a measure of labor demand, increased

228,000 to a seasonally adjusted 5.9 million, the Labor Department said. That was the highest level since the series started in December 2000 and pushed the jobs openings rate up one-10th of a percentage point to 3.9 percent in July. Hiring was little changed at 5.2 million in July, keeping the hiring rate steady at 3.6 percent for a second straight month. But hiring slowed in August, with nonfarm payrolls

increasing by 151,000 jobs, a report showed last week. The economy added a total of 546,000 jobs in June and July. Although Fed officials view the labor market as being at or near full employment, concerns about persistently low inflation have left the U.S. central bank cautious about raising interest rates in the near term. Job openings were almost across the board. There were big increases in construction, retail,

leisure and hospitality, as well as professional and business services. In a sign of confidence in the labor market, 3.0 million Americans voluntarily quit their jobs in July, keeping the quits rate at 2.1 percent for a second straight month. This rate has rebounded from a low of 1.3 percent in early 2010. Layoffs were little changed at 1.6 million in July, holding the layoffs rate at a 3-1/2-year low of 1.1 percent. The

ratio of job openings to unemployment hit a 15-year high. A top Federal Reserve official on Tuesday repeated his call for gradual interest rate hikes, evidently unfazed by a slowdown in

U.S. job gains and sluggishness in the services sector that now has traders betting against any rate hike at all this year. It "makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later," San Francisco Fed President John Williams said in remarks prepared for delivery to the Hayek Group. In his prepared remarks Williams did not address the release of data on Tuesday that

showed activity in the U.S. services sector had hit a six-and-a-half-year low, or government data last Friday that showed U.S. employers added fewer jobs than expected in August. Williams said the economy was in "good shape," and he forecast unemployment, now at 4.9 percent, to fall to 4.5 percent in the coming year and inflation to rise to the Fed's 2 percent target in the next year or two. Longer-term,

however, Williams made it clear he is far from comfortable with the Fed's current approach to monetary policy. Targeting low inflation, as

BAIPHIL Market Watch – 08 Sept 2016

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the Fed and many other central banks currently do, simply will not work well in a world where economic growth and interest rates are likely to be persistently lower than they were in the era before the Great Recession, he said. A low inflation target, he said, gives the Fed too

small a buffer to fend off future shocks. The Fed could raise its 2 percent inflation target to 3 percent or even 4 percent, or shi ft away from inflation targeting altogether and instead target a nominal level of national economic output, Williams said. He said that because it will take time to figure out which approach will work best when faced with future downturns, the Fed needs to get cracking. "Time is not on our side,"

Williams said. Williams first raised the idea of ripping up the Fed's monetary policy playbook last month, when he also began advocating more strongly for a rate hike. Fed Chair Janet Yellen said last month that the Fed was not currently actively considering any of the strategy shifts that Williams had argued for, and it is not clear how much traction his ideas have gained.

Signature Analysis & Forgery Detection – 17 September 2016 Developmental Course on Treasury Products - Bond Duration – 17 September 2016 Establishing Internal Controls in Banks – 24 September 2016 Developmental Course on Treasury Products - Spot, Forwards and FX Swaps – 24 September 2016 Fraud Risk Management –24 September 2016 Developmental Course on Treasury Products - Interest Rate Swaps – 01 October 2016 Establishing Internal Controls per BSP Cir. No. 871 – 01 October 2016 Basic Leadership and Effective Supervision Seminar (BLESS Program) for Bank Supervisors – 07 & 08 October 2016 Introduction to Financial Regulatory Reporting and Related Financial Control Standards – 08 October 2016 Developmental Course on Treasury Products - Currency Swaps/Forward Rate Agreement – 08 October 2016 IT Risk Management, IT Risk Rating System, and IT Regulatory Updates – 14 October 2016 Enterprise Risk Management – 15 October 2016 Developmental Course on Treasury Products - Bootstrapping – 15 October 2016 BSP Cir. No. 706, AMLA Law, RA 10365 and the AML Risk Rating System – 21 October 2016 Risk Management and Risk Based Supervision – 21 October 2016 Developmental Course on Treasury Products - Financial Options – 22 October 2016 Advanced Workshop on Banks Frauds and Forgery Detection – 22 October 2016 Tax Accounting for Various Banking Products and Services, and Regulatory Remittances and Corporate Taxation of RBU and FCDU – 22 October 2016 Labor Laws for Bankers – 22 October 2016 Supervisory Expectations on Compliance Systems for Board and Senior Management – 28 October 2016 Trade Financial Commercial Crime – 29 October 2016 Overview of Outsourcing Framework (Knowing the Essentials When Outsourcing) – 12 November 2016 Advanced Project Management – 19 November 2016 PFRS-based Financial Statements (Internal FS & the Annual Audited FS) by Philippine banks – 19 November 2016

For details, please contact BAIPHIL via telephone (853-4457/519-2433) or email training@baiphil.org.

BAIPHIL Market Watch – 08 Sept 2016

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SEPTEMBER 1-15

01 Ma. Agnes J. Angeles - Past President

02 Ma. Diwata A. Lingatong - Standard Chartered

08 Vanessa C. Chua - JP Morgan

08 Gregorio M. Yaranon, Jr. - Maybank Phils

09 Maria Teresita R. Dean- ChinaBank Savings

09 Ma. Gina A. de Guzman - Assoc. Life Member

11 Carol P. Warner - Security Bank

12 Arnelito M. Ocampo - Sterling Bank

14 Elma D. Valenzuela - CARD SME Bank

TINA: There Is No Alternative - "There is no alternative," often abbreviated "TINA," is a phrase that

originated with the Victorian philosopher Herbert Spencer and became a slogan of British Prime

Minister Margaret Thatcher in the 1980s. Today it is often used by investors to explain a less-than-

ideal portfolio allocation, usually to stocks, since other asset classes offer even worse returns. Such

decisions by investors can lead to the "Tina Effect," in which stocks rise only because investors

have no viable alternative.

Why is a misleading sales pitch called a “song and dance”?

During the days of travelling vaudeville shows, there were featured stars, and there were fillers. The

fillers were the comics who were hired to keep the audience amused by telling jokes within a song

and dance routine until the next headliner was ready to come on stage. Since then, any well-

rehearsed routine that is intended to divert your attention from what you came to see has been called

a “song and dance.”

REFERENCE COMPILED AND PREPARED BY: RESEARCH AND INFORMATION COMMITTEE FY 2016-2017

BPI Asset Management Business World Philippine Daily Inquirer Philippine Star GMA News ABS-CBN News Bulletin Today PSE

Reuters Bloomberg CNN Wall Street Journal Investopedia Brainy Quotes Goodreads Corsinet- Trivia

Director: Maria Teresita R Dean (ChinaBank Savings) Chair: Sheryll K. San Jose (Equicom Savings Bank) Member: Rachelle A Fajatin (Equicom Savings Bank)

DISCLOSURE: The BAIPHIL Market Watch (BMW) is for informational purposes only. The content of the BMW is sourced

from third party websites and may be subject to change without notice. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by BAIPHIL or any of its directors, officers or

employees, and BAIPHIL is not under any obligation to update or keep current this information