BUSINESS HEADLINES THIS PAST WEEK...
(Mini Reads followed by Full Reports below)

EL NIÑO COULD CUT GDP GROWTH FURTHER
[Private think tank warns of higher prices in H2 as a direct impact]


JUNE 1 ---Fears have surfaced about another El Nino, a weather phenomenon that occurs when the Pacific Ocean heats up abnormally. In India, it would drive away rain clouds and put the monsoon and kharif harvest at risk. Bank of America Merrill Lynch, for instance, has put out a report saying there’s a 50-75 basis point risk to their gross domestic product (GDP) growth forecast of 5.4% for FY15 because of El Nino. FROM LIVEMINIT.COM - An 80 percent chance of the El Niño dry spell running through the end of the year could slash Philippine economic growth further and calls for an urgent strategy to avert what could be its worst possible impact, a private think tank said. Citing the latest update from the United States’ National Oceanic and Atmospheric Administration, the Metrobank Research said in its latest weekly report there is a 90 percent chance that El Niño may continue through the summer and an 80 percent probability of it lasting until the yearend. “It should be noted that the agriculture sector is not the only economic sector that is affected by this phenomenon, which is why it could reduce GDP [gross domestic product] growth if it proves to be severe and prolonged,” Pauline Revillas, analyst at Metrobank Research, said in the report. Higher consumer prices seen in H2 The analyst warned that the impact of the dry spell could be seen directly on consumer prices, particularly in the last six months of 2015. READ MORE...

ALSO: RP 1st quarter GDP disappointing — Swiss bank UBS, 3 reasons why


JUNE 2 --Giant Swiss bank and financial services UBS yesterday said the first quarter GDP result of the Philippines is “disappointing.” UBS gave three important government mistakes that led to the 5.2 percent GDP, which is far from the expected 6.6 percent.According to the firm, the root of disappointing GDP for the first quarter are: 1. The negative surprise of the headline number compared to consensus is the widest since the global financial crisis. 2. This could be traced to a weaker-than-expected trade balance (led by disappointing export number). 3. Domestic demand (consumption, government and investment expenditure) growth actually accelerated from 5.9 percent in fourth quarter of 2014 to 6.4 percent in first quarter of 2015. UBS specifically called the first quarter GDP as “disappointing despite stronger domestic demand.”  “The Philippine government reported Q115 GDP growth of 5.2 percent which was significantly lower than consensus estimates of 6.6 percent,” an email sent by UBS to select business reporters, including The Daily Tribune.  But the financial services firm said the “headline number is not as bad as it seems,” citing various reasons.READ MORE...

ALSO: PNoy tells Japanese traders now's the best time to invest in PHL


JUNE 4 ---President Benigno Aquino III talks with Marubeni officials led by its chairman Teruo Asada during the latter's courtesy call at the Imperial Hotel on Tuesday, June 2, as part of Aquino's four-day state visit to Japan. Ryan Lim 
President Benigno Aquino III on Thursday encouraged Japanese businessmen to invest in the Philippines and trumpeted his administration’s economic gains since taking over the helm of government in 2010. Aquino is now in Japan for a four-day state visit that began on Tuesday. In a speech at the Philippine Investment Forum in Tokyo, Aquino said reforms introduced by his administration have resulted in a favorable business climate in the Philippines. “We have leveled the playing field, improved the quality of infrastructure, and vastly minimized corruption in doing business,” the Philippine leader told Japanese investors. The economic growth and investment grade ratings the Philippines has gained so far show that now is the best time for investors to “bet on the Philippines,” he added. “The Philippines as an investment destination is more attractive today than at any other point in our history. We can further deepen, or forge partnerships in which all parties benefit,” he said. READ MORE...

ALSO: ERC approves power rate hike, but Meralco says lower generation charge to offset increase
[Expect higher billing rates starting this month.]


JUNE 4 --The Energy Regulatory Commission (ERC) has approved the Manila Electric Company’s (Meralco) petition to implement “pass thru” charges of P0.0418 per kilowatt hour (KWh) that will be billed against consumers starting this month. The ERC approval was made on June 1. ERC Executive Director Francis Juan on Thursday said Meralco petitioned for a power rate adjustment to recover uncollected charges from its 5.367 million customers from November 2003 to January 2004 and for 2011. The charges shouldered by Meralco supposedly ballooned to P2,479,289,633, ERC data showed. A P0.0418 per kWh charge for households consuming 200 kWh a month translates to an additional P8.24 to the electric bill. This additional charge will be reflected on the monthly electric bill of Meralco customers until the amount is fully recovered. READ MORE...

ALSO WARNING FROM ECCP:  Firms leaving China seen skipping PH if  taxation system remains a drag


JUNE 5 ---ECCP president Michael Raeuber PHOTO FROM ECCP.COM The European Chamber of Commerce of the Philippines (ECCP) warned Thursday that the country risked losing potential investments to its neighbors in the Association of Southeast Asian Nations (Asean) if the government would not adjust the current taxation system that has been a drag to the competitiveness of the local business environment. “We have to bring the Philippines forward. The government now has limited time to approve economic legislation and institute reforms. If we do not address the issue now, companies will be going to Vietnam and not here,” ECCP president Michael Raeuber said. “The ECCP has been encouraging European businesses to invest in the Philippines. We are also working closely with Philippine exporters not just to Europe but to other countries. There is a need to see some action,” he added. READ MORE...

ALSO: Peso declines to 4-month low


JUNE 6 --The peso closed at its weakest level in more than four months against the US dollar on Friday, amid a global selloff in bonds on renewed concerns over Greece’s ability to settle its debt. The local currency closed at 44.87 against the greenback Friday, down by 0.1 percent from 44.815 on Thursday, with more than $670 million worth of foreign exchange traded in the local currency market. The currency dropped 0.6 percent for the week, taking losses in the past three months to 1.7 percent. Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said global concerns over Greece, with a possibility of delayed debt payment to the International Monetary Fund worried investors. “[The peso’s weakness was due to] strong dollar and concerns about Greece,” Tetangco said in a text message. Data showed the peso’s level on Friday was the lowest since Jan. 12 when it settled at 44.875 against the dollar. A weaker peso affects prices of imported products, including petroleum and fuel. “We’re seeing a broad dollar move across the region,” so the extent of the peso’s fall may be sustainable,’’ said Alan Cayetano, head of foreign-exchange trading at Bank of the Philippine Islands.

ALSO PSE: Index ends lower on lack of buying catalysts


JUNE 6 ---Philippine Stock Exchange index (PSEi)
 Local share prices fell for a second consecutive session to end the week on a sour note as the absence of catalysts to trigger buying persisted. The 30-company Philippine Stock Exchange index (PSEi) dropped 0.36 percent or 26.95 points to close at 7,526.70 while the broader All Shares index slipped 0.32 percent or 14.13 points to 4,340.87. “Friday made little impact on the overall picture, with the market spending the entire day in the red,” said Justino Calaycay Jr., analyst at Accord Capital Equities. “Headlines at the local front were dominated by politics – how the 2016 presidential election is shaping up,” he added. Local stocks were mostly in the red expect for mining/oil firms which managed to gain 0.46 percent or 66.39 points. READ MORE...


READ FULL MEDIA REPORTS HERE:

El Niño could cut GDP growth further’
Private think tank warns of higher prices in H2 as a direct impact


Fears have surfaced about another El Nino, a weather phenomenon that occurs when the Pacific Ocean heats up abnormally. In India, it would drive away rain clouds and put the monsoon and kharif harvest at risk. Bank of America Merrill Lynch, for instance, has put out a report saying there’s a 50-75 basis point risk to their gross domestic product (GDP) growth forecast of 5.4% for FY15 because of El Nino. FROM LIVEMINIT.COM

MANILA, JUNE 8, 2015 (MANILA TIMES)  by MAYVELIN U.CARABALLO REPORTER - An 80 percent chance of the El Niño dry spell running through the end of the year could slash Philippine economic growth further and calls for an urgent strategy to avert what could be its worst possible impact, a private think tank said.

Citing the latest update from the United States’ National Oceanic and Atmospheric Administration, the Metrobank Research said in its latest weekly report there is a 90 percent chance that El Niño may continue through the summer and an 80 percent probability of it lasting until the yearend.

“It should be noted that the agriculture sector is not the only economic sector that is affected by this phenomenon, which is why it could reduce GDP [gross domestic product] growth if it proves to be severe and prolonged,” Pauline Revillas, analyst at Metrobank Research, said in the report.

Higher consumer prices seen in H2

The analyst warned that the impact of the dry spell could be seen directly on consumer prices, particularly in the last six months of 2015.

READ MORE...
“Upside inflationary pressure is likely in the second half of the year as the third quarter is also a lean season for rice production here in the Philippines,” Revillas said.

Importation would mean higher prices as the dry spell could also affect the rice stocks of major exporting countries such as Thailand and Vietnam, she added.

At its monetary policy meeting on May 14, the central bank adjusted upward its inflation forecasts for 2015 and 2016 to account for the impact of El Niño on consumer prices.

The BSP now projects inflation for full-year 2015 at 2.3 percent, up from a previous forecast of 2.2 percent. For 2016, it raised its forecast to 2.6 percent from 2.5 percent.

Growth in the country’s gross domestic product (GDP) in the first quarter of 2015 failed most analyst expectations when the latest official data, released on Friday, showed a much slower than expected pace of 5.2 percent in the three months to March. Private analysts had forecast growth of between 6.0 percent and 6.8 percent and the government has set a target range of 7 percent and 8 percent for this year.

Revillas said energy-intensive industry sectors could also bear the brunt of the impact on electricity supply, especially in Mindanao because of the area’s high dependence on hydropower. Manufacturing also stands to get hit by constraints in the supply of agricultural products, while tourism and the banking sector are also expected to be affected.

“A comprehensive and coordinated plan from both the public and private sectors to address the dry spell is essential to avert the worst possible impact of El Niño on the economy,” Revillas said.


TRIBUNE

RP 1st quarter GDP disappointing — Swiss bank UBS, 3 reasons why Written by Ed Velasco Tuesday, 02 June 2015 00:00
 

Giant Swiss bank and financial services UBS yesterday said the first quarter GDP result of the Philippines is “disappointing.”

UBS gave three important government mistakes that led to the 5.2 percent GDP, which is far from the expected 6.6 percent.

According to the firm, the root of disappointing GDP for the first quarter are:

1. The negative surprise of the headline number compared to consensus is the widest since the global financial crisis.

2. This could be traced to a weaker-than-expected trade balance (led by disappointing export number).

3. Domestic demand (consumption, government and investment expenditure) growth actually accelerated from 5.9 percent in fourth quarter of 2014 to 6.4 percent in first quarter of 2015.
UBS specifically called the first quarter GDP as “disappointing despite stronger domestic demand.”

“The Philippine government reported Q115 GDP growth of 5.2 percent which was significantly lower than consensus estimates of 6.6 percent,” an email sent by UBS to select business reporters, including The Daily Tribune.

But the financial services firm said the “headline number is not as bad as it seems,” citing various reasons.

READ MORE...
“On top of the fact that domestic demand actually showed a healthy pick up, it should be noted that over the last year, the seasonally adjusted GDP growth profile has been volatile (Q214 — 2 percent; Q314 — 0.4 percent; Q414 — 2.5 percent and Q115 — 0.3 percent).

It added that the Q115 headline GDP number, therefore, may not necessarily be indicative of sustained weakness moving forward.

“Nevertheless, there may be some downside risk to our 2015E GDP of 6.5 percent,” it said.
UBS added that in its view, the economy could continue to grow stronger relative to region, albeit potentially at a slower pace potentially due to rising interest rates.

Furthermore, the market is not cheap.

It listed the possible opportunities following market’s recent decline — the Philippine Stock Exchange index has fallen by 7.6 percent to 7,500 from its peak of 8,127 on April 10, 2015 following generally weaker-than-expected Q115 earnings and the Q115 GDP disappointment.

“In our view, this could present a buying opportunity for stocks that are less at risk for earnings downgrades such a SM Prime or Megaworld due to their high recurring income base or for stocks where negative news may be in the price such as LT Group, Metro Pacific Investments Corp. and Bloomberry,” it added.

UBS is the biggest bank in Switzerland, operating in more than 50 countries with about 60,000 employees around the world, as of 2014.

It is considered the world’s largest manager of private wealth assets, with over 2.2 trillion Swiss francs in invested assets, and is a leading provider of retail banking and commercial banking services in Switzerland.


GMA NEWS ONLINE

PNoy tells Japanese traders now's the best time to invest in PHL June 4, 2015 1:05pm


President Benigno Aquino III talks with Marubeni officials led by its chairman Teruo Asada during the latter's courtesy call at the Imperial Hotel on Tuesday, June 2, as part of Aquino's four-day state visit to Japan. Ryan Lim

President Benigno Aquino III on Thursday encouraged Japanese businessmen to invest in the Philippines and trumpeted his administration’s economic gains since taking over the helm of government in 2010.

Aquino is now in Japan for a four-day state visit that began on Tuesday.

In a speech at the Philippine Investment Forum in Tokyo, Aquino said reforms introduced by his administration have resulted in a favorable business climate in the Philippines.

“We have leveled the playing field, improved the quality of infrastructure, and vastly minimized corruption in doing business,” the Philippine leader told Japanese investors.

The economic growth and investment grade ratings the Philippines has gained so far show that now is the best time for investors to “bet on the Philippines,” he added.

“The Philippines as an investment destination is more attractive today than at any other point in our history. We can further deepen, or forge partnerships in which all parties benefit,” he said.

READ MORE...
The President made these statements a week after the government announced that the Philippines posted a slower 5.2-percent economic growth in the first quarter of 2015, primarily due to low government spending, weak global demand and frail agriculture sector.

'Game development'

Aquino particularly urged Japanese businessmen to invest in manufacturing, information technology and infrastructure in the Philippines.

The Philippines is looking at venturing into other fields like legal transcription, accounting, engineering services, and even animation, he said.

“Game development is another area we are looking to develop – and I am certain that Japanese creativity, innovation, and technological prowess can help us to maximize this sector,” Aquino said.

To support Japanese investments, the President said his administration will continue to ensure steady power supply and to build more infrastructure projects, particularly ports and airports.

“The improvement of sectors like power and infrastructure has indeed redounded to the Philippines’ increased competitiveness. At the same time, we continue to believe that the most important sector –the most important resource – we can invest in is the Filipino people,” he said. – Andreo Calonzo/VS, GMA News


GMA NEWS ONLINE

ERC approves power rate hike, but Meralco says lower generation charge to offset increase By SHERRIE ANN TORRES, GMA News June 4, 2015 8:08pm

Expect higher billing rates starting this month.

The Energy Regulatory Commission (ERC) has approved the Manila Electric Company’s (Meralco) petition to implement “pass thru” charges of P0.0418 per kilowatt hour (KWh) that will be billed against consumers starting this month.

The ERC approval was made on June 1.

ERC Executive Director Francis Juan on Thursday said Meralco petitioned for a power rate adjustment to recover uncollected charges from its 5.367 million customers from November 2003 to January 2004 and for 2011.

The charges shouldered by Meralco supposedly ballooned to P2,479,289,633, ERC data showed.

A P0.0418 per kWh charge for households consuming 200 kWh a month translates to an additional P8.24 to the electric bill.

This additional charge will be reflected on the monthly electric bill of Meralco customers until the amount is fully recovered.

READ MORE...
“Ang nangyari lang doon sa ginawang pag-a-aral sa kaso ng Meralco, may mga ilang under recovery sila sa implementation ng mga pass-on charges tulad ng generation, transmission, lifeline, subsidies. So nag-accumulate lang 'yan over these years,” said Juan.

90% sure

But all isn't bad news for Meralco customers as the additional charge will be offset by a lower generation charge this month.

Meralco Spokesman Joe Zaldarriaga said the possibility of a lower generation charge this month is “90 percent.”

And the projected decline in the generation charge is between P0. 15 and P0.20 per kWh.

“Based on the initial forecast – data that we have – ay pababa nga ho ang ating generation charge. At 'yun nga ho ang ating nakikita sa ngayon, and hopefully kung mag-tu-tuloy-tuloy yung ating analysis we’re looking at the reduction of the June billing,” Zaldarriaga said.

Days before this announcement, Zaldarriaga reported a spike in prices of power at the Wholesale Electricity Stock Market (WESM) last month.

The situation raise some alarm bells when a number of power plants serving the Luzon grid shut down, Zaldarriaga said.

Fears of a rate increase were doused by the stable prices of fuel and coal used by the power suppliers of Meralco, said to Larry Fernandez, Meralco Utility & Maintenance Facilities head.

“Yung preliminary bill, sa wholesale increase. But it looks like there’s a strong possibility that charges of the PSAs (Power Supply Agreement) and the IPPs (Independent Power Producers) may be able to offset this increase,” Fernandez said.

Meralco will reveal on Monday how much the generation charge will actually go down. – VS, GMA News


INQUIRER

ALSO WARNING FROM ECCP:  Firms leaving China seen skipping PH if  taxation system reamins a drag By: Amy R. Remo @inquirerdotnet Philippine Daily Inquirer 05:05 AM June 5th, 2015


ECCP president Michael Raeuber PHOTO FROM ECCP.COM

The European Chamber of Commerce of the Philippines (ECCP) warned Thursday that the country risked losing potential investments to its neighbors in the Association of Southeast Asian Nations (Asean) if the government would not adjust the current taxation system that has been a drag to the competitiveness of the local business environment.

“We have to bring the Philippines forward. The government now has limited time to approve economic legislation and institute reforms. If we do not address the issue now, companies will be going to Vietnam and not here,” ECCP president Michael Raeuber said.

“The ECCP has been encouraging European businesses to invest in the Philippines. We are also working closely with Philippine exporters not just to Europe but to other countries. There is a need to see some action,” he added.

READ MORE...
According to Raeuber, the Philippines must be competitive enough by offering the right set of incentives and tax system if it wanted to tap the companies that were planning to leave China and convince them to relocate to the Philippines. Many of these companies, however, were considering Vietnam as their preferred destination.

Marikina Rep. Romero Quimbo was earlier quoted as saying that it made good economic sense to completely overhaul the country’s corporate and individual income taxes in order to be competitive amid the impending establishment of the Asean Economic Community (AEC).

Such a move might especially prove to be critical in attracting more foreign investments in the agriculture and manufacturing sectors to achieve inclusive growth. Otherwise, the country might lose out to Thailand, Vietnam and Cambodia, he added.

According to Quimbo, the tax bracket rates have not been adjusted since 1997 with 86 percent of income taxes being shouldered by only 16 percent of the population.


MANILA STANDARD

Peso declines to 4-month low By Julito G. Rada | Jun. 05, 2015 at 11:10pm

The peso closed at its weakest level in more than four months against the US dollar on Friday, amid a global selloff in bonds on renewed concerns over Greece’s ability to settle its debt.

The local currency closed at 44.87 against the greenback Friday, down by 0.1 percent from 44.815 on Thursday, with more than $670 million worth of foreign exchange traded in the local currency market.

The currency dropped 0.6 percent for the week, taking losses in the past three months to 1.7 percent.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said global concerns over Greece, with a possibility of delayed debt payment to the International Monetary Fund worried investors.

“[The peso’s weakness was due to] strong dollar and concerns about Greece,” Tetangco said in a text message.

Data showed the peso’s level on Friday was the lowest since Jan. 12 when it settled at 44.875 against the dollar. A weaker peso affects prices of imported products, including petroleum and fuel.

“We’re seeing a broad dollar move across the region,” so the extent of the peso’s fall may be sustainable,’’ said Alan Cayetano, head of foreign-exchange trading at Bank of the Philippine Islands.

READ MORE...
“We’re also getting the Greece effect, so that’s adding to risk-aversion,” Cayetano said. He forecasts a year-end exchange rate of 45.50 to 46.50 per dollar.

Astro del Castillo, managing director of First Grade Finance Inc., said positive jobs data in the US provided support to the dollar.

“[Also] the continued realignment of foreign fund managers in the stock market contributed [to the peso’s weakness] as well,” Del Castillo said, adding “foreign funds remain a net seller in the equities.”

Bangko Sentral revised its foreign exchange forecast this year to 43.46 to a dollar from the previous estimate of 41.44 made in October last year.

Greater volatility affected the peso in 2014 as the balance of payments posted a deficit of $2.9 billion, the biggest on record, driven primarily by the normalization of monetary policy in the US.

National Economic and Development Authority director-general Rolando Tungpalan said the peso was expected to remain stable in the coming months.

“With the country’s strong external position, the peso is expected to remain relatively stable and this will contribute to stable domestic prices going forward,” he said.


PHILSTAR

Index ends lower on lack of buying catalysts By Richmond S. Mercurio (The Philippine Star) | Updated June 6, 2015 - 12:00am


Philippine Stock Exchange index (PSEi)

MANILA, Philippines - Local share prices fell for a second consecutive session to end the week on a sour note as the absence of catalysts to trigger buying persisted.

The 30-company Philippine Stock Exchange index (PSEi) dropped 0.36 percent or 26.95 points to close at 7,526.70 while the broader All Shares index slipped 0.32 percent or 14.13 points to 4,340.87.

“Friday made little impact on the overall picture, with the market spending the entire day in the red,” said Justino Calaycay Jr., analyst at Accord Capital Equities.

“Headlines at the local front were dominated by politics – how the 2016 presidential election is shaping up,” he added.

Local stocks were mostly in the red expect for mining/oil firms which managed to gain 0.46 percent or 66.39 points.

READ MORE...
Turnover value improved to P7.27 billion from the previous day’s P6.94 billion.

Market breadth remained negative as decliners trumped advancers, 81 to 71, while 53 stocks were unchanged.

“Pessimism remained in local equities ahead of the crucial release of US employment data. Progress over discussions on Greece’s debt payment also weighed on sentiment, especially following Wall Street’s results,” said Jason Escartin, investment analyst at F. Yap Securities.

Most Asian shares likewise declined yesterday while US stocks finished lower Thursday on caution ahead of a US jobs data release.


Chief News Editor: Sol Jose Vanzi

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