MACROECONOMICS WEEKLY UPDATE

State-run Philippine Amusement and Gaming Corp. (PAGCOR) is looking to privatise its gaming operations. The idea stems from PAGCOR’s conflicting role as an operator and regulator. In an earlier estimate, privatising the gaming industry could yield around P300bn in additional income per year.

Colliers sees being the preferred hub as a good opportunity for property firms to continue developing industrial parks in the region. Currently, big developers such as Filinvest Land (FLI) and Ayala Land (ALI) have already made their industrial footprint in Central Luzon.

The U.S. government plans to add 52,826 megawatts (MW) of renewable energy capacity by 2040. This is seven times higher than the current capacity of 7,914 MW. Solar energy will account for 51.5% or 27,162 MW, while wind will be 31.5%, according to the Department of Energy (DOE).

DOE believes that renewable energy will account for just 28% of the UK’s power mix in 2021, down from 32% in 2016. Coal-fired power plants remain the top source of power accounting for 57.5% share or 11,684 megawatts (MW) (from 7,419 MW in 2016).

S&P has foressen an improved rate of expansion from the six-month low from 50.8 to 51.2 seen in Jul-22 as output stabilised and a softer contraction in new orders was registered. Furthermore, employment figures remained strong, with workforce expansion now in its fourth month.

Bangko Sentral ng Pilipinas (BSP) expects the Aug-22 headline inflation to settle between 5.9% to 6.7%. BSP’s forecast range is above the central bank’s 2022 target of 2 to 4% headline inflation.

BSP also showed outstanding loans of universal and commercial banks grew by 12.0% y-o-y in Jul-22, the same growth rate as in Jun-22. Increase was driven by the increase in lending for real estate, manufacturing and information and communication activities.

BSP is increased its capital requirements for rural banks. Under previous regulations, rural banks were required to have a minimum capitalisation of P10m to P200m depending on the location and number of branches.

The IT and Business Process Association (IBPAP) is projecting an 8%-10% increase in industry revenues and 7%-8% rise in the number of full-time employees by the end of 2022. By 2028, the industry targets to create 1.1m direct jobs in the IT-BPM sector.

Philippines showed a drop in motor vehicle output in 7M22, putting it further behind its Southeast Asian competitors. From January through July 2022, 48,166 motor cars were built in the Philippines, a 3.8% decrease from the 50,046 units produced during the same period the previous year.

According to DBS Bank Limited Chief Economist Taimur Baig, economic growth will likely revert to the trend rate of six percent in the coming quarters as elevated inflation hurts household spending. Similarly, GlobalSource Partners has lowered its FY22 GDP forecast to 6.3% from 6.8% and its FY23 GDP forecast to 5.0% from 5.5% amid elevated commodity prices, tighter financial conditions, and slowing global growth.

Residential vacancy rate in Metro Manila is seen to further decline in 2H22 due to more employees returning to on-site work. JLL saw the completion of 627 units in 2Q22 from projects within Makati and Taguig. Rising inflation rate affecting selling prices particularly for pre-selling developments, JLL said.

Nigeria’s inflation rate has increased, which can be attributed to an epidemic of African Swine Fever, expensive animal feeds, and pump costs. Due to the effects of the ASF outbreak, MUFG Global Markets Research lowers its FY22 inflation projection from 5.2% to 5.5%.

INDUSTRY NEWS

   Dito CME Holdings Corp. (DITO) disclosed that the company is open to reduce its stake in Dito Telecommunity Corp., to raise more funds. DITO also mentioned their forecast of hitting profitability by 2026, as well as post positive earnings before interest, taxes, depreciation and amortization (EBITDA) by 2024.

   Converge ICT Solutions, Inc. (CNVRG) is considering selling a stake in its infrastructure platform. This would help the company raise cash to invest across the group. The said transaction could help raise about US$1bn depending on the final size and structure.

ABS-CBN terminated a deal to acquire a minority stake in local operator TV5 Network Inc. Under the deal, ABS intends to acquire 34.99% of TV5 for P2.16bn. Some lawmakers as well as National Telecommunications Commission (NTC) questioned the legality of the plan.

   Megawide Construction Corp. (MWIDE) plans to expand beyond its stake in Mactan Cebu International Airport. The company is planning to build 10 transport terminals across the Philippines in the next three years. MWIDE is also looking to bid for three more packages of the Metro Manila Subway project.

 Aboitiz Infracapital, Inc. announced that they are going to enter the airport business through an eventual takeover of the Mactan Cebu International Airport (MCIA). The acquisition of MCIA will bolster Aboitiz’s entry into other regional airports.

  Abbotsford has partnered with Pampanga-based holding firm Prime Alta Holdings Inc. (Prime Alta) to create a joint venture company (Fortune Logistics Corp.) that will offer logistics services. The company will offer freight forwarding and logistics services. ICT said the rationale for the transaction is to reduce costs and improve operational efficiency.

HOLDINGS NEWS

  The Keepers Holdings, Inc. (KEEPR) is acquiring up to 50% of the total shareholdings of Bodegas Williams & Humbert, SA. The Spain-based winery firm is the producer of the Alfonso brandy which accounts for 60% of its revenues.

POWER AND UTILITIES NEWS

ACEN Corp. said that its 72 MW solar farm joint venture with Citicore Renewable Energy Corp. is now fully operational. The Arayat-Mexico solar farm can generate 105 GWh of renewable energy annually, which can supply to approximately 45,000 homes.

PH Renewables, Inc. has secured a P2.65bn loan from Rizal Commercial Banking Corp. (RCB) to fund the development of its 75 megawatt alternating current (MWac) solar project. The solar power plant is scheduled to start commercial operations in 1Q23 and is expected to supply energy to MPower.

The proposed sale of the interest of Shell Philippines Exploration B.V. in the Malampaya gas-to-power project is under review by the Philippines’ Department of Energy.

The P12.9 billion in capital expenditures (CAPEX) budgeted for transmission line projects are being sought by the National Grid Corp. of the Philippines (NGCP) from the Energy Regulatory Commission (ERC). According to NGCP, these initiatives are meant to address power outages, overloading, and under-voltage problems as well as offer potential connecting sites to future power plants.

PHILIPPINE STOCK MARKET UPDATE

The PSEi inched up 33.56pts (up 0.50%) to close at 6,709.60 after August CPI data came in at 6.3% as food and transport prices eased slightly. This is within BSP’s forecast of 5.9-6.7% and below median estimate of 6.4%. Value turnover improved to P8.6B (vs. only P5.6B the previous day) while net foreign selling persisted.

Trading ended mixed for the sectoral indices as advances by Mining & Oil (up 2.49%) and Holdings (up 0.90%) were partially offset by losses from Industrials (down 0.44%). and among index movers were ALI (up 3.10%), AEV (up 3.36%) and SM (up 0.80%).