BAIPHIL Market Watch – 02 Aug 2016 Page 1 of 11

BAIPHIL MARKET WATCH

02 Aug

2016

Legend Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE

PHILIPPINES

Financial Rates Current Previous

USD/PHP 46.9400 47.1100

30-D PDST-R1 1.4688% 1.4700%

91-D PDST-R1 1.7233% 1.7650%

180-D PDST-R1 2.2500% 2.8012%

1-Y PDST-R1 1.5287% 2.1867%

10-Y PDST-R1 3.1970% 3.2432%

30-D PDST-R2 1.4688% 1.4700%

91-D PDST-R2 1.7233% 1.7617%

180-D PDST-R2 1.4778% 2.2724%

1-Y PDST-R2 1.5659% 1.5766%

10-Y PDST-R2 3.2876% 3.3395%

Stock Index Current Previous

PSEi 8,069.81 7,963.11

Market Cap (Php Trillion) 13.260 13.147

Total Value (Php Billion) 7.315 11.928

PSEi Performers Closing % Change

Top Gainers

BHI Holdings Inc 1,448.00 15.84%

F&J Prince Holdings 7.20 14.29%

Crown Equities 0.18 11.11%

Top Losers Chemical Industries of the Phils 140.10 -7.83%

Grand Plaza Hotel Corp 20.30 -7.73%

The Philodrill Corp 0.01 -7.69%

ASIA-PACIFIC

Stock Index Current Previous

NIKKEI 16,635.77 16,569.27

HANG SENG 22,169.58 21,891.37

SHANGHAI 2,942.24 2,979.38

STRAITS 2,893.53 2,868.69

SET 1,524.37 1,524.07

JAKARTA 5,337.30 5,215.99

Currency Exchange Current Previous

USD/JPY 102.0642 102.0500

USD/HKD 7.7612 7.7571

USD/CNY 6.6442 6.6371

USD/SGD 1.3418 1.3393

USD/THB 34.7642 34.7600

USD/IDR 13,095.00 13,097.00

REST OF THE WORLD

Stock Index Current Previous

FTSEuro First 300 1,322.41 1,347.43

FTSE 100 6,693.95 6,724.43

DAX 10,330.52 10,337.50

CAC 40 4,409.7 4,439.81

DOW JONES 18,404.51 18,432.24

S&P 500 2,170.84 2,173.60

NASDAQ 5,184.20 5,162.13

Various Current Previous

EUR/USD 1.1163 1.1181

GBP/USD 1.3183 1.3230

Gold Spot (USD/oz) 1,352.10 1,349.70

Brent Crude(USD/bbl) 42.22 42.46

3-M US Treasury Yield 0.24% 0.24%

10-Y US Treasury Yield 1.50% 1.46%

30-Y US Treasury Yield 2.23% 2.18%

PHILIPPINES

The local equities market rallied as foreign funds continue to come especially after the release of the US’s disappointing GDP growth. The

PSEi gained 106.70 points, or +1.34%, to close at 8,069.81. All of the sectors ended in green, led by the holding firms (+1.48%) and

property (+1.34%). Market breadth was positive with 120 advances outnumbering 82 declines, while 41 issues remained unchanged. Total value turnover reached Php7.32 billion. Foreigners were net buyers at Php735.1 million.

The Peso traded sideways with a slight upward bias vis-a-vis the US Dollar. Tempering US growth, as reflected in the disappointing 2Q GDP print of 1.2% (vs. expectations of 2.6%), year-on-year, caused the greenback to slump relative to the Peso, which likewise benefited from renewed foreign buying interest in local financial markets. The USD/PHP pair fell 17.0 centavos, or -0.36%, to close today's

trading at the 46.94 level. On the local fixed income space, yields of government securities fell, tracking the US Treasuries, as the disappointing GDP data

led to speculations of lower-for-longer level of interest rates. Yields fell by an average of 9.23 basis points led by the short-end, which dropped 21.1 bps. Likewise, the belly and the long-end declined by 2.4 bps and 4.7 bps, respectively.

The Philippines is emerging as a clear winner among members of the Association of Southeast Asian Nations (ASEAN) in attracting foreign direct investments (FDIs) as China becomes a less attractive destination for inflows, Credit Suisse said in a

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report. The investment bank said FDI inflow in the Philippines is now at a multi-decade high of $8 billion as of end-April, up from $6 billion in 2015 and $1 billion just five years ago. This helped the Philippines surpass the FDI inflows in Thailand. It added Japan and the US are

key drivers behind the increase, while inflows are concentrated in the manufacturing and the finance industry. Credit Suisse said Vietnam also continued to be an FDI magnet, attracting manufacturing investments especially from South Korea on the back of generous tax incentives and still relatively cheap labor. Likewise, it added Malaysia’s FDI inflows remained surprisingly resilient despite political

uncertainty in recent years. However, Malaysia is likely to sustain the robust inward FDI due to the lack of reform momentum. Credit Suisse noted weakening trend in Indonesia, Singapore and Thailand. “The previous FDI favorites, including Indonesia, Singapore and Thailand, saw some weakening trends,” it said. FDI inflows in Thailand is now down to $3 billion as of end-April after peaking at $15 billion in 2014,

while inflows to Indonesia reached $30 billion on a rolling basis. On the other hand, FDI inflows in Singapore reached $60 billion in the first quarter of the year from $68 billion in 2013.Many observers have projected a strong increase in FDI inflows in ASEAN as China becomes a less attractive FDI destination due to political tensions with Japan, rising wages and moderating domestic demand. However, Credit Suisse

said ASEAN saw a decline in FDI inflows, reflecting a broader macro trends including the still weak outlook for exports and investments globally. The Bangko Sentral ng Pilipinas sees FDI inflows rising to $6.3 billion this year amid the country’s strong macroeconomic fundamentals and the implementation of much needed infrastructure projects under the public private partnership scheme.

Inflation likely stayed flat last month as rising utility and oil prices were offset by lower food and tuition rates, an official from the Department of Finance said yesterday. “The general price level for July may reflect the year-on-year change last month at 1.9 percent,” Finance Undersecretary Gil Beltran said in an economic bulletin. This was similar to the figure in June and would be slower than the two to

four-percent government target for the year. As of the first half, inflation hit 1.3 percent. According to Beltran, rising electricity and fuel prices may have pushed inflation upwards last month, noting that low “base effects” from last year are already being exhausted. In particular, he cited the 29-centavo increase in generation charge of Manila Electric Co. after two consecutive months of decline.

Meanwhile, local pump prices have recorded a net increase of P0.94 per liter for gasoline and P4.28 per liter for diesel as of July 26, according to the Department of Energy. “The slowing down in food price and education prices, however , may serve as counter-balance,” Beltran said. Beltran expects the food price sub-index, which accounts for 39 percent of CPI, to have risen 2.5 percent, slower than 2.9

percent in June. After the enrollment period, on the other hand, the education sub-index likely posted two-percent inflation, barely moving from 1.9 percent. Beltran said a slower inflation would help sustain the economy’s “rapid’ growth, which hit 6.9 percent in the first quarter. The target for the year is six to seven percent. He also said it would boost chances the central bank would still keep policy rates steady,

making credit still relatively cheap to finance growth. “In the foreseeable near -term, the general price level is expected to be stable, giving policy makers ample room for maneuver against external shocks,” Beltran said.

The long-delayed personal equity and retirement account (PERA) may soon be in place with authorities awaiting to conduct test runs with industry players before finally offering the new savings program to the public, a senior central bank official said. The implementation of the PERA Law got a fresh push last week after the Bureau of Internal Revenue (BIR) released rules which details the

reporting requirements covering the new investment tool. The PERA Law or Republic Act 9505 was passed in 2008, which aims to encourage Filipinos to save up for retirement by serving as a new investment product. However, its implementation has been stalled pending the BIR’s reporting guidelines. A person can contribute a maximum of P100,000 yearly under the platform, but the amount may be

as much as P200,000 for overseas Filipino workers (OFWs). A qualified contributor may place money in five PERA accounts at once across five recognized investment products. In turn, the individual can enjoy a 5% tax credit that can be deducted in his/her annual tax liabilities to encourage saving up for the future.The contributions will then be invested in other products such as trust funds, mutual funds,

insurance, pre-need, government bonds and listed equities for the money to grow, the proceeds of which may be claimed once a person reaches the age of 55 or has invested in the fund for at least five years. The money may be claimed by on a periodic or lump sum basis, and will be on top of pensions that will be paid by the Social Security System or the Government Service Insurance System. Asked about

additional preparations that need to be put in place to carry out the PERA, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. said that they are simply awaiting for the BIR to register fund administrators before they can proceed with offering the new investment scheme.“The system is in place. We just need to do dry runs to test. As soon as BIR registers two approved adminis trators so

far, we can go live,” Mr. Espenilla said in a text message. Under BIR Revenue Memorandum Order 42-2016, Commissioner Caesar R. Dulay detailed the reporting standards before the agency’s PERA processing office, which registers applications from fund administrators as approved by the BSP, the Insurance Commission, or the Securities and Exchange Commission.“Many employers are expected to take

this opportunity to become an agent in furthering the objective of the State to promote capital market development and savings mobilization. Employees, including self-employed individuals and overseas Filipinos, can start planning their future by establishing their own PERA,” the BIR order read. The BSP has approved two administrators so far, Mr. Espenilla said, who w ill have to register with the BIR

before they can offer the investment product targeting retirees. Administrators are given the task of reporting contributions, computing investment values, and collecting taxes covered by the fund, according to the law.In 2014, the Monetary Board came up with rules for accrediting service providers under the PERA to cover banks and trust companies which they regulate. Mr. Espenilla added that it will have

to engage market participants -- or the PERA administrators, investment managers and fund custodians -- in a test run before offering the product to the public. “The dry run is a PERA systems test involving BSP and market participants to make sure everything works before going live,” the central bank official said last week.

Credit granted to assist government-owned and -controlled corporations (GOCCs) hit a one-year high in June, but was still down

from last year’s level, data from the Bureau of the Treasury showed. Subsidies amounted to P16.05 billion, down 54.07 percent year-

on-year, but was the highest since the P34.95 billion recorded in the same period last year. The national government gives out subsidies to GOCCs and state-run financial institutions to support their operations. They, in turn, remit more than half of their annual earnings as dividends. Subsidies form part of state expenditures, while dividends are recorded under revenues. In June, dividends reached P188

million, after a P22.23-billion remittance in April. Broken down, the National Housing Authority (NHA) cornered the bulk of subsidies with P10.63 billion, data showed. This was the first assistance given to NHA this year. It was followed by National Irrigation Administration and Social Housing Finance Corp., which received P1.59 billion and P1.43 billion, respectively. Below the billion-peso line were the National

Home Mortgage Finance Corp. with P750 million, Philippine National Railways (P478 million), National Power Corp. (P324 million), Subic Bay Metropolitan Authority (P145 million), Philippine Children’s Medical Center (P140 million) and National Kidney and Transplant Institute (P128 million). Other GOCCs that received funding were Philippine Health Corp. (P67 million), Center for International Trade Expositions

and Missions (P64 million), Light Rail Transit Authority (P61 million), Cultural Center of the Philippines (P58 million), Lung Center of the Philippines (P51 million) and National Dairy Authority (P43 million). Completing the list were Credit Information Corp. (P21 million), Development Academy of the Philippines (P18 million), Philippine Institute for Development Studies (P18 million), Aurora Pacific Economic

Zone and Freeport Authority (P10 million), Philippine Fisheries Development Authority (P9 million), Zamboanga City Special Ec onomic Zone Authority (P8 million) and Southern Philippines Development Authority (P4 million). Bigger subsidies were recorded in June as the previous administration left the Duterte government with a budget deficit worth P120.3 billion as of the first semester, data showed. A deficit

indicates more revenues were spent than earned. The first half result was equivalent to 42 percent of the original 2016 defic it cap of P283.7 billion or two percent of economic output.

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The Department of Agriculture (DA) is conducting a probe on the alleged excessive collection of fees among small banana

exporters in Mindanao, reaching approximately P56 million annually. Agriculture Secretary Emmanuel Piñol said the Mindanao Banana Farmers and Exporters Association Inc. (MBFEA) in Davao has complained of payments without official receipts from the DA-attached agency Bureau of Plant Industry (BPI). “I am questioning the propriety of the employees of a regulatory body of the government

from the very people that they are supposed to regulate,” he added. DA legal consultant Israelito Torreon said the department found out there are varying prices insofar as collecting certain fees among small banana exporters is concerned. “The legal basis is DA Administrative Order-01 series 2001 that allows government employees to charge overtime fees reaching as high as P750 to P2,500 per

month and these are not receipted,” Torreon said. There are 85,000 hectares of planted banana in Davao, 42,000 of which are under the Pilipino Banana Growers and Exporters Association (PBGEA), and 43,000 are under small growers. Meanwhile, 19,000 hectares have no clear status. “The banana industry is a multibillion industry in Davao. The 43,000 plus 19,000 hectares sources of bananas are open for

corruption because they can just charge based on the DA-AO,” Piñol said. “Unless you are a member of the PBGEA, these big groups know the administrative order so the collection will only be based upon the DA-AO but if you are not a member of PBGEA, you are collected of these amount which is very high,” Torreon said. In line with this, Piñol eyes the amendment of the administrative order as it

continues to pave way for more corruption. “How could you be objective in your evaluation of the quarantine standards of the products being exported if you are receiving money from companies that you are supposed to supervise?” Piñol said. “Government should pay for the overtime services of its employees and I will not allow those kind of practice because it compromises the independence,” he added.

While MBFEA is aware of the government fees being charged, the group said they are amenable to just pay P500 on a monthly bas is. They want that all payments for the deliveries should be treated like a trust fund for the development of the banana industry,” Torreon said.

The Philippines remained the fastest growing motorcycle market in Southeast Asia in the first half of the year while ranking third in vehicle sales. Latest report from the Asean Automotive Federation showed growth in sales of motorcycles and scooters in the Philippines outpaced those of other countries in the region as it zoomed 42.4 percent in the first six months of the year to 544,788 units

from 382,568 units in the same period in 2015. Singapore registered a 12.7 percent jump in sales while take-up in Thailand stood flat. Motorcycle sales in Indonesia and Malaysia, meanwhile, registered year-on-year decline of 4.6 percent and 0.3 percent, respectively. Affordability and the mobility motorcycles offer are among the top factors cited by industry players as to why the Philippine motorcycle

industry remains on the growth track. Aside from strong motorcycle and scooter demand, vehicle sales in the country have also remained robust in the first six months of the year on the back of the country’s growing middle class and available financing options. Data from the Asean Automotive Federation revealed that Philippine vehicle sales surged with the third fastest pace in the region at 27.4 percent during

the first semester. Singapore posted the highest year-on-year growth at 63.7 percent followed Sales in Indonesia improved 1.2 percent, while those of Brunei and Malaysia dropped 19.1 percent and 14.5 percent, respectively. Overall, vehicles sold in the seven ASEAN-member states monitored by the regional automotive federation increased 3.2 percent in the January to June period to 1.53 million units

from 1.48 million units last year. Production-wise, however, the Philippines remains at the bottom in terms of volume despite recording year-on-year growth. Philippine motor vehicle production in the first half reached 55,078 units, up 20.6 percent from 45,662 units in the same period last year. Thailand is the region’s top vehicle manufacturer with 993,380 units produced in the first half.

Revenue Commissioner Caesar Dulay was recently asked by some business leaders to adopt a tax amnesty program to raise

more money for the anticipated high funding needs of the Duterte administration. In a tax amnesty, the liabilities of a taxpayer who

failed to pay the correct taxes or filed incorrect tax returns are condoned on condition he complies with certain requirements and pays a specific sum of money to the government. This measure is considered extraordinary because it goes against the motherhood principle that citizens are legally and morally obliged to support the government by paying the correct taxes. It is resorted to if the government is in dire

financial straits and needs to immediately raise funds to finance its projects or meet pressing financial ob ligations. The scheme also helps broaden the country’s tax base and enables the government to have a fresh start in the enforcement of its tax laws. It’s a two-way street though because the amnestied taxpayer is, for his part, expected to turn a new leaf and be more conscious in complying with his tax

obligations. Several tax amnesty programs have been adopted over the years to raise additional revenues from different tax levels, e.g., income tax, improperly taxed motor vehicles, real property tax and travel tax. The Marcos regime issued 18 presidential decrees on tax condonation. President Cory Aquino came out with four executive orders for the same purpose. In the case of Presidents Fidel Ramos,

Joseph Estrada, Gloria Macapagal-Arroyo and Benigno Aquino III, since they did not have legislative powers during their term of office, they went through the administrative route, i.e., the Bureau of Internal Revenue (BIR). The last time Congress took an active role on this matter was in 2007 when it enacted a Tax Amnesty Law that allowed individual and corporate taxpayers to extinguish their liabilities for

unpaid internal revenue taxes by paying an amount equivalent to five percent of their net worth and, in the case of corporations, P25,000 to P500,000 depending on their subscribed capital stock. This early, despite the fact that President Duterte has yet to submit the proposed 2017 national budget to Congress and the Department of Budget and Management stating that it has over P1.02 trillion available for higher

spending, some business leaders already want the BIR to include tax amnesty in its bucket list. The Insurance Commission (IC) has released guidelines on small claims in a move to hasten the resolution of such types of

cases. Through Insurance Memorandum Circular No. 2016-01, the regulator adopted and promulgated the rules of procedure for small claims, pursuant to the provisions of the Insurance Code and the Pre-Need Code of the Philippines, which will cover claims and complaints amounting to up to P200,000 presented before the Insurance Commission in any single claim, exclusive of interest, costs, and attorney’s

fees.Under the regulation, action on small claims will begin by either “filing with the Commission an accomplished and verified statement of claim, accompanied by a certification of non-forum shopping, and two photocopies of the actionable documents subject of the claim, written notice of claim to the respondent, written denial of the claim, as well as the affidavits of witnesses and other evidence to support the claim”

or “by filing a verified complaint with a certificate of non-forum shopping prepared by a lawyer” containing other attachments as outlined in the circular.“On the procedure for small insurance claims... in this proposal, a claimant just needs to submit a position paper in writing. Wala nang (No more) hearing sa amin (with us). Then the other side will also submit a position paper, and [we] will evaluate it. So the

concerned parties, particularly the victim, can expect immediate and quick resolution of the claim,” Insurance Commissioner Emmanuel F. Dooc told reporters in a media briefing last Friday.“The cost will also be less because you don’t have to seek for a hearing, be represented by a lawyer, but of course you can request for assistance from a lawyer to help prepare your position paper,” he added. The Insurance

commissioner noted that under the previous procedure, the Commission required the submission of documents, appearance and a hearing for claims up to P5 million. Now, under the new rules, for claims up to P200,000, Mr. Dooc said “we can assure the small claimants that their claims will be prioritized in a way because their claims will no longer undergo the formal process of hearing, just submission of

position paper.” “Complainant may join in a single statement of claim one or more separate small claims against a respondent provided that the total amount claimed, exclusive of interest and costs, does not exceed P200,000,” the memorandum read.The IC in its circu lar said a claim filed with a Motion to Sue as Indigent shall be referred to the Division Manager of the Claims Adjudication Division or the D istrict

Offices for immediate action. If the motion is granted, the case shall be assigned to the Hearing Officer designated to hear small claims cases and the filing fees shall be alien on any judgment rendered in the case favorably to the indigent litigant, unless the Commission

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otherwise provides.“If the motion is denied, the complainant shall be given five days within which to pay the docket fees, otherwise, the case shall be dismissed without prejudice.” -- Imee Charlee C. Delavin. After the Hearing Officer or Division Manager determines that the

case falls under this rule, the Commission may motu proprio, or of his own accord, order the dismissal of the case at any time based on the allegations of the Statement of Claim and evidence attached thereto for any of the grounds for the dismissal of a complaint.“ If no ground for dismissal is found, upon payment of the Filing Fee and Summons Fee, the Commission shall forthwith issue a Summons on the day of

receipt of the Statement of Claim, directing the respondent to submit a verified Response. The Commission shall also issue a Notice to both parties, directing them to appear before it on a specific date and time for hearing, with a warning that no unjustified postponement shall be allowed,” the circular stated. The IC added: “The Summons and Notice to be served on the respondent shall be accompanied by a

copy of the Statement of Claim and documents submitted by the complainant, and a copy of the Response to be accomplished by the respondent.”Regarding the response, “the respondent shall file with the Commission and serve on the complainant within a non-extendible period of ten days from receipt of summons.”Deputy Insurance Commissioner Dennis B. Funa said the objective of the memorandum

circular is to expedite the decision of cases. “If it will take a long time, it is to the detriment of the policyholders if they are made to wait for a number of years. So with this procedure, hopefully we’ll be able to settle it within a few months.”“If efforts at settlement fail , the hearing shall proceed in an informal and expeditious manner and shall be terminated within five hearing days. The Commission shall render its

decision within 30 days from the last scheduled hearing based on evidence presented,” the IC said, noting that “the decision shall be final and unappealable.”The new issuance from the Commission shall take effect on Sept. 1.

Monetary authorities have shuttered two more rural banks—one headquartered in Agusan del Norte and the other in Quezon—bringing to 14 the number of banks closed this year due to insolvency. The Monetary Board, the Bangko Sentral ng Pilipinas’ (BSP) highest policy-making body, on July 28 put the Rural Bank of Cabadbaran (Agusan) and the Rural Bank of Alabat (Quezon) under

receivership by the Philippine Deposit Insurance Corp. (PDIC), according to a bulletin posted by the insurance agency. The Rural Bank of Cabadbaran, whose head office was located in Cabadbaran City, the capital of Agusan del Norte, had other offices in Butuan, Cagayan de Oro and Gingoog cities. The Rural Bank of Alabat Inc., which had its head office in Alabat, Quezon, had two branches in Atimonan and

Mauban towns in the province. The PDIC took over the two banks’ affairs, assets, branches and records on July 29. So far this year, the BSP has placed 11 other rural banks under PDIC receivership: Rural Bank of Villaviciosa (Abra) Inc., Lapu-Lapu Rural Bank Inc., Rural Bank of Bayawan (Negros Oriental) Inc., Rural Bank of Basay (Negros Oriental) Inc., Rural Bank of Panay Inc., Koronadal Rural Bank Inc.,

Rural Bank of Malinao (Aklan) Inc., Surigao City Evergreen Rural Bank Inc., Rural Bank of Amadeo (Cavite) Inc., New Rural Bank of Binalbagan, and Rural Bank of Siaton (Siaton, Negros Oriental) Inc. Included in the list was the thrift bank GSIS Family Bank, which the Monetary Board closed in May. But GSIS Family Bank may get a new lease in life as “less than 10” firms have expressed interest in

rehabilitating the lender previously controlled by state-run pension fund Government Service Insurance System, according to the PDIC. The PDIC said a new law (Republic Act No. 10846) that amended the PDIC charter and took effect in June made it quicker for depositors to get their insured deposits. Under the amended law, payment of deposit insurance would also be based on depositors’ records found to

be authentic by PDIC and not just solely on the basis of records maintained by the closed bank.” The country’s largest lender BDO Unibank grew its first semester net profit by 13 percent year-on-year to P13.2 billion, buoyed by

improvement in core businesses and one-time gain from the consolidation of insurance business. Core lending, deposit-taking and fee-based businesses had driven the bank’s performance during the period, BDO disclosed to the Philippine Stock Exchange on Monday. BDO expanded its loan book by 21 percent year-on-year to end the semester at P1.4 trillion, outpacing the industry’s loan growth. On the

funding side, total deposits rose by 17 percent year-on-year to P1.8 trillion. Profits of Aboitiz-led Union Bank of the Philippines surged 30 percent in the first half amid the strong growth in the bank’s

interest and fee-based earnings. UnionBank president and COO Edwin Bautista said the bank’s net income amounted to P3.9 billion from January to June, P900 million higher than the previous year’s P3 billion. “This significant increase shows that our income is definitely sustainable,” he said. Bautista said the bank’s net interest income jumped 30 percent to P7.3 billion as a result of the year -on-year

expansion in loan portfolio, while its fees-based income grew 11 percent to P2 billion due to an expanded customer base in both loans and deposits. “Loans, investment, total deposits and digital channel growth – channels for our core income – were the key drivers. With this, we have been able to demonstrate the scalability of our infrastructure as well as our drive to further improve our products and services that

take on a more customer-centric approach,” Bautista said. The bank’s lending activity rose 12 percent to P202 billion, while total deposits grew eight percent to P336 billion. Bautista said other non-interest income was down as a result of lower trading gains. According to him, total expenses of UnionBank climbed six percent to P5.3 billion as it continued to focus on business and branch expansion. Un ionBank’s

assets stood at P439 billion as of end-June. The Aboitiz-owned bank earlier announced it was spending P1 billion for capital expenditures this year. The bulk of the amount would go to the bank’s digitalization efforts, while the balance would be used to expand its current network of 300 branches.

A French manufacturer of personal protective equipment is considering to set up a production facility in the Philippines amid the

country’s plan to increase spending in the critical infrastructure industry. Delta Plus saw the advantage of building a manufacturing

plant in the Philippines, which it said would also generate jobs for capable Filipino workers. “The Philippines is becoming an emerging tiger in Southeast Asia and as one of the fastest growing economies worldwide. There are a lot of opportunities here, especially in relation to the [Association of Southeast Asian Nation] economic integration,” said Thibauld de Chantemele, chair of Delta Plus Philippines and

concurrent export director for the parent firm. He said the planned hub would also be used as a starting point for an expansion across the region. Delta Plus has already set up a subsidiary in the Philippines in order to tap the country’s booming construction, manufacturing and shipping industries, among other sectors that require protective gear. The company will make available here its lineup of head-to-toe

protective gear, ranging from eyewear, safety helmets, hearing protection, shoes to gloves. “Philippine industries such as sh ipping, construction, manufacturing and others are growing at a fast pace, which makes it a must for Delta Plus to be part of this growth and be able to serve them with their safety need,” de Chantemele said. The construction industry here is forecast to grow $47 billion by 2020, up

by almost 10 percent from 2015, according to London-based Timetric’s Construction Intelligence Center (CIC). The global supply chain of Delta Plus includes Wujiang in China, Calcutta in India, Apt in France, Sosnowiec in Poland, and Manchester in the United Kingdom.

Leading local logistics firm LBC Express Holdings Inc. expects to hit P1 billion in net profit before tax this year on the back of brisk business reflective of a fast-growing economy. In an interview after the company’s stockholders meeting yesterday, LBC Express Holdings president and chief operating officer Mike Camahort said 2016 was “looking just as good or even better than last year.” Asked

whether the company would be able to hit P1 billion in net profit as expected by some investors, Camahort said: “We’re working hard to breach that P1 billion.” In 2015, LBC Holdings’ net income before tax rose by 243 percent to P686.9 million. In the first quarter of 2016, net income before tax stood at P310 million, rising by 36 percent year-on-year. The LBC group derives 80 percent of its business from cargo

delivery and 20 percent from its money remittance business. LBC Express Holdings chief finance officer Enrique Rey Jr. said that in two and a half weeks, the group would release its second quarter earnings. “It’s better than first quarter results,” Rey said. “I think the

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shareholders and future investors will be very impressed when they see the mid-year numbers.” The group is seen “trending” toward the P1-billion net profit before tax, he added. In January, the LBC group faced a P1.8-billion asset attachment and garnishment order initiated

by the state-controlled Philippine Deposit Insurance Corp. (PDIC) as part of a collection claim on behalf of a defunct LBC banking affiliate. By end-February, LBC obtained a court ruling lifting the order, which freed up assets and liquidity and thereby eased the administrative and operational challenges from the legal case. “We’re business as usual and much more. The second quarter should prove

to be very favorable,” Camahort said, adding that LBC’s lawyers were now addressing the legal case. The company is looking at the second semester with greater optimism. Historically, the second semester of the year tends to be 10 to 15 percent better than LBC’s output in the first semester, primarily because of robust activities during the runup to the Christmas season. LBC has set aside P200 million for

expansion activities for this year through next year as the group aims to be an integrated logistics solutions firm. It has invested in a cold storage chain and is increasing its warehousing capabilities. It currently has about 100,000 square meters of warehousing floor space, which it intends to double or triple in the next few years. With close to 8,000 employees and 1,300 offices nationwide, LBC is seen to have

the most extensive retail footprint servicing capability in the country. Megawide Construction Corp. is further diversifying into an infrastructure conglomerate after “hitting its prime” as a

construction and engineering company, officials said over the weekend. The diversification would allow the company to get into more industries such as power and related industries and not just construction. The company unveiled its five-year diversification plan with four core businesses under the new structure. These are construction, airport operation, transport and power generation with a focus on

renewable energy. In power, the company announced the 100 percent acquisition of Citicore Power, a renewable energy company under the Citicore brand, from affiliate Citicore Holdings Inc. Citicore Power is committed to produce 1000 Megawatts (MW) of clean energy through the widest range of RE sources such as solar, biomass, wind, and hydropower. It currently operates three solar power projects in

the provinces of Bataan, Negros Occidental and Cebu, which together account for more than one hundred megawatts of power going into the national grid. Megawide chief financial officer Oliver Tan said the diversification is part of the company’s vision when it went public in 2011. “The IPO was set up with the vision to transition from pure construction to a well diversified infrastructure and engineering

conglomerate. Now we have achieved that, we want to pursue stronger, wider-ranging recurring sources of revenue,” Tan said. Last week, Megawide announced the buy-back of 410,842,702 shares from Sybase Equity Investment Corp. with an equivalent of 17 percent total issued and outstanding shares as of June 30, 2016. Sybase Equity Investments, which is owned by the family of retail tycoon H enry Sy,

acquired the shares during Megawide’s Initial Public Offering in 2011. “Megawide is already at its prime as a construction company. More than ever, it is capable of providing the most basic and one of the important components of these businesses, and that is EPC,” said Megawide chief executive officer Michael Cosiquien. “This is a natural progression. We are taking the company further,” he added. Sybase

board representative Elizabeth Anne Uychaco said the diversification gives Megawide the flexibility to go into power generation and related industries. In 2015, construction contributed 66 percent of total income, with the airport business bringing in 34 percent. Megawide has been in the airport business after it acquired the concession to operate Mactan Cebu International Airport (MCIA) in 2014. The company

has also diversified into transport and energy. In transport, the company’s Southwest Integrated Transport Terminal (SWITS) is positioned as its entry into the progressive property sector. SWITS is expected to bring in a mix of transportation infrastructure supported by mixed-use retail and commercial recurring revenues. The 35-year build-transfer-operate contract was signed in 2015. “We remain bullish and

hopeful in this current track and look forward to contributing to a stronger economy for the country,” said Cosiquien. The country’s largest telco has tapped the NTT Group of Japan to strengthen its global network infrastructure to provide

customers faster internet speed. PLDT Inc. said it sought the services of NTT Communications Corp. (NTT Com), the information and communications technology solutions and international communications business within the NTT Group, to beef up its global network infrastructure by utilizing the 100 gigabit-per-second (100Gbps) connectivity powered by NTT Com’s Tier 1 Global IP (Internet Protocol)

backbone. The ultra-high capacity is expected to help enable PLDT deliver improved internet speed for both individual and enterprise customers. The development comes as there is rising demand for international bandwidth in the Philippines as well as its peers in Asia, with the growth estimated to be at 300 percent over the last four years. “Strengthening our connectivity with NTT Com’s indus try-leading

Tier 1 IP backbone provides a solid foundation for PLDT and our customers to adopt new business models that will enable all to transform digitally and to connect the Philippines with the global market seamlessly,” PLDT chairman and CEO Manuel V. Pangilinan said. PLDT and NTT Group’s partnership dates back to 2000. As of the first semester, mobile phone operator NTT DOCOMO and NTT Com hold

approximately 20 percent of PLDT’s outstanding common stock. For his part, NTT Com Asia Ltd. president and CEO Hideaki Ozaki said it is also in the interest of the firm to take the partnership with PLDT to the next level, by deploying the ultra-high-capacity 100Gbps link for the latter to be able to carry large volumes of global IP traffic. “In this increasingly connected world, bandwidth has become a critical

accelerator for business and individuals, which is the reason why we continually invest in upgrading our network technology and infrastructure. We believe the enhanced connectivity for PLDT will largely increase its capacity in handling the anticipated massive explosion of data driven by the rise of disruptive technologies such as Cloud, Big Data, IoT (Internet of Things) and video s treaming,” he

said. The 100Gbps ultra-bandwidth connectivity will allow PLDT to handle traffic bursts and scale-up faster to meet the needs of subscribers. “Higher speeds translate to faster data transmission and thus, improve efficiencies for PLDT and its customers,” Pangilinan said. “Coupled with PLDT’s initiatives to expand and upgrade its access and transport networks, this network infrastructure enhancement

will definitely help PLDT improve internet services in the Philippines,” he said. NTT Com has been a leader in the global telecoms space with significant investments made in network infrastructure and the delivery of services. The NTT Com Global IP Network Service provides high-speed, high-capacity IP connectivity covering Asia, North America, Europe and Oceania. PLDT is investing heavily on improving its

data coverage and capacity as well as in other digital initiatives to cater to the subscribers’ needs. Food and beverage firm RFM Corp. is revising upwards its growth targets in the next five years amid increased confidence in the

current administration’s agenda. Joey Concepcion, RFM president and chief executive officer, told The STAR the company is scaling up its plans until 2020, a move that is also seen impacting the trajectory of its profitability. “We’re refining our program. We have a five-year plan but we’re revising it because there are a lot of opportunities. We’re focusing more on the provinces now with the expansion of

President Duterte in infrastructure. More money will be going that way. So we’re looking at the potential of growth in the provinces,” Concepcion said. Although the company’s revised growth plan will be finalized by year-end, Concepcion said RFM is looking at a robust 18 percent to 20 percent profit growth this year behind a 10 percent revenue growth. “If our growth this year is phenomenal, then that means

we can push it higher,” he said. According to Concepcion, RFM has set aside a modest P200 million capital expenditures for this year. He said the company has already done the heavy spending in the past three years, investing about P3.5 billion for pasta brand and factory expansion.

Leisure & Resorts World Corp. (LRWC) will continue expanding its gaming business despite a pronouncement from Malacañang

against online gambling operations. “We are pursuing with the plans; we don’t see any reason why we should not as long as we follow

government guidelines,” LRWC Chairman and President Reynaldo P. Bantug told reporters after an annual stockholders’ meeting in Pasay City on Friday. In the first Cabinet meeting, President Rodrigo R. Duterte directed Philippine Amusement and Gaming Corporation

BAIPHIL Market Watch – 02 Aug 2016 Page 6 of 11

(PAGCOR) Chairman and Chief Executive Officer Andrea D. Domingo to revoke the licenses of online gambling operators. “We’re happy to say that [the] company is not affected by the statement... First, our business model is not really online because, as you know, we are a

bingo parlor and we don’t use the Internet for that except for a small portion of our business,” Mr. Bantug said. LRWC offers electronic games launched by PhilWeb Corp. under a license from PAGCOR although even this operation cannot be considered as online gambling, its Investor Relations Head Alfredo B. Reyes noted.“There is really no online gaming in the Philippines because even the Philweb, you

have to come in the site, sit down in the terminal... you cannot access it from the house,” Mr. Reyes said. The misconceptions about the gaming industry are already being clarified with Mr. Duterte through PAGCOR, Mr. Bantug said.“We follow government regulations, which are actually very strict. You have to be a certain distance from churches, certain distance from schools. You cannot allow anybody who is

minor, below 21, to come in. All of your games being played has to have PAGCOR approval. So, all of these [are] being monitored very, very strictly.”Asked whether Mr. Duterte’s hard line stance against online gambling has impacted operations, Mr. Bantug said: “In our business, it’s not really affecting us too much at all because even the e-Games, it’s business as usual. There is really no change in how we

are operating the games.”Accordingly, LRWC will continue implementing its expansion plan for the year. The listed company targets to open 30 more boutique bingo sites, in addition to the 137 it currently operates across the Philippines.The company has reached various stages of negotiations with property owners in the provinces, particularly in Luzon and the Visayas, for the planned expansion, Mr. Reyes

said.LRWC is focused on building standalone sites rather than opening outlets in malls. This will allow for longer operating hours and save the company from the premium usually charged by the mall operator, Mr. Reyes said.“But our expansion is really centered more on acquisition of existing sites and improving our own internal capabilities to be of better service to our patrons, so that wil l encourage them to

patronize our sites more often,” Mr. Bantug said. Strict regulatory requirements, particularly on the location of gaming operation, make it “very difficult” for the company to secure new sites for expansion, Mr. Bantug added. Aside from operating bingo parlors, LRWC holds a 69.68% interest in First Cagayan Leisure & Resort Corp. (FLRC), which the Cagayan Economic Zone Authority (CEZA) has allowed to

develop, operate and conduct Internet and gaming enterprises and facilities in the Cagayan Economic Zone Free Port.“CEZA has online jurisdiction, which is different from the local market that PAGCOR is the one overseeing, so apparently the president’s focus was on the local market,” Mr. Bantug said, noting the operation in Cayagan caters to foreign players largely from China. Asked if the country’s legal

victory in an international arbitration over the territorial dispute off the West Philippine Sea has impacted the business, Mr. Bantug said: “Nothing. We’re in good relations. [Chinese players] enjoy coming here.”

Dusit International wants to have 15 properties with the Thai hotel brand in the Philippines, mostly outside the National Capital Region, within the next three years. “The Philippines is one of the strongest up-and-coming economies in Asia and here is a fact because when we talk to investors, the Philippines has a very good vibes, very positive prospects,” Dusit International Chief Operating

Officer Book Kwee Lim told reporters in Makati City on Friday. Mr. Lim had flown in the Philippines to sign an agreement for the management of a hotel and serviced apartment within the Waves Beach Club and Residences in San Juan, La Union under the “dusi tD2” brand. The development, scheduled to open by 2019, forms part of the group’s expansion plans outside Metro Manila, noted Evelyn R.

Singson, vice-chairman and president of Philippine Hoteliers, Inc., which owns Dusit Thani Makati.“At Dusit, we really feel bullish and we have been bullish about this country, so we started looking outside [Metro Manila]. There are certain areas in this country, where you can have the first mover advantage,” Ms. Singson said.Dusit International intends to manage 15 hotels in the Philippines -- a number that Ms.

Singson considers “ideal” and achievable within the next three years. Aside from the Dusit Thani Makati, the group has secured management contracts for an island resort and business hotel in Davao, a business hotel in Cebu and an integrated hospitality school and hotel in Taguig City. Without disclosing details, Ms. Singson noted that Dusit International is negotiating another contract in Cebu. The

group is talking to property developers in Coron in Palawan and Iloilo. “We’re looking at Vigan also. They’re building a big convention center in Vigan and they have a hotel that’s going up there, so we already expressed our interest to manage that hotel,” Ms. Singson said. Asked about plans to acquire properties rather than secure management contracts, Ms. Singson replied: “Well, we are flexible. Some

owners want to continue owning, some want to go on joint venture, others want to just sell their property or we can lease it.”“We have some other prospects which is lease-to-own but we cannot also divulge it now because it is not a signed contract yet, but we’re discussing. We’re discussing with others,” Ms. Singson added, noting such a setup may apply for a project being eyed in Vigan City. Dusit Interna tional

currently has 43 projects across the globe, including six in the Philippines, in the pipeline, Mr. Lim noted. “Outside of Thailand, outside of China, we are also big on the Gulf countries. So, we’re opening one hotel in Dubai in probably late September. Doha also and we have another property opening in Vietnam [that] we hope to open before end of this year,” Mr. Lim said.The Philippines accounts for most

projects included in the pipeline, next to China which secured Dusit International 20 contracts. Yet, the group will continue scouting for expansion opportunities in the country, Mr. Lim said. Dusit International is backing its expansion plan with the development of the Dusit Management Hospitality College as part of the dusitD2 scheduled to open in Taguig City next year.“Because you know once the school

starts producing graduates, we’ll have the opportunity to really support and supply manpower. We need employment for these people. We could be able to use them,” Ms. Singson said. The school will occupy the first 10 floors of the 26-storey building. The next seven floors will house the hotel rooms and the remaining eight will offer serviced apartments. “This is the first in the world, where you have an integrated

school and hotel so that there will be practical, actual training of the students. The other schools, they tie up with hotels and send their students there,” Ms. Singson said. Dusit International plans to initially open the school for executive training programs and accept students for the four-year degree programs once the country’s expanded basic education curriculum called K to 12 starts producing graduates.“It’s

going to be limited because this is very intensive. So, we probably will target only 1,500 students, but we will also have special courses because we are partnering with international institutes who specialize in different kinds of cooking,” Ms. Singson said.

ASIA-PACIFIC

Japan's Nikkei share average erased earlier losses and edged up on Monday as a surge in the yen slowed. The Nikkei gained 0.4

percent to 16,635.77 points, after falling to as low as 16,319.15. Financials lead the way, with the banking subindex climbing 3.3 percent.

Shares of financial companies have been buoyant after the Bank of Japan refrained on Friday from charging more interest to institutions for parking their excess reserves at the central bank. As part of its monetary easing the BOJ did opt to increase the amount of exchange-

BAIPHIL Market Watch – 02 Aug 2016 Page 7 of 11

traded funds (ETFs), which has helped underpin the broader equity market. The JPX-Nikkei Index 400 nudged up 0.04 percent to 11,885.15 and the broader Topix dipped 0.1 percent to 1,321.83.

China stocks slumped more than 1 percent on Monday morning as a crackdown by regulators on speculation led investors to dump

small caps ahead of a fresh wave of initial public offerings (IPOs). But Hong Kong shares rose sharply, as Asian shares .MIAPJ0000PUS

hit a one-year high after disappointing United States economic growth data reduced expectations of imminent U.S. rate hikes. China's blue-chip CSI300 index .CSI300 fell 1.1 percent, to 3,167.65 points by lunch break, while the Shanghai Composite Index .SSEC lost 1.3 percent, to 2,942.24 points. Small-caps were among the worst casualties, with Shenzhen's start-up board ChiNext .CHINEXTC tumbling more than

2 percent. "We have seen an escalation in regulatory oversight," said Wu Kan, head of equity trading at investment firm Shanshan Finance. "It's good for the market in the long term, but it hurts sentiment in the short term."

Most Southeast Asian stock markets rose on Monday tracking Asian peers, as poor U.S. economic growth data tempered expectations about a possible interest rate hike by the Fed in the next few months. U.S. gross domestic product rose 1.2 percent in the April-June period, less than half the 2.6 percent growth economists had expected. New York Fed President William Dudley said the Fed should be

cautious in raising rates due to lingering risks to the U.S.economy. The likelihood of the U.S. not raising rates any time soon puts Asia in a better light as growth rates in the region are higher than expected, said Grace Aller, an analyst with Manila-based AP Securities. Asian shares hit a one-year peak, with MSCI's broadest index of Asia-Pacific shares outside Japan up 1.1 percent. Indonesian shares surged 2.3

pct to their highest in fourteen months, driven by financial and telecom stocks. "People are buying heavily into the blue chips that posted big losses last Friday," a trader said. Indonesia's annual inflation rate in July eased slightly from the previous month, the country's statistics bureau said on Monday. Indonesia's July consumer price index rose 3.21 pct year on year. Thai stocks edged higher to their highest since

May 2015 led by energy and consumer stock such as CP All PCL, the country's largest convenience store chain. Thailand's annual headline consumer prices rose for a fourth straight month in July, driven by higher prices of food and cigarettes, the Commerce Ministry said on Monday. Bucking the trend, Vietnam fell as July factory growth dipped to 4-month low as orders slowed.

Oil prices started August trading with fresh falls on Monday after several bearish reports, including rising output from OPEC, a rise in

U.S. drilling and weak economic data from Asia. Brent crude futures were trading at $43.46 per barrel at 0126 GMT (9:26 p.m. ET on

Sunday), down 7 cents from their last close in July, when they already lost 12 percent over the month. U.S. West Texas intermediate futures were trading at 41.58 per barrel, down 2 cents from July's last close. WTI shed 13 percent of value in July. Overproduction of crude and a wave of refined products were the main factors weighing on oil. "Last week's crude build in the U.S. and the return of production in

both Canada and Nigeria was a rude awakening that rebalancing (of oil markets) is probably further away than the market thought," Singapore Exchange (SGX) said on Monday. "Additionally, gasoline – which the majority of respondents to the SGX survey at the end of last year predicted would drive the oil complex this year – is now awash with stocks... On the paper side, some of the long positions

amassed since the start of the year took profit and the net shorts are building." Japanese manufacturing activity shrank in July at a slower pace than the previous month but new export orders contracted the

fastest in more than 3-1/2 years, a private survey showed on Monday, in an indication that recent yen gains are hurting exporters. The IHS Markit/Nikkei Japan Final Manufacturing Purchasing Managers Index (PMI) rose to 49.3 in July, versus a preliminary 49.0 and a final reading of 48.1 in June. But the headline index remained below the 50 threshold that separates contraction from expansion for the fifth

month. The sub-index for new export orders was 44.5. That compares with a preliminary reading of 44.0, but showed overseas demand fell at the fastest pace since December 2012. Recent gains in the yen have raised concern among policymakers and business leaders, because this tends to weigh on exporters' earnings and make Japanese products less competitive overseas.

Activity in China's manufacturing sector unexpectedly shrank in July, an official survey showed on Monday, with small and

medium-sized firms leading the fall and reinforcing fears that the economy may once again be losing momentum. The official

Purchasing Managers' Index (PMI) eased to 49.9 in July, compared with the previous month's reading of 50.0 and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts polled by Reuters predicted a reading of 50.0. After expanding for three consecutive months from March to May, growth in China's factory sector stalled in June, though economic growth slightly beat

expectations in the second quarter after near-record credit expansion. Analysts say the economy has mostly steadied, but activity is increasing reliant on growing government spending and debt and many China watchers expected renewed weakness later this year. Industrial profits rose at the fastest pace in three months in June, but gains were concentrated in just a few industries inc luding electronics,

steel and oil processing. Factory output fell to 52.1 in July from 52.5 in June, and total new orders hovered just inside expansionary territory at 50.4, slightly down from June's 50.5, the PMI showed. New export orders contracted as overseas demand remains weak and the impact of Britain's vote to leave the European Union hurt sentiment, the National Bureau of Statistics said. Manufacturers continued to cut jobs,

with the employment sub-index falling to 48.2, compared to 47.9 in June. Job losses could be rising as the government has pledged broad capacity cuts across a range of industries. Chinese officials admitted last week that they have cut less than a third of the excess steel capacity they had targeted for 2016, but will step up efforts in the second half of the year. A report on Wednesday by the National Academy

of Development and Strategy at Renmin University in Beijing found 51.43 percent of listed steel firms surveyed could be classified as "zombie firms", non-viable enterprises that are still operating. A sub-index for smaller firms fell, while performance at larger companies improved, a sign that the government's dependence on big state firms for growth this year has not changed. A similar business survey

showed activity in China's services sector expanded at a faster pace, with the official reading at 53.9 in July from 53.7 in June. A measure of the construction industry stood at 61.1, down from 62.0 in June but still pointing to solid expansion as the government goes on an infrastructure spending spree. Financial services rose but the property sector fell, as the real estate market began to cool following strong

activity earlier in the year. The services employment sub-index fell again in July, indicating companies were cutting staff. Beijing has been counting on a strong services sector to pick up the slack as it tries to shift the economy away from a dependence on heavy industry and manufacturing exports.

BAIPHIL Market Watch – 02 Aug 2016 Page 8 of 11

REST OF THE WORLD

European shares closed lower on Monday, dragged down by banks such as UniCredit and Raiffeisen that performed poorly in a Europe-wide stress tests. The pan-European STOXX 600 and the FTSEurofirst 300 index both closed 0.6 percent weaker. The STOXX 600 banking index fell 1.8 percent, reversing earlier gains and giving back a rally seen in the previous days as enthusiasm for the results of the

stress test, which delivered little negative surprises, was short-lived. Austrian bank Raiffeisen, which emerged among the four worst perfomers in the tests along with Monte dei Paschi, Banco Popular and UniCredit, fell 5 percent. UniCredit slumped 9.4 percent as the poor showing in the tests highlighted the need for Italy's biggest bank by assets to strengthen its capital, while Banco Popular fell 5.9 percent.

"The stress test results confirm the necessity for UniCredit to reinforce its capital position," Banca Akros analyst Luigi Tramontana said in a note. Analysts have said UniCredit needs to raise as much as 9 billion euros. Monte dei Paschi, however, rose 0.6 percent as some optimism over a last-minute rescue plan offset the Italian lender's bad showing in the tests, where it fared the worst. Energy shares also

lost ground following a sharp decline in crude oil prices. The European sector index dropped 1.8 percent, dragged down by a 2.9 percent and 2 percent fall in Royal Dutch Shell and BP. However, Europe's STOXX 600 Basic Resources index, which includes mining stocks, rose 0.2 percent as sluggish manufacturing growth data from China, the world's biggest metals consumer, raised hopes of further ec onomic

stimulus. Among other gainers, Legrand rose 3.8 percent on the back of its well-received results at the French power switch maker, whose sales growth in the first half beat expectations. But Heineken fell 3.7 percent after the Dutch brewer reported first half revenue below Reuters' estimates, hurt by declining sales in Africa and Eastern Europe.

The S&P 500 and the Dow closed slightly lower on Monday, as a drop in oil prices dragged down energy stocks, while tech names

Apple and Alphabet helped lift the Nasdaq to its highest close in over a year. The S&P 500 had hit a record high earlier in the session, but

was unable to hold gains as U.S. crude CLc1 slumped to below $40 a barrel, its lowest level since April, before settling at $40.06. "Oil has once again re-emerged as a real driver of how investors are gauging the trend for equities," said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York. "Now we are beginning to see the glut narrative have an impact on oil and have an impact on

equities." The S&P 500 gained 3.6 percent in July, its best month since March, touching record intraday highs seven times, as the U.S. economy showed signs of picking up and corporate earnings were not as bad as had been initially feared. Earnings are now expected to decline 3 percent for the second quarter, according to Thomson Reuters data, an improvement from the 4.5 percent decline expected on

July 1. Exxon (XOM.N) and Chevron (CVX.N) were down 3.1 percent and 3.3 percent, respectively, as the biggest drags on both the Dow and the S&P 500. The S&P energy sector .SPNY lost 3.3 percent. The Dow Jones industrial average .DJI fell 27.73 points, or 0.15 percent, to 18,404.51, the S&P 500 .SPX lost 2.76 points, or 0.13 percent, to 2,170.84 and the Nasdaq Composite .IXIC added 22.07 points, or 0.43

percent, to 5,184.20. The Nasdaq closed at its highest level since July 21, 2015. Prime Minister Theresa May will on Tuesday outline her bid to reshape the British economy for a post-Brexit world, reviving the

once unfashionable concept of industrial policy 30 years after Margaret Thatcher killed it off. May will chair the first meeting of the "Cabinet Committee on Economy and Industrial Strategy" in her Downing Street Offices, bringing together the heads of 11 other ministries to set out her vision for a state-boosted industrial renaissance. "If we are to take advantages of the opportunities presented by Brexit, we

need to have our whole economy firing," May said ahead of the meeting in a statement released by her office. "We also need a plan to drive growth up and down the country – from rural areas to our great cities." After a referendum campaign that revealed dissatisfaction in many of Britain's struggling post-industrial regions, May is pitching a plan to reunite the country by raising the prospects of those who she

casts as "hard-working people". The June 23 vote to leave the European Union has raised serious questions about the future of the world's fifth largest economy, with some surveys indicating a recession, a hit to consumer confidence and a possible fall in investment. "We need a proper industrial strategy that focuses on improving productivity, rewarding hard-working people with higher wages and creating more

opportunities for young people so that, whatever their background, they go as far as their talents will take them," May said ahead of the meeting. The challenge is to find a formula that arrests a decades-long decline in Britain's manufacturing sector by helping firms tackle the challenges posed by globalization without blunting the market forces that make them competitive. She will make a priority of developing the

industries already based in Britain - a push that could help carmakers like Jaguar Land Rover (TAMO.NS), GM-owned Vauxhall (GM.N) and Nissan (7201.T), and aerospace industry leaders like BAE Systems (BAES.L) to weather the Brexit storm. The strategy will also involve finding new ways to rebalance the economy away from its reliance on the services sector, and ensure wealth is distributed away

from the prosperous south east of England. Whilst policy detail is scarce, the strategy is likely to combine state-backed investment in traditional infrastructure like roads and rail with funding for modern essentials like broadband and lower energy costs, along with a push to train more of the highly-skilled workers industry says it needs. Industrial policy has a toxic legacy in Britain. It was once used to help failing

national champions through a series of flawed policies in the 1960s and 1970s that sought to arrest a decline in manufacturing influence. "We're not getting into the business of picking winners: it's more about creating the right environment," a government source who spoke on condition of anonymity said. May's office said the strategy would promote a range of industrial sectors with a focus on addressing long term

productivity growth; encouraging innovation and focusing on the industries and technologies that give Britain a competitive advantage. May surprised French utility EDF (EDF.PA) and China last week with a last-minute decision to review the building of Britain's first nuclear plant in decades. The refocusing of Britain's economic policy, for the last six years aimed at balancing the books and heavily reli ant on foreign money to replace state infrastructure spending, also carries a potentially huge political prize. With the opposition Labour Party, long seen

as the champions of the working classes, locked in a vicious internal ideological struggle and losing sway in their traditional heartlands, May has an opportunity to won over those who saw voting 'Leave' in the EU referendum a 'nothing to lose' protest vote. "The Brexit vote and euroscepticism was strongest in former manufacturing areas, where the industry has gone, the good jobs have gone and peop le feel

disaffected," said David Bailey Professor of Industry at Aston Business School. "If May's going to do something about reconnecting, manufacturing has got to be part of the story."

The Federal Reserve should be cautious in considering an interest rate increase due to lingering risks to the U.S. economy, one of the central bank's most influential policymakers said on Monday, appearing to signal the chance of a hike by the end of the year was fading. While New York Fed President William Dudley said it was "premature" to rule out a policy tightening in 2016, he added

BAIPHIL Market Watch – 02 Aug 2016 Page 9 of 11

that negative shocks were more likely than positive ones due to the unknown fallout from Britain's vote to leave the European Union, a strong dollar, and because it was safer to delay a move with rates so low. "All three of these reasons - evidence that U.S. monetary policy

is currently only moderately accommodative, the fact that U.S. financial conditions have been influenced by economic and financial market developments abroad, and risk management considerations - argue, at the moment, for caution in raising U.S. short-term interest rates," said Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on U.S. policy. The comments, including a reference to

uncertainty around the Nov. 8 U.S. election, suggested the central bank is leaning toward standing pat on rates until perhaps December - which would mark one year since it raised rates for the first time in nearly a decade. Dudley applauded recent investor expectations for a less aggressive U.S. tightening cycle going forward, and warned that it was becoming increasingly clear that some post-crisis "headwinds"

were likely to be permanent. U.S. manufacturing activity eased in July amid shrinking order backlogs and declining employment, while an unexpected drop in

construction spending in June suggested second-quarter economic was probably even weaker than reported last week. The Institute for Supply Management's (ISM) report on Monday also showed manufacturers ramping up production to an 18-month high even as factories continued to draw down inventories, which some economists said pointed to moderate growth in the sector. Tim Quinlan, a

senior economist at Wells Fargo Securities in Charlotte, North Carolina, said it was counterintuitive for manufacturers to step up production while cutting payrolls and running down inventories, given that production is a coincident indicator for the economy. "Perhaps the inventory drawdown has left stockrooms too spare, resulting in production increases as orders pick up," Quinlan said. "These crosscurrents are

explained somewhat by the fact that we are late in the economic cycle and businesses are understandably cautious with all the various risk factors." ISM said its index of national factory activity slipped 0.6 percentage point to a reading of 52.6 last month. A reading above 50 indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy. The index has now increased for five

straight months. Manufacturers reported a moderate slowdown in new orders as well as export order growth. Order backlogs contracted as did factory employment and inventories, though the pace of destocking slowed. Manufacturers also reported that their customers continued to view inventories as too high. An outright drop in business inventories weighed on economic growth in the second quarter, with gross

domestic product rising at a tepid 1.2 percent annualized rate after increasing at a 0.8 percent pace in the first quarter. Manufacturing remains constrained by the lagging effects of the dollar's rally and an oil price plunge between June 2014 and December 2015, which have hurt exports and undercut business spending. With the dollar rising in recent months and oil prices slumping again, economists see little

upside for manufacturing. "Any growth in manufacturing is of the hand-to-mouth variety rather than a vibrant expansion," said Michael Montgomery, U.S. economist at IHS Global Insight in Lexington, Massachusetts. "With the recent strength in the dollar still not fully reflected in imports and exports yet, we will need the data to be more convincing to call this anything more than almost stalled." U.S.

financial markets largely ignored the data. The S&P 500 index .SPX hit an intraday record high before falling into negative territory. Prices for U.S. government bonds fell, while the dollar .DXY rose against a basket of currencies. In a separate report, the Commerce Department said construction spending declined 0.6 percent to its lowest level since June 2015 after dipping 0.1 percent May. June marked the third

straight month of declines in outlays. Economists polled by Reuters had forecast construction spending rising 0.5 percent in June after a previously reported0.8 percent drop in May. Their June estimates were largely based on the government's assumptions for private residential and nonresidential construction spending in the advance GDP report. "The assumptions for June construction spending plugged

into the advance GDP estimate were optimistic," said Ted Wieseman, an economist at Morgan Stanley in New York. "The government hasn't released all of their assumptions yet, but these figures look consistent with second-quarter GDP growth being revised down to 1.1 percent or 1.0 percent." Weak spending on home building and nonresidential structures, including gas and oil well drilling, contributed to

anemic growth in the last quarter. In June, construction spending was held down by a 0.6percent drop in private construction. Outlays on private residential construction were unchanged as spending on both single-family and multi-family projects fell. Private residential construction spending edged up 0.1 percent in May. Spending on private nonresidential structures fell 1.3 percent in June, the biggest

decline since December 2015, after rising 0.4 percent in May. Public construction spending slipped 0.6 percent in June, dropping for a fourth straight month. Outlays on state and local government construction projects, the largest portion of the public sector segment, fell 0.5 percent, the fourth consecutive monthly decline. Federal government construction spending dropped 2.3 percent in June.

BSP Cir. No. 706, AMLA Law, RA 10365 and the AML Risk Rating System – 05 August 2016

Developmental Course on Treasury Products - Basics of Financial Math – 06 August 2016

Developmental Course on Treasury Products - Basics of Fixed Income Securities – 13 August 2016

Embedding Risk Management in New Product Development & Management – 13 August 2016

EQ and Leadership for Bankers – 19 August 2016

Process Mapping as an Operational Risk Management Tools – 20 August 2016

Compliance with Operational Risk Management Guidelines – 26 August 2016

Related Party Transactions – 26 August 2016

Counterfeit Detection – 03 September 2016

Fraud Risk Management – 17 September 2016

Developmental Course on Treasury Products - Bond Duration – 17 September 2016

Developmental Course on Treasury Products - Spot, Forwards and FX Swaps – 24 September 2016

Developmental Course on Treasury Products - Interest Rate Swaps – 01 October 2016

Developmental Course on Treasury Products - Currency Swaps/Forward Rate Agreement – 08 October 2016

Developmental Course on Treasury Products - Bootstrapping – 15 October 2016

Developmental Course on Treasury Products - Financial Options – 22 October 2016

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

BAIPHIL Market Watch – 02 Aug 2016 Page 10 of 11

COMMITTEE CHAIRPERSONS FY 2016-2017

AMELITA G. CUA Audit- VP, Philippine Trust Co.

CARLOTA A. BACANI BAIPHIL Week -VP/Senior Compliance Manager and MLRO, ANZ Bank

MA. VICTORIA F. ABANTO Finance & Budget -VP, Philippine National Bank

MARY JOYCE M. SASAN Legal & Regulatory- Chief Compliance Officer & Corporate Governance Officer UBP

ROWENA A. MARCELANG Membership- Associate Director Standard Chartered Bank

BELINDA C. RODRIGUEZ PR & Publications- FVP, Philippine Business Bank

ELVIRA E. DITCHING-LORICO Program & Attendance- Managing Director,Bangko Sentral ng Pilipinas

SHERYLL K. SAN JOSE Research & Info Exchange -Senior Manager, Equicom Savings Bank

MARIA ELENA M. RUIZ Special Projects- Associate Life Member, BAIPHIL

NOEL A. FLORES Sports & Fellowship- FVP & Chief Compliance Officer CTBC Bank

ANA TERESA B. DIAZ DE RIVERA Technology Management - AVP, Wells Fargo Bank

ANGELO DENNIS L. MATUTINA 29th National Convention- EVP, Union Bank of the Philippines

CELIA M. SOTTO Business & Products - Associate Life Member, BAIPHIL

EDEL MARY D. VEGAMORA Finance & Audit - Chief Financial Officer/Controller Bank of Commerce

MARIA DAISY B. POSADAS Governance, Legal & Compliance - VP & Chief Compliance Officer ING Bank N.V.

MARIA VICTORIA P. RONQUILLO Operations & Technology - Compliance Officer, UCPB

EDEZA A. QUE Risk Management - FVP, Philippine Savings Bank

DEXTER B. DELA CRUZ Soft Skills - Chief Compliance Officer, Bank of Makati

AUGUST 1-15

01 Ricardo P. Lirio - Past President

05 Angelita L. Esguerra - Assoc Life Member

07 Ana Rose T. Kwan - PNB

08 Antonio V. Viray - Past President

10 Edel Mary D. Vegamora - BOC

11 Imelda B. Capistrano - Wells Fargo

13 Jeanne Frances Chua - Century Bank

13 Luisa A. Lucin - Philtrust Bank

14 Lyneth L. Derequito- CARD Bank Inc

QUANTITATIVE TRADING - Quantitative trading consists of trading strategies based on quantitative

analysis, which rely on mathematical computations and number crunching to identify trading

opportunities. As quantitative trading is generally used by financial institutions and hedge funds, the

transactions are usually large in size and may involve the purchase and sale of hundreds of

thousands of shares and other securities. However, quantitative trading is becoming more commonly

used by individual investors.

Why are vain people said to be “looking for the limelight”?

In the early days of theatre, the players were lit by gas lamps hidden across the front of the stage.

Early in the twentieth century, it was discovered that if a stick of lime was added to the gas, the light

became more intense, and so they began to use the “limelight” to illuminate the spot on stage where

the most important part of the play took place. Later called the “spotlight,” the “limelight” was where

all actors fought to be.

BAIPHIL Market Watch – 02 Aug 2016 Page 11 of 11

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