MACROECONOMICS WEEKLY UPDATE

According to the BSP’s May survey, private sector economists predict an average inflation rate of 5.8% for 2023, a decrease from the April projection of 6%, but still above the BSP’s revised expectation of 5.5%. Inflation predictions for 2024 and 2025 remain steady at 3.6% and 3.5% respectively, and there is an increased expectation of inflation staying within the 2-4% range for those years. Analysts speculate that the BSP may start cutting rates between 25-125 basis points in the fourth quarter of 2023, with further cuts of up to 250 basis points in 2024 and 100 basis points in 2025.Finance Secretary Benjamin Diokno cautions against a proposed nationwide daily minimum wage increase of Php150, citing the potential for increased inflation and unemployment. He warns that such an increase could lead to a 1.4 percentage point rise in inflation, reaching 6.9% this year.The Sugar Regulatory Administration (SRA) is contemplating the importation of 150,000 metric tons of sugar in August or September, assuring that it will not negatively impact domestic production. However, local sugar production is expected to decrease to 1.8 million metric tons, with an additional reduction of 10-15% due to the anticipated El Niño effect.

INDUSTRY UPDATE

EXCHANGE NEWS 

Trading in the shares of Phoenix Petroleum Corp. (PNX) and five other listed companies have been temporarily halted by the Philippine Stock Exchange (PSE) due to their failure to submit their annual financial statements for 2022. The move highlights PSE’s commitment to regulatory compliance and transparency within the market.

TELLECOMMUNICATIONS 

PLDT (TEL) has completed the first tranche of its tower sale and leaseback deal with Unity Digital Infrastructure, Inc. This tranche covers 150 telecom towers for a cash consideration of Php1.9 bn. Funds from the sales will be used to cover capital expenditure for infrastructure improvement.

HOLDING COMPANIES

In the first quarter, Lucio Tan Group (LTG) experienced a 2.2% year-on-year decline in net income, reaching Php6.38 billion. This decrease can be attributed to reduced volumes in various business segments, including tobacco (PMFTC), distilled spirits (TDI), property (Eton), and beverages (ABI). However, the banking segment (PNB) saw a rise in net income, driven by one-time gains from the sale of foreclosed properties and increased revenues.First Pacific Group clarified the tender offer price for minority shareholders of Metro Pacific (MPI) within their consortium. The initial price of Php4.63 per share is subject to adjustment based on the upcoming valuation report, which will provide an in-depth evaluation of MPI’s financial condition and future prospects, ultimately determining the final tender offer price.The board of directors at House of Investment (HI) approved the sale of 14.346% of EEI Corp’s (EEI) common shares, equivalent to approximately 148.66 million shares, to Industry Holdings and Development Corp. (IHDC) at Php7.23 per share. This transaction, totaling Php1.08 billion, is part of HI’s strategic reshuffling of its portfolio and follows a previous divestment of a 20% stake in EEI to RYM Business Management Corp (Group of House Speaker Martin Romualdez).

CONSUMER DISCRETIONARY

Jollibee Food Corp (JFC) is planning an aggressive expansion in China, aiming to open up to 150 new stores. The expansion will be focused not only on major cities but also on areas with emerging consumer markets. This move is part of JFC’s strategy to increase its footprint in the region, leveraging the strength of its brands, including Yonghe King, Tim Ho Wan, and Hong Zhuang Yuan.Emperador Inc. (EMI) has earmarked Php7 bn in capex this year, intended for the expansion of its operations and the upgrading of its facilities and machinery. The bulk of the budget, Php6 bn, will be allocated towards enhancing its five facilities in Scotland, which produce its flagship single malt whiskies. The remaining funds will be used for improving brandy facilities in the Philippines, Spain, and Mexico.Century Pacific Food Inc. (CNPF) disclosed that its majority shareholder, Century Pacific Group (CPG), has conducted a private placement for 114 mln common shares of CNPF, equivalent to a 3% stake in the company. The shares were sold at Php24.6/sh, representing a 5.20% discount from its last closing price prior to the transaction. This move increased CNPF’s float to 34%, with the proceeds set to be deployed across various investments.

ENERGY

The Philippine government is contemplating the reassumption of control over the National Grid Corp. of the Philippines (NGCP), which has partial ownership by a Chinese state-owned firm, due to national security concerns. The government plans to conduct a comprehensive study or hearings to investigate the extent of foreign influence on NGCP and its potential implications for national security.First Gen (FGEN), a prominent renewable energy producer in the country, is reportedly exploring the possibility of delisting from public trading. This decision has garnered significant investor attention, as evidenced by a 25% increase in FGEN’s stock price over the past three weeks. There is speculation about a potential tender offer to minority investors, making FGEN’s future actions a noteworthy aspect for market observers to monitor.

LOCAL MARKET UPDATE

The PSEI ended the week in negative territory as it fell by 0.4576% (30.02bps) to 6,530.20. CNVRG (-2.75%), ICT (-2.50%) and BPI (-2.43%) led the index decliners while MONDE (+3.06%), SMC (+2.31%) and AGI (+0.76%) were the top index gainers.