Land Asia June Expansions

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FINAL  Final3 Final2

Peso declines ahead of US payrolls data

THE PESO closed weaker against the dollar yesterday despite relatively quiet trading, as market players await the release of jobs data in the United States later this week that could give hints on the pace of future interest rate hikes there.

The peso closed at P49.82 against the greenback on Monday, seven centavos weaker than its P49.75-per-dollar finish last Friday.

The local unit opened at P49.725 versus the greenback, slightly stronger than its previous close and also its intraday high. It succumbed to the dollar’s strength later in the session, though, with its trough for the day seen at P49.85.

Two traders interviewed yesterday said the session was relatively muted, with market players focused on the release of key economic data in the US in the coming days.

“Trading has been very quiet; the recent range is still holding for now. The market is still looking forward to employment reports [from the US],” one trader said in a phone interview.

The US will release non-farm payrolls (NFP) data on Friday. Market players are expecting that some 185,000 jobs were created in May coming from 211,000 new positions in April, while unemployment is seen to hold at the 4.4% level.

Meanwhile, the privately-commissioned ADP National Employment Report will be released a day before the official data.

Strong labor figures would help shape the Federal Reserve’s decision on the timing of an interest rate hike, while a disappointing turnout may defer plans for a fresh lift-off. Some analysts are doubting chances of a rate hike during the Fed’s upcoming June 13-14 review.

A second trader added that the peso likely moved alongside Asian currencies as the dollar strengthened yesterday, with the local unit simply consolidating.

Both traders also said that President Rodrigo R. Duterte’s certification of the tax reform bill as urgent did not affect the day’s trading, as the passage of the proposal within the year has been already “priced in” by investors.

To recall, the peso strengthened versus the dollar last May 4, which traders attributed to the passage of the tax measure at the committee level of the House of Representatives.

For today, the peso is still likely to trade range-bound, with the first trader pointing out that the dollar is unlikely to budge with the US observing a holiday in time for Memorial Day.

The first trader expects the peso to trade within P49.70 to P50 on Tuesday, while the second expects a P49.75-P49.95 range.

ASIAN UNITS WEAKEN

Asian currencies paled against a stronger US dollar on Monday, with markets little fazed by a ballistic missile test by North Korea, but trading was subdued as key financial markets were closed.

The dollar index was up about 0.03% against a basket of currencies, extending Friday’s rally when it hit a one-week high on positively revised US gross domestic product data.

Earlier in the session, North Korea fired about one short-range ballistic missile that landed in the sea off its east coast, the latest following two successful tests of medium-to long range missiles in defiance of world pressure and threats of more sanctions.

Investors are also awaiting China’s official factory activity data, due on Wednesday, which is expected to show the slowest pace of growth in eight months, according to a poll by Reuters. Analysts expect China’s overall economic growth to slow gradually over the rest of the year. — with Reuters

Duterte tags lower income tax rate, higher consumption tax bill as urgent

DOF urges House to pass tax reform package by Wednesday

MANILA — The President has certified as urgent its first tax reform package aimed at lowering personal income tax rates while slapping additional or new taxes on consumption, the Department of Finance said Monday.

Finance Assistant Secretary Paola Alvarez said the certification of urgency was issued Monday morning and was to be delivered to the House of Representatives, which was expected to pass House Bill No. 5636 on third reading at the plenary on Wednesday.

HB 5636 was the substitute bill with “moderate modifications” containing the original DOF proposal under House Bill 4774 and 54 other measures, which would adjust personal income tax brackets to correct “income bracket creeping”; reduce the maximum personal income tax rate to 25 percent over time, save for the “ultra-rich” who would be slapped a higher 35 percent; and shift to a simpler modified gross system.

It would also broaden the value-added tax base by cutting down on exemptions; increase excise taxes on petroleum, automobiles and sugar-sweetened drinks; as well as reduce the estate and donors’ tax rates.

The DOF is eyeing House approval of the first tax reform package before Congress’ sine die break on June 2, such that when session resumes on July 24, it will be then the Senate’s turn to discuss the measure, according to Alvarez.

Also, Alvarez said the DOF wanted the implementation of the new personal income tax rates by January 2018, ahead of the implementation of the excise tax hikes on oil, vehicles and sugary beverages. “We want taxpayers to feel the bigger take-home pay before the other tax increases,” she said.

In a statement, the DOF said Executive Secretary Salvador Medialdea in his May 29 letter to House Speaker Pantaleon Alvarez that President Duterte certified “the necessity of the immediate enactment of HB 5636 or the proposed Tax Reform for Acceleration and Inclusion Act (Train).”

“The benefits to be derived from this tax reform measure will sustainably finance the government’s envisioned massive investments in infrastructure thereby encouraging economic activity and job creation,
as well as fund the desired increase in the public budget for health, education and social programs to alleviate poverty,” President Duterte was quoted by the DOF as saying in a separate letter to Senate
President Aquilino Pimentel III.

Finance Secretary Carlos G. Dominguez III had appealed to President Duterte in an earlier memorandum “in the hope that the House of Representatives, from where all tax and budget laws originate, could pass the Train, which is the first package of the comprehensive tax reform program, before Congress goes on its sine die adjournment,” the DOF said.

“We believe that the President’s certification of the tax reform bill as an urgent legislative measure can help ensure timely and full passage of the tax reform package before the close of the session on June 2, 2017, so that the benefits of the reform can be felt sooner,” Dominguez told President Duterte.

The DOF said that “Train aims to make the country’s antiquated tax system simpler, fairer and more efficient, especially for the poor and low-income families, by making sizable cuts in personal income tax
rates—and to make up for the projected revenue loss, and at the same time raise funds for the Duterte administration’s massive expenditure program, by expanding the VAT base and adjusting excise taxes on oil, automobiles and other products.”

Dominguez warned of “dire consequences” if Train’s passage was delayed “given its design to help guarantee a steady revenue flow for the Duterte administration’s unmatched public investments  over the next half-decade to support its envisioned ‘golden age of infrastructure,” attract investments and create jobs, cut the poverty rate from 21.6 percent to 14 percent, and transform the Philippines into an upper
middle-income economy by the time the President leaves office in 2022.”

“Without the Train bill, the government’s strategy to embark on an aggressive expenditure program by raising deficit spending to three percent of the gross domestic product (GDP) would lead to an “unsustainable fiscal position,” which, in turn, could trigger a credit rating downgrade possibly costing the government an extra P30 billion in annual debt servicing and P100 billion more in higher borrowing costs for the public,” Dominguez said.

“Such a scenario could leave the government more vulnerable to fiscal risk because it would adversely affect the funding source for increasing state liabilities such as the pension of uniformed personnel and indigent senior citizens. With many countries including China already being downgraded, this tax reform bill serves as our country’s immunization from such threat,” Dominguez added.

Also, “the non-passage of the Train bill by the Congress would disrupt the planned increase in public investments in infrastructure, education, health and social protection, which the government seeks to undertake to make sure that the country’s continued high growth truly leads to the economic inclusion of all Filipinos,” Dominguez warned.  SFM

MVP, RSA open to partnerships with China, Russia firms

By Richmond Mercurio (The Philippine Star)
Updated May 29, 2017 – 12:00am
http://www.philstar.com/business/2017/05/29/1704463/mvp-rsa-open-partnerships-china-russia-firms

MANILA, Philippines –  Tycoons Manuel Pangilinan and Ramon Ang are not passing up on opportunities to capitalize on the country’s warming relationship with China and Russia as they welcome potential joint venture deals with firms from these nations.

Pangilinan and Ang said they are open to striking a partnership with Russian and Chinese groups should opportunities arise in line with the Philippines’ new international foreign policy.

With President Duterte’s pursuit of an independent foreign policy, the country is taking steps in strengthening bilateral engagements with non-traditional partners such as Russia and China.

Pangilinan, chairman of infrastructure conglomerate Metro Pacific Investments Corp. (MPIC), said his team is in talks with Chinese firms, mostly as contractors for its tollways and bridge projects.

He admitted, however, that his group is not acquainted to Russian firms yet.

“Yes of course we are interested to partner with them. They have several good Russian firms. We just don’t know them. That’s why Mr. (Michael) Toledo is there with two or more of our people so whatever he gives us as feedback, we’re prepared to talk to them,” Pangilinan told The STAR.

Toledo, MVP Group spokesperson, joined the Philippine business delegation to Russia to scout for possible partners for their different businesses.

The MVP Group’s different businesses include mining through Philex Mining Corp., infrastructure and tollways through MPIC., telecommunications through PLDT, water through Maynilad Water Services Inc. and media through MediaQuest Holdings.

Ang, president and chief operating officer of diversified conglomerate San Miguel Corp. (SMC), meanwhile, also expressed willingness to team up with companies from China and Russia for the group’s various businesses.

“Yes we are open to partner with everybody. But at present, we are not talking to any Russian firms,” Ang said.

Ang said he wanted to join the President’s business delegation to Russia but had to watch over some of SMC’s ongoing projects in the country.

“If it’s only possible, I’ll join all the foreign trips of the government but there is really so much work here,” he said.

SMC is in the business of infrastructure, food through San Miguel Pure Foods, fuel and oil through Petron, energy through SMC Global Power, beer through San Miguel Brewery Inc., liquor through Ginebra San Miguel Inc. and packaging through San Miguel Yamamura Packaging Group.

But while both prominent business personalities seem to welcome the government’s push for closer ties with non-traditional partners such as Russia and China, they have, meanwhile, expressed concerns over the government’s proposed hybrid approach for public-private partnership infrastructure projects.

“I think if they do that, it might affect the good standing balance sheet of the government today. The balance sheet of the Philippines is now good, but if the Philippine government suddenly borrows money for various infrastructure projects, then they will reverse that. Back to the dark days when the Philippine government’s debt is so huge,” Ang said.

Ang also pointed out the risk of corruption in government to government deals.

Under the hybrid approach, projects will be constructed by the government, of which the funding will come from a mix of sources such as bilateral loans, official development assistance and government funds

The project operations and maintenance will later on be auctioned to the private sector.

“Everyone is now moving away from government projects so why should we go back now. The thrust of good governance in every government is privatization and public bidding,” Ang said.

PH main index up on foreign buying, window dressing

By: Doris Dumlao-Abadilla
Philippine Daily Inquirer
12:24 AM May 30, 2017
http://business.inquirer.net/230386/ph-main-index-foreign-buying-window-dressing

The local stock barometer firmed up on Monday, aided by some foreign buying and month-end window-dressing activities.

The main-share Philippine Stock Exchange index added 18.54 points or 0.24 percent to close at 7,886.03.

“The Philippine market kicked off the last few days of May in the green after taking a momentary breather last Friday as window dressing started,” said Luis Gerardo Limlingan, managing director at Regina Capital Development.

Limlingan also said markets welcomed the release of real GDP (gross domestic product) growth in the United States, which was revised up by five tenths to +1.2 percent for the first quarter.

Relative to forecasts, the upside came from a larger-than expected revision to business fixed investment, though personal consumption was also revised up meaningfully. In contrast, gross domestic income and corporate profits were relatively weak.

At the local market, the day’s gains were led by the property counter, which rose by 1.44 percent while the financial and industrial indices slipped.

The holding firm, services and mining/oil counters all declined.

Total value turnover amounted to P8.6 billion. Foreigners were net buyers for the day to the tune of P674 million.

Market breadth was neutral as advancers equaled decliners (95 each).

The day’s most actively traded stock was Eagle Cement, which rose by 2 percent as public trading of its shares began.

On the other hand, the PSEi was led higher by SM Prime and Petron, which both rose by over 2 percent, while Ayala Land, Megaworld and BDO all gained over 1 percent.

GT Capital, PLDT, Ayala Corp. and Metrobank likewise contributed gains.

Outside of the PSEi, another notable gainer was Pilipinas Shell, which rose by 2.8 percent.

On the other hand, URC fell by 1.02 percent while Security Bank also dipped.

Eagle Cement marks stock debut, targets dominance in Philippines market

MANILA, Philippines – Newly-listed Eagle Cement Corp. targets to dominate the local market over the near term after a successful stock debut yesterday.

Eagle Cement chairman Ramon Ang said the company is eyeing a market share of at least 25 percent in the next two to three years.

This would propel Eagle Cement as the market leader in the country, surpassing current industry leaders Republic and Holcim, Ang said.

Eagle Cement’s current market share stands at 14 percent.

“I think by next year already, Eagle should be number one by capacity. We hope we can sell that much volume. So if we can sell seven million tons next year, Eagle will be number one right away,” Ang said.

Ang said the expected increase in its market share would be driven by the additional volume to be provided by its new factories in Bulacan and Cebu.

He said the government’s aggressive infrastructure push under the “Build, Build, Build” program also bodes well for the company.

“But majority of the cement market are really catering to general public because there are a lot of OFWs (overseas Filipino workers) that are constructing houses everywhere,” Ang said.

By next year, the company will commission a third line in its Bulacan plant, which would boost its cement capacity to 7.1 million metric tons from the 5.1 million metric tons at present.

The firm is also building a P12.5 billion cement plant in Cebu which will serve the Visayas and Mindanao markets once completed in two years’ time. The Cebu plant will have a capacity of two million metric tons.

Eagle Cement entered the market in 2010 after establishing a newly-built cement plant in San Ildefonso, Bulacan in 2008.

“Right now, we are already offering the most affordable price to our consumer because this is a 100 percent Filipino company. We want to keep in check the prices so that it is affordable to our consumers,” Ang said.

The company became publicly listed yesterday under the ticker symbol “EAGLE” in a deal that was more than three times oversubscribed.

It raised some P8.63 billion for its maiden offering, a portion of which will be used to finance the construction of its Cebu cement plant. The firm sold 500 million common shares by way of primary offer with an overallotment option of up to 75 million secondary shares.

Eagle Cement opened at P16 per share and closed at P15.30, above its initial public offering price of P15 each share.

Manila Water raises stake in Vietnam water firm

By Czeriza Valencia (The Philippine Star)
Updated May 30, 2017 – 12:00am
http://www.philstar.com/business/2017/05/30/1704778/manila-water-raises-stake-vietnam-water-firm

MANILA, Philippines – The Singapore unit of Ayala-led Manila Water Co. Inc. is raising its stake in a Vietnamese water firm to strengthen its foothold in the Southeast Asian country.

In a regulatory filing yesterday, the company said its wholly owned unit Manila Water South Asia Holdings Pte. Ltd. (MWSAH) has signed an investment agreement with Saigon Water Infrastructure Corp. (SII) for the acquisition of additional 6.15 million primary shares which will allow it to own 37.99 percent of the outstanding capital stock of SII.

SII is a holding company in Vietnam listed on the Ho Chi Minh City Stock Exchange. It aims to become the first fully integrated water services firm in Vietnam, providing both water and wastewater treatment service as well as engineering, operation and management services.

It has holdings in Tan Hiep 2, a bulk water company supplying 300 million liters per day to the state-owned utility serving the area of Hoc Mon, Ho Chi Minh City where it has 75,000 water service connections.

Outside Ho Chi Minh, SII has interest in a bulk water company that supplies 20 million liters per day in Gia Lai province, as well as a water distribution company in lam Dong province.

Manila Water said MWSAH will pay the subscription prices after SII has complied with the conditions laid down for the acquisition.

“Manila Water undertakes to provide the exchange with all the necessary information about the transaction upon the completion of the acquisition,” the firm said.

Manila Water still derives most of its income from its Metro Manila east zone concession area that covers parts of Quezon City and Makati, the southeastern parts of Manila, Taguig, Pateros, Marikina, Pasig, San Juan, Mandaluyong and Rizal province.

The company, however, has been expanding its presence overseas. In Vietnam, it already operates Thu Duc Water Holdings Pte. Ltd. and Kenh Dong Water Holdings Pte. Ltd.

Alsons revives Indonesia expansion plan

By Danessa Rivera (The Philippine Star)
Updated May 29, 2017 – 12:00am
http://www.philstar.com/business/2017/05/29/1704465/alsons-revives-indonesia-expansion-plan

MANILA, Philippines –  Alcantara-owned Alsons Consolidated Resources Inc. (ACR) is reviving its plans to expand operations in Indonesia given its proximity to its home base in Mindanao.

The company is exploring power investment opportunities in Sulawesi province in Indonesia “because of its proximity to Mindanao and encouraging information on infrastructure and economic development in the eastern part of Indonesia,” said Alsons chairman and president Tomas Alcantara.

“The north Sulawesi area is 45 minutes away from Davao by plane. In fact, even by boat, General Santos to Cebu is double the distance of General Santos – Manado (North Sulawesi’s capital). That’s how close Indonesia is. We look at that as our natural market already,” he said.

Developing that part of the country will encourage migration and solve the over-population and high density issues in major cities.

“In Indonesia, you have the Java Sumatra area. The concentration of population is there, it is their Luzon. Now the Borneo, Sulawesi, New Guinea are all but forgotten. But there is a lot of potential there: it’s highly mineralized but it’s underpopulated and under-developed for infrastructure,” Alcantara said.

ACR is looking at fossil fuel-based power projects since it is indigenous in area, he said.

Indonesia is one of the world’s largest producers and exporters of coal. According to BP Statistical Review of World Energy, the country ranks 10th globally, or has roughly 3.1 percent of the total global coal reserves.

“We are talking to our traditional partners. Toyota is already there. And then some Singaporean… but again we’re covered by non-disclosure agreement,” Alcantara said.

It was in 2012 when ACR first announced its plans to expand operations in Indonesia.

The group used to manage a diesel power plant in the country, said Oscar Benedict Contreras III, Alsons Power Head of Corporate Communications.

ACR unit Alto Power Management Corp. (APMC) provides management support to the 62.6-megawatt (MW) P.T. Makassar Power Corp. based in Indonesia.

APMC is owned by ACR and Toyota Tsusho Corp. of Japan, which acquired Tomen Corp. in April 2006. The firm is also into operations and management contracts overseas with Holcim and P.T. Makassar Power.

At present, ACR is operating a total of 363 MW in capacity.

At home, ACR is currently constructing the section 2 of the 210-megawatt (MW) Sarangani Energy Corp. (SEC) baseload coal-fired power plant in Maasim, Sarangani Province.

Within the year, the company also expects to begin construction of the 15-MW Siguil River run-of-river hydroelectric plant in Maasim, Sarangani; and the 105-MW San Ramon Power Inc. (SRPI) baseload coal-fired power plant in Talisayan, Zamboanga City.

It will soon undertake a solar power project in the General Santos-Sarangani area.

Once ongoing projects are completed, ACR-affiliated power facilities are expected to have a total generating capacity of 588 MW by the end of 2021. The said capacity will fulfill more than 25 percent of Mindanao’s projected peak power demand for that year.

3 bidders qualify for Sucat power plant

By Danessa Rivera (The Philippine Star)
Updated May 30, 2017 – 12:00am
http://www.philstar.com/business/2017/05/30/1704770/3-bidders-qualify-sucat-power-plant

MANILA, Philippines – State-run Power Sector Assets and Liabilities Management Corp. (PSALM) has pre-qualified three firms to bid for the decommissioned 850-megawatt (MW) Sucat Thermal Power Plant (STPP) in Muntinlupa City.

Out of the six bidders who initially expressed interest to bid, only three companies were found to be fully compliant. These companies are Riverbend Consolidated Mining Corp., VPD Trading and G.G. Uy Bonapor Metal Contractor Co., PSALM said in a statement yesterday.

The three interested bidders passed the prequalification process undertaken by PSALM and will be allowed to participate further in the bidding process and are expected to submit their bids for the Sucat plant.

The state-run firm has scheduled tomorrow the opening of bids for the sale of the structures, plant equipment, auxiliaries and accessories of the STPP.

The sale also includes the obligation to clean up and remediate the site which means the buyer shall return the present site to ground zero (road level) free and clear of wastes, toxic substances, debris and structures.

“The successful sale of this asset advances the interest of the government as the proceeds will be part of the additional funding source for the liquidation of the National Power Corp.’s debts assumed by PSALM,” PSALM OIC Lourdes Alzona said earlier.

GBPC to bid for Caliraya-Botocan-Kalayaan project

By Danessa Rivera (The Philippine Star)
Updated May 29, 2017 – 12:00am
http://www.philstar.com/business/2017/05/29/1704466/gbpc-bid-caliraya-botocan-kalayaan-project

MANILA, Philippines –  Global Business Power Corp. (GBPC) is keen on joining the bid for the 728-megawatt (MW) Caliraya-Botocan-Kalayaan (CBK) hydropower plant in Laguna, one of the hydropower projects offered by the government.

“If there will be an auction which we think will be critical, it’s CBK,” said GBPC president Jaime Azurin.

The company is interested in the government facility because it will complement its current roster of baseload power plants.

“Because during the off-peak, you pump water. During peak, you unload water in the upper reservoir. Majority of generators, they need those off-peak power,” Azurin said.

The CBK hydro facility consists of the 22.6-MW Caliraya plant in Lumban, 20.8-MW Botocan plant in Majayjay and the 684.6-MW Kalayaan I and II in Kalayaan facilities, Laguna.

The power facility is being operated by CBK Power Co. Ltd. — the tandem of J-Power and Sumitomo Corp. of Japan — whose IPP contract runs until Feb. 7, 2026.

Currently a major power player in Visayas, GBPC is expanding in Luzon and Mindanao through traditional power projects and renewables as it aims to double its capacity to around 1,500 to 2,000 MW in five years.

It wants to expand operations in other grids as its market share in Visayas is already at 29 percent, close to the market share limitations (MSL) of 30 percent for generation companies set by the power regulator. At present, GBPC’s total capacity is 845 MW.

The company has formed Global Luzon Energy Development Corp. to work on a 670-MW super critical coal fired plant in Luna, La Union and Mindanao Energy Development Corp. to scout for projects in the region.