Philippines Microeconomic Weekly Update #39

MACROECONOMICS WEEKLY UPDATE

Foreign direct investments (FDI) in the Philippines experienced an 18% decline, totaling $2.92 billion as of April this year compared to $3.56 billion during the same period last year. The decrease in net FDI was even more pronounced in April alone, dropping by 14.1% to $876 million. This reduction is attributed to concerns about sluggish economic growth and relatively high global inflation levels, affecting investor confidence. Meanwhile, the country’s trade deficit in goods shrank by 21% year on year to $4.4 billion in May due to a significant decrease in imports and a moderate increase in exports.

On the regulatory front, the Securities and Exchange Commission (SEC) has been criticized for its slow response to technological and financial advancements, prompting them to hasten the implementation of short-selling and establish more stringent rules for cryptocurrencies and digital asset exchanges. Despite worries about inflation, the Philippines witnessed a notable 27% YoY increase in vehicle sales in June, reaching a total of 36,311 units sold. However, month-to-month sales indicate signs of strain, declining by 8.23%, possibly reflecting the impact of inflation on consumer spending behavior.

INDUSTRY UPDATE

HOLDING COMPANIES

Holcim (HLCM) recently released a Tender Offer Report stating that its significant shareholder, Holderfin, is offering ₱5.33 per share. The tender offer period is set to run from July 10 to August 30, with settlement scheduled for September 13. HLCM’s shares were suspended on June 29 due to a block sale that reduced its public float to 5%, below the PSE’s minimum requirement of 10%. The tender offer price is 37% higher than HLCM’s last market (₱3.87) price before the suspension but significantly lower than its peak of ( ₱17.00) in early 2017.

ENERGY

Greenergy (GREEN), recently announced that its parent company, Earthright Holdings Inc (EHI), issued 6,600 primary shares to Li Pei Feng. This transaction resulted in a reduction of Anthony Tiu’s stake in EHI from 99.96% to 60%. EHI actively trades GREEN stock and disclosed that it currently owns 55.20% of the company’s common stock and 100% of its preferred shares. Additionally, EHI recently sold its interest in 750 million partially paid GREEN common shares to MIS Maritime Corporation (MIS) for ₱187.5 million. As a result, Mr. Tiu’s holdings in GREEN decreased from 58.99% to 38.16%, while MIS now owns 20.83% of the company.

INFRUSTRUCTURE

Board of directors of Megawide, an infrastructure construction firm, has approved the purchase of 100% of the outstanding stock of PH1 World Developers for ₱5.2 bn. The acquisition is a related party transaction as both companies are owned by the same management group. Megawide has been suspended by the PSE under its Substantial Acquisition Rule and will remain suspended until MWIDE is able to provide comprehensive disclosure on the said acquisition.

RETAIL

The Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund or issue a tax credit certificate to San Miguel Brewery Inc. (SMB) for an amount of P146million. This is a result of the BIR’s erroneous, excessive, and/or illegal collection of excise taxes on specific San Miguel products during the year 2018. The CTA stated that the BIR collected an additional P0.59 per liter, as the correct amount should have been P24.43 per liter instead of the collected P25.03 per liter.

REAL ESTATE INVESTMENT TRUST 

Filinvest REIT (FILRT) aims to diversify revenue sources and improve occupancy rates through a renewed push. The company is in advanced talks with two major BPO firms, potentially securing 12,400 square meters of new leases. FILRT also plans to increase the share of co-working and traditional clients to boost occupancy.

BANKING AND FINANCE

According to Finance Secretary Benjamin Diokno, the merger between Land Bank of the Philippines and Development Bank of the Philippines (DBP) will be delayed until the first half of next year. The purpose of the merger is to create a single state-run financial institution, which is now expected to occur in mid-2024, slightly later than the initial target of end-2023. The delay is attributed to other priority measures being pursued by the Marcos administration.

ENTERTAINMENT 

Viva Holdings, the parent company of Viva and VivaMax, is considering an IPO to raise $250 mln USD (~₱14 bn). The IPO aims to unlock value from VIVA and fund regional expansion into Southeast Asian markets. VivaMax currently has seven million registered users, with around 600,000 paying customers (₱169). The IPO is expected to take place no earlier than 2024.

PHILIPPINE STOCK MARKET 

The PSEi performed strongly today, closing at 6,578.49 (+1.73%) influenced by the previous day’s rise in the U.S markets due to better-than-expected U.S CPI data for June. All sectoral indices ended positively, with Financials (+2.61%) and Holdings (+1.60%) leading the gains. The value turnover reached Php 5.05 billion, higher than the average of Php 3.02 billion for the past three days (excluding block sales).

The net foreign buying remained at Php 995 million, and JFC (+3.86%) and BDO (+4.23%) were the top traded stocks and among the top 5 index gainers, while WLCON (-2.16%) was the top decliner.

 

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