BAIPHIL Market Watch – 01 June 2016

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BAIPHIL

MARKET WATCH

01 June

2016 Legend

Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE

PHILIPPINES

Financial Rates Current Previous

USD/PHP 46.7550 46.7500

30-D PDST-R1 1.6500% 1.6467%

91-D PDST-R1 1.7594% 1.7656%

180-D PDST-R1 2.4850% 2.4942%

1-Y PDST-R1 2.5203% 2.0320%

10-Y PDST-R1 4.4767% 4.2133%

30-D PDST-R2 1.6467% 1.6457%

91-D PDST-R2 1.7547% 1.7641%

180-D PDST-R2 2.4383% 2.4875%

1-Y PDST-R2 2.5170% 2.0314%

10-Y PDST-R2 4.4733% 4.2133%

Stock Index Current Previous

PSEi 7,401.60 7,464.34

Market Cap (Php Trillion) 12.208 12.281

Total Value (Php Billion) 32.804 15.385

PSEi Performers Closing % Change

Top Gainers

Keppel Phil. Holdings 5.99 15.19%

Da Vinci Capital Holdings 5.32 11.76%

Citystate Savings Bank 10.16 11.53%

Top Losers Liberty Telecoms Holdings 3.00 -17.13%

Central de Azucarera De Tarlac

170.00 -15.00%

LMG Chemicals Corp 1.85 -14.35%

ASIA-PACIFIC

Stock Index Current Previous

NIKKEI 17,234.98 17,068.02

HANG SENG 20,815.09 20,634.40

SHANGHAI 2,916.62 2,823.86

STRAITS 2,791.06 2,802.83

SET 1,424.28 1,422.61

JAKARTA 4,796.87 4,838.20

Currency Exchange Current Previous

USD/JPY 110.5300 110.2354

USD/HKD 7.7693 7.7564

USD/CNY 6.5854 6.5613

USD/SGD 1.3776 1.3806

USD/THB 35.7210 36.7123

USD/IDR 13,648.00 13,584.00

REST OF THE WORLD

Stock Index Current Previous

FTSEuro First 300 1,363.54 1,372.90

FTSE 100 6,230.79 6,270.79

DAX 10,262.74 10,333.23

CAC 40 4,505.62 4,529.40

DOW JONES 17,787.20 17,873.22

S&P 500 2,096.95 2,099.06

NASDAQ 4,948.06 4,933.50

Various Current Previous

EUR/USD 1.1132 1.1135

GBP/USD 1.4478 1.4626

Gold Spot (USD/oz) 1,215.50 1,208.90

Brent Crude(USD/bbl) 49.67 49.52

3-M US Treasury Yield 0.28% 0.30%

10-Y US Treasury Yield 1.83% 1.85%

30-Y US Treasury Yield 2.63% 2.65%

PHILIPPINES

The local equities market ended negative on month-end rebalancing and as investors took the opportunity to book profits ahead of the June

FOMC meeting. The PSEi index lost 62.74 points or 0.84%, closing at 7,401.60. All indices ended in the red led by property(-1.72%)

and industrial (-0.97%). Market breadth was mostly negative with 118 declines and 76 advances while 44 were unchanged. Total value turnover is at Php32.80 billion. Foreigners were net buyers at Php2.31 billion.

In the local fixed income space, prices of government securities went down given hawkish tone from Fed members. On average, the curve rose by 1.41 bps, led by the long-end, which increased by 5.0 bps. The short-end and belly of the curve went up by 0.2 and 0.3 bp, respectively.

The Peso was slightly down against the US Dollar as investors were defensive given hawkish rhetoric from the Fed, but this was slightly

offset by net foreign buying in the equities market. The peso went down by 0.5 centavos or 0.01% to close at 46.755 to a dollar.

Money supply continued to grow in April, mainly driven by the sustained demand for credit, the central bank revealed on

Tuesday. Domestic liquidity or M3 – the broadest measure of money within an economy – grew by 12.7 percent year-on-year in April to

P8.6 trillion, and faster than the 11.7-percent recorded in March. "Money supply continued to expand due largely to sustained demand for credit," the Bangko Sentral ng Pilipinas (BSP) said in an emailed statement. "The sustained expansion of M3 during the month indicates that money supply remains sufficient to support economic growth," it added. According to the BSP, domestic claims rose by 18.4 percent in

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April, compared with 15.4 percent in March after credits to the private sector increased at a faster pace. Most bank loans last month were channeled into key production sectors such as real estate; electricity, gas, steam and air conditioning supply; wholesale and retail trade;

and repair of motor vehicles and motorcycles. Loan proceeds also went to financial and insurance activities; and information and communication. Net claims on the central government grew by 42.0 percent in April, faster than the 33.6 percent in March. Meanwhile, net foreign assets (NFA) in peso terms grew by 8.0 percent in April from 5.8 percent in March, driven by robust foreign exchange inflows from

overseas Filipinos' remittances and business process outsourcing receipts. For banks, however, the NFA expanded at a slower pace compared with foreign liabilities which grew largely on the growth in investments in marketable debt securities. "Going forward, the BSP will continue to monitor monetary conditions closely to ensure that liquidity growth remains consistent with the BSP's price and f inancial stability

objectives," it said. The Philippines and India have breathed new life into their trade relationship during the 12th Meeting of the Joint Working Group

on Trade and Investments (JWGTI) held in New Delhi, according to a statement released by the Department of Trade and Industry . An 11-member delegation, led by Philippine Board of Investments Governor Lucita P. Reyes, represented the Philippines in the meeting that was attended by a 20-member delegation from India, headed by Joint Secretary of the Department of Commerce Ravi Capoor. The

two countries identified areas of cooperation in the following areas: the coconut and rice industries, customs, Science and T echnology, Information Communication Technology, pharmaceuticals, micro, small, and medium enterprises development, and higher education. They also pledged to create a mechanism for shared statistical data as well as to fast-track the process of pending memoranda

between both countries. Philippine-Indian trade has been valued at $1.8 billion for 2014-2015. The next JWGTI will be held in Manila in the late 2017.

President Benigno Aquino III has signed into law the Customs Modernization and Tariff Act (CMTA), the Bureau of Customs said on Tuesday. The law updates the Tariff and Customs Code, last amended in 1978, and is supposed to modernize the bureau's facilities, procedures, and overall operations. With the CMTA in place, several reforms will be implemented at the BOC that include full electronic

processing of shipments, streamlining of export and import procedures, and simplified processes for seizure and disposition of illegal goods. The measure will also raise tax exemptions on balikbayan boxes as it raises the value of de minimis – small items usually of minor or lacking importance – from P10 to P10,000. "We, at the Bureau of Customs, are pleased to announce that Republic Act No. 10863,

otherwise known as the Customs Modernization and Tariff Act (CMTA), has been approved and signed into law by His Excellency President Benigno Aquino III," Customs Commissioner Alberto Lina said in an emailed statement. The act will also reduce corruption and technical smuggling, as well as improve revenues, as it establishes a "cashless, faceless, and paperless environment," Lina noted. "Efforts

are already underway to attune current BOC systems to the new provisions in the CMTA focused on business process re-engineering, computer-based systems development, organizational development, capacity building, and external communication and education," he said.

President-elect Rodrigo R. Duterte assembled his Cabinet on Tuesday, naming a former coup leader and a lawyer to head

revenue-generating agencies, a day after a joint session of Congress declared him the winner of the May 9 presidential elections.

“I can assure you, they are men of honesty and integrity,” Duterte told a news conference in Davao City, where he was mayor f or more than two decades before he was elected president. The newly appointed Cabinet officials were introduced to the media by Mr. Duterte’s spokesperson Salvador S. Panelo following a closed-door meeting that started late afternoon. Yesterday marked Mr. Duterte’s first press

briefing as the country’s 16th President. It was held at the hardly-used presidential guesthouse here built during the term of former President Gloria Macapagal-Arroyo. The appointees for Cabinet secretaries are: • Agriculture -- Emmanuel F. Piñol

• Agrarian Reform -- Rafael V. Mariano • Energy -- Alfonso G. Cusi • Finance -- Carlos G. Dominguez

• Budget and Management -- Benjamin E. Diokno • Transport and Communications -- Arthur P. Tugade • Interior and Local Government -- Ismael “Mike” D. Sueno

• National Defense -- Delfin N. Lorenzana • Science and Technology -- Fortunato T. Dela Peña • Social Welfare and Development -- Judy M. Taguiwalo

• Education -- Leonor M. Briones • Interior and Local Government -- Catalino S. Cuy • Public Works and Highways -- Mark A. Villar

• Foreign Affairs -Perfecto R. Yasay Jr. • Justice -- Vitaliano Aguirre II • Socioeconomic Planning -- Ernesto dM. Pernia

• Security adviser -- Hermogenes C. Esperon, Jr. • Philippine Drug Enforcement Agency -- Isidro Lapeña • National Intelligence Coordinating Agency -- Alex Monteagudo

• National Disaster Risk Reduction & Management Council -- Ricardo Halad • Bureau of Internal Revenue -- Cesar R. Dulay • Bureau Immigration -- Jaime Morente

• Bureau of Customs -- Nicanor Faeldon • Land Transportation and Franchising Board -- Martin Bogra • Land Transportation Office -- Edgar Galvante

• National Bureau of Investigation -- Dante Gierran • Office of the Solicitor General -- Jose Elnida • Presidential Assistant for Visayas -- Michael Diño

• Peace adviser -- Jesus G. Dureza • Cabinet Secretary -- Leoncio B. Evasco, Jr. • Executive Secretary -- Atty. Salvador C. Medialdea

• Presidential Assistant for the Visayas -- Michael Diño • Philippine National Police -- Police Chief Ronald M. dela Rosa “It’s not a simple job if you are looking for the composition of the cabinet... It took me several days, when I’m not around in the public eye, I

am reviewing papers of the recommendees,” Mr. Duterte said. “I have assured the country, the businessmen, and the community that I will

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level, really level, the playing field,” he said.

Incoming President Rodrigo R. Duterte’s choice as Agriculture Secretary, Emmanuel F. Piñol, said he will allow private traders to import rice after all, but will impose more rigid safeguards against smuggling. “We will still allow imports from private traders,” said Mr. Piñol in a phone interview over the weekend when sought to confirm his plan to ban private importers. Mr. Piñol had said the directive

came from the President-Elect. “What happened is that the privilege [of importing] was abused. We will meet with them on Tuesday (today) and discuss how they can import while keeping them from abusing the use of import permits,” Mr. Piñol added. President Benigno S. C. Aquino III recently signed a law imposing heftier fines on the large-scale smuggling of agricultural products. Mr. Piñol is set to meet in

Davao City with rice millers and the National Food Authority (NFA) to discuss the country’s rice stock. He said the governmen t should prepare for a possible rice crisis on the back of one of the severest El Niño episodes the country has endured in years. “This early, we’ll look at the inventory of NFA, rice traders, and millers with the expected rice shortage due to El Niño” said Mr. Piñol. The Department of

Agriculture (DA) forecast palay losses to hit 957,000 metric tons (MT) in the first semester. The agency’s latest report shows losses at 230,659 MT. DA Undersecretary for Operations and Agribusiness and marketing Emerson U. Palad said the DA “[does] not see any possibility of a rice crisis.” “[B]ut considering the La Niña, that’s something we cannot forecast,” he said. The Philippine Statistics Authority -

- Bureau of Agricultural Research recently released its first quarter production report showing palay output slumping by 9.97% to 3.9 million tons, lower than the government forecast of 4.01 million tons.

Philippine banks are seen to defy a regional trend of a slip in asset quality given their low exposure in lending to oil firms and other commodity-related borrowers, Moody’s Investors Service said in a new report. In a May 30 report, the global debt watcher said banks across Asia-Pacific are likely to hold more problem loans as a continued slump in global commodity prices puts pressure on

companies in terms of settling their bank dues. “We expect that the quality of some of this (loan) exposure will continue to deteriorate, based on our assessment that energy and most other commodity prices will remain lower for longer,” the report read. “Such price dynamics will further dampen corporate earnings and weaken the debt repayment capacity of many commodity firms, creating pressure on or

delaying the recovery of asset quality and profitability of banks in the region.” “We note that profitab ility is already under pressure in most Asia-Pacific banking systems, owing to worsening margins and rising credit charges.” Companies rely on bank loans to finance their expansion activities. Banks’ credit exposure to companies such as oil and gas, metals and mining, shipping, energy, and farming averaged

at 7% by end-2015, the debt watcher said, though noting that there is a wide variance across countries. “We expect low oil prices to weaken the debt service metrics of Asian firms active in the oil and gas services sector -- such as exploration, drilling and other oil field support -- with problem loans to rise,” Moody’s said, pointing out that lenders in Singapore and Korea will likely be hit the most given their

exposure to the oil and gas sectors. Banks in Mongolia also stand most vulnerable to low commodity prices due to their “outsized exposure” to mining firms, Moody’s said, which contributed to a 14.4% share of bad loans across its banking system last year. Meanwhile, Philippine banks are expected to feel the least credit pressure from the continued price slump, given a low exposure to global commodity

trade and lending to these sectors. “The least affected will be banks in Hong Kong, Australia, Taiwan and the Philippines, because of either the banks’ low exposure to the energy/commodity sectors, the low reliance of these economies on commodities exports, or both,” Moody’s said. In particular, the credit rater said only 4% of Philippine banks’ total loans were for energy and commodity-related activities. This is

among the lowest exposures across 13 economies. Listed commodity firms also made up just 13% of the total debt incurred by non-financial firms on the stock market, which prodded the debt watcher to assign a “low” tag in terms of overall credit pressure among Philippine banks. System-wide non-performing loans stood at 2.23% across the Philippine banking sector, with P145.165 billion of bad

debts against total loans amounting to P6.507 trillion for the first three months of 2016. The ratio has improved from the 2.47% share seen at end-March 2015. Still, banks remained profitable as of end-March, raking in a collective P38.956 billion during the first quarter which is 6.4% higher than the P36.623-billion net income posted during the comparable year-ago period. Despite higher credit risks, Moody’s said

the current trend is unlikely to merit downgrades for banks as they stand well-capitalized against such shocks: “Overall, banks in Asia Pacific demonstrate good buffers against rising credit risks, despite the likely continued pressure on the quality of their commodity portfolios.” In November, the international credit rater tempered its outlook for Philippine banks to “stable” from a “positi ve” tag given in

2012 as capital levels are seen to decline as the lenders pursue the consumer segment. The Philippines slid by a notch in the annual global competitiveness ranking of the International Institute for Management

Development in 2016, the Asian Institute of Management Rizalino S. Navarro (AIM RSN) Policy Center said Tuesday. The country's strength against external headwinds and real economic growth failed to make up for the drop in sub-factor rankings on prices such as food costs. The Philippines landed in 42nd place out of 61 countries this year, a notch lower from 41st the previous year. It was assessed in

terms economic performance, government efficiency, business efficiency, and infrastructure using international statistical data from international and national sources. An opinion survey was also generated with over 300 criteria to measure the competitiveness of economies. In an emailed statement released by the AIM RSN Policy Center, the Philippines tumbled four notches to 38th place from the

34th in the international ranking on economic performance. “Ranking 2nd in terms of resilience to external shocks, and 3rd in forecasted real GDP growth was not enough to make up for decreases in sub-factor rankings for prices – the country ranked 57th in food costs – and international trade,” it said. The Philippine Statistics Authority has reported that the GDP grew by 6.9 percent in the first quarter of 2016.

The International Monetary Fund is forecasting the Philippine economy to grow by 6.0 percent this year , a “favorable” outlook albeit subject to increased downside risks such as the lower growth in China and the region, higher global financial volatility and capital outflows, and weather-related disruptions. Despite the drop in economic performance, the Philippines fared better in other categories such as business

efficiency where it improved by two notched to 24th from 26th, on the back of improvements in productivity and efficiency, management practices, and attitudes and values sub-categories. “Particularly, the country ranked fifth in real growth of overall productivity. Likewise, the Philippines ranked fourth in availability of skilled labor, and third in the executive opinions survey for the flexibility and adaptability of

Filipinos,” the policy center noted. The country improved under the infrastructure cr iteria and landed in 55th place or two notches up from 57th, despite registering “poor marks” in human development, pupil-teacher ratios, communications technology, and pollution management. It also scored higher in business efficiency, rising two places to 24th from 26th after noting a better performance in productivity and

efficiency, management practices, and attitudes and values sub-categories. “Particularly, the country ranked fifth in real growth of overall productivity. Likewise, the Philippines ranked fourth in availability of skilled labor, and third in the Executive Opinions Survey for the flexibility and adaptability of Filipinos,” the policy center noted. Meanwhile, the efficiency ranking of the Philippine gove rnment was

unchanged at 36th place – performing “well” in certain criteria, and ranking fifth for the positive impact of the central bank policy on the economy. According to the policy center, the latest Philippine ranking “reflects a general decline in the competitiveness of most Asian countries in the 2016. "The rankings of Taiwan, Malaysia, Korea Republic, and Indonesia also dropped markedly over the last year,” it said.

This year’s list was topped by Hong Kong, which unseated the United States. The US was the top country on the list for three consecutive years. It made third place this time around, while was second Switzerland. “The United States, which still tops the economic performance and infrastructure criteria, lagged behind the smaller economies in terms of government and business efficiency,” AIM said.

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The Bangko Sentral ng Pilipinas has approved the entry of South Korea's second largest lender by asset, Woori Bank, into the

Philippines. In a statement, Woori Bank said it has received approval to acquire a 51 percent stake in the Gaisano family's Wealth Development Bank, which has 16 branches and an asset base of P7 billion. Under the partnership, Wealth Development Bank can gain access to overseas Filipinos in South Korea as well as to the millions of South Korean tourists and expatriates coming into the Philippines.

The acquisition will increase Woori Bank's presence to 19 countries. The purchase is expected to be completed in the first half of the year. Rizal Commercial Banking Corp. (RCBC) is looking to surpass its first-quarter loan portfolio growth, with all segments of its

lending business expected to drive growth and on the back of the bank’s efforts to expand its market reach. The banking arm of the Yuchengco-led conglomerate saw its loan portfolio expand 12% to P302 billion in the first quarter of 2016 as all market segments sustained their growth momentum. Average loan volumes of corporate, consumer and small and medium enterprises (SMEs) increased

15%, 18% and 13% respectively. Last year, RCBC said it continued to build up its core lending as average loan volume -- excluding interbank loans expanded by 18% -- with all market segments showing consistent growth. “In terms of sustaining our loan portfolio growth, we want to sustain or even surpass the first quarter [growth] as we move further,” RCBC Vice-President and Head of Marketing Lending

Center Abellardo B. Villarosa, Jr. said in an interview at the sidelines of RCBC’s midyear products fair last Monday. In terms of the segment driving the growth, Mr. Villarosa said RCBC sees all areas of its lending business contributing to the expansion. “There’s no such thing as one segment driving the growth because everyone’s really pushing to get more business ... [our loan portfolio] will be more than our loan

portfolio growth last year. It has to be more.” “Corporates will have the bigger volume, but we’d also like to think that growth will be coming from SME (small and medium enterprises) segment. That’s what we’re trying to push,” he added. The bank executive said RCBC is trying to expand loans to SMEs by promoting the use of its digital channels -- enterprise banking, cash management facility, online portals -- “in

order to not just sustain the growth but also surpass our target.” “We’re trying to become very, very reachable. We’d like to be the bank of choice, and how do we do that? We provide everyone with easy access to our systems by becoming digital, and of course, enterprise banking so that they don’t have to go the banks.” “Our corporate clients are used to that but of course we’d like to push that to our

consumer and SME segments. Becoming digital is the thrust so that our customers can use more of our products, everything is geared towards that already. Of course we still have the traditional banking, but we’re trying to push everyone to use digital,” Mr. Villarosa explained. RCBC’s microfinance lending thru Rizal Microbank grew 119%. The bank told the Philippine Stock Exchange when it reported

its first quarter performance that the bank’s interest income from its lending business accounted for 81% of the total interest income of the bank. Meanwhile, despite the push for digitization, the Yuchengco-led bank is adding more branches this year both in restricted and non-restricted areas to expand the listed lender’s footprint. Currently, the bank has 475 consolidated network nationwide and 1,405 automated

teller machines as of end-March. Net income of RCBC grew by 12.43% in the January to March period to P1.8 billion from the P1.6 billion seen during the same quarter last year on the back of the continued expansion of its core businesses. RCBC booked a P5.1-billion unaudited consolidated net income for 2015, up 15.2% compared to the P4.4 billion it earned the previous year.

Rizal Commercial Banking Corporation (RCBC) on Tuesday announced three new hires to key positions as it continues to

recover from the money laundering scandal that involved stolen funds from the account of the Bangladesh central bank with the

US Federal Reserve in New York. Chester Y. Luy was named as new head of treasury, replacing Raul Tan, who resigned as treasurer in April as the Senate hearing on the money laundering scandal progressed. He will assume office on June 27, 2016. Luy has 24 years of extensive experience in banking as managing director and head of corporate finance and structured transactions of the Bank of Singapore.

He also worked for Julius Baer, Bank of America/Merrill Lynch, Barclays Capital, HSBC Securities, and JP Morgan Chase Securit ies. Samuel Poblete was named as head of branch audit group while Margarita B. Lopez was named head of digital banking group. The new appointees will be working under the new RCBC president, Gil Buenaventura, who started work at the bank earlier this month.

Buenaventura replaced Lorenzo Tan, who resigned on May 6 even even after the bank cleared him of involvement in one of the biggest cyber-heists in history.

Philippine National Bank’s (PNB) expects growth in its net earnings this year to be in the “mid-teens,” with core businesses seen to drive the rise and as the lender pushes with digitization to expand its market reach. The Lucio C. Tan-owned saw its net income rise by 15% last year to P6.3 billion in 2015 from the previous year’s P5.5-billion net profit, driven by continued improvements on earnings

from its core business, particularly in its net interest income and net service fees and commissions. In the first quarter of the year, the listed bank more than doubled its net income to P2.6 billion, rising 116% from the P1.2 billion posted during the first three months of 2015. “It’s very difficult to sustain 100% growth [as seen in the first quarter] but what is sustainable is growth in our core income. Net interest income,

fees and transactions ... the momentum is there. So it could be mid-teens for net income for 2016 and so far, it’s according to plan,” PNB Executive Vice-President (EVP) and Treasury Group Head Horacio E. Cebrero III told reporters in a media briefing after the bank’s annual stockholder’s meeting yesterday. Mr. Horacio said last year, the lender also targeted mid-teens growth in net income and ended up 2015

with high-teens growth. The bank also expects added loan volume from all segments of its lending portfolio. Currently around 55% of its loan book are corporates, 28% commercial, 10% consumer and 9% are loans to the government. Over the next the next three years, the share of commercial loans will be “33-35%”, consumer to 15%, while PNB targets the share of government accounts to go down. Cenon C.

Audencial, Jr, PNB EVP for its Institutional Banking Group said the target last year was to expand net income by 12.5%. In a bid to expand its footprint nationwide, tap the unbanked sector, and cut costs, PNB said it is also pushing its digitization channels. “The challenge is how to bring down cost of financial service delivery and it will improve by technology -- if you improve service technology, it will reduce cost for

delivery of financial services,” he added. “We’re trying to partner with retailers to expand our footprint and extend our services at a retail level. Tap other market segments and the unbanked,” the bank executive further said. In its push to integrate technology in i ts operations PNB has set aside P3 billion in capital expenditure (capex) budget, of which P1.8 billion will be allotted for upgrades and new technology,

PNB EVP and Chief Financial Officer Nelson C. Reyes said. “There is a very big market for consumer business. The way we’ll do this is through partnerships to tap these underserved markets,” he said, adding that efficiency will not be in the brick and mortar side but the thrust towards digitization. Meanwhile, the bank is not closing its doors to possible acquisitions and partnerships to grow its business further. “In

relation to potential partnerships, we’re looking at a foreign bank that could bring in technology. There are no discussions yet, but we haven’t closed our doors ... We’re looking for partnerships that will give is competitive advantage. As long as it makes economic sense then we’ll look at it,” PNB Chief Marketing Officer Norman Martin C. Reyes said. PNB said the foreign partner should allow the bank to expand

its presence overseas and strengthen its local business. The bank currently has around four million individual depositors. PNB shares closed at P46.45 each yesterday, declining by P3.40 or 6.82% from Monday’s finish of P49.85 apiece.

The stock market will open up to companies with public-private partnership (PPP) contracts worth at least P5 billion, according to draft listing rules issued for public comment. The Philippine Stock Exchange, Inc. (PSE) on Monday released the proposed supplemental listing and disclosure rules applicable to the private-sector proponents of PPP infrastructure projects. The release comes

barely a year after a series of consultations that began in August 2015 and included the PPP Center, the PSE, Securities and Exchange

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Commission and the Asian Development Bank. The draft rules, according to the PSE document, “relaxed” the exchange’s listing r ules that require companies to have a three-year track record of being profitable and with operating history before going public. The PPP company

can lodge an initial listing application without meeting those standards, the PSE said. Most PPP proponents, anyway, are a consortium of companies or joint ventures newly formed specifically for the government-initiated projects. Easing the rules would be in step with most Asian exchanges -- Bursa Malaysia, Hong Kong Exchanges and Clearing, Ltd., Stock Exchange of Thailand, and Taiwan Stock Exchange -

- which, the PSE noted, have provisions for listing of infrastructure project companies, most of them financing those deals through debt and cash. “We recognize the need for PPP companies to have funding options available to them,” PPP Chief Operating Officer Roel A. Refran said in a statement issued Tuesday. “We hope that by enhancing our listing rules for infrastructure companies, PPP firms will consider

raising capital through the stock market. In doing so, both the PSE and our investor base will serve as conduits in the country’s economic growth.” Infrastructure spending -- partly through PPP -- helped buoy the economy to become one of Asia’s fastest. The supplemental rules also allow a PPP company to list on the exchange when the project cost reaches P5 billion and above. The applicant, however, can seek

initial listing only when it has commenced commercial operations or completed construction work or a phase of the project. Also, the PPP contract must have a remaining life of at least 15 years from the date of filing of the listing application. The PSE bars the principal shareholders of a listed PPP company from selling, assigning or disposing of their shares in any manner a year from the initi al listing date.

Secondary offering is also prohibited during the initial public offering (IPO) period. “Any lock-up period prescribed in the PPP contract is without prejudice to the application of this requirement,” the draft rules read. The PSE further states that funds the PPP company raised from the IPO will remain under escrow. “The escrow agent shall not release any portion of the funds for any purpose other than the

disclosed intended use of proceeds and in accordance with the timetable of expenditure,” the draft rules read. A listed special purpose company created for a particular PPP project is subject to automatic delisting upon termination or expiration of its PPP contract. “However, a tender offer to all minority/ public stockholders of record must be conducted within 30 trading days from termination or expiration of the

PPP contract,” according to the draft rules. Failure to conduct a tender offer will prohibit the listed PPP company and its p rincipal shareholders to return to the PSE for five years from the time of delisting. Directors and executive officers are further disqualified from holding such positions in other companies applying for listing within the same five-year period. The PSE has given stakeholders until June

17 to comment on the proposed rules. The government reckons it has 55 projects in the PPP pipeline as of May. Of these, 12 contracts worth P217.4 billion have been awarded since the Aquino administration launched the program in the third quarter of 2010. President-elect Rodrigo R. Duterte has expressed openness to continue the infrastructure thrust of the outgoing administration of President Benigno S.C.

Aquino III. “We expect this stance to open up more opportunities for PPP companies to address the pressing need for more infrastructure investments,” Mr. Refran said. “With these rules, we hope that we can help contribute in building more public highways, airports, power plants and other important infrastructure for our country,” he added.

San Miguel Corp. (SMC) said on Monday that it decided to divest all its shares in its telco business to PLDT Inc. and Globe

Telecom Inc. as it was in the "best interest of the consumers" and "all parties involved." “After exploring possible joint venture deals

with other potential partners, SMC was convinced that the proposal presented by both PLDT and Globe is the most expeditious, feasible, and in the best interest of the consumers, its stockholders, and all the parties involved given the current situation,” SMC said in an emailed statement. The statment came on the heels of the announcement of both telco companies that they would each acquire a 50-percent

stake in the SMC telco with a total acquisition consideration of P69.1 billion. SMC had been in talks with Australian company Telst ra Corp Ltd. to create a joint venture company which would have been a third player in the telecommunications industry. Negotiations, however, were scrapped in March after the failure of both companies to agree on an equity investment. Meanwhile, the sale also involves SMC's

700-megahertz (MHz) spectrum, highly coveted by both PLDT and Globe, which analysts and the companies say would lead to improved internet speeds in the country. “This is a sacrifice we have to make to finally unlock the full potential of our high-quality, mobile broadband spectrum faster and allow consumers access to its benefits through the combined resources, network and expertise of the two c arriers,”

SMC President and COO Ramon S. Ang said. SMC also noted that while it still believed that the best way to bring down the cost of communication services is to open up the industry to more players, the amount of time it would take to get a strategic partner, coupled with investment costs would be “better directed to areas where SMC can leverage on its track record, scale and resources such as

infrastructure and power.” Ang noted, however, that the SMC still expected to recover its investments in building its network. “Moving forward, we expect to fully recover what we have invested over the past six years building our network. But more importantly, the public should expect to get faster, affordable internet access very soon,” he said. While PLDT CEO Manuel V. Pangilinan said that their

customers may see improvement in services in the next six months, Globe CEO and President Ernest Cu said subscribers will be able to feel improvements in the next three to four months.

On the premise of an exponentially better internet service in the country, the National Telecommunications Commission (NTC) has given Globe Telecom Inc. and Smart Communications Inc. the permission to co-use certain radio frequencies in the coveted 700 megahertz spectrum previously held by San Miguel Corp. (SMC). "The NTC has today approved the use by Smart

Communications Inc. of certain radio frequencies in the 700 megahertz (MHz), 900MHz, 1800 MHz, 2300 MHz, and 2500 MHz bands," PLDT said in a disclosure to the Philippine Stock Exchange. The approval was signed on and the disclosure was released by the exchange Tuesday morning. In a separate text message, Globe Telecom Senior Vice President for Corporate Communications Yolanda Crisanto

confirmed the NTC approval. PLDT Inc. – Smart's parent company – and Globe on Monday executed a sale and purchase agreement to buy out SMC from Vega Telecom Inc. for P69.1 billion. Among the assets both companies gained under the transaction are the "much-needed" radio frequencies such as the 700 MHz which has been cited by PLDT and Globe as key to expanding mobile broadband service

in the country. The two major telcos will also receive supplementary frequencies in the 900 MHz and 1800 MHz bands which PLDT says will result in "faster and improved data services."

The Philippine Competition Commission (PCC) yesterday stressed that the Competition Law is in full effect even without the issuance of its final Implementing Rules and Regulations (IRR) as the body assures the public it will exhaust all its powers to probe the controversial $1.5-billion purchase of San Miguel Corporation’s telecommunications business by Globe and PLDT, the

duopoly in the country’s telecommunication industry where Internet service ranked second worst only to Afghanistan. While the final IRR of the law is yet to be issued, the Commission said the law is in full effect. “We remind the public and the business communi ty that the provisions of the Philippine Competition Act are fully in effect and do not require the final issuance of IRR to trigger effectivity,” the PCC

headed by Arsenio Balisacan said in a statement. According to PCC, it is within the powers of the Commission to evaluate all business agreements and transactions that may have potential impacts on market competition citing the strong public clamor for faster, cheaper, and better quality Internet and mobile services, and that these could be stymied by a lack of competition in the sector. In view of the importance

of this transaction to the public interest, “The Commission has a keen interest in this proposed transaction. The PCC will assert all of its powers provided for in the law. The Commission shall assess and take action as appropriate.” The Commission will gather more information and details on the transaction, and until such time, shall refrain from commenting further on the potential effects of the subject

transaction on competition. “We assure the public and the parties that the Commission recognizes the urgency of the matter and will move

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quickly to reach a fair assessment,” the statement added. All of the Commission’s actions are directed by its mandate to advance consumer welfare and protect the public interest through promotion of fair competition. Under the Competition Act, the Anti -Competitive

Agreements provision covers agreements that are prohibited if shown to have the object or effect of substantially preventing, restricting or restricting competition. The law also provides for “Abuse of Dominant Position”, a conduct that would substantially prevent, restrict or lessen competition and includes, among others, predatory pricing, imposing barriers to entry, discrimination in price or other terms, tying

and bundling. There is a rebuttable presumption that an entity is in a “market dominant position” if the market share of such entity in the relevant market is at least 50 percent, unless the PCC determines a new market share threshold for a particular sector. The law has also a provision for Anti-Competitive Mergers and Acquisitions provision to those mergers and acquisitions that substantially prevent, restrict or

lessen competition. “By way of exception, the PCC may exempt mergers and acquisitions if the parties are able to prove that ( i) the concentration has brought about or is likely to bring about gains in efficiencies that are greater than the effect of any limitation on competition that result or likely to result from the merger or acquisition; or (ii) a party thereto is faced with actual or imminent financial failure

and the agreement represents the least anti-competitive alternative among the known alternative uses for the failing entity’s assets.” The law further provides that parties to mergers or acquisitions, the transaction value of which exceeds R1 billion are prohibited from consummating the same until 30 days after the PCC has been notified thereof in the form and containing the information specified in the

regulations to be issued by the PCC. Failure to comply with such notification requirement renders the merger or acquisition void and the parties thereto liable to pay an administrative fine equivalent to 1-5 percent of the transaction value.

San Miguel Brewery, Inc. (SMB) could book P12 billion to P15 billion in net income by the yearend, with the company already netting P4 billion during the first quarter, its chairman said. “I think SMB is doing very well [because] for the first quarter alone, net income is P4 billion. And that’s not the peak season yet, usually Christmas season and summer,” its Chairman Ramon S. Ang told

reporters after a stockholders’ meeting in Pasig City on Monday. The beer subsidiary of San Miguel Corp. managed to grow its net income by 23% from the P3.3 billion posted a year earlier, as new campaigns further boost consumption of its products. The company’s revenues rose 23% to P23.3 billion, while sales increased 25% to P20.3 billion, following a 25% growth in volume to 51 million cases. “In the

Philippines, the company introduced new campaigns backed by consumer and trade programs to strengthen market leadership and further generate consumption,” SMB noted in a statement. Net income from the company’s Philippine operations alone jumped 18% to P3.8 billion in the first quarter of the year. SMB also registered improved results in 2015. The company posted a net income of P13.5 billion, af ter

increasing its consolidated revenues by 4% to P82.4 billion and operating income by 3% to P22.6 billion. When asked about expansion plans for the beer business, Mr. Ang said: “The beer business does not need too much expansion or what. It’s already do ing very very well.” Mr. Ang also downplayed the recently announced joint venture of rival Asia Brewery, Inc. and Heineken International B.V. for the

local production of the latter’s products. “In the beer business side, SMB does not need to do anything. W e have been competing with every major beer maker in the world, none of them were successful in competing with us in the Philippines,” he said. SMB is also expected to continue turning profits amid the liquor ban proposed by president-elect Rodrigo R. Duterte. “Liquor ban is nothing new for us. Our

volume in Davao is not affected at all. The liquor ban is up to 1 a.m. or 2 a.m., it has no effect on us,” Mr. Ang said.

Manila Electric Co. (Meralco) is looking to borrow between P10 billion and P15 billion to fund around half of its P30-billion capital

expenditure (capex) for the 2016-17 regulatory periods, its financial controller said on Tuesday. “If you look at our past long-term debt, depending on the requirement, it can be between P10 -- P15 billion,” said Betty C. Siy-Yap, Meralco senior vice-president and chief financial officer during a press conference after the utility’s annual stockholders meeting in Pasig City. “While we have the cash, certainly

there is also a need to borrow,” she added. Ms. Siy-Yap said Meralco has equity infusion requirements for its subsidiaries Meralco Powergen Corp. (MGen), Meralco Energy, Inc. (MServ) and MRail, Inc. “MGen certainly is one of them for the equity portion of our investment. Our other subsidiaries are also on expansion mode and that includes MServe and MRail,” she said. In the case of MServ, she

said Meralco, instead of infusing capital, linked the unit with a bank to allow it to borrow directly. MServ aims to be the c ountry’s premier energy services company through strategic loadside outsourcing and energy efficiency solutions. “MRail is going through another rail-related project,” she said of the Meralco unit that is engaged in engineering, construction and maintenance of mass transit s ystem. Ms.

Siy-Yap said the planned borrowing comes after Meralco withdrew its application from the Energy Regulatory Commission (ERC) for the approval of its filing on how much debt it can secure based on its exisiting equity “so that we would not have to go back for each long-term loan arrangement.” “The market condition at that point also changed. We see interest rates increasing at that time, so we withdrew our

request for a [debt-equity] ratio but certainly we would need to borrow and we are exploring other options possible for us,” she said. ERC regulates the power distribution utility within a so-called “reset period” consisting of four regulatory years. The company’s regulatory year begins on July 1 and ends on June 30 of the following year. Its fourth reset period began on July 1, 2015 and ends on June 30, 2019. In

May, ERC approved a P15.47-billion capital expenditure program for Meralco for 2016, or about P2 billion short of the amount it applied for during the period. For 2017, Meralco has a pending application for a capital expenditure program amounting to around P15.2 billion for 23 major projects costing P5.6 billion and residual projects at P9.6 billion. Meralco’s capex program for 2016 comes after the c ompany faced a

significant rise in sales in the first four months, largely because of the hot weather. However, sales volume is seen to likely decline in the coming months, amid the onset of the La Niña phenomenon, a weather aberration characterized by heavy rains and flooding. “In terms of sales volume, it will be a question of to what extent is weather the driver of what we’ve seen. There are other factors... very good economic

conditions, positive consumer and business confidence, low inflation, low interest rates... all of these are drivers,” said Oscar S. Reyes, Meralco president and chief executive officer, said. “People and businesses have more money in their pockets,” he said. Alfredo S. Panlilio, Meralco senior vice-president, said sales during the first four months of the year “was very strong.” “We’re going to end the first

four months at 12.1% ... so I expect the next few months to be a bit lower, but on top of that I think customer growth would be also strong at 3.9%,” said Mr. Panlilio, who is also the utility’s head of customer retail services and corporate communications. He said the weather may have an impact on sales for the rest of the year, “surely lower, but hopefully not too low because of the strong economy.” “W e have a lot of

new customers coming in -- big and small -- that might still push for growth,” Mr. Panlilio said. Shares in Meralco rose by 0.8% to P303.40 each on Tuesday. Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is party owned by Philippine Long Distance Telephone Co. (PLDT). Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an

interest in BusinessWorld through the Philippine Star Group, which it controls.

Maynilad Water Services, Inc. expects to spend around P42 billion from this year to 2018 to hasten the improvement and

expansion of water and wastewater services for the west zone concessionaire’s customers. Ramoncito S. Fernandez, Maynilad president and chief executive officer, said in a statement that with the capital expenditure (capex) for 2016 to 2018, “we hope to ramp up our massive investments by accelerating the completion of new projects so we can meet our service obligations to our customers and the

government.” Around P21 billion or half of the budget will be used for water projects, including service expansion, management of water losses or non-revenue water and operational support programs. Also included are the upgrade of pumping stations and the development of new water sources. Of the capex, around P20 billion has been set aside for sewerage and sanitation program. The amount covers the

construction of sewage treatment plants, laying of conveyance systems, acquisition of lots for new wastewater facilities and maintenance of

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the existing wastewater infrastructure. “Funding for Maynilad’s infrastructure investments will come from local and international bank loans, and internally generated funds,” the company said, adding that it targets to generate more than 126,000 jobs from the three-year spending

program. Last year, Maynilad initiated arbitration proceedings against the government for its refusal to pay the company for losses incurred from the deferred tariff hike implementation. Metropolitan Waterworks and Sewerage System (MWSS) in 2013 rejected the company’s petition for an P8.58/cubic meter (cu.m.) hike in its basic water charge and instead ordered Maynilad to reduce its rate by P1.46/cu.m.

The appeals panel’s decision resulted in a hike of P3.06/cu.m. in Maynilad’s tariff but the approved rate includes the corpor ate income tax component. However, the regulator wants to exclude the tax component before giving the green light for implementation of the appeals panel’s ruling, but Maynilad had said it wouldn’t settle for a rate less than what was approved by the appeals panel. Maynilad has filed a

claim for a P3.44-billion sovereign guarantee, covering revenue losses from Jan. 1, 2013 to Feb. 28, 2015 due to delayed implementation of appeals panel-approved rate hike. The concessionaire had said it has been incurring an additional P208 million in losses for every month of delay. Metro Pacific Investments Corp., which has a 52.8% stake in Maynilad, is one of three key Philippine units of Hong Kong-based

First Pacific Co. Ltd., the others being Philex Mining Corp. and Philippine Long Distance Telephone Co. (PLDT). Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake inBusinessWorld.

Megaworld on Tuesday said it will build two more office towers in its township project in Davao City to add 30,000 square meters of office spaces. The Andrew Tan-led company said the two office towers, One Republic Plaza and Emperador House, will add to the 10-storey Davao Finance Center, which is currently being built. The three office tower projects will bring the total office inventory in Davao

Park District to around 50,000 square meters. “This is just the start of our expansion of office offerings. Being one of the top BPO destinations in the country, we see an upward tick in the demand for office spaces in Davao City in the next three years. Megaworld is committed to respond to this demand so companies will not think twice of locating here,” said Jericho Go, senior vice president at

Megaworld. The company is expecting to create 100,000 jobs in the township by 2020.

Eton Properties Philippines, Inc. will invest P30 billion over the next five years, as it expands beyond Luzon and diversifies into

hospitality and leisure developments. “We will pursue plans to expand our footprint beyond Luzon as we add leisure and hospitality developments in our portfolio,” Eton President and Chief Executive Officer Lucio K. Tan, Jr. said in a report read during the stockholders’ meeting in Manila on Tuesday. The property development business of tycoon Lucio C. Tan’s listed LT Group, Inc. will spend P30 billion in

capital expenditures over the next five years, its chief financial officer Wilfredo Z. Pineda told reporters. “But that doesn’t take into account the other capex requirements when we finalize masterplanning the Cebu property,” Mr. Pineda added. Eton Properties plans to develop a 35-hectare beachfront property in Cebu for hospitality and leisure, its Deputy Chief Operating Officer Josefino C. Lucas said. “We’re doing

basic engineering studies, likewise a basic market study for hospitality in that area. Before we actually break ground, most likely that would be next year -- mid next year,” Mr. Lucas noted. Eton Properties will spend P7 billion this year alone, almost double the P3.4 billion incurred for capital expenses last year, Mr. Pineda said. The spending program will cover existing and new projects mostly in leasable office

spaces. This will include downpayment for planned office buildings dedicated to business process outsourcing (BPO) locators. “We have acquired, last year, additional properties for offices. So, we have four BPO buildings in the pipeline. One is already for construction and three are in various stages of plans and preparations. We hope we can begin construction before the yearend,” Mr. Lucas said. The four

BPO buildings require P9 billion in investments over the next five years. The company’s gross leasable area is expected to increase to 350,000 square meters by 2020. “But it will progressively increase in between as the other BPOs are completed particularly the BPO Five, which will breakground this month,” Mr. Pineda said. Rental income accounted for 47% of the company’s revenues last year. This largely

came from seven BPO buildings, which were fully leased out. Eton Properties saw its rental income rise 58% year -on-year to P1.17 billion in 2015, driving the company’s full-year net income 161% higher to P313.25 million. The company will continue to build and expand its market, as economic prospects remain bright and demand for office space from the BPO sector remain strong, Mr. Tan said. “Our goal is

to not just expand Eton Properties’ footprint, but to make it more visible and more entrenched in the markets that truly count,” he added.

Mass housing developer 8990 Holdings has unveiled a new medium-rise residential development project in Cebu, targeting the

working class in the city of Mandaue. The project—Urban DECA homes (UDH) Hernan Cortes—is the fourth project to be launched by 8990 Holdings this year and its third medium rise township project in Cebu. 8990 Holdings will spend P573 million for the construction of 17 residential buildings with four storys each, the company said in a press statement. UDH H. Cortes will produce a total of 1,596 housing

units in the 3.2-hectare lot in Kasambangan in Cebu. A studio-type unit in this project will have a footprint of 26.8 square meters. Two-bedroom units are offered with a size of 36.5 square meters. The project is behind the Cebu Country Club Golf Course. It is between Cebu City and Mandaue City. “We are pleased with the turnout of reservations in the launching of UDH H. Cortes, this is an indicat ion of a huge

unmet demand in affordable housing that 8990 DECA Homes is able to serve,” 8990 Holdings Januario Jesus Atencio said. “The location is perfect for people working in Cebu City and people working in the booming city of Mandaue, and with affordable prices of P1.15 million to P1.475 million, we are confident that this project will be a hit in Cebu.” Atencio added. 8990 Holdings’ net profit grew by 10 percent year-on-

year to P1.03 billion in the first quarter this year. For 2016, the mass housing developer sees its net income growing by 20 percent to P4.8 billion on the back of a 24-percent increase in revenues to P12 billion.

Alliance Select Foods International, Inc. (ASFI) is looking to expand its market share in the United Kingdom (UK), which is among the five biggest tuna importers in the European Union (EU). In a statement issued Monday, the listed tuna and salmon product manufacturer unveiled plans of bringing more products to the UK. “The UK is one of the leading destinations of processed tuna in the EU

and Alliance Select is well-positioned to meet that demand,” ASFI President Raymond K.H. See was quoted as saying in the statement. The EU is the world’s second largest market for imported tuna. The UK is among the region’s five biggest importing countries. The UK imports 29% of its seafood consumption largely comrpising salmon and tuna, according to ASFI. The Philippines counts

the UK as the fifth biggest export market. Latest data from the Bureau of Fisheries and Aquatic Resources show 17,324 metric tons of fishery products worth P2.4 billion were shipped to the EU. ASFI is banking on its price competitiveness arising from the Philippines’ inclusion in the EU Generalized Scheme of Preferences Plus (GSP+), which provides for zero tariff on tuna products. The company earlier

noted the GSP+ status granted to the Philippines allows for the expansion of its existing market in the EU.

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ASIA-PACIFIC

Japanese stocks rose for a fifth straight day on Tuesday as growing expectations of an imminent U.S. interest rate hike helped the dollar hold onto recent gains against the yen, supporting exporter shares. Turnover on the broader market hit a more than one month high. Analysts say U.S. index provider MSCI's review of the component stocks of some of its indexes, which include Japanese counters, led to

increased trading activity of such stocks. The Nikkei share average rose 1.0 percent to 17,234.98. The broader Topix gained 1.0 percent to 1,379.80. Turnover was 2.874 trillion yen, the highest level since April 28. The JPX-Nikkei Index 400 advanced 1.0 percent at 12,453.26.

China stocks posted their biggest daily gain in three months on Tuesday, closing at three-week highs, with financials leading a broad rally as investors bet that MSCI will add mainland shares to its index for the first time. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 3.4 percent to 3,169.56, while the Shanghai Composite Index gained 3.3 percent, to 2,916.62 points.

"Investors are now betting China shares will be included into the MSCI Emerging Market index," said Wu Kan, head of equity tr ading at investment firm Shanshan Finance. The CSOP FTSE China A 50 ETF - the largest offshore exchange-traded fund that enables direct foreign investment to Chinese shares - saw a net capital inflow of about 2 billion yuan ($303.9 million) on Monday, the largest single-day

inflow in the past year. Southeast Asian stocks were largely cautious on Tuesday as investors waited for cues from U.S. inflation and employment data

next week, the two most important indicators for a "data-dependent" U.S. Federal Reserve. Investors will also be keeping a keen eye out for Fed chair Janet Yellen's speech in Philadelphia on Monday for clarity over whether rates would be increased as early as June. On Friday, Yellen said that if current economic conditions hold, a rate hike over the next few months would be "appropriate." W hile Fed

policymakers will be looking at inflation and jobs data as they decide whether to raise key interest rates as soon as June, traders will read through them to try and get ahead of the Fed decision. Singapore was up, underpinned by financial stocks. Vietnam rose 0.9 percent, led by gains in utilities and financials. Indonesia however fell, snapping four days of gains, dragged down by financials. Malaysia slipped for a

second straight day, with CIMB Group Bhd losing the most on the index. U.S. oil prices were lifted early on Tuesday by the start of the peak demand summer driving season, although international fuel

markets were weighed down by rising output in the Middle East, which mostly serves Asian customers. U.S. West Texas Intermediate (WTI) crude oil futures were trading at $49.50 per barrel at 0042 GMT, up 17 cents from their last settlement. Demand in North America is set to pick up along with the official start of the U.S. summer driving season this week, triggering a cut in the amount of

open short crude positions that would profit from falling prices. "Investor positioning points to further support for commodity prices as bearish bets continue to be reduced," ANZ bank said on Tuesday. The amount of outstanding managed short crude positions of U.S. WTI crude futures fell to its lowest level this year last week. International oil markets, however, were hit by a rise in Middle Eastern crude

exports, most of which go to Asia. Brent crude oil futures were trading at $49.65 a barrel, down 11 cents from their last close. Iraq will supply 5 million barrels of extra crude to its partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share ahead of an OPEC meeting this week. Iraq, which is the second-largest producer in the Organization of

Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3 .47 million barrels per day. Saudi Arabia, the world's top crude exporter, as well as fellow OPEC producers Kuwait, Iran and the United Arab Emirates, also plan to raise supplies in the third quarter in an ongoing race for market share in the world's biggest consumer region, Asia.

China’s central bank on Monday set the value of the yuan currency at a more than five-year low against the US dollar, according

to the national foreign exchange market, in a pattern of weakness in anticipation of higher US interest rates. The People’s Bank of

China put the yuan — also known at the renminbi (RMB) — at 6.5784 to $1.0, down 0.45 percent from its fix on Friday, according to data from the China Foreign Exchange Trade System. The level was the lowest level since February 2011. China only allows the yuan to rise or fall two percent on either side of the daily fix, one of the ways it maintains control over the currency. “The yuan will depreciate gradually,”

Song Yu, China economist for Goldman Sachs/Gao Hua Securities, told Bloomberg News. “The main driver for the decline would be a stronger dollar on the back of the expectation that the Fed will raise interest rates.” US Federal Reserve Chair Janet Yellen last week implied that interest rates could be lifted soon. Yellen, speaking at Harvard University on Friday, said a US rate hike “probably” would be

justified “in the coming months” if economic data continued to strengthen. China rattled global investors with a surprise devaluation last August, when it guided the normally stable yuan down nearly five percent over a week. At mid-morning on Monday, the yuan was quoted at 6.5800 to the dollar on the onshore market, weakening 0.31 percent from Friday’s close, according to the national market.

South Korea’s industrial production fell more than economists expected as weak exports and corporate restructuring of

shipbuilders continue to hurt demand and business sentiment. Factory output dropped 2.8 percent from a year earlier in April,

Statistics Korea said Tuesday, compared with a 1.3 percent decline estimated by economists in a Bloomberg survey. Production fell 1.3 percent from a month earlier. "The negative factory output data trend shows that the foundations of growth are weak," said Suh Dae Il, an economist at Mirae Asset Daewoo Co. "The government’s push to restructure shipbuilders and shipping companies will further hurt

domestic demand." Suh forecasts that the Bank of Korea will cut the benchmark interest rate by 25 basis points in July, as data continues to contradict the BOK’s view that domestic demand will support growth. The inventory-to-shipment ratio eased slightly to 124.2 percent in April, remaining at a high level after touching 128.3 percent in January, the highest since 2008. The high ratio is a sign of weak demand as

manufacturers stockpile unsold goods at their warehouses. Production of electronic components fell 12.7 percent from a year ago, while output of cars and machinery dropped 8.7 percent and 9.5 percent, respectively. South Korea will release its May readings for inflation and trade on Wednesday.

The first phase of the Global Code of Conduct for the Foreign Exchange Market, as well as principles for adherence to the new

standards, were released by the Foreign Exchange Working Group (FXWG) recently. “In a globalized world, the foreign exchange

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market is one of the most vital parts of the financial plumbing,” Guy Debelle, FXWG chairman and assistant governor of the Reserve Bank of Australia, said. “One of the guiding principles underpinning our work is that the Code should promote a robust, fair, liqu id, open and

transparent market,” he added. The FXWG was set up in July 2015 and operates under the auspices of the Markets Committee of the Bank for International Settlement (BIS). The group’s membership covers major financial centers in both advanced and emerging marke t economies, and its work is supported by the private sector Market Participants Group. Officials said it was a unique opportunit y for key

participants in the FX industry to work together to develop a code of conduct that will have far-reaching implications across the market. The Global Code is organized around six leading principles. They are: • Ethics: Market participants are expected to behave in an ethical and professional manner to promote the fairness and integrit y of the FX

market. • Governance: Market participants are expected to have robust and clear policies, procedures and organizational structure in place to promote responsible engagement in the market.

• Information Sharing: Participants are expected to be clear and accurate in their communications and to protect confidential information to promote effective communication that supports a robust, fair, open, liquid and appropriately transparent market. • Execution: Participants are expected to exercise care when negotiating and executing transactions in order to promote a robust, fair,

open, liquid and appropriately transparent market. • Risk Management and Compliance: Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, measure, monitor, manage, and report on the risks associated with their engagement in the market.

• Confirmation and Settlement Processes: Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the market. The complete Code and the adherence mechanisms, which aim to promote the integrity and effective functioning of foreign exchange

markets, will be released in May 2017. India's largest carmaker Tata Motors reported a three-fold increase in quarterly profits Monday, boosted by strong sales of luxury

British unit Jaguar Land Rover and a one-off insurance payment. Consolidated net profit for the three months to the end of March 2016 rose to 51.8 billion rupees ($771 million) from 17.2 billion rupees a year ago, the Mumbai-based company said in a report. That was well above the estimate in a survey of 25 analysts by Bloomberg News who predicted that the car manufacturer wou ld report net profits of

35.3 billion rupees for the fourth quarter. Tata said its profits had been lifted by strong worldwide sales of Jaguar Land Rover as well as money recouped from a massive chemical blast in China's Tianjin last year that killed 161 people. "Exceptional items for the quarter includes further insurance and other recoveries of Rs. 555 crores (5.55 billion rupees) on account of the vehicles damaged at Tianjin Port

explosion in Jaguar Land Rover business," Tata said in its statement. Tata said in November that it had lost 5,800 cars in the explosion last August. Tata Motors is hugely reliant on revenues from JLR, which it bought for $2.3 billion from Ford in 2008 at the height of the global financial crisis. It said JLR net sales jumped by 19 percent. Investors were upbeat ahead of the earnings announcement with shares of

Tata Motors, part of sprawling tea-to-steel conglomerate Tata, rising 4.3 percent on the Bombay Stock Exchange on Monday.

REST OF THE WORLD

European shares were steady on Tuesday, with the region's stock markets set for their best monthly performance since October, as the euro's weakness on currency markets propped up export-driven companies. The pan-European STOXX 600 and FTSEurofirst 300 indexes were flat but on track for their third straight month of gains and their best month since last October. The dollar hovered near its highest level

in two months against a basket of currencies on Tuesday on growing expectations of an imminent U.S. interest rate hike, while the euro lost ground. British financial trading and betting company IG was among the best-performing stocks in Europe, rising 2 percent after IG forecast its full-year earnings to come in slightly ahead of market expectations.

The S&P 500 wrapped up its third straight month of gains on a flat note on Tuesday as weaker energy shares countered a rise in safe-

haven utilities. The Nasdaq closed higher on Tuesday, and ended up 3.6 percent for the month, the best performance of the thr ee major

indexes. The Dow eked out gains for May to notch its fourth straight positive month. Data on Tuesday showed U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of automobiles, while another report showed an ebb in consumer confidence in May. Consumer staples ended down 0.49 percent, while consumer discretionary shares fell 0.11

percent. Energy shares were the worst performing sector, dropping 0.57 percent, as oil prices settled lower. Utilities rose 0.56 percent, leading all sectors. The Dow Jones industrial average fell 86.09 points, or 0.48 percent, to 17,787.13, the S&P 500 lost 2.11 points,

or 0.1 percent, to 2,096.95 and the Nasdaq Composite added 14.55 points, or 0.29 percent, to 4,948.06. Investors will be parsing through economic data, including Friday's employment report, to gauge whether the U.S. Federal Reserve will raise interest rates as soon as its June 14-15 meeting. The central bank caught investors off guard earlier this month when it signaled its next rate hike could be just

weeks away. After a rough start to the year amid jitters about the global economy and volatility in the oil market, the S&P 500 notched its third straight month of gains, its first such streak in two years. The benchmark index is up more than 2 percent in 2016. About 8.2 billion shares changed hands on U.S. exchanges, well above the roughly 7 billion daily average for the past 20 trading days, according to

Thomson Reuters data. Advancing issues outnumbered declining ones on the NYSE by 1,648 to 1,395, for a 1.18-to-1 ratio on the upside; on the Nasdaq, 1,591 issues rose and 1,250 fell for a 1.27-to-1 ratio favoring advancers.

Euro-area economic confidence rose for a second month in May as the European Central Bank prepares to present updated economic projections that could provide further clues about the impact of its stimulus program. An index of executive and consumer sentiment increased to 104.7 from a revised 104.0 in April, the European Commission in Brussels said on Monday. That’s the

highest level in four months and compares to a median estimate for an increase to 104.4 in a Bloomberg News survey of economists. ECB officials meeting in Vienna on Thursday are expected to keep their ultra-loose policy unchanged again after they expanded quantitative

BAIPHIL Market Watch – 01 June 2016

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easing by a third to 80 billion euros ($89 billion) in March and cut the deposit rate further below zero. Vice President Vitor Constancio said last week that he’s optimistic the ECB will reach its inflation goal by 2018, reflecting the upgraded stimulus and rising oil prices. “We expect

both the inflation and growth projections to be revised upward; that’s going to be the focus in this week’s meeting,” said Johannes Gareis, an economist at Natixis in Frankfurt. “The ECB will stress the importance of QE now that you can actually see some positive effects in the data.” Eurostat will say on Tuesday that the inflation rate rose to minus 0.1 percent in May from minus 0.2 percent the previous month, and

unemployment was unchanged at 10.2 percent in April, according to separate Bloomberg surveys. Sentiment among consumers rose to minus 7.0 from minus 9.3 the previous month, according to Monday’s report. Confidence in retailing and construction improved as well, while a measure for industry remained unchanged and a gauge for services declined. In March, the ECB forecast euro-area growth of 1.4

percent this year, 1.7 percent in 2017 and 1.8 percent in 2018, with inflation of 0.1 percent, 1.3 percent and 1.6 percent, r espectively. Asked in a Bloomberg Television interview whether he thinks consumer prices will rise faster in two years than currently pred icted, Constancio said he “certainly personally expects” so.

U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of

automobiles, suggesting an acceleration in economic growth that could persuade the Federal Reserve to raise interest rates

soon. Though other data on Tuesday showed an ebb in consumer confidence in May, spending is likely to remain supported by strong gains in house prices, as well as a strengthening labor market, which is steadily pushing up wages. Fed Chair Janet Yellen said on Friday an interest rate hike would probably be appropriate in the "coming months," if the economy continued to pick up and the labor market

added jobs. Her views were similar to those expressed in minutes from the Fed's April 26-27 policy meeting published recently. The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 1.0 percent last month as households bought a range of goods and services. Last month's increase was the largest since August 2009 and beat

economists' expectations for a 0.7 percent rise. Strong consumption lifted inflation last month. The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, rose 0.2 percent after edging up 0.1 percent in March. That left the increase in the year-on-year core PCE rate at 1.6 percent. The core PCE is the Fed's preferred inflation measure and is running below its 2

percent target. Economists expect inflation to continue creeping higher this year, citing the dollar's fading rally and a gradual increase in oil prices and wages. Financial markets are pricing in a roughly 61 percent chance of an interest rate increase at the July 26-27 Fed policy meeting, according to CME FedWatch. When adjusted for inflation, consumer spending shot up 0.6 percent, the biggest gain since

February 2014, after being flat in March. The strong consumer spending report joined data on goods exports, industrial production, housing starts and home sales in suggesting the economy was regaining momentum after growing at a lackluster 0.8 percent annualized rate in the first quarter. The Atlanta Fed is currently forecasting gross domestic product rising at a 2.9 percent rate in the second quarter. The

brightening economic outlook was dimmed somewhat by a separate report from the Conference Board showing its consumer confidence index slipped to 92.6 this month from a reading of 94.7 April. Households also had a less favorable view of the labor market. The share of respondents saying jobs were "plentiful" was little unchanged at 24.3 percent, while those reporting that jobs are

"hard to get" increased to 24.4 percent from 22.8 percent in April. Still, households continued to expect their incomes to increase. In a third report, the Institute for Supply Management-Chicago said its business index fell 1.1 points to a reading of 49.3 in May, indicating a contraction in manufacturing activity in the Midwest. The decline mirrors other regional surveys and suggests national factor y activity likely

slumped in May after two straight months of growth. Despite the retreat in consumer confidence and weakness in manufacturing, rising incomes and higher house price are likely to prop up consumption. A fourth report showed the S&P/Case Shiller composite home price index of 20 metropolitan areas rose 5.4 percent in March from a year ago. Last month, consumer spending was buoyed by a 2.3 percent

jump in purchases of long-lasting manufactured goods, with automobiles accounting for most of the increase. Purchases of nondurable goods surged 1.4 percent and spending on services increased 0.6 percent. Personal income increased 0.4 percent last month aft er rising by the same margin in March. Wages and salaries rose 0.5 percent after advancing 0.4 percent in March. With spending outpacing income,

savings fell to $751.1 billion last month from $809.4 billion in March. German unemployment declined more than economists estimated, pushing the jobless rate to the lowest level since

reunification. The number of people out of work fell by a seasonally adjusted 11,000 to 2.695 million in May, data from the Federal Labor Agency in Nuremberg showed on Tuesday. The median estimate in a Bloomberg survey was for a decline of 5,000. The jobless rate dropped to 6.1 percent. The report comes two days before European Central Bank officials convene in Vienna to set monetary policy and

assess whether they’ve done enough to sustain an economic recovery in the 19-nation euro region. The ECB is expected to keep its stimulus plan unchanged after President Mario Draghi announced an expansion of quantitative easing by a third to 80 billion euros ($89 billion) in March and cut the deposit rate further below zero. Unemployment dropped by 8,000 in western Germany and declined by 3,000

in the eastern part of the country, the report showed. Growth momentum in Europe’s largest economy remains strong after gross domestic product expanded at the fastest pace in two years in the first quarter. German business sentiment rose to the highest level in five months in May and consumer prices unexpectedly halted their decline. The Bundesbank predicts the economy will retain its underlying strength, even

though expansion will probably slow somewhat this quarter. Italy’s unemployment rate rose more than estimated in April amid weakening business and household expectations for recovery

in the euro region’s third-biggest economy. The jobless rate rose to 11.7 percent from a revised 11.5 percent in March, national statistics agency Istat said Tuesday in Rome. The median estimate in a Bloomberg survey of eight analysts called for 11.4 percent in April. The reading matched the level in January and February, while the previous high was 12.2 percent in June. “There are some posi tive signs

that suggest the employment rate can improve, but there are still a number of obstacles ahead,” Andrea Brasili, economist at Pioneer Investment Management in Milan, said before the data were released. Italy is recovering from its longest recession since World War II. Manufacturing confidence and consumer morale unexpectedly dropped this month, signaling pessimism among executives and households

over the growth prospects, national statistics agency Istat said in a May 27 report. Earlier in the month separate Istat reports showed disappointing data for both industrial sales and orders in March. At an annual meeting of the country’s main business lobby Confindustria last week, its new president Vincenzo Boccia expressed doubts about the strength of the economy. Italy is forecast to expand 1.1 percent

this year, the International Monetary Fund said in a report this month. Istat expects the unemployment rate to fall to 11.3 percent in 2016, according to economic forecasts released on May 17. That is less than the 11.4 percent expected by Prime Min ister Matteo Renzi’s government. Youth joblessness increased in April to 36.9 percent from 36.7 percent in March, statistics office Istat said in the report.

Volkswagen saw net profit fall 19 percent in the first quarter as it struggled to deal with a scandal over cars equipped to cheat in

diesel emissions tests. The company also faced plummeting sales in Russia and Brazil due to troubled economies there. Profits for the

first three months of the year fell to 2.37 billion euros ($2.63 billion) from 2.93 billion euros a year earlier. Revenue fell 3.4 percent due to lower unit sales and to exchange rate effects. Volkswagen faces heavy costs for recalls and fixes to cars with engine-control software that evaded emissions tests. CEO Matthias Mueller said in a statement Tuesday that the company “managed to limit the economic effects of

the diesel issue and achieve respectable results under difficult conditions.”

BAIPHIL Market Watch – 01 June 2016

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Supervisory Expectation on the ICAAP (2

nd Run)

- 10 June 2016 Overview of Outsourcing Framework

- 11 June 2016

e-Commerce Law, Intellectual Property and Data Privacy - 17 June 2016

BSP Circular No. 706, AMLA Law, RA 10365 and the AML Risk Rating System

- 17 June 2016 Asset Liability Management

- 18 June 2016

Excel Training for Bankers - 24 & 25 June 2016

Embedding Risk Management in New Product Development

- 25 June 2016 Counterfeit Detection

- 8 July 2016

EQ and Leadership for Bankers - 8 July 2016

Updated Guidelines on Sound Credit Risk Management (Includes BSP Cir. No. 908: Agricultural

Value Chain Financing Framework) - 15 July 2016

Signature Analysis & Forgery Detection

- 23 July 2016

For details, please contact BAIPHIL via telephone (853-4457/519-2433) or email training@baiphil.org.

JUNE 1-15

2 Lydia King - Past President

3 Sabino Maximiano O. Eco - RCBC

4 Racquel B. Mañago - Phil Veterans Bank

7 Ana Luisa S. Lim - RCBC

11 Rosalina DL.P. Magat - Assoc Life Member

15 Edeza A. Que - PSBank

REVERSE MORTGAGE - A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage (principal or interest) is required until the

borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the

loan. Often, the lender will require that there can be no other liens against the home. Any existing liens must be paid off with the proceeds of the reverse mortgage .

BAIPHIL Market Watch – 01 June 2016

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“A wise woman wishes to be no one's enemy; a wise woman refuses to be anyone's victim.”

- Maya Angelou

The scientific name for an ice cream headache is “sphenopalatine ganglioneuralgia”. This basically

just means “nerve pain of the sphenopalatine ganglion”. Getting a headache now GRRRR!

One snowy night, Sherlock Holmes was in his house sitting by a fire. All of a sudden a snowball

came crashing through his window, breaking it. Holmes got up and looked out the window just in

time to see three neighborhood kids who were brothers run around a corner. Their names were

John Crimson, Mark Crimson, and Paul Crimson.

The next day, Holmes got a note on his door that read: “? Crimson. He broke your window”.

Which of the three Crimson brothers should Sherlock Holmes question about the incident?

BPI Asset Management Business World Philippine Daily Inquirer Philippine Star

GMA News ABS-CBN News Bulletin Today Reuters

Bloomberg CNN Wall Street Journal Strait Times

Investopedia Brainy Quotes Goodreads Corsinet – Trivia

Trivia Of The Day Filipi-Know Phrases.Org.UK Fun, Trivia & Humor

Compiled And Prepared By: Research Committee FY 2015-2016

Director: Maria Teresita R Dean (ChinaBank Savings) Chair: Sheryll K. San Jose (Equicom Savings Bank) Members: Rachelle A Fajatin (Equicom Savings Bank)

DISCLOSURE: The BAIPHIL Market Watch (BMW) is for informational purposes only. The content of the BMW is sourced from third party websites and may be subject to change without notice. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by BAIPHIL or any of its directors, officers or employees, and BAIPHIL is not under any obligation to update or keep current this information