MACROECONOMICS WEEKLY UPDATE

Major infrastructure projects relating to liquefied natural gas (LNG) could face underutilisation or cancellation. Countries such as the Philippines, Pakistan, Bangladesh, and Vietnam could see delays or cancellations of around US$96.7bn worth of LNG-related projects.

According to Department of Trade and Industry (DTI), prices of basic necessities and prime commodities are likely to rise by between 3.29% and 10% over the next five years. DTI noted that SKUs which have increased by 10% have not raised their prices since last year.

The House Committee on Ways and Means has approved a measure on first reading that would impose value-added tax (VAT) on digital transactions. Once the bill is approved, it would subject the sale of digital services such as online advertisements, subscription services, and others that can be delivered through the internet to 12% VAT.

The interest rates on the overnight deposit and lending facilities were raised to 3.25% and 4.25%, respectively. This recent policy action brings the Bangko Sentral ng Pilipinas (BSP)’s year-to-date cumulative rate hikes to 175bps. The latest rise in the overnight reverse repurchase facility was by 50bps.

Philippine Statistics Authority (PSA) showed in its preliminary general retail price index (GRPI) that retail prices of goods in the National Capital Region (NCR) grew by 3.5% y-o-y in Apr-22, the highest in three and a half years. This acceleration in prices was primarily attributed to the 3.6% y-o-y growth in the food index and the 33.5% y-o-y growth of the mineral fuels, lubricants and related materials index.

According to the Mines and Geosciences Bureau (MGB), the Philippine mining industry’s output surged to P112.66bn in the 1H22, driven by strong metal prices of gold, copper, and nickel. Nickel accounted for P51.32bn, followed by gold with P46.44bn, copper with P12.84bn, and silver, chromite, and iron ore with P2.07bn.

Senate Bill 135 seeks to amend Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE). It will allow registered business enterprises in economic zones (ecozones) and freeports to adopt a WFH setup without the loss of tax and fiscal incentives. Employees who are forced to work on-site would rather resign from their job because of the cost in time, money and effort.

The Bangko Sentral ng Pilipinas (BSP) sees a deceleration in the 3Q22 gross domestic product (GDP) on a year-onyear basis driven by external headwinds such as the Russia-Ukraine war and the slowdown in China and the US. However, the BSP still expects that domestic economic activity will remain firm in 2H22 given looser mobility restrictions.

The Philippine government is poised to reduce infrastructure spending from P1.19tr in 2022 to P1.18tr in 2023 due to less financial support for projects. As a share of gross domestic product (GDP), infrastructure spending will be equivalent to 5% of GDP, lower than the 5.5% estimated for 2022.

According to Agriculture Senior Undersecretary Domingo Panganiban, the retail price of sugar could go down to P60/ kg. Retail prices in wet markets are expected to be influenced by the lower sugar prices imposed to sell sugar at the suggested retail price of P70/kg. Moreover, the government is expected to inspect more warehouses to increase supply and to lower the price of the commodity.

 

INDUSTRY NEWS

Universal Robina Corp (URC) has partnered with Asahi Beverages Philippines (ABP) for a new product, Good day cultured milk drinks. It offers benefits such as it promotes production of antibodies and enhance the effects of certain vaccines. The product represents the Filipinos, having gone through adversities, now stronger due to health appreciation.

Shakey’s Pizza Asia Ventures, Inc. (PIZZA) said that it plans to fully exhaust the remaining P362m from its record high FY22 capital expenditure budget of P650m for store network expansion. As of 1H22, PIZZA opened 10 new stores, comprising of seven company-owned and three franchisee-owned outlets, from 316 stores last year.

Metro Retail Stores Group Inc (MRSGI) posted a turnaround in earnings in 1H22, generating P218.9m in net profits. This was despite the supply chain disruptions and elevated commodity prices. Revenue grew by P8.9bn on the back of the 24.7% blended same store sales growth (SSSG).

The Sangley Point International Airport (SPIA) Development Consortium is expected to bag the contract to build and operate the US$11bn SPIA project. The SPIA consortium is composed of foreign companies such as Munich International Airport GmbH, and Samsung C&T Corp.

Manila Electric Co. (MER) announced that it has started the competitive selection process (CSP) to supply 200 megawatts (MW) of baseload by 2024. Solar Philippines Batangas Baseload Corp. (SPBBC) offered a P4.65 per kilowatt-hour (kWh) headline rate for 20 years.

ACEN Australia, ACEN Corp’s (ACEN) subsidiary secured a AU$100m green long-term revolving loan from DBS Bank Ltd. This initial green loan facility is intended to help advance ACEN’s fund-raising capacity of over AU$600m to develop and construct existing and additional pipeline of renewable energy (RE) in Australia.

Megawide Construction Corp. listed its maiden fixed rate bond offering worth P4bn. Proceeds will be used to refinance MWIDE’s short-term debts, fund its capital expenditures, and meet other general corporate requirements. The issue received total tenders of P6.7bn, oversubscribed by 2.24x from the P3bn base issue amount.

D&L Industries, Inc. (DNL) targets to export 50% of its products upon the opening of its First Industrial Township expansion. The plant, located in Tanauan, Batangas, is under the Philippine Economic Zone Authority (PEZA). The expansion is expected to start operations by the beginning of 2023.

PLDT Inc. (TEL) unit Smart Communications, Inc. has rolled out 2,500 additional 5G base stations across the country, bringing its total 5G base stations to 7,300 as of end Jun-22. This also brings the company’s aggregate total base stations to 77,100 nationwide, supporting its 3G, 4G/LTE (long-term evolution) and 5G customers.

 

MINING AND OIL NEWS

 

Global Ferronickel Holdings, Inc. posted revenues of P3.61bn and net income of P640m in 1H22. FNI completed 19 shipments of ore totaling to 1,035 million wet metric tons (WMT). The company expects better weather in 3Q22 which historically delivers more than 60% of its yearly revenues.

 

BANKING AND FINANCE 

 

Metropolitan Bank & Trust Co.’s (MBT) 1H22 net income rose to P15.6bn ahead of DBS’s above consensus expectations on modest rise in interest and non-interest income as well as the flat increase in operating expenses. Net interest income grew P39.8bn, while non-interest income rose by P14.9bn on the back of higher fee-based income. Gross loans rose by P1.3tr, led by a 12% corporate and commercial lending and 16%gross credit card receivables Operating expenses was flat at P29.4bn to improve operational efficiency, resulting in 53.8% cost-to-income ratio.

 

REAL ESTATE INVESTMENT TRUST

The PSE index dropped 86.03 pts (down 1.28%) to close at 6,618.38 tracking the decline in global markets and as investors continued to take profits. The broader All Shares and other sectoral indices also closed the day with losses. 

Value turnover was retained at P5.4B while foreign outflows (-P100M). Market breadth was likewise negative as losers outnumbered gainers 151 to 37.

 

HOLDINGS NEWS

GT Capital Holdings, Inc. (GTCAP) posted a core net income of P8.1bn in 1H22 driven by higher earnings contribution from Metropolitan Bank & Trust Company (MBT). MBT’s net income rose to P15.6bn due to the rise in interest and non-interest income as well as the flat increase in operating expenses. Meanwhile, Toyota Motor Philippines (TMP) posted earnings of P3.4bn.

 

Metro Pacific Investments Corp. (MPI) disclosed that Cebu Governor Gwendolyn Garcia has asked the company to look at building a bridge from Cordova, Cebu to Bohol. Metro Pacific Tollways Corp. President Rodrigo Franco said that viability is the issue because the project cost of P90bn is high. There is a chance that financing could be raised for the feasibility study.

 

PHILIPPINE STOCK MARKET UPDATE

The PSE index dropped 86.03 pts (down 1.28%) to close at 6,618.38 tracking the decline in global markets and as investors continued to take profits. The broader All Shares and other sectoral indices also closed the day with losses. 

Value turnover was retained at P5.4B while foreign outflows (-P100M). Market breadth was likewise negative as losers outnumbered gainers 151 to 37.