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BAIPHIL Market Watch – 17 Oct 2016

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BAIPHIL MARKET WATCH

17 Oct

2016

Legend Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE

PHILIPPINES

Financial Rates Current Previous

USD/PHP 48.4400 48.3400

30-D PDST-R1 2.0724% 1.3911%

91-D PDST-R1 1.5143% 1.4018%

180-D PDST-R1 2.1404% 1.4018%

1-Y PDST-R1 1.7768% 1.7929%

10-Y PDST-R1 3.8545% 3.8499%

30-D PDST-R2 2.0723% 1.3911%

91-D PDST-R2 1.5179% 1.4018%

180-D PDST-R2 2.0536% 1.4018%

1-Y PDST-R2 1.7786% 1.7929%

10-Y PDST-R2 3.8570% 3.8497%

Stock Index Current Previous

PSEi 7,389.30 7,312.18

Market Cap (Php Trillion) 12.216 12.124

Total Value (Php Billion) 7.375 8.776

PSEi Performers Closing % Change

Top Gainers

LT Group 15.06 + 6.36

Security Bank 215.80 + 4.25

Semirara Coal Corporation 122.70 + 3.46

Top Losers

Alliance Group Inc 15.00 - 1.45

Metro Pacific Investments 7.11 - 1.25

Jollibee Food Corporation 241.00 0.00

ASIA-PACIFIC


NIKKEI 16,856.37 16,774.24

HANG SENG 23,233.31 23,144.06

SHANGHAI 3,063.73 3,061.85

STRAITS 2,815.24 2,798.02

SET 1,477.61 1,376.35

JAKARTA 5,399.88 5,356.03

Currency Exchange Current Previous

USD/JPY 104.1800 103.7799

USD/HKD 7.7583 1.7574

USD/CNY 6.7277 6.7260

USD/SGD 1.3902 1.3851

USD/THB 35.3300 35.7000

USD/IDR 13,042.00 13,040.00

REST OF THE WORLD


FTSEuro First 300 1,341.54 1,323.95

FTSE 100 7,013.55 6,977.74

DAX 10,580.38 10,414.07

CAC 40 4,470.92 4,405.17

DOW JONES 18,138.38 18,098.94

S&P 500 2,132.98 2,132.55

NASDAQ 5,214.16 5,213.33

Various Current Previous

EUR/USD 1.0966 1.1053

GBP/USD 1.2189 1.2238

Gold Spot (USD/oz) 1,251.60 1,257.40

Brent Crude(USD/bbl) 51.95 51.96

3-M US Treasury Yield 0.29% 0.28%

10-Y US Treasury Yield 1.79% 1.74%

30-Y US Treasury Yield 2.56% 2.47%

PHILIPPINES

The local equities market increased after a seven-day decline due to positive economic data within China which rallied in several

regional markets. The PSE index went up by 77.12 points or 1.06%, closing at 7,389.30. All indices were green led by mining & oil (+2.55%) and financials (+1.27%). Market breadth was positive with 132 advances and 54 declines while 40 were unchanged. Total value turnover was at Php7.38 billion. Foreigners were net sellers at Php418.44 million.

The Peso depreciated against the US Dollar due to a better-than-expected Chinese inflation data. The USD / PHP rose by 10

centavos or 0.21%, closing at 48.440. In the local fixed income space, prices of government securities fell with investors staying on the sidelines ahead of Fed Chair

Janet Yellen’s speech by the end of the day. Yields have increased by an average of 7.24 bps, led by the short and long-end of the curve which rose by 35.9 bps and 0.2 bps. Meanwhile, the belly declined by 11.5 bps.

The net outflow of so-called “hot money” in September hit a 32-month high amid profit-taking among foreign investors, coupled

with less new investments due external uncertainty and a deadly blast in the President’s hometown, Bangko Sentral ng Pilipinas

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data showed. Last month, the Philippines posted a $807.2-million net outflow in foreign portfolio investment, the highest since January 2014’s of $1.8 billion. Net outflow meant more portfolio investments left than entered the country that month. In September, the P2.1-billion hot money outflow exceeded the P1.3 billion in inflow. In a statement, the BSP attributed to “profit-taking” last month’s outflow, which was up 56.5 percent from a month ago’s $1.3 billion and 23 percent higher than year-ago’s $1.7 billion. The 27.5-percent month-on-month drop from $1.8 billion and 6.9-percent year-on-year decline from $1.4 billion in foreign portfolio investments inflow, meanwhile, were blamed by the BSP on “lingering uncertainty on the timing of the next interest rate hike in the United States; the bombing in Davao City in early September, which prompted the government to declare a ’state of lawless violence’ in the country, and the European Central Bank’s decision to discontinue its bond-buying program.” BSP data showed that September’s outflow was the highest since June 2015’s $2.2 billion, while the inflow was the lowest since April this year. The net outflow in September ended four straight months of net inflows following April’s $354.1-million net outflow, which had been attributed to market jitters ahead of the national elections on May 9. It was more than double of September last year’s $324 million in net outflow and a reversal of August’s $427 million net inflow. In September, 88.7 percent of registered investments were in Philippine Stock Exchange-listed securities, mostly pertaining to banks; food, beverage and tobacco companies; holding firms; property companies and telecommunication firms, the BSP said. All transactions yielded net outflows of $654 million in PSE-listed securities; $153 million in peso government securities; and below $1 million in other peso debt securities. The top five investor-countries in September were Luxembourg, Malaysia, Singapore, the United Kingdom and the United States, which accounted for a combined 72.3 percent of the total. The US, meanwhile, was still the main destination of outflows, with 76.7 percent of total remittances. Year-to-date, a $1.3-billion net inflow of foreign portfolio investment was recorded, as the $13.7-billion inflow as of Oct. 2 outpaced the $12.5-billion outflow. The year-to-date net inflow also reversed the $414-million net outflow a year ago. The BSP also noted that the total net inflow during the third quarter, at $687 million, improved from the first quarter’s $410 million as well as the second quarter’s $170 million. The BSP attributed the jump in third-quarter net hot money inflow to “renewed” interest in peso-denominated government securities as well as an industrial firm’s initial public offering during the July to September period. Foreign portfolio investments are in the form of placements in publicly listed shares, government and private sector IOUs, and deposit certificates.

The Bangko Sentral ng Pilipinas(BSP) last week shuttered a rural bank in Laguna, bringing the number of closed countryside

lenders so far this year to 16. In a bulletin, state-run Philippine Deposit Insurance Corp. (PDIC) said the Monetary Board, the BSP’s highest policymaking body, in an Oct. 13 resolution prohibited San Pedro City, Laguna-based Sampaguita Savings Bank Inc. from doing business. With the closure of Sampaguita Savings Bank, which had a lone branch in Biñan City, Laguna the number of shuttered rural banks thus far in 2016 already exceeded the 14 last year. As designated receiver, the PDIC took over the bank as well as its affairs, assets, branch and records on Oct. 14. BSP Deputy Governor Nestor A. Espenilla Jr. had said the rural bank sector is “evolving” such that closures as well as mergers among small lenders were seen to strengthen the banking industry as a whole. “What we are seeing is that weaker players have decided to get out of the system or combine with others so those that remain to continue servicing the market are stronger, compared with the banking system 10 years ago,” Espenilla had said. The 15 other rural banks earlier placed by the BSP under PDIC receivership were Rural Bank of Villaviciosa (Abra) Inc., Lapu-Lapu Rural Bank Inc., Rural Bank of Bayawan (Negros Oriental) Inc., Rural Bank of Basay (Negros Oriental) Inc., Rural Bank of Panay Inc., Koronadal Rural Bank Inc., Rural Bank of Malinao (Aklan) Inc., Surigao City Evergreen Rural Bank Inc., Rural Bank of Amadeo (Cavite) Inc., New Rural Bank of Binalbagan, Rural Bank of Siaton (Siaton, Negros Oriental) Inc., Rural Bank of Alabat (Quezon) Inc., Rural Bank of Cabadbaran (Agusan) Inc., Rural Bank of Claveria (Cagayan) Inc., and Rural Bank of Luna (Isabela) Inc. Including thrift bank GSIS Family Bank, the Monetary Board closed down a total of 17 banks to date. According to Espenilla, a number of rural banks were undergoing merger deals under the Consolidation Program for Rural Banks (CPRB). The PDIC earlier said two groups of 10 rural banks have been eyeing to merge under the CPRB. Jointly shepherded by the BSP, the PDIC and the Land Bank of the Philippines, the CPRB was a bank-strengthening program for rural banks aimed at enhancing their ability and viability to promote financial inclusion as well as stability in their respective communities. The CPRB, which rural banks can avail of until Aug. 25 next year, offers regulatory incentives to proponent banks. A group of at least five rural banks with head offices or majority of the branches located in the same region or area could qualify under the CPRB.

The non-performing loan (NPL) ratio of rural and cooperative banks improved during the second quarter even as these entities

ramped up their lending activities, data from the Bangko Sentral ng Pilipinas (BSP) showed. Non-performing loans, or debts left unpaid at least 30 days past due date, made up just 11.48% of smaller banks’ total debts at end-June, improving from an 11.58% share at end-March and the 11.9% seen during the comparable year-ago period. The amount of soured debts remained steady even as the banks handed out more credit at end-June. Bad loans reached P14.473 billion for the first semester, almost steady from the P14.215 billion recorded at end-March and just 1.5% higher than the P14.254 billion tallied in June 2015. Meanwhile, the banks’ total loan portfolio rose by 5.3% to P126.088 billion, well above the year-ago level of P119.78 billion, according to central bank data. Non-performing assets, which represent seized properties and other assets from defaulting borrowers, also stood at P24.146 billion as of June, a tad higher than the P23.884 billion seen a year prior. Still, the rural and cooperative lenders worked to hike their buffers against potential defaults, able to cover 70.32% of total NPLs, rising from a 68.51% ratio seen the previous quarter and 62.51% from a year ago. In particular, total allowance for credit losses stood at P10.178 billion, up by 14.2% from P8.91 billion in June 2015. This drove a higher share of loan loss reserves to 8.07% from 7.44%, data showed. The BSP tracks the NPL ratios of banks and financial entities to monitor asset quality, in keeping with its mandate of keeping a sound and stable banking system. Rural and cooperative banks also managed to remain liquid while raking in profits during the first half. The lenders raked in a cumulative net profit of P1.908 billion as of end-June, growing from a P1.636-billion income seen during the comparable year-ago period. On the other hand, banks held more liquid assets during the quarter at 43.99% of total deposits, higher than the 43.08% share seen the year prior. Cash and collectibles from other banks, as well as other financial assets amounted to P65.358 billion, rising from P58.062 billion. However, the rural and cooperative banks slipped in terms of capital buffers, but still remained well above the BSP’s minimum requirement. The lenders saw a 17.72% capital adequacy ratio (CAR) as of the second quarter, slipping from 17.85% seen a year ago on solo basis. The CAR computed in a consolidated basis likewise dropped to 18.79% from 18.76% previously, but still met the central bank’s 10% standard. The CAR is among the measures of financial health, and is imposed as part of the international Basel 3 framework that seeks to improve risk management among financial entities in order to prevent a repeat of the 2008 global financial crisis.

President Duterte has ordered the adoption of the National Economic and Development Authority’s (Neda) long-term vision

aimed at tripling Filipinos’ real per capita income as well as eliminating hunger and poverty on or before 2040. Executive Order No. 5 signed by the President on Oct. 11 adopted “Ambisyon Natin 2040” as the 25-year long-term vision for the Philippines. The goal is that by 2040, “the Philippines shall be a prosperous, predominantly middle-class society where no one is poor.” EO 5 mandated the identification of an “appropriate set of milestones” that will guide the medium-term development plans to be developed by four administrations, starting with the Duterte administration. President Duterte has ordered the adoption of the National Economic and Development Authority’s (Neda) long-term vision aimed at tripling Filipinos’ real per capita income as well as eliminating hunger and poverty on or before 2040. Executive Order No. 5 signed by the President on Oct. 11 adopted “Ambisyon Natin 2040” as the 25-year long-


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term vision for the Philippines. The goal is that by 2040, “the Philippines shall be a prosperous, predominantly middle-class society where no one is poor.” EO 5 mandated the identification of an “appropriate set of milestones” that will guide the medium-term development plans to be developed by four administrations, starting with the Duterte administration. “The four medium-term Philippine Development Plans (PDPs) to be crafted and implemented until 2040 shall be anchored on the Ambisyon Natin 2040 and overall goals. The PDPs shall ensure sustainability and consistency of strategies, policies, programs and projects across political administrations,” EO 5 read. As such, “all plans of government departments, offices and instrumentalities, including government-owned or -controlled corporations and local government units, shall be consistent with Ambisyon Natin 2040,” the President ordered. The Duterte government is currently drafting the PDP for 2017-2022, eyed for publication by yearend. Launched last March, Ambisyon Natin 2040 was aimed at tripling Filipinos’ per capita income to $11,000 in 24 years’ time by sustaining at least a 6.5-percent annual gross domestic product growth alongside the implementation of policies that would make the Philippines a high-income country by 2040. A survey conducted early this year showed a majority of Filipinos aspire for a “simple and comfortable life,” which Neda had said reflected a middle-class lifestyle—earning enough, all children educated until college, owning a car, owning a medium-sized house, finding time to relax with family and friends, owning a business, and being able to travel around the country.

Don’t get distracted with “noise.” This was Finance Secretary Carlos G. Dominguez III’s appeal to officials of debt watcher Moody’s Investors Service, whom the head of the economic team assured that President Duterte remains “fully engaged” in the 10-point socioeconomic agenda aimed at significantly reducing poverty. “If you talk about the political noise, yes, there is. It’s inevitable for someone who’s shaking up the tree. It’s inevitable because of the personality of the President and people not used to this type of governance. But he’s fully engaged in [the administration’s] economic agenda,” Dominguez told officials belonging to Moody’s sovereign risk group in a recent meeting. President Duterte’s recent controversial remarks against US President Barack Obama, the European Union and the United Nations have been making markets jittery, hence being partly blamed for the depreciating peso as well as increasing outflow of “hot money” during the past few weeks. In a statement Friday, the Department of Finance said Dominguez assured Moody’s that the Duterte administration “would carry out its inclusive growth agenda while building on the economic gains of the past administrations and exercising fiscal responsibility.” The Philippines enjoys from Moody’s an investment-grade credit rating of “Baa2” with a stable outlook. Dominguez met with the following Moody’s officials: vice president and senior credit officer Christian de Guzman, managing director Atsi Sheth, and associate analyst Matthew Circosta, the DOF said. According to the DOF, Dominguez informed Moody’s of the government’s plan to overhaul the tax system and introduce sweeping reforms not only in tax policy but also in administration. Dominguez noted that the first package of the proposed tax policy reform program was submitted for Congress’ consideration last month, as he had promised, and just less than 90 days into the Duterte administration. The Finance chief reiterated that the proposal “aims to ease the tax burden on wage earners and the middle class as well as protect the country’s vulnerable sectors, while raising enough revenues to accelerate spending on infrastructure, human capital, social protection and agricultural modernization.” Tax reform forms part of the 10-point socioeconomic agenda, which Dominguez pointed out was already being worked on by economic managers even before the President was sworn into office on June 30. Following consultations with the business and civil society sectors to firm up the agenda, President Duterte plans to “hold consultations with mayors, governors and other local chief executives to basically hear what they want, and to tell them what we want,” Dominguez said. “And what we want is no corruption and no crime,” according to the Finance chief. Ultimately, the Duterte administration wants to slash poverty incidence to 17 percent by 2022 from 26 percent at present, but this cannot be done “unless the President also focuses on his two other priority goals, which are to transform the country into a law-abiding society by eliminating crime and corruption, and ensure lasting peace within the country and with its neighbors,” Dominguez

Production by metal mines in the country fell by more than a 10th annually last semester as a drop in nickel ore output offset increases in gold and silver, the Mines and Geosciences Bureau (MGB) reported yesterday. Results reflected the impact of an industry-wide crackdown on miners deemed erring by the MGB and subdued metal prices abroad, according to a statement. Noting that total value of metal mine production fell by 13.59% to P48.25 billion last semester from P55.84 billion in 2015’s comparable six months, MGB said in its statement that “[s]uspension of mining operations, reported zero mine production and sluggish metal price movement were the key factors for this weak performance.” The period had seen operations at 10 metal mines nationwide suspended as a result of a state environmental audit, and 20 others face the same fate by month’s end should they be found liable for similar deficiencies and violations. The total of metal mines either suspended or facing suspension accounts for nearly three-fourths of 41 such facilities spread across the country. Before the administration of President Rodrigo R. Duterte assumed office at noon of June 30, the mining industry had already been reeling from a moratorium on new permits that has been in place since 2011 and extended indefinitely through Executive Order No. 79 signed by former president Benigno S.C. Aquino III on July 6, 2012. A new mining revenue-sharing scheme that was supposed to lift the moratorium was left untouched when the 16th Congress ended last June. Miners had said before the May 9 general elections that a new administration should bring fresh hope, but that was dashed with the appointment of a staunch environmentalist to the helm of the Department of Environment and Natural Resources (DENR) in the person of Regina Paz “Gina” L. Lopez who launched the audit in July. Since then, Ms. Lopez has also voiced opposition to the prospective $5.9-billion Tampakan gold-copper mining project in south-central Mindanao, while Canada-based TVI Pacific, Inc.’s local affiliate -- TVI Resource Development Philippines, Inc. -- put “on hold” last month plans to raise P1.515 billion by listing shares on the Philippine Stock Exchange, citing “the uncertain environment in which the Philippine mining industry has operated since the nationwide audit of mines was ordered by the DENR Secretary under the Duterte administration that came into power in June...” Gold, MGB noted in its statement yesterday, “made a big comeback... accounting for 47% or P22.68 billion of the total metallic production value.” While nickel direct shipping ore and mixed nickel-cobalt sulfide combined had dominated total metallic mineral production since 2012, MGB noted that nickel took a backseat to the yellow metal last semester, accounting for 33% at P16.08 billion, copper contributed 19% at P9.01 billion, while 1% or P470 million came from the cumulative values of silver, chromite and iron ore. “In general, the poor showing of nickel ore and nickel product producers during the period led to the lackluster performance of the metallic minerals industry,” MGB said in its statement. Last semester saw a 30% drop in nickel ore production to 10.451 million dry metric tons (DMT) worth P9.2 billion from 14.88 million DMT worth P19.08 billion a year ago, while mixed nickel-cobalt sulfide output went down 14% to 37,604 DMT worth P6.89 billion from 43,512 DMT worth P9.23 billion in the same comparative six months. The regulator particularly cited the continued suspension of four nickel mines in Zambales in Central Luzon that are operated by Benguet Corp Nickel Mines, Inc.; Eramen Minerals, Inc.; LNL Archipelago Minerals, Inc. and Zambales Diversified Metals Corp., as well as “zero production” of Wellex Mining Corp.; Oriental Vision Mining Phils. Corp. and Western Shore Nickel Corp. at their Dinagat Island (northeastern Mindanao) projects “due to poor metal price and ongoing care and maintenance work during the period.” Moreover, major nickel producers SR Metals, Inc. in Agusan del Norte; Rio Tuba Mining Corp. in Palawan; as well as Taganito Mining Corp. and Platinum Group Metals Corp. in Surigao del Norte recorded less output in the same comparable six months. Out of the 30 metal mines either closed or facing suspension under the current audit, 18 are nickel producers that account for 55.5% of the country’s total nickel ore output based on last year’s production. The country produced 467,000 metric tons (MT) of nickel last year, accounting for 24% of the global mined total of 1.93 million MT, according to a recent quarterly report of Morgan Stanley. “A lot of nickel mines fell short of their targets,” Robert Christian G. Bodollo, RCBC Securities Inc. equity research analyst, noted in a telephone interview yesterday. “With the raining in Surigao, they can’t mine as


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often as possible. The transportation of nickel ore depends on the weather; that’s why the shortfall in the first half,” Mr. Bodollo explained. “For the rest of the year, I think they cannot catch up anymore,” he said. “Operations are already closed in Mindanao for the rest of the year -- that is from the last week of October to March. So they can’t recover anymore.” Vivienne Lloyd, senior analyst for base metals at Macquarie Group, said in a phone interview from London that “the government’s antagonistic stance towards mining companies has been noted and does not lend itself to investor confidence.” Noting that the country is expected to experience more rains “which forces the industry to a temporary standstill until new year,” Ms. Lloyd said that “mine output will struggle to rise given the suspensions, but we think that grade improvements and better weather next year are likely to offset the closures.”

Revenue loss arising from the value-added (VAT) exemption of senior citizens is seen to hit P10 billion this year. To plug this

revenue leak, the Department of Finance is planning to replace this privilege with a system that will provide targeted subsidies to indigent elderly. In a statement, Finance Undersecretary Karl Kendrick T. Chua said the DOF was planning to “transform some of the VAT exemptions into a system that would provide social protection to those who deserve them, such as indigent seniors and other vulnerable sectors.” The first package of the proposed tax policy reform package pending in Congress sought the expansion of the VAT base by limiting exemptions to raw food, education and health products and services, while removing the exemption on senior citizens’ nonessential purchases from the 12-percent VAT. “We propose to target the benefits only to the poor and vulnerable to plug the leakage which is very rampant in our estimate. The World Bank estimated close to P10 billion in leakage in the senior citizen VAT discounts,” Chua said. Government data showed that the revenue leak from senior citizens’ exemption ranged between P4.9 billion and P7.1 billion in 2012, which Chua said included foregone revenue from “nonseniors who benefit from the seniors’ VAT exemption.” “The estimated nominal growth of consumption is about 35 percent between 2012 and 2016, thus the 2016 estimated leak is about P6.6 billion to 9.6 billion,” said Chua. “A significant portion of the revenue to be collected under package one of the tax reform will go to subsidies and other forms of social protection for vulnerable sectors,” he said.

The Department of Environment and Natural Resources (DENR) will do an "intense" review of environmental compliance

certificates (ECC) and mineral production sharing agreements (MPSA) that have been awarded to companies, to make sure the compliance and contracts are above board. "There will be an intense evaluation of ECCS and MPSAs," Environment Secretary Gina Lopez told reporters in a press conference at the DENR Central Office in Quezon City on Friday. The latest evaluation is separate from the recently concluded audit of mining operations in which the DENR recommended the suspension of 20 mining operations on top of the 10 others that were earlier suspended by the government. "No more mining in any protected area!" Lopez said, noting the review will cover around 800 ECCs. An ECC is a document issued by the DENR secretary or the regional executive director certifying that a proposed project will not cause a significant negative impact on the environment. On the other hand, an MPSA is a contract specifying that the government as owner of the minerals reserves the right to have a share in the production of the contractor, in cash or in kind. In return, the contractor provides the financing, technology, management and personnel for the mining project. "In the review of these ECCs and MPSAs, we may even come up with new and better policies in the DENR. Our commitment is always to the common good," the Cabinet official said. If an MPSA is found "contrary to the common good and proven by scientific and environmental evaluation, we will cancel it. We have the right to do that because it is a privilege given by the government. "The privilege can be withdrawn if it goes against the Constitution." Lopez noted. "I want to put a moratorium on any new mine," she said. "In addition to that, I want to say something: I don't want to fight the mining companies. I can work with them as long as they don't silt the river, destroy the rice fields," she added.

The Department of Environment and Natural Resources has suspended the environmental compliance certificates (ECC) of a

miner and a property developer. In a press conference at the DENR Central Office, Environment Secretary Gina Lopez told reporters the department suspended the ECC of the proposed 58-hectare housing project of Century Communities Corporation. The project, located in a critical area of the La Mesa Watershed in Quezon City, is for the retired employees of Metropolitan Waterworks and Sewage System (MWSS). "I am personally for zero development in any watershed," Lopez said. The Cabinet official noted the company did not comply with the required ground water survey, and did not have a permit from the MWSS. Century Communities is a wholly-owned subsidiary of the Century Properties Group Inc. In a separate statement, Century Properties noted there was "no definitive basis to suspend its ECC for the said project." The suspension was not warranted as Century Communities has not commenced with any development work at the site, it added. The DENR chief also announced the suspension of the ECC of Austral-Asia Link Mining Corp. in Davao Oriental. "We sent the Biodiversity Management Bureau (BMB) and they saw so much biodiversity there. The company is putting at risk the biodiversity there," Lopez said. "Their mining sites are sandwiched between two protected areas," she added. Lopez noted the mining operations are situated between Mt. Hamiguitan and Pujada Bay, a UNESCO heritage site and a marine protected area.

Department of Public Works and Highways (DPWH) Chief Mark Villar proposed that the processing of permits and licenses of

infrastructure projects to be centralized. "Following President Duterte's mandate to cut down corruption and streamline the process, DPWH is proposing that permits, licenses are secured government to government," Villar said in a statement on Thursday. The DPWH secretary noted that instead of contractors going to both national agencies and local government units, the department would like to centralize the processing of the needed permits and licences. However, Villar said existing laws and local ordinances would need to be revised for the said proposal. "The special power if granted would facilitate this shift more efficiently," Villar said, reffering to the measure sought by the Department of Transportation to grant the President emergency powers to solve traffic woes in the country. "We're also hoping to have a court dedicated specifically to handling right of way issues. Upon assessment, most slippages are caused by the need to acquire private lands, relocate informal settler families," he added. "We have cascaded 24/7 operations in select projects located in Visayas and Mindanao. We are instituting reforms with whatever is allowable but a grant of special powers would effectively fast-track our projects," Villar said.

said. The government would also reduce poverty through massive infrastructure, human capital and social protection investments, he said. The Department of Trade and Industry is hoping to make significant headway in improving the competitiveness of the micro,

small and medium sized enterprises (MSMEs), which will receive the bulk of the agency’s planned P4.25 billion budget for 2017. This represented the thrust of the current administration toward boosting “employment and entrepreneurship in the country as a means to uplift the quality of Filipinos and alleviate poverty.” Trade Secretary Ramon Lopez explained that a little more than half of the budget they have filed before Congress will be invested in initiatives for MSMEs, from the training, shared services facilities (SSFs), to the different roadmapping activities for local industries, among other measures. Data from the Department of Budget and Management showed that the DTI has allocated P535 million “for the establishment of Go Negosyo Centers to promote ease of doing business and facilitate access to services by MSMEs in accordance with the Go Negosyo Act or Republic Act No. 10644. All similar activities undertaken by the DTI shall now be implemented by the Negosyo Centers.” Go Negosyo Centers usually serve as a one stop shop for MSMEs. These are expected to hasten the business application process of local enterprises in coordination with the local governments and other concerned agencies. These centers are likewise mandated to provide business advisory services such as facilitating access to grants, financial assistance and


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shared service facilities. Another P70 million meanwhile will be allocated for SSFs which are expected to “improve the quality and productivity of MSMEs and the establishment of business resource centers.” The SSF is a flagship program of the DTI which seeks to address the low production capacity of existing industries in the rural areas. By providing MSMEs with the necessary equipment, the products’ marketability and efficiency are expected to be enhanced, which in turn would generate more quality jobs and better income. Roughly P90 million would be appropriated under the so-called Promotion and Development of Small and Medium Industries and shall be used for “assistance to disadvantaged municipalities which shall be determined based on the magnitude of poor families, vulnerability to disasters and other criteria,” according to the DBM. The DTI also plans to allocate P3.4 million for the implementation of remedies such as safeguard measures; and P76.62 million to support the program beneficiaries development component of the Comprehensive Agrarian Reform Program. In addition to these appropriated amounts, the DTI targets to budget P21.32 million for the MSME Development Council Fund, for further development of local enterprises. This proposed allocation shall be sourced from 90 percent of the total penalties collected by the Bangko Sentral ng Pilipinas from lending institutions, as provided under RA No. 9501 or the Magna Carta for MSMEs. The rest of the budget will be allocated for trade and industry policy services; trade and investment promotions; technical advisory; consumer protection; and trade regulatory services, among others. In total, the DTI and all its attached agencies will get a total budget of P7.95 billion, which is 20 percent higher than the P6.64 billion budget this year. Under this proposed budget, the Philippine Economic Zone Authority will get P2.76 billion; Board of Investments, P401 million; Center for International Trade Expositions and Missions (Citem), P220 million; Construction Industry Authority of the Philippines (P111 million); Design Center of the Philippines (P96 million); Aurora Pacific Economic Zone and Freeport Authority (P59 million); and Philippine Trade Training Center (P58 million).

The proposed ban on land conversion projects may only worsen the rising socialized housing backlog, which is seen to hit 5.7

million units this year, according to the Housing and Urban Development Coordinating Council (HUDCC). “The proposed blanket two-year ban on land use conversion will introduce further delays in the housing and resettlement processes, which will exacerbate the insurmountable housing backlog that we are working to address,” said Vice President Leni Robredo, who also chairs the HUDCC. “This will further delay our efforts in Yolanda-affected and other disaster-stricken areas, since these sites are mostly within agricultural zones,” Robredo added. Robredo, along with several other members of the Cabinet, had been vocal in their opposition against the land conversion moratorium, which was proposed by the Department of Agrarian Reform. The said proposal seeks to suspend the conversion of agricultural lands to non-agricultural purposes, and to review all the land conversions, stock distribution and leasehold arrangements. However, with the impending lack of supply in land for housing, Robredo expressed concern that a moratorium would only drive up the prices of residential lands and, consequently, significantly reduce the supply of low-cost housing. “By unnecessarily locking up the land resources for two years, including those that were already identified as suitable for socialized housing, this will make our mission far more difficult in solving the growing problem of homelessness,” Robredo added. Data from HUDCC showed that out of the projected housing need of 5.7 million units by the end of 2016, 1.5 million would be for informal settler families (ISFs) that need resettlement while 1.8 million units would be for families who were victims of natural disasters between 2009 and 2014 and would thus need immediate housing intervention. “Even as we move to reinvigorate the country’s agri sector, we hope that the steps we take will not hurt the homeless and prolong the agony of the families waiting for supportive housing,” Robredo said. On Wednesday, high ranking government officials submitted to Malacañang a position paper to oppose the DAR’s proposed land conversion ban. This petition was signed by Robredo, Socioeconomic Planning Secretary Ernesto M. Pernia, Finance Secretary Carlos Dominguez III, Trade Secretary Ramon Lopez and Budget Secretary Benjamin Diokno. Even business leaders and economists had opposed the proposed moratorium, saying it would not only hamper the entry of much needed investments into the Philippines, but could set back the country’s development goals.

Nationwide housing prices jumped double-digits in the second quarter and outpaced the first-quarter increase as residential

property prices accelerated outside Metro Manila, the Bangko Sentral ng Pilipinas reported Friday. The second-quarter residential real estate price index (RREPI), which measures the average changes in prices of all types of housing units across the country, increased to 122.8 from 115.9 in the first quarter and 110.3 a year ago, the highest thus far since the index measured real estate prices in the second quarter of 2015. The growth rate of the index measures house price inflation, the BSP explained. In the second quarter, the average price of housing units in the country climbed 11.3 percent year-on-year from 9.4 percent in the previous quarter, primarily as prices of single detached/attached houses grew 18.6 percent year-on-year, almost more than double the 7.7-percent rise a quarter ago. Prices of townhouses increased 14.7 percent year-on-year, faster than 7.6 percent in the first quarter. But duplex prices rose at a slower 0.6 percent year-on-year during the April to June period compared with the 10.4-percent increase from January to March. Prices of condominium units, meanwhile, contracted 0.1 percent in the second quarter, reversing the 13.4-percent jump during the preceding quarter. In Metro Manila, the average price of housing units rose 2.7 percent year-on-year, slower than the first quarter’s 10-percent increase. Prices of single detached/attached houses and townhouses within the National Capital Region (NCR) rose 13.8 percent and 9.2 percent year-on-year, respectively, whereas the cost to buy a duplex and a condominium unit dropped 22.5 and 0.2 percent, respectively. Outside Metro Manila, housing prices soared 18.4 percent in the second quarter, up from the previous quarter’s 9 percent. Units sold in areas outside NCR during the second half registered year-on-year increases: single detached/attached house, up 19.3 percent; duplex, up 24.7 percent; townhouse, up 24.3 percent; and condominium unit, up 0.1 percent. As for residential real estate loans recorded between April and June, the BSP said in a statement that seven out of every 10 loans were for purchases of new houses. Half of residential property loans were for single detached, followed by condominiums (41.2 percent) and townhouses (8.4 percent).

A growing number of Filipino homebuyers have started to prioritize their long term residential needs by passing up on starter

homes and purchasing a place that will meet their future needs—even if it means having to shell out more. Thanks to recent improvements in the economy, they are now more motivated to purchase a home for many reasons, including the pride of ownership and desire to establish roots in a community. Acquisition costs have also eased as new loan facilities have been made available for developers, as well as more affordable end-use loans for the homebuyers. Indeed, this group of homebuyers now look for homes in the mid-market segment, meaning those priced above the economic housing segment of P1.7 million and below the VAT (value added tax) threshold of P3.2 million. These are the places they could call their own, where they can eventually raise their families. “The mid-income market represents a large percentage of the Metro Manila population. While speculative investment in high end properties has tapered off a bit, we foresee the mid-market segment to continue to grow, supported by a growing population benefiting from robust economic growth. These are also end-user buyers, who will live in the units they purchase instead of renting them out. So the projects should be built with this in mind,” observed Julius Guevara, director and head of consultancy, valuation and advisory services of Colliers International Philippines. And developers are more than willing to provide them.

There is a growing and powerful market waiting to be tapped. They are the millennials, skilled, highly motivated, and driven to

achieve much in life, and who have been helping drive the sustained growth of the local economy today. This is a generation that enjoys the challenge of pushing things to the limit; they are not afraid to speak their minds and express themselves; they are open to new ideas and criticisms, and they seem to view life at a different angle than the older generations. While seemingly young and carefree, the


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media-savvy millennials also have aspirations that are quite impressive. Despite the age, they see the value in planning and creating a roadmap for themselves, and they set goals on how to achieve their dreams. Recent studies, in fact, have shown that having their place—a home they can call their own—was among the major aspirations of this generation. Hence you see many developers scrambling to offer the best value proposition for the millennials whose needs and whims highly differ from the markets they used to cater. Empire East Land Holdings Inc., for one, admitted that the millennial group has a growing demand that every developer aims to tap as it is a huge market that has the spending power as well. However, this group is also a tricky and challenging market to convince as the millennials are the ones that cannot be easily fooled by false advertisements. They are technology savvy, and they often use this to their advantage—being able to quickly search the net for feedbacks and reviews. But one advantage that Empire East holds is its ability to create developments that could be tailor made specifically for the millennials. It builds with the purpose and goal of providing whatever the present generation needs. As a responsible and dependable developer, the company carefully studies the market to ensure that it aptly evolves with the changing times. Admittedly, the needs of the market of before are very much different from the needs of present day homebuyers, and this is one thing that the company would always look into. As a seasoned developer, Empire East sees as its duty to fully understand the pulse of the market. More than just providing high-quality structures, Empire East always ensures that its developments will serve as a sanctuary, a nook that offers comfort and convenience, and a place where one would truly feel safe and secure. Meanwhile, Empire East follows a certain standard when it comes to creating homes for the millennials to ensure that each development will be able to provide an enhanced, comfortable lifestyle for this hardworking market. Born in the modern age, Millennials have become so used to comfort that they expect it to come naturally. This is why Empire East has built Transit-Oriented Developments (TODs) to ensure that the millennials would have access to the comfort of an easy commute. Empire East’s developments are likewise strategically located giving one easy access to commercial areas and other key institutions. From dining, buying, to getting services, the millennials want everything delivered to them in an instant. They are not one to waste time waiting and as such Empire East developments can provide everything they would need that would make for a convenient lifestyle— particularly quick access to retail, dining, commercial and entertainment establishments. With commercial areas and other services incorporated within the development, everything is made available in an instant. The millennials have the capacity to invest and buy. But they can be discerning when it comes to making delicate choices and decisions. Being as tech-savvy as they are, they can quickly check on things and identify exactly what they aspire to have and own and as such, millennials can’t be easily fooled and enticed by mere advertisements. Highly aware of this, Empire East has built high-quality and well-designed homes that are affordable and which millennials would find hard to resist—from the flexible payment terms, the quality of its buildings, and good returns that are guaranteed in every Empire East project. Many of the millennials today are working for multinational companies and IT-business process management companies located in key business districts across the metro. As their jobs would often require them to be always on the go no matter the time of the day, today’s generation would usually prefer to stay and invest in a nearby place that would allow them to live such a lifestyle without the hassle and the worries. And this is what Empire East projects can offer. When it comes to security, for instance, each development would have guards manning the place while safety and security nets are installed in almost every corner of the area. This would allow the millennial to come and go about their daily tasks without the extra baggage of worrying about their safety. Used to the comforts and excitement that city living brings, the millennial cannot afford to stay in a place that is not well equipped with amenities and lacking in features that offer modern conveniences. A safe and reliable developer like Empire East, however, knows only too well. And this is why every Empire East development features well thought out modern amenities that would ensure a comfortable lifestyle attuned to the present times. The company believes that when buying a home, one is also purchasing a particular way of life. As such, it would be crucial to include features that are not only useful, but would also allow the millennial access to a balanced, more holistic, and enhanced lifestyle.

A squabble over the ownership of logistics giant 2GO Group Inc. escalated Friday after Phoenix Petroleum CEO Dennis Uy, via a

private holding firm, filed a legal suit in a Manila court seeking to be recognized as a shareholder. The development emerged after 2GO’s management held a press conference Friday morning, denying that Uy-led Udenna Investments recently acquired a significant minority stake in 2GO, the country’s largest end-to-end logistics provider. For not notifying management, 2GO’s lawyers said Udenna failed to follow proper procedures to be recognized as a shareholder. 2GO’s officers, led by chief financial officer Jeremias Cruzabra, also signaled during the briefing they were open to negotiations with other interested investors. Throughout the briefing, however, officials said there was no intention to block the entry of Uy. “I’m sure there is no hostility to any investment by Mr. Uy,” 2GO’s external counsel Lorna Patajo-Kapunan told reporters, adding that 2GO president and CEO Sulficio Tagud Jr. and Uy had a “friendship that goes way back.” In a statement, however, Udenna said it was suing the Tagud family’s Negros Holdings Management Corp. for blocking its entry. It said a case was filed before a Manila trial court, where it sought to stop Negros Holdings from enforcing its decision while also seeking for damages. “The complaint just seeks to enforce the right of Udenna Investments as shareholder,” Udenna said in its statement. Udenna said it has indirectly acquired a 21 percent voting interest and 28 percent beneficial interest in 2GO, a listed company with a market value of about P18.7 billion. Udenna’s entry was not in 2GO itself, but through one of its major shareholders, KGL Investments B.V., which is registered overseas and controls two of nine board seats in 2GO. The layers of ownership are explained below: KGL Investments—which Udenna said it acquired—and Negros Holdings are joint owners of a company called KGLI-NM Holdings Inc., which in turn controls 60 percent of the voting shares of Negros Navigation Co. Negros Navigation Co., partly owned by another foreign investment fund, China Asean Marine, B.V., is the main shareholder of 2GO, owning 88.3 percent. The remaining 11.7 percent of 2GO is held by the public. In its legal filing, Udenna also asked the court to “enjoin Negros Holdings Management Corporation/ KGLI-NM from excluding Udenna Investments in participating in such management.” 2GO management, meanwhile, said the company was still luring plenty of interest from investors. At stake was a big slice in one of the country’s most successful logistics companies, whose shareholders weathered the Asian financial crisis and a court-ordered rehabilitation. 2GO, formerly known as Aboitiz Transport System Corp. before the entry of the Tagud family, was projected to produce a record P20 billion in revenues this year, Cruzabra said. The firm controls more than 92 percent of the country’s passenger freight and 35 percent of cargo. Those deliver close to half of revenues. It is also involved in logistics and value-added services.

DoubleDragon Properties Corp. has completed a deal to buy a 70-percent stake in hotel developer and operator Hotel of Asia Inc.

(HOA) for P832.17 million, marking its entry into the hospitality business. HOA has 855 hotel rooms under its wings under homegrown condotel brand Hotel 101 and the local franchise of Jinjiang Inn, one of the largest hotel brands in Asia. DoubleDragon chair Edgar Sia II believes the hospitality industry will continue to be one of the fastest growing sectors and would be an ideal vehicle for DoubleDragon to create another recurring revenue stream. HOA was created in 2011 as a joint venture among Sia’s Injap Investments Inc., Chan C. Bros. Holdings, Inc. (CCBHI) of the Oishi Group and Staniel Realty Development Corp. (SRDC). The hotel company will soon add another 608 rooms to its portfolio with the development of Hotel 101-Fort located adjacent to C5 nearly across SM Aura and Market. In consideration for its stake in the hotel business, Injap Investments has been paid with DoubleDragon common shares priced at a 5 percent premium over the 30-day weighted average of the closing price of common shares preceding closing date of the transaction, which is P61.34 per share, the company said in a disclosure to the Philippine Stock Exchange. With the closing of the transaction, Injap Investments has fully divested its interests in HOA and consolidated into DoubleDragon while CCBHI and SRDC will retain a stake of 15 percent each in HOA. The acquisition of HOA, which booked a P113.4-million net income in 2015, is seen to allow DoubleDragon to


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benefit from the booming tourism sector and fully optimize the use of its string of prime properties in various strategic areas of the country. International petroleum brand Gulf Oil has entered the local market with its first retail outlet, on the way to building a network of

20 gas stations by next year. At the same time, the company opened its doors to franchisees its gasoline and diesel distributorship. Last Tuesday, Gulf Oil launched its first petroleum dealership in Asia in Abucay, Bataan, which it expected to be the first of several fuel stations in key cities in Mindanao, Cagayan Valley and Metro Manila. Specifically, the firm aims to bring its petroleum products to the cities of Davao, General Santos and Santiago, and the town of San Isidro in Isabela province. For the National Capital Region, Gulf Oil’s first outlet will be located in Quezon City. “Gulf Oil aims to put up at least 20 fuel stations for the remaining part of the year up to the end of 2017 to jump-start its retail network growth and is now looking for new partners to take the brand into new territories and new product markets,” the firm said in a statement. The opening of Gulf Oil’s first gas station was witnessed by its UK-based international vice president Frank Rutten along with the firm’s local partners who have been distributing the company’s lubricants in the country for the past 18 years. Since introducing the first drive-in service station in 1911, Gulf Oil has been at the forefront of innovation in the petrol retail industry with pioneering moves such as the introduction of complimentary road maps, over-water drilling and catalytic cracking refineries. Gulf Oil was founded in 1901 at the time of the discovery of oil in Spindletop, Texas. It has since evolved into an oil company with operations including exploration, production and transport, refining and marketing; and with exposures to diversified industries such as petrochemicals and automobile component manufacturing. It is present in over 100 countries through a network of official distributors and wholly owned operations. A portfolio of products is provided to distributors through a network of blending facilities in Asia, Europe, North and South America.

Pilipinas Shell Petroleum Corp. has priced its initial public offering at P67 per share, allowing the oil firm to sell as much as P19.5

billion to the public. The oil firm has finalized its offering at 275 million shares, which can be raised to 291 million if overallotment is exercised, said Reginaldo Cariaso, managing director at BPI Capital which is the lead domestic underwriter for this deal. “Pilipinas Shell IPO was priced at P67 per share, the top end of the price guidance of P65 to P67 (per share),” Cariaso said in a text message on Friday. The IPO will run from Oct. 19 to 25.

The country’s leading hybrid rice producer SL Agritech Corp. seeks to bag a joint seed production deal with Chinese partners

and is working on the relaxation of China’s rice quarantine protocol as the group joins the business delegation accompanying President Duterte in his state visit to China next week. SL Agritech chair Henry Lim Bon Liong told the Inquirer that “friends” from China were offering a lot of business opportunities in agriculture, power and trade. Lim said his company had already exported banana to Dalian, China previously. He is hoping to expand trading opportunities to include pineapples. He said SL Agritech’s premium “Dona Maria” rice had also found a market in China. However, because of a quarantine protocol in rice between the Philippines and China, he said it had been difficult to establish the presence of this brand. “We hope we can have the rice protocol expedited in this trip,” he said. SL Agritech does not grapple with similar quarantine restrictions in other export destinations. He said this might have been an offshoot of the diplomatic chill between China and the Philippines in previous years. The tension intensified during the term of President Aquino, under whose term the Philippines sought an international arbitration on its territorial dispute with China. In July, the United Nations Arbitral Tribunal favored the Philippines’ sovereign rights over the West Philippine Sea and ruled that China’s “nine-dash line” claim was invalid. Lim said he was hoping that China would relax its quarantine protocol on Philippine rice exports now that President Duterte was rekindling the bilateral relationship. “I believe Dona Maria premium rice, especially our brown rice, which is one of the best tasting in the world, has a big market in China based on the trade show in Nanning a few years ago when 1,300 kilograms of rice were sold in three hours’ time,” Lim said. The businessman said there were many parties in China willing to act as dealers of Dona Maria rice. “We may also sign a joint seed production agreement in China because of the big demand for our hybrid rice seed variety SL8H,” Lim said. “We hope to sign it during the trip.” Incorporated in 2000, SL Agritech is the only Philippine producer of hybrid rice seeds with fully integrated operations. It operates two business segments: the production of hybrid rice seeds and premium rice. Majority of the business is derived from the hybrid rice seeds business after its first product SL8H was developed and distributed. SL Agritech, which aims to debut on the Philippine stock exchange soon, is positioning itself as a leading proponent of hybrid rice farming technology and industry model for sound farming and management practices. It aspires to help the country achieve rice self-sufficiency and improve livelihood of local farmers. Founded by the Lim family, SL Agritech is affiliated with the Sterling Paper Enterprise, a leading local manufacturer and distributor of paper products with a 70-year track record.

Mall owners and operators in Metro Manila have agreed to schemes proposed by the Inter-Agency Council on Traffic (I-ACT) to

ease traffic in light with the Christmas season. According to the Metropolitan Manila Development Authority (MMDA), one of the agencies that make up the I-ACT, said mall owners expressed their willingness to comply with four suggestions of the traffic body. Mall owners have agreed to a traffic management plan that includes the deployment of their respective traffic personnel, and a nighttime delivery schedule from 11 p.m. to 5 a.m. I-ACT traffic personnel will also help manage the queue of vehicles headed to the malls. Moreover, mall owners agreed not to conduct sales and "other crowd-drawing events" on weekdays starting November 1. These sales, however, pertain only to those on a "mall-wide scale." Individual department stores or brands renting inside the mall should coordinate with the I-ACT. "This show of support from the private sector will definitely help the government towards the common goal of solving the traffic problem in Metro Manila," MMDA Gen. Manager Tim Orbos said. Orbos also asked mall owners to submit their concerns and suggestion to authorities "for proper evaluation and action." Aside from the MMDA, the I-ACT is composed of the Department of Transporation and the Philippine National Police's Highway Patrol Group.

Security Bank Corp. (Security Bank) aims to double the number of its automated teller machines (ATMs) in the next few years as

it continues to expand its footprint across the country, according to a top official. “We have almost 600 ATMs and we’re constantly growing this and expect to double it in a couple of years,” Daniel U. Yu, senior vice- president and head of the transaction banking group of Security Bank, said during the 42nd Philippine Business Conference & Exposition yesterday. As of end-2015, the bank had 555 ATMs. Last July, Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. said that the bank is on track to beat the January 2017 deadline in securing all of its cards with Europay MasterCard Visa (EMV) chip technology in compliance with stricter regulations aimed at tightening the security features of ATMs and guards against credit card fraud. In August 2013, the Monetary Board of the Bangko Sentral ng Pilipinas approved an enhanced Information Technology Risk Management (ITRM) framework that mandates Philippine banks to shift to EMV from most of the banks’ current magnetic stripe technology, with the aim of beefing up security. The BSP stated that financial institutions supervised by the central bank must “shift from magnetic stripe technology to more secure EMV chip-enabled cards by Jan. 1,2017.” Security Bank saw its net income increase by 4% to P4.9 billion in the first half of the year on the back of the continued growth in its core earnings despite depressed trading gains during the period. Mr. Salcedo has said that the bank is on track to surpass its net earnings in 2015 at P7.7 billion, and expects growth in all areas of the bank’s operations. Currently, Security Bank has 277 branches. Mr. Salcedo said last month that the bank targets to add 15 more branches to this number, ending 2016 with 292. Last August, global debt


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watcher Moody’s Investors Service assigned a Baa2 rating on the long-term and short-term deposit ratings of the bank with a stable outlook.

Technology provider Converge ICT is looking to spend at least P2.7 billion next year to fund its expansion plans in a bid to

extend its coverage in the Visayas and Mindanao areas. The firm recently rolled out a pure fiber technology service in Metro Manila which provides internet connection to business process outsourcing (BPOs), financial, education, and hospitality sectors. Although its market share is “very small” compared to the telco giants, by the end of 2017, the company will increase its network with added infrastructure investments in other key cities of the country, Dennis Anthony H. Uy, Converge ICT CEO, said at a press briefing on Friday. Its capital expenditures (capex) this year was set at P2.2 billion for additional access networks, upgrade of the backbone of its system, and other network equipment. “We will be rolling out in Visayas and Mindanao by end of next year, 2017. Our CAPEX is P2.7 billion and we hope to grow even further with its new pure fiber technology,” Mr. Uy added. The company executive cited the demand in the country for fast and reliable internet connections, providing growth opportunities for smaller players in the market. “Access to the internet has accelerated recently as we are now amid digitization,” the company executive said. “The power of pure fiber technology is capable of delivering high-speed internet. Pure fiber technology utilizes fiber optics that are lightweight, durable, non-flammable and non-corrosive, thus it is also less prone to downtimes and interruptions ... one fiber can also stretch up to several kilometers and is capable of transmitting 100Gbps.” There are just three million homes connected with broadband out of the estimated 20 million homes in the Philippines; 2.2 million of these still utilize copper technology while less than 300,000 are connected with fiber optic technology. Converge ICT saw its revenues rise by around 30%-35% from a year ago. Currently, it stood at P2 billion and the company is “on-track to hitting its targets this year.” It has around 100,000 subscribers.

Alsons Consolidated Resources, Inc. is issuing P2.5 billion in short-term commercial papers in several tranches between this

year and 2018, the holding company of the Alcantara group said on Friday. In a disclosure to the stock exchange, Alsons said the proceeds of the issuance will be used to fund the company’s “working capital requirements and other general corporate purposes including operations of the company’s power projects in Mindanao.” The initial tranche will be for P500 million, and will be issued within this year or early 2017. It will have tenors of 90, 180, and 360 days. The succeeding tranches will be set in 2017 and 2018 with values of up to P1 billion a year, the company said. Alsons’ board, which has authorized the issuance, has also approved the tapping of Multinational Investment Bancorporation as sole underwriter, and AB Capital and Investment Corp.’s trust investments division as facility agent. The company said the initial P500-million tranche has been assigned by Philippine Rating Services Corp. (PhilRatings) with an issuer credit rating of PRS Aa, or the second-highest rating category under the firm’s credit rating scale. PhilRatings cited as a basis Alsons’ “robust revenue generating capability” and its “ability to establish joint ventures with strong partners for particular projects.” Alsons said it is “Mindanao’s first and most experienced independent power producer and it has played a pivotal role in helping end the power crisis in the country’s second largest island.” Its power facilities generate 363 megawatts (MW) and serves more than 8 million people in 13 cities and eight provinces. These service areas include urban centers Davao City, Cagayan de Oro, General Santos, Iligan, and Zamboanga City. The latest addition to its portfolio is the 105-MW first section of the 210-MW coal-fired power plant Maasim, Sarangani under Sarangani Energy Corp. Alsons described the $570-million power plant as “the single largest power investment in Sarangani province and the entire Region 12.” Sarangani Energy’s second unit of 105 MW is set to begin the initial stages of construction later this year and stepped up by early 2017. “In the second half of 2017, the group will commence construction of the 105 MW San Ramon Power, Inc. baseload coal-fired power facility in Zamboanga City,” Alsons said.

GT Capital Holdings, Inc. has authorized dividend rates of around 5% for the perpetual preferred shares it will issue for a

maximum of P12 billion. In a disclosure to the Philippine Stock Exchange on Friday, the holding firm of billionaire George S.K. Ty announced a 4.6299% dividend rate for the Series A perpetual preferred shares and 5.0949% for the Series B. The P12-billion offering includes perpetual preferred shares cumulatively worth P4 billion for overallotment. The offer period was scheduled for Oct. 17-21 and the listing date for Oct. 27. GT Capital has the option to redeem the Series A preferred shares in whole on the fifth anniversary of the issue date or any dividend payment date thereafter. The Series B securities, meanwhile, can be redeemed on the seventh year. The company intends to sell the securities for P1,000 each and net about P7.95 billion or P11.93 billion, should it fully exercise the oversubscription option. GT Capital earmarked a portion of the proceeds for the refinancing of its acquisition of a 15.6% stake in Metro Pacific Investments Corp. (MPIC) and additional investment in Property Company of Friends, Inc. (Pro-Friends) to control 51% of the homebuilder. The company allocated the rest for more strategic acquisitions in the financial services and infrastructure sectors. In the six months to June, the company booked a 50% year-on-year increase in net income to P13.88 billion from P9.26 billion. Earnings attributable to the parent accordingly rose 62% to P9.11 billion from P5.62 billion. GT Capital maintains an interest in automotive assembly, importation, distribution, dealership and financing through Toyota Motor Philippines Corp., Toyota Manila Bay Corp., Toyota Financial Services Philippines Corp., GT Capital Auto Dealership Holdings, Inc. and Toyota Subic, Inc. The company also engages in banking through Metropolitan Bank and Trust Co.; property development through Federal Land, Inc. and Pro-Friends; life and non-life insurance through Philippine AXA Life Insurance Corp.; and infrastructure and utilities through MPIC.

Manila-based port operator International Container Terminal Services, Inc. (ICTSI) said on Friday that it has successfully

repurchased $345.5 million of its outstanding perpetual securities via a tender offer, funded by the $375 million issuance of new senior perpetual securities, it said on Friday. The Razon-led firm said in a statement that the liability management exercise allowed ICTSI to further strengthen its capital structure while managing the maturity profile of its existing debts. “On Oct. 13, ICTSI and Royal Capital B.V. announced the results of the Issuer’s offer to holders of its 6.25% senior perpetual capital securities callable in 2019 (“NC19 Securities”) and 5.50% senior perpetual capital securities callable in 2021 (“NC21 Securities,” and together with the NC19 Securities, the “Old Perpetual Securities”), both guaranteed by ICTSI, to tender Old Perpetual Securities for cash,” the port operator said. ICTSI noted that an aggregate nominal principal amount of $345.453 million in the old perpetual securities was submitted by security holders in the tender offer of which $160.314 million comprised tenders of the NC19 Securities and $185.139 million from tenders of NC21 Securities. The ICTSI subsidiary, Royal Capital, offered security holders a price of $1,067.50 per $1,000 in principal amount of the NC19 Securities and $1,057.50 per $1,000 in principal amount of the NC21 Securities. It accepted all tender instructions submitted, it added. The port operator earlier said it is undertaking the tender offer -- through its subsidiary -- as part of its strategy to manage the maturity profile of its existing debt obligations. “In addition, on Oct. 13, the issuer successfully priced a $375 million offering of senior perpetual capital securities, guaranteed by ICTSI. The New Perpetual Securities were structured to constitute equity under International Financial Reporting Standards and represent ICTSI’s third successful issuance in this format,” ICTSI said. It noted that the new perpetual securities “confer a right to receive distributions at a rate of 4.875% per annum and were priced at 99.225%. The new perpetual securities shall rank pari passu with all other outstanding unsubordinated obligations of the Issuer, who will have the right to redeem the New Perpetual Securities on May 5, 2024 and any semi-annual distribution payment date thereafter.” The rate of distribution for the New Perpetual Securities will be reset every five years from May 5, 2024 and will increase by 2.50% per annum on May 5, 2024, in each case if the New Perpetual Securities


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were not already redeemed by the Issuer, ICTSI said in its news release yesterday. The New Perpetual Securities were widely distributed, with fund managers accounting for 46%, private banks for 30%, and banks for 24%. By geography, Asia took up 82% and Europe 18%. ICTSI said the transaction is significant in several respects -- it is the first such transaction targeting repurchase of dollar perpetual securities in Asia this year, the New Perpetual Securities also achieved the longest non-call date for any Asian corporate hybrid security to date, adding that ICTSI remains the only Philippine issuer to have offered US dollar senior perpetual securities in the international debt capital markets. Moreover, the New Perpetual Securities set a record-low US dollar distribution rate for a Philippine corporate perpetual security, a significant reduction relative to the NC19 Securities and NC21 Securities. “This capital management exercise is strategic and value accretive in many respects. The two most important of which are the extension of the call duration on almost half of ICTSI’s outstanding senior perpetual securities, and securing guaranteed annual cost savings from the lower distribution rate. We are pleased to have achieved these objectives particularly given the volatile market backdrop,” ICTSI Senior Vice-President and Chief Financial and Compliance Officer Rafael D. Consing was quoted as saying. Citigroup Global Markets Ltd., Standard Chartered Bank (SCB), and the Hong Kong and Shanghai Banking Corporation Limited (HSBC) were tapped as joint lead managers for the new securities offer and as dealer managers for the tender offer. D.F. King Ltd was appointed as the tender and information agent for the tender offer. The bonds are exempt from the securities laws of the US and the Philippines, according to ICTSI. Royal Capital will also apply for listing of the bonds on the Singapore Exchange Securities Trading Ltd. In August last year, the port operator raised $450 million from an issuance of perpetual bonds which was priced at par to yield 5.5% per annum. In January 2015, ICTSI also launched a $300 million senior perpetual non-call 4.25-year note at a yield of 6.375%. The bonds drew an order book of $1.25 billion, Reuters reported.

The proposal to hike excise taxes on automobiles is likely to dampen industry growth and push prices higher at a time when

owning a car in the Philippines is already more expensive than in other Southeast Asian countries, executives from two automakers said. In separate interviews, officials from Isuzu Philippines Corp. (IPC) and Mitsubishi Motors Philippines Corp. (MMPC) expect local demand to be affected from higher taxes, but maintained that they are waiting for the final structure of the tax plan before giving an official stance. The first package of the Duterte administration’s comprehensive tax reform plan was submitted to Congress earlier this month. It includes a restructuring of the current tax rates imposed on automobiles, more than doubling the existing excise tax from 2% to 5% for automobiles with prices below P600,000; 20% for those selling for P600,000 to P1.1 million; 40% for those with prices ranging from P1.1 million to P2.1 million; and 60% for vehicles selling above P2.1 million. The proposal would restructure the excise tax on automobiles but would not include buses, trucks, cargo vans, jeeps, jeepney substitutes and special purpose vehicles. “All taxes pass on to the buying public. So demand (will) definitely be affected,” MMPC First Vice-President Dante C. Santos told reporters in the sidelines of the Philippine International Motor Show (PIMS) thanksgiving party. He said consumers are in a “rush” to buy automobiles before the implementation of the proposed tax hike. “Everybody will have to recalibrate: the inventory, ordering, even the banks will have to recalibrate everything. So all of these recalibration will create the natural slowing down of the speed of buying. So we are looking at that way.” Mr. Santos noted the cost of vehicles in the Philippines is already “much more” than other Southeast Asian countries, which was why the government implemented the Comprehensive Automotive Resurgence Strategy (CARS) program. The initiative that began under the former Aquino administration plans to achieve economies of scale, among other objectives, which means saving costs by producing more output. Mitsubishi is one of the car companies that has been allowed to participate under the CARS program, along with Toyota Motors Philippines. Under the six-year resurgence program, they are expected to locally produce at least 200,000 units. “Any change in structure of pricing affects the demand. Even market acceptance will actually refocus. Acceptability of the pricing will have to be look into. It takes time to adjust,” he added. For his part, Arthur A. Balmadrid, senior vice-president at the Isuzu Philippines Corp. expects a temporary but “big” effect on sales but is betting on the sustained growth of the economy to help the industry recover. “Malaki ’yung impact niya pero kung ’yung growth ng economy ay tuloy-tuloy, ’pag may growth, kailangan ng sasakyan. So eventually, mapipilitan din lahat bumili. Pero magkakaroon ng slowdown ’yan definitely, hindi namin alam gaano katagal (It will have a big impact but if the economy continues to grow, there will always been a demand for vehicles. Eventually, people will have to buy. But definitely there will be a slowdown, but we don’t know how long),” he told reporters in the sidelines of the same event. Mr. Balmadrid recalled that sales of Asian utility vehicles (AUV) dropped 20% after the government in 2003 passed Republic Act No. 9224, which amended the National Revenue Code of 1997 to include the excise tax on automobiles. However, he said this is unlikely to happen this time since the Philippine economy is doing better now. Both Mitsubishi and Isuzu officials are also hoping for a dialogue with the finance department to relay the issues of the industry. As of September, Mitsubishi Motors Philippines Corp. has the second largest market share in the automobile industry, while Isuzu Philippines Corp. ranked fourth.

First Gen Corp. is offering up to 40% of its proposed $1-billion liquefied natural gas (LNG) regasification terminal in Batangas

City to prospective investors, the head of the Lopez-led company said on Thursday. “We are going through a partner selection process. We have very good names in the shortlist. We’re talking to Japanese and European players as partners. Right now, they’re still there. What we are doing is spending time with them to see what the fit is,” said Francis Giles B. Puno, First Gen president and chief operating officer, told reporters on the sidelines of an industry forum. The company is building the terminal that can handle 5 million tons of LNG, or an equivalent of 5,000 megawatts, ahead of the anticipated exhaustion of the Malampaya gas field in 2022 to 2024. The facility is expected to cater not just to the company’s requirements but those of the Ilijan plant and First Gen’s planned 414-MW Santa Maria and 414-MW St. Joseph plants. First Gen expects to select the partner by the first half next year, which Mr. Puno said may not be limited to one partner. The company is talking to “eight different names” equally from Japan and Europe, he said. The investors may also be the company’s partners in the Santa Maria and St. Joseph projects. “We’ll start essentially construction by site preparation. We’re also bidding out the tender for EPC [engineering, procurement and construction] next year,” he said, adding that the company was choosing among five prospective contractors. He said bidding out the EPC contractor would allow First Gen to “ride on the favorable conditions today” when there are few available projects. The competitive bids could bring down the project cost below $1 billion. “We still have time. We don’t have to conclude it today. We really need to be able to do it so that by the time we make the investment decision tail-end of next year, we would already have a partner by then,” he said. Mr. Puno said First Gen might also hold discussions with the government, which under the Department of Energy (DoE), was considering building a 200-MW plant that runs on natural gas. The company also needs to find out from the DoE if there are other company keen on building a similar facility. He said building a natural gas-fired plant would be a “grand opportunity” for the current administration to make it its “legacy investment.” The DoE previously said that its proposed project might be under its corporate arm Philippine National Oil Co. Separately on Thursday, First Gen subsidiary Energy Development Corp. (EDC) said it had signed a power supply agreement with Ilocos Norte Electric Cooperative, Mountain Province Electric Cooperative and Kalinga-Apayao Electric Cooperative for the supply of up 53 MW from Dec. 26, 2016 until Dec. 25, 2018. “EDC is working hard to move the renewable energy agenda forward. We are thankful that more and more customers are giving RE [renewable energy] a chance and share our goal of building a low carbon world through clean energy. As we help improve electricity supply in the region, we also support the region’s goal of economic growth and competitiveness,” said Richard B. Tantoco, EDC president and chief operating officer, in a statement on Thursday.

Sky Cable Corp. is poised to exceed its targets this year banking on higher contributions from its Pay TV Networks segment, as it


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continues to maximize its cable, Internet and television content. The cable unit of ABS-CBN Corp. saw at least 40% growth in its broadband business over the past six months versus last year’s level. It currently has at least a million subscribers and will exceed that level by year end, compared to 2015’s level of about 700,000, Sky Cable Corp. CEO March S. Ventosa told reporters at the sidelines of a company event. “If you look at our performance this year, we would exceed a million subscribers by the end of the year for all our services... Sky Direct is also still performing very well and we will be exceeding the target of exceeding 100,000 subscribers this year, only seven months of operation,” Mr. Ventosa said. In a bid to offer an all-in-one product to meet the growing demand for both connectivity and entertainment in a single plan, Sky Cable launched its new postpaid subscription “One Sky” -- that will be available by mid-October -- as it sees a continued aggressive growth of its broadband business. Mr. Ventosa expects this to become the company’s “most profitable” business line. A One Sky plan will combine a high-speed SkyBroadband connection, HD cable TV viewing via Sky Cable, mobile Internet via Sky Mobi and its video on demand service, Sky On Demand. “Our growth in broadband has been over 40% and we believe that we’ll continue with that moving on, particularly with this product offering it makes it a lot easier for subscribers to make a plan and hopefully that will continue to drive the growth in our subscribers,” Mr. Ventosa added, noting that the cable TV and broadband provider’s margins are higher when people avail more services from them. He noted the bulk of Sky’s subscription is still “cable-only,” particularly in the provinces, while in Metro Manila, more people avail of bundles, providing “growth opportunities” for the ABS-CBN unit. Moving forward, Sky will also rollout its broadband in provincial areas to expand its coverage nationwide. Currently, its network is mostly still in Mega Manila and in key cities. “We’re still rolling out in other provincial areas because we’re not yet 100% in those markets. Our target is to be able to sell broadband anywhere where we have cable presence,” Mr. Ventosa added. ABS-CBN, the parent company of SkyCable, reported P20.9-billion consolidated revenue for the first half of 2016, bringing its net income to P2.1 billion, 76% higher compared to the same period last year.

The joint venture of Jollibee Foods Corp. (JFC) and Cargill Philippines, Inc. is looking to start operations in about a year, as its

planned poultry processing plant in Batangas advances to the construction stage. In a statement, Cargill Philippines announced that its partnership with the homegrown fastfood giant already broke ground on Monday for the facility located in Santo Tomas, Batangas. The joint venture, Cargill Joy Poultry Meats Production, Inc. (C-Joy), targets to complete construction of the plant that will process 45 million chickens annually within the fourth quarter of 2017. The project, considered the biggest in the Philippines, represents the first poultry processing plant of global agricultural products supplier Cargill, Inc. in the country. “The facility is a testament of the importance of the Philippines for Cargill and our continued commitment to invest in the country,” C-Joy Managing Director Paul Fullbright was quoted as saying in the statement released on Thursday. “As Cargill does everywhere we do business, we will contribute in improving the system of hygiene, food safety, and quality in this world class facility and we look forward to having high level of partnership with the poultry growers and farmers.” The facility will supply dressed and marinated chickens, in particular, to meet the requirements of Jollibee, Mang Inasal, Chowking, Greenwich, Burger King and other JFC brands. “This plant, which will provide JFC with dressed and marinated chicken, will augment the chicken supply to the fast growing JFC brands,” JFC Chief Business Support Officer Fernando Siy Yu, Jr. said in the statement. JFC operates the largest food service network in the Philippines. As of end-June, it has 2,528 outlets across the country: 939 Jollibee, 457 Chowking, 237 Greenwich, 378 Red Ribbon, 455 Mang Inasal and 62 Burger King. In addition, the company operates 655 stores abroad. In late May, JFC announced a partnership with Cargill Philippines for the poultry processing plant in Batangas. It agreed to invest P244.9 million in the joint venture and another P15.2 million in Cargill Joy Poultry Realty, Inc. “This partnership will meaningfully benefit our customers, our operations as well as the overall Philippine food industry,” Mr. Yu said. “We will continue to maintain our strong relationship with key chicken supplier in the country and look forward to sustained long-term supply arrangements with them as our business grow together.” C-Joy expects the operation to create 1,000 full-time jobs and develop opportunities for the farming community in Batangas and nearby provinces. “I am confident that this will contribute in making Batangas to be one of the leading producers of chickens in Calabarzon,” Batangas Governor Hermilando I. Manandas said. “But more than this, I think the impact is the number of local people that you will employ and the number of farming livelihoods that you will help.”

Nickel Asia Corp. registered a double-digit decline in sales during the first nine months, as unfavorable weather conditions

delayed shipments of nickel ore while prices remain depressed. In a statement issued on Thursday, the country’s largest lateritic nickel ore producer said the value of its shipments dipped 19% to P9.94 billion from the P12.32 billion reported for the same three quarters in 2015. “Lower shipment volumes coupled with the overall weakness in nickel ore prices led to a drop in the company’s estimated value of shipments,” the statement read. Nickel Asia sold 15.18 million wet metric tons (WMT) from its four mining operations from January to September. The volume settled about 5% below the 15.96 million WMT shipped in the comparable 2015 period. The company’s Taganito mine accounted for 43% of total shipments. It sold 2.13 million WMT of saprolite ore and 4.37 million WMT of limonite ore, including 2.82 million WMT shipped to the Taganito high-pressure acid leach (HPAL) processing plant. The operation sold 2.34 million WMT of saprolite ore, 3.92 million WMT of limonite ore, including 3.10 million WMT shipped to the HPAL plant, during the first nine months of 2015. “The lower volumes compared to the prior year was due to remedial work conducted over a one-month period at the Taganito HPAL plant, which reduced ore delivery from the company’s Taganito mine. The remedial work was completed in May 2016 and the plant has since resumed operations at full capacity,” Nickel Asia noted. The company’s Rio Tuba mine, meanwhile, accounted for 30% of total shipments. It sold 1.47 million WMT of saprolite ore and 3.05 million WMT of limonite ore, including 2.62 million WMT delivered to the Coral Bay HPAL plant. In the comparable 2015 period, the operation shipped 2.51 million WMT of saprolite ore and 2.52 million WMT of limonite ore to the Coral Bay plant. The decrease was attributed mainly to a change in the ore grade mix brought about by the impact of lower ore prices. Shipments from the Hinatuan mine likewise dropped to 2.48 million WMT from 2.72 million WMT. The Cagdianao mine shipped 1.69 million WMT compared with the 1.96 million WMT reported a year earlier. “The unfavorable weather conditions and the effects of sea swells during the first half of the year resulted in delays in the start of shipment from the company’s Hinatuan and Cagdianao mines, thereby translating to lower shipment volumes during the first three quarters of the year,” the company said. The lower production and shipment delays added to the negative impact of the overall weakness in nickel ore prices on the company’s financial results. The estimated realized nickel price on 9.74 million WMT of ore sales to Japanese and Chinese customers in the first nine-months of the year averaged $19.20 per WMT compared to an average of $22.70 per WMT realized during the same period last year,” Nickel Asia said. The company realized an average of $4.19 a pound of payable nickel on the 5.44 million WMT of low-grade limonite ore, which are linked to prices on the London Metal Exchange (LME), sold to the Coral Bay and Taganito processing plants. In comparison, Nickel Asia received an average of $5.74 for every pound of payable nickel on the 5.62 million WMT of low-grade limonite ore shipped during the first nine months of 2015. Nickel Asia President and Chief Executive Officer Gerard H. Brimo, however, took note of the recovery in nickel prices, saying: “The average LME price in the third quarter alone was $4.66 per pound, a 19% increase compared to the first-half average of just $3.93 per pound.” Also, the results of audits conducted by the Department of Environment and Natural Resources have erased some uncertainties over the company’s operations. Taganito, Rio Tuba and Cagdianao have passed the audits ordered by Environment Secretary Regina Paz L. Lopez, a vocal mining critic. “We are delighted that three of our four mines, including our two largest -- Taganito and Rio Tuba -- passed the mine audits with flying colors,” Mr. Brimo was quoted as saying in the statement. Nickel Asia has supposedly not received any formal communication from the Environment department about the non-inclusion of the Hinatuan mine in the list of operations that passed


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the recently concluded audit. “We are confident that our Hinatuan operation will likewise pass, as its operating standards are at par with our other mines,” Mr. Brimo said.

Negros Navigation Co., Inc. saw a 42% increase in net income in the first six months of the year, driven by strong revenue

growth. In a statement, the shipping group said it posted a P1.7-billion income in the first six months of the year, compared with P1.2 billion seen during the same period in 2015. Negros Navigation attributed the rise in its bottomline to “maintaining its healthy cost-to-revenue ratio, were the vital factors to the strong performance of the sustained revenue growth of all the business units within the group.” Through its operating company 2GO Group, Inc. (2GO), the shipping group said it has further expanded its foothold as the largest fully-integrated supply chain enterprise and most complete end-to-end solutions providers in the Philippines. Meanwhile, Negros Navigation denied reports that Udenna Corporation, a holding company owned by Phoenix Petroleum CEO Dennis Uy, recently acquired a substantial stake in the company which controls the 2GO Group, saying “no such acquisitions have been made upon checking with the Corporate Secretary who stated there was no satisfactory proof of such acquisition.” Without the proof of acquisition, Negros Navigation continues to be owned and controlled by KGLI-NM Holdings, Inc., whose major shareholder is Negros Holdings & Management Corporation.

ASIA-PACIFIC

Japan's Nikkei share average rose in choppy trade on Friday as index heavyweight Fast Retailing Co's strong gains offset

negative sentiment from Wall Street's weakness overnight. The Nikkei ended 0.5 percent higher after trading in negative territory earlier. The benchmark index was nearly flat for the week. The broader Topix gained 0.4 percent to 1,347.19 and the JPX-Nikkei Index 400 added 0.3 percent to 12,046.36. Fast Retailing jumped 5 percent after the owner of the Uniqlo casual-wear brand said it expected operating profit to jump 38 percent to a record high 175 billion yen ($1.70 billion) for the year ending in August 2017. Fast Retailing's good news contributed a hefty positive 64 points to the Nikkei.

Hong Kong stocks ended a bearish week on an upbeat note on Friday after China's producer prices unexpectedly rose for the

first time in nearly five years, easing some of the pressure on Chinese miners and manufacturers. The Hang Seng index rose 0.9 percent to 23,233.31 points, while the China Enterprises Index gained 1.1 percent to 9,601.40. But for the week, the Hang Seng dropped 2.6 percent, its worst weekly performance in a month. After a strong third quarter, the Hong Kong market has recoiled amid a resurgence in global volatility ahead of the U.S. presidential election in November, an expected U.S. interest rate hike in December and the start next year of what are expected to be tough negotiations on Britain's exit from the European Union. Chinese data for September so far has been a mixed bag for investors. Markets retreated after disappointing export and import numbers on Thursday, but drew some comfort from pickups in producer and consumer prices reported on Friday. Stronger-than-expected producer price data points to higher profits and gives companies more room to service their debts. All main sectors rose on Friday, with energy and financial shares leading the gains.

A regional election north of Tokyo between candidates most Japanese have never heard of may decide the fate of the world's

biggest nuclear plant and mark a turning point for an industry all but shut down after the Fukushima disaster. The campaign for governor of Niigata Prefecture has boiled down to two men and one issue: whether to restart the seven-reactor Kashiwazaki-Kariwa Nuclear Power Station. Reviving the seven-reactor giant, with capacity of 8 gigawatts, is key to saving Tokyo Electric Power, which was brought low by the 2011 Fukushima explosions and meltdowns, and then the repeated admissions of cover-ups and safety lapses after the world's worst nuclear disaster since Chernobyl in 1986. Tepco, as the company supplying about a third of Japan's electricity is known, is in turn vital to Prime Minister Shinzo Abe's energy policy, which relies on rebooting more of the reactors that once met about 30 percent of the nation's needs. But Ryuichi Yoneyama, 49, an anti-nuclear doctor-lawyer who has never held office and is backed by mostly left-wing parties, has made a tight race for governor of Niigata against an initially favored veteran politician from Prime Minister Shinzo Abe's pro-nuclear party, Japanese media say. In a sign that Abe's Liberal Democratic Party also sees a tough contest, party heavyweights were dispatched to campaign for Tamio Mori, 67. The former mayor and construction ministry bureaucrat is seen more likely to allow Kashiwazaki-Kariwa to restart. Distrust of Tepco, put under government control in 2012, is so high in Niigata that this election has become a litmus test for nuclear safety and put Abe's energy policy and Tepco's handling of Fukushima back under the spotlight. The government wants to restart units that pass safety checks, also promoting renewables and burning more coal and natural gas. Only two of Japan's 42 reactors are running more than five years after Fukushima, but the Niigata plant's troubles go back further. Several reactors at Kashiwazaki-Kariwa have been out of action since an earthquake in 2007 caused radiation leaks and fires in a disaster that prefigured the Fukushima calamity and Tepco's bungled response. A Tepco spokeswoman said the company could not comment on the election and was committed to boosting safety at the plant. On the campaign trail in Niigata, help for Tepco is in short supply. Yoneyama has promised to continue the outgoing governor's policy of refusing to allow a restart unless Tepco provides a fuller explanation of the Fukushima disaster. He has run for local office unsuccessfully four times but says this time he feels different, as the public supports his anti-nuclear, anti-Tepco message. Yoneyama, who has worked as a radiological researcher, says Tepco doesn't have the means to prevent Niigata children from getting thyroid cancer in a nuclear accident, as he says has happened in Fukushima. And he says the company doesn't have a solid evacuation plan. “As I go from town to town and village to village, I hear the same thing: 'We want you to protect this town. We want you to protect our hometown, our lives and our children's future,'" he told a crowd in Nagaoka this week. The LDP's Mori has toned down his support for restarting the plant as the race tightens, media say, and now insists that safety is the top priority for Kashiwazaki-Kariwa, while promoting the use of natural gas and solar power in Niigata. LDP heavyweight Shigeru Ishiba, a former cabinet minister and party secretary-general, told Reuters the party sent him to Niigata to campaign for Mori because "we can't take anything for granted". "Mr. Mori is not a person who just acquiesces to what the national government says," Ishiba said. "He has courage and will stand up to the government if he thinks our policies are wrong."


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Saudi Arabia and Japan's SoftBank Group (9984.T) will create a technology investment fund that could grow as large as $100 billion, making it one of the world's largest private equity investors and a potential kingpin in the industry. The move is part of a series of dramatic business initiatives launched by Riyadh this year as Saudi Arabia, its economy hurt by low oil prices, deploys huge financial reserves in an effort to move into non-oil industries. Earlier this year, it invested $3.5 billion in U.S. ride-hailing firm Uber, surprising many. SoftBank, a $68 billion telecommunications and tech investment behemoth, has also been stepping up investment in new areas. It agreed to buy U.K. chip design firm Arm Holdings in July in Japan's largest ever outbound deal. Saudi Arabia's top sovereign wealth fund, the Public Investment Fund (PIF), will be the lead investment partner and may invest up to $45 billion over the next five years while SoftBank expects to invest at least $25 billion. Several other large, unnamed investors are in active talks on their participation and could bring the total size of the new fund up to $100 billion, SoftBank said. "Over the next decade, the SoftBank Vision Fund will be the biggest investor in the technology sector," SoftBank Chairman Masayoshi Son said in a statement. At an annual rate of $20 billion, the new London-based fund could at current levels account for roughly a fifth of global venture capital investment. In the year to September, venture capital-backed companies globally raised $79 billion, according to data from KPMG and CB Insights, with tech start-ups attracting the lion's share of that cash. "Son is very good at looking for companies with big growth prospects, and that will create fierce competition," said Hiroyuki Kuroda, secretary general of the Venture Enterprise Center in Japan. The project will be led for SoftBank by Rajeev Misra, the group's head of strategic finance and who joined the Japanese firm in 2014 from Fortress Investment Group, a private equity and hedge fund group. PIF will engage its own team. Saudi Arabia's Deputy Crown Prince Mohammed bin Salman, leading an economic reform drive in the kingdom, has revealed a string of high-profile investment plans this year. He aims to expand the PIF, founded in 1971 to finance development projects in the kingdom, from $160 billion to about $2 trillion, making it the world's largest sovereign fund. In June, the PIF departed from Saudi Arabia's traditional strategy of low-risk investments and took a step into the tech world with the Uber investment. That deal which illustrated how Riyadh now hopes to use its investments to develop the economy: Uber is a popular form of transport for Saudi women, who are banned from driving, and is creating badly needed non-oil jobs for Saudi citizens. SoftBank, a diverse company with stakes from U.S. carrier Sprint (S.N) to e-commerce giant Alibaba (BABA.N), is also changing, shifting towards cutting edge tech investments after Son scrapped retirement plans in July and announced plans to reinforce "SoftBank 2.0". It is still wrestling with a $112 billion debt pile and the turnaround of Sprint. "SoftBank has been looking to invest aggressively in the internet of things, and this fund is part of that wider move," said Naoki Yokota, analyst at SMBC Friend Research Center Ltd.

Chinese state-owned chemical companies Sinochem Group and ChemChina are in discussions about a possible merger to create

a chemicals, fertilizer and oil giant with almost $100 billion in annual revenue, three sources familiar with the matter said. The deal has been proposed by China's central government as part of its efforts to slash the number of state-owned companies and create larger, more competitive global industry players, said the sources. The sources asked not to be identified because they were not authorized to speak publicly about the matter. Top management of the two firms held a meeting earlier this week to discuss a potential merger, said one source directly briefed on the matter. "The government has given the mandate to let Sinochem lead in this potential merger with ChemChina," said the source. A second source familiar with the matter said both firms have started due diligence work looking into each other's financial details and business segments. When asked about a potential merger, a ChemChina spokesperson said: "There is no such thing." A Sinochem spokesman said he was not aware of the discussions. China's State-owned Assets Supervision and Administration Commission (SASAC), which oversees state-owned enterprises, did not comment when asked about the talks. Shares in the companies' listed subsidiaries jumped on the news, with Sinochem International up 10 percent for its biggest one-day rally in a year and Sinofert on track for its best daily gain since December. While still at an early stage, the talks come as China National Chemicals Corp, as ChemChina is officially known, finalizes a $43 billion takeover of Swiss pesticides and seed group Syngenta. That deal would be China's largest-ever foreign investment. In early European trading, Syngenta shares were down about 2 percent at their lowest in almost two months. Syngenta declined to comment on the news. European Competition Commissioner Margrethe Vestager would not comment on any potential issues arising from the deal, were China to create a domestic chemicals, fertilizer and oil giant. "It's very early days," she told reporters on Friday. The European Union is expected to rule on the deal by Oct. 28. It was not clear why the discussions were happening before the ChemChina-Syngenta deal had been finalised, or whether it would create further problems with anti-trust regulators around the world which have been looking at that deal. Beijing may have initiated the talks to create a stronger, larger player to make it easier to absorb a world-class company like Syngenta, said the source directly briefed on the matter. Backing from Sinochem might help ChemChina finance its Syngenta deal on more favorable terms, the source said. ChemChina faces a $3 billion break fee if its Syngenta deal does not proceed. If approved, the ChemChina-Sinochem merger would be among the largest between two Chinese state-owned enterprises, following similar marriages that created shipping giant China Cosco Shipping Corp, train maker CNR-CSR and more recently, the tie-up between Baosteel Group and Wuhan Steel. Combining the two companies, which make everything from refined oil products to latex gloves and insecticides, would propel it into the top echelons of the competitive global chemicals, fertilizer and oil industries. Based on 2015 annual reports, revenues of the combined group would comfortably eclipse Germany's BASF, the world's largest maker of industrial chemicals by sales. It would be a major global chemical giant and challenge domestic rivals Sinopec, PetroChina and CNOOC, said Michal Meidan, London-based China analyst with Energy Aspects. "It really does align nicely the government's priority to reduce the number of SOEs (state-owned enterprises)," Meidan said. A merger would fit in with President Xi Jinping's years-long push to shrink the number of centrally-controlled state-owned enterprises, which number more than 100. In Sinochem's case, it is larger than ChemChina, but it needs a partner in the long term if it wants to expand in the global market and extend beyond roots that go back almost 70 years in oil and chemical trading, experts who know the companies said. Sinochem has seen growth in the key energy business stagnate with increasing domestic competition in trading from the likes of state oil trader Unipec and Chinaoil, while its overseas oil and gas assets have struggled amid prolonged low oil prices. ChemChina would add some 500,000 barrels per day of crude oil processing capacity to Sinochem's oil refining business. Premium assets ChemChina acquired would also boost Sinochem's chemical departments. The second source said a deal would benefit both companies: Sinochem's upstream oil and gas assets could feed ChemChina's nine refineries, Sinochem's access to rubber trading would help ChemChina's tyre business, while Sinochem's dominance in fertilizer markets would be a good fit for ChemChina's agri-chemical business. "Sinochem is generally light on assets, while ChemChina is a more of a manufacturer," he said.

Samsung Galaxy Note 7 smartphone devices will be banned from aircraft in the United States starting on Saturday at noon EDT

(1600 GMT) under an emergency order, regulators said on Friday after numerous reports of the devices catching fire. Samsung Electronics Co Ltd (005930.KS) scrapped its flagship Galaxy Note 7 smartphone on Tuesday because of incidents where the phones began smoking or caught fire, dealing a huge blow to its reputation. The decision came after reports of fires in replacement devices prompted a new round of warnings from regulators, phone carriers and airlines. The order from the U.S. Transportation Department and other agencies bars owners from carrying on the devices or stowing them in checked baggage during flights. "We recognize that banning these phones from airlines will inconvenience some passengers, but the safety of all those aboard an aircraft must take priority," said Transportation Secretary Anthony Foxx. "We are taking this additional step because even one fire incident inflight poses a high risk of severe personal injury and puts many lives at risk." The Transportation Department warned that passengers who packed the devices in


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checked luggage raised the risk of "a catastrophic incident." "Anyone violating the ban may be subject to criminal prosecution in addition to fines," the department said in a press statement. The agency said that the phones might be confiscated from passengers attempting to take them onboard, and that people found onboard with the phones might face fines. In another statement issued late Friday, the department clarified that owners who attempt to travel by air with Samsung Galaxy Note 7 devices would only be "denied boarding." The world's largest phone maker this week said it was also expanding a U.S. recall of the fire-prone model to a total of 1.9 million Note 7 phones, including the 1 million Galaxy Note 7s it recalled on Sept. 15. The U.S. Consumer Product Safety Commission said on Thursday the Note 7's battery "can overheat and catch fire, posing serious fire and burn hazard to consumers." It added that Samsung had received 96 reports of batteries in Note 7 phones overheating in the United States, including 23 new reports since the Sept. 15 recall announcement.

REST OF THE WORLD

European shares rose on Friday to claw back ground lost in the previous session, with banking stocks outperforming, while

hedge fund Man Group also surged higher. The pan-European STOXX 600 index rose 1.3 percent, after touching during the previous session a three-month low. The index however remains down by around 7 percent so far in 2016, but Clairinvest fund manager Ion-Marc Valahu backed having a "long" position to bet on more gains for European stocks. He cited expectations that Deutsche Bank would reach a settlement with U.S. authorities over alleged mis-selling of mortgage backed securities as one reason for this. Deutsche Bank shares rose 2 percent, and Valahu also cited expectations that Italy would fix problems with its struggling banks as a further reason to stay upbeat on European stocks. "You should stay 'long' on European equities. I expect positive resolutions on Deutsche and Italian banks," he said. Europe's STOXX Bank was the biggest sectoral gainer with a gain of 2.2 percent, further undepinned by better-than-expected results from three big U.S. banks. Shares in Banca Popolare di Milano and Banco Popolare both rose more than 6 percent as investors bet shareholders would approve a merger to create Italy's third-largest lender when they meet on Saturday. Shares in French telecoms group SFR climbed 3.8 percent after rival Altice acquired another 5 percent stake in SFR, with the broader STOXX Europe 600 telecoms index advancing by 1.4 percent. Shares in British hedge fund Man Group jumped 13.8 percent to top STOXX gainers after the company posted a rise in assets under management, and announced a share buyback and the acquisition of investment management company Aalto. "Overall, we think (this) is an encouraging release, and reiterate our 'Buy'," said Bank of America Merrill Lynch analyst Philip Middleton in a research note. Software AG slumped 8.7 percent after reporting a drop in licence revenue.

Global stocks and the dollar rebounded on Friday, buoyed at first by U.S. and Chinese data, but Federal Reserve Chair Janet

Yellen later rattled investors when she said aggressive steps may be needed to address an economy whose potential is slipping. The dollar posted its largest weekly rise in more than seven months, with rebounding U.S. retail sales and a rise in producer prices last month indicating the economy had regained momentum in the third quarter after a lackluster first-half. Stocks in Europe rose more than 1 percent and an index of global equities gained. But stocks on Wall Street pared gains to close just above break-even, while yields on longer-dated U.S. Treasuries ticked up, with the benchmark 10-year note edging above 1.8 percent. Yellen, who posed her comments in Boston as questions that need more research, also suggested the U.S. central bank may allow inflation to exceed its 2 percent target. Yellen's remarks suggest she embraces the thinking of former U.S. Treasury Secretary Larry Summers who has said secular stagnation, or a lack of demand, is crimping global growth, said Jeffrey Gundlach, chief executive of DoubleLine Capital. "I didn't hear, 'We are going to tighten in December,'" Gundlach told Reuters. Peter Kenny, senior market strategist at Global Markets Advisory Group in New York, said Yellen has kept everyone guessing as to when the next rate hike will occur, which has led to an inconsistent and trendless trading pattern in equities. "If the markets have a fit, they're not going to hike. If the markets are going to have smooth sailing until December, 'yes,' we'll hike," said Axel Merk, president and chief investment officer of Merk Investments in Palo Alto, California. "She's going to look for every excuse not to hike rates." The Dow Jones industrial average .DJI closed up 39.44 points, or 0.22 percent, to 18,138.38. The S&P 500 .SPX rose 0.43 points, or 0.02 percent, to 2,132.98 and the Nasdaq Composite .IXIC added 0.83 points, or 0.02 percent, to 5,214.16. For the week, the Dow fell 0.56 percent, the S&P 500 slid 0.96 percent and the Nasdaq slipped 1.48 percent. The dollar index, which tracks the greenback against a basket of six major currencies, added 0.57 percent to 98.069 .DXY and was up 1.5 percent for the week. Against the yen, the dollar rose 0.44 percent to 104.14 JPY=, while the euro fell 0.77 percent to $1.0971 EUR. Chinese producer prices and U.S. economic data had bolstered expectations earlier in the session that the Fed would raise interest rates in December. U.S. producer prices rose in September to post their biggest year-on-year rise since December 2014, while retail sales gained 0.6 percent after a 0.2 percent decline in August. In China, September producer prices unexpectedly rose for the first time in nearly five years and consumer inflation also beat expectations, easing some concerns about the health of the world's second-biggest economy. Disappointing Chinese trade data on Thursday had rattled investors and pushed global equity markets to three-month lows. European shares tracked Asian markets higher and Wall Street initially jumped as strong results from JPMorgan and Citigroup lifted financial stocks. Shares later pared gains. Shares of JPMorgan (JPM.N), the biggest U.S. bank by assets, fell 0.32 percent after it beat forecasts for revenue and profit. Citigroup (C.N) rose 0.29 percent after earnings fell less than expected. In Europe, the pan-regional FTSEurofirst 300 .FTEU3 index rose 1.33 percent to close at 1,341.54, while MSCI's all-country world index .MIWD00000PUS of equity markets in 46 countries rose 0.30 percent. Oil slipped below $52 a barrel, giving up earlier gains, as abundant crude supplies outweighed tighter U.S. fuel inventories and plans by the Organization of the Petroleum Exporting Countries to cut output. Global benchmark Brent LCOc1 settled down 8 cents at $51.95 a barrel. U.S. crude CLc1 slid 9 cents to settle at $50.35 a barrel. U.S. Treasury yields rose, with the benchmark 10-year note US10YT=RR falling 19/32 in price to yield 1.8048 percent. The benchmark 10-year German bund DE10YT=TWEB rose 2 basis points to 0.05 percent.

Oil prices fell slightly on Friday as traders balanced a stronger dollar and another increase in the U.S. oil rig count against

expectations that more OPEC talk of output cuts will keep crude above $50 per barrel. The dollar .DXY posted its best weekly performance in more than seven months against a basket of currencies, weighing on prices of greenback-denominated commodities, including crude oil. [FRX/] A closely watched report by oil services provider Baker Hughes, meanwhile, showed U.S. drillers added four


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rigs in the week to Oct. 14. It was the 16th week in a row that oil drillers had gone without making cuts, indicating more production to come. [RIG/U] Despite that, oil prices fell just slightly. Brent LCOc1, the London-traded crude benchmark, settled down 8 cents, or 0.2 percent, at $51.95 a barrel. For the week, it closed flat. U.S. West Texas Intermediate (WTI) crude ended down 9 cents at $50.35. It rose about 1 percent on the week. "There's no big news to drive the market," said Phil Flynn, analyst at Chicago brokerage Price Futures Group. He described the oil rig count rise of four as "anti-climatic." Most analysts have said rigs need to rise by at least 10 in a week to have a sustained bearish impact on prices. For now, many think that prices could continue rising in the near term on expectations related to output cuts proposed by OPEC. Oil prices have trended higher since Sept. 27, with Brent gaining about 13 percent and hitting one year highs above $53, after the Organization of the Petroleum Exporting Countries announced its first planned output cut in eight years. OPEC plans to rein in a global supply glut that forced crude to crash from mid-2014 highs above $100 and has asked other major producers, including Russia, to join in cutting output. [OPEC/M] Between now and November, what OPEC will be trying to do is a lot of jawboning to move prices higher and the market is likely to respond," said Jim Williams at consultancy WTRG Economics in London, Arkansas. In Thursday's trade, both Brent and WTI rose, continuing their recent upward momentum, despite the U.S. government reporting the first domestic crude inventory build in six weeks. Market participants had focused then on larger-than-expected drawdowns in diesel, gasoline and other fuel stockpiles reported by the U.S. Energy Information Administration. [EIA/S]

Britain's banks are not reporting the full extent of cyber attacks to regulators for fear of punishment or bad publicity, bank

executives and providers of security systems say. Reported attacks on financial institutions in Britain have risen from just 5 in 2014 to 75 so far this year, data from Britain's Financial Conduct Authority (FCA) show. However, bankers and experts in cyber-security say many more attacks are taking place. In fact, banks are under almost constant attack, Shlomo Touboul, Chief Executive of Israeli-based cyber security firm Illusive Networks said. Touboul cites the example of one large global financial institution he works with which experiences more than two billion such "events" a month, ranging from an employee receiving a malicious email to user or system-generated alerts of attacks or glitches. Machine defenses filter those down to 200,000, before a human team cuts that to 200 "real" events a month, he added. Banks are not obliged to reveal every such instance as cyber attacks fall under the FCA's provision for companies to report any event that could have a material impact, unlike in the U.S. where forced disclosure makes reporting more consistent. "There is a gray area...Banks are in general fulfilling their legal obligations but there is also a moral requirement to warn customers of potential losses and to share information with the industry,” Ryan Rubin, UK Managing Director, Security & Privacy at consultant Protiviti, said. Banks are not alone in their reluctance to disclose every cyber attack. Of the five million fraud and 2.5 million cyber-related crimes occurring annually in the UK, only 250,000 are being reported, government data show. But while saving them from bad publicity or worried customers, failure to report more serious incidents, even when they are unsuccessful, deprives regulators of information that could help prevent further attacks, the sources said. A report published in May by Marsh and industry lobby group TheCityUK concluded that Britain’s financial sector should create a cyber forum comprising bank board members and risk officers to promote better information sharing. Security experts said that while reporting all low level attacks such as email "phishing" attempts would overload authorities with unnecessary information, some banks are not sharing data on more harmful intrusions because of concerns about regulatory action or damage to their brand. The most serious recent known attack was on the global SWIFT messaging network in February, but staff from five firms that provide cyber security products and advice to banks in Britain told Reuters they have seen first-hand examples of banks choosing not to report breaches, despite the FCA making public pleas for them to do so, the most recent in September. "When I moved from law enforcement to banking and saw what banks knew, the amount of information at their disposal, I thought 'wow', I never had that before," Troels Oerting, Group Chief Information Security Officer at Barclays and former head of Europol's Cyber Crime Unit, said. Oerting, who joined Barclays in February last year, said since then banks' sharing of information with authorities has improved dramatically and Barclays shares all its relevant information on attacks with regulators. Staff from five firms that provide cyber security products and advice to banks in Britain told Reuters they have seen first-hand examples of banks choosing not to report breaches. "Banks are dramatically under-reporting attacks, they do what's legally required but out of embarrassment or fear of punishment they aren't giving the whole picture," one of the sources, who declined to be named because he did not want to be identified criticizing his firm's customers, said. Apart from Barclays, the other major British banks all declined to comment on their disclosures. The Bank of England declined to comment and the FCA did not respond to requests for comment. Companies that use external security systems also do not always inform them of attacks, the sources said. "Our customers sometimes detect attacks but don't tell us," Touboul, whose firm helps protect banks' SWIFT payment networks by luring attackers to decoy systems, said. Hackers used the bank messaging system that helps transmit billions of dollars around the world every day to steal $81 million in one of the largest reported cyber-heists. Targeted attacks, in which organized criminals penetrate bank systems and then lurk for months to identify and profile key executives and accounts, are becoming more common, David Ferbrache, technical director Cybersecurity at KPMG and former head of cyber and space at the UK Ministry of Defended, said. "The lesson of the SWIFT attack is that the global banking system is heavily interconnected and dependent on the trust and security of component members, so more diligence in controls and more information sharing is vital," Ferbrache said. Big banks are spending enormous amounts of money, $400-500 million a year, but there are still vulnerabilities in their supply chains and in executives' home networks, and organized crime groups are shifting their focus accordingly," Yuri Frayman, CEO of Los Angeles-based cyber security provider Zenedge, said. Banks are increasingly sensitive to the brand damage caused by IT failings, perceiving customers to care just as deeply about security and stable service as loan or deposit rates. Former RBS Chief Executive Stephen Hester waived his bonus in 2012 over a failed software update which caused chaos for thousands of bank customers. And HSBC issued multiple apologies to customers after its UK personal banking websites were shuttered by a distributed denial of service (DDoS) attack, following earlier unrelated IT glitches. "People don't care about a 0.1 percent interest rate change but 'will this bank do the utmost to keep my money and information safe?'" Oerting said.

Deutsche Bank is studying a possible change of its strategy in the United States, where it is fighting a $14 billion fine the

Department of Justice (DoJ) is requiring over the sale of toxic mortgage bonds before the financial crisis, two sources close to the company said on Saturday. They said that while abandoning the United States, its most important market, altogether was very likely out of the question for the bank, it could consider scaling down its activities, so as to focus more on the needs of German corporate clients overseas. German newspaper Welt am Sonntag in an abstract of a story due to be published on Sunday said earlier that a change of business strategy might be part of a settlement with the DoJ, in addition to paying the fine, possibly by giving up its investment banking in the United States, but the two sources did not confirm this connection. A Deutsche Bank spokeswoman declined to comment on the report. The bank has been engulfed in crisis since news of the DoJ fine demand emerged last month. It is fighting the fine but could have to turn to investors for more money if it is imposed in full. Progress is also slow on steps to cut staff, overheads and the sell off of non-core businesses that chief executive John Cryan announced when he took on his job last year. A source with direct knowledge of matters said on Friday that the bank's CFO last month told staff representative that job cuts could be double those planned, in a step possibly removing a further 10,000 employees. A second source familiar with the discussions said on Friday the management was examining the countries where it is present so as to decide where it was worth staying. Generally, the bank is looking hard where to generate future profits and whether to curb trading activities in its investment banking division. Sueddeutsche Zeitung on Saturday said the supervisory board had been discussing how to proceed in the United States, including a complete withdrawal, although given that market's importance, this might


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be too radical a move. A partial exodus from the U.S. could, on the other hand help save capital costs and expenditure, the newspaper said.

A heavy slate of U.S. corporate earnings could set the course next week for a wavering U.S. stock market. Better-than-expected

big bank earnings on Friday somewhat helped shore up Wall Street's confidence, which has been shaken by a rocky beginning to third-quarter reporting season, marred by disappointing results from industrial and healthcare companies. But with the bulk of results still to come, investors are counting on large U.S. companies to stop a year-long streak of profit declines. Next week's reports include Microsoft (MSFT.O), General Electric (GE.N), Johnson & Johnson (JNJ.N) and Bank of America (BAC.N). Mixed initial results have added to other concerns in recent days that hurt equities, including weak economic data in China, worries over Britain's exit from the European Union, and the likelihood of a Federal Reserve interest rate hike before year-end. After a second straight week of losses, the S&P 500 sits about 2.5 percent below its all-time closing high set two months ago. "The exuberance you saw this summer as it got to new highs was built on the premise that prices were leading a breakout in earnings," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. Investors "were looking for a pretty strong breakout in the second half of the year to make up for a very weak first half, and I just don't know that that's in the cards," McCain said. With 34 S&P 500 companies reporting so far, third-quarter earnings are expected to slip 0.4 percent, according to Thomson Reuters I/B/E/S. But given how many better-than-expected reports typically occur, investors are eyeing the quarter to potentially end with earnings in positive territory. S&P 500 profits fell 5 percent in the first quarter and 2.1 percent in the second. "At the end of the day, it really is all about earnings. Every economic data point filters down into earnings," said Karyn Cavanaugh, senior market strategist at Voya Investment Management in New York. "When we actually move to positive, I think psychologically that will be a point for investors to say, 'Wow, this really is probably the best place to be in terms of investing. You have to be in equities'," said Cavanaugh. Strong earnings forecasts will be important for supporting historically expensive stock valuations. The S&P 500 trades at nearly 17 times earnings estimates for the next 12 months, against its historical average of 15 times. One potential obstacle to upbeat outlooks is the strengthening U.S. dollar, which this week climbed to its highest since March against a basket of currencies .DXY. Multinational companies that generate business outside the United States stand to see those sales reduced when translated back into dollars. Alan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta, said he will be watching "whether or not businesses feel like they have their operating models working well and under control, and if the dollar turns into the excuse du jour for weak guidance or missing the quarter." "At these valuation levels, the market gets to be vulnerable," Gayle said.

The U.S. budget deficit widened to $587 billion for the fiscal year 2016 on slower-than-expected revenues and higher spending for

programs including Social Security and Medicare, the Treasury Department said on Friday. The 2016 deficit increased to 3.2 percent of gross domestic product. It was the first time the deficit increased in relation to economic output since 2009, according to figures from the Congressional Budget Office. That year, the deficit peaked at $1.4 trillion amid the financial crisis. Last fiscal year's deficit was $439 billion, with a deficit-to-GDP ratio of 2.5 percent. Accounting for calendar adjustments, the 2016 fiscal year deficit was $548 billion. Fiscal 2016 revenues grew 1 percent to $3.267 trillion, while outlays rose 5 percent to $3.854 trillion. Revenue growth was reduced by the retroactive extension of some expired individual and corporate tax deductions passed by Congress as part of the Protecting Americans from Tax Hikes (PATH) Act late last year, Treasury said. With an aging population, mandatory spending for Social Security and Medicare, the federal retirement and healthcare programs for the elderly, have increased. For September, the Treasury posted a $33 billion budget surplus, a 63 percent decline from the same month last year. Analysts polled by Reuters had expected a $25 billion surplus for last month. When accounting for calendar adjustments, September would have shown a $75 billion surplus compared with an adjusted $91 billion surplus in the same month a year ago. Receipts last month totaled $357 billion, a 2 percent decline from September 2015, while outlays stood at $323 billion, an 18 percent rise from the same month a year ago. The non-partisan Congressional Budget Office has repeatedly warned that increasing federal debt levels are unsustainable over the long term unless Congress changes current laws.

The Federal Reserve may need to run a "high-pressure economy" to reverse damage from the 2008-2009 crisis that depressed

output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short. Though not addressing interest rates or immediate policy concerns directly, Yellen laid out the deepening concern at the Fed that U.S. economic potential is slipping and aggressive steps may be needed to rebuild it. Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone "by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market." "One can certainly identify plausible ways in which this might occur," she said. Looking for policies that would lower unemployment further and boost consumption, even at the risk of higher inflation, could convince businesses to invest, improve confidence, and bring even more workers into the economy. Yellen's comments, while posed as questions that need more research, still add an important voice to an intensifying debate within the Fed over whether economic growth is close enough to normal to need steady interest rate increases, or whether it remains subpar and scarred, a theory pressed by Harvard economist and former U.S. Treasury Secretary, Lawrence Summers, among others. Her remarks jarred the U.S. bond market on Friday afternoon, where they were interpreted as perhaps a willingness to allow inflation to run beyond the Fed's 2.0 percent target. Prices on longer dated U.S. Treasuries, which are most sensitive to inflation expectations, fell sharply and their yields shot higher. The yields on both 30-year bonds US30YT=RR and 10-year notes 10YT=RR ended the day at their highest levels since early June, and their spread over shorter-dated 2-year note yields US2YT=RR widened by the most in seven months. Jeffrey Gundlach, chief executive of DoubleLine Capital, said he read Yellen as saying, "'You don't have to tighten policy just because inflation goes to over 2 percent.' "Inflation can go to 3 percent, if the Fed thinks this is temporary," said Gundlach, who agreed Yellen was striking a chord similar to Summer's "secular stagnation" thesis. "Yellen is thinking independently and willing to act on what she thinks." While investors by and large think the Fed is likely to raise interest rates in December this year, in a nod to the country's 5.0 percent unemployment rate and expectations that inflation will rise, they do not see the Fed moving aggressively thereafter. "This is a clear rebuttal of the hawkish arguments," to raise rates soon, a line of argument pitched by some of the Fed's regional bank presidents, said Christopher Low, chief economist at FTN Financial. Boston Federal Reserve Bank president Eric Rosengren, who is hosting the conference at which Yellen spoke, was one of three policymakers who dissented at the Fed's September policy meeting and argued for an immediate increase in interest rates. He feels a slight increase now will keep job growth on track and prevent a faster round of rate increases later. But in a speech earlier on Friday Rosengren also referred to the economy as "nonconformist" because of its slow growth, and the general mood at the conference was that the sluggishness is largely the result of forces like aging and demographics that are unlikely to change. "We may have to accept the reality of low growth," said John Fernald, a senior research at the San Franciso Fed. "Potential is really low." That sort of assessment could figure importantly in coming debates over rate policy, and over whether support is building at the Fed to risk letting inflation move above its 2.0 percent target in order to employ more workers and perhaps encourage more investment. It could even impact the central bank's willingness to put more aggressive monetary policies back into play if the economy slows. "If strong economic conditions can partially reverse supply-side damage after it has occurred, then policymakers may want to aim at being more accommodative during recoveries than would be called for under the traditional view that supply is largely independent of demand," Yellen said. It would "make it even more important for policymakers to act quickly and aggressively in response to a recession, because doing so would help to reduce


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the depth and persistence of the downturn." From low inflation to the effect of low interest rates on spending, Yellen's remarks demonstrated how little in the economy has been acting as the Fed expected. With public expectations about inflation so hard to budge, Yellen said tools like forward guidance, "may be needed again in the future, given the likelihood that the global economy may continue to experience historically low interest rates, thereby making it unlikely that reductions in short-term interest rates alone would be an adequate response to a future recession."

JPMorgan Chase (JPM.N) and Citigroup (C.N) trounced third-quarter estimates on Friday on a sharp rebound in trading revenues

while Wells Fargo & Co (WFC.N) barely beat expectations as a sales scandal engulfed the bank. Wells Fargo is under pressure to keep its profit engine humming while dismantling the aggressive sales culture at the heart of its woes, since unlike JPMorgan and Citigroup it does not have a big trading arm. "We're prepared for things to get worse before they get better," Chief Executive Tim Sloan, who took over as boss on Wednesday after John Stumpf, the bank's veteran leader, announced he was leaving amid a public furor over the scandal. Revelations that Wells' branch staff had opened as many as 2 million accounts without customers' knowledge to meet internal sales targets has shattered the bank's folksy image. Once a Wall Street darling for its ability to sell multiple products to individual customers, Wells Fargo said on Friday that new account openings had dropped sharply. New consumer checking accounts were 30 percent lower than in August, and applications for consumer credit cards fell 30 percent in September from the prior month. Wells Fargo's staff are in a period of flux after the bank scrapped sales targets for branches last month and in a note following Sloan's presentation, Brian Kleinhanzl, an analyst at KBW, said, “Management doesn’t know what the consumer bank will look like in the future." The bank has said the scandal will minimally affect its wealth management business and was unlikely to alter its plans to return capital to shareholders. On Friday, the state of Ohio joined a growing list of municipalities to suspend business relationships with Wells Fargo. The bank makes less than 1 percent of its revenue from working with local governments but Ohio's decision is a blow, coming days after Stumpf, a lightning rod for much of the criticism around the scandal, had departed. Sloan must navigate federal and state investigations in coming months. The scandal has renewed left-leaning lawmakers' attacks on Wall Street and bolstered their mission to introduce stricter oversight. While Wells Fargo's overall profit dropped for a fourth straight quarter, net income in the third quarter topped estimates, helped in part by lower-than-expected loan-loss provisions. JPMorgan and Citi also beat expectations as bond trading roared back in the third quarter, boosted by Brexit-inspired volatility along with changing expectations for monetary policy in the United States, Europe and Japan as well as money market reforms. Banks got a fillip from a rise in the London interbank offered rate, which moved to a seven-year high during the quarter as U.S. money market funds scaled back holdings of short-term bank debt in advance of new U.S. regulations. JPMorgan's chief financial officer, Marianne Lake, said the fourth quarter so far is showing positive signs. "The momentum that I just characterized as fairly broad and fairly consistent across the (third) quarter, has somewhat continued so far," she told journalists. JPMorgan's after-tax income dropped 7.6 percent after recording a tax expense, compared with a rare tax benefit of $2.2 billion a year earlier. But revenues and profits both topped analysts' estimates. Citigroup, the fourth-biggest U.S. bank by assets, beat expectations for third-quarter net profit after trading revenue surged 35 percent. While net income fell 11 percent to $1.24 per share, it exceeded the average estimate of $1.16 per share. Total adjusted revenue fell 4 percent to $17.76 billion, but beat the average estimate of $17.36 billion. The strong trading performance helped U.S. financial stocks snap a three-day losing streak, with markets-focused bank shares such as Goldman Sachs (GS.N) and Morgan Stanley (MS.N) up 2 percent and 1.4 percent, respectively, ahead of their results next week. Citigroup was up over 0.8 percent in late trade after earlier rising as much as 3 percent. JPMorgan tipped into negative territory after earlier gaining as much as 2 percent. Wells Fargo was up 0.25 percent. The S&P financial index .SPSY gained 0.85 percent. The British government's tougher line on immigration in the wake of the Brexit vote has bankers preparing for a scenario in which London loses access to the single market, meaning they would have to move parts of their operations elsewhere in Europe. "As a result, we will be starting to build out technology systems and operations in Europe," JPMorgan's Lake said.

IT Risk Management, IT Risk Rating System, and IT Regulatory Updates – 14 October 2016 Developmental Course on Treasury Products - Bootstrapping – 15 October 2016 BSP Cir. No. 706, AMLA Law, RA 10365 and the AML Risk Rating System – 21 October 2016 Developmental Course on Treasury Products - Financial Options – 22 October 2016 Advanced Workshop on Banks Frauds and Forgery Detection – 22 October 2016 Enterprise Risk Management – 22 October 2016 How to Spot Fake IDs and Money Mules – 29 October 2016 A Regulatory Prospective on Trust Activities and Administration – 11 & 18 November 2016 Overview of Outsourcing Framework (Knowing the Essentials When Outsourcing) – 12 November 2016 Establishing Internal Controls in Philippine Banks-SEMINAR ONE. – 19 November 2016 Advanced Project Management – 19 November 2016

For details, please contact BAIPHIL via telephone (853-4457/519-2433) or email [email protected].


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OCTOBER 1-15

02 Teresita S. Galvadores - Past President

02 Emma B. Co - PS Bank

04 Evangeline L. Salazar-Nevado - PDS

04 Rene S. Natividad - Bancnet Inc

06 Maria Victoria P. Ronquillo - UCPB

09 Zenaida P. Molina - Past President

10 Maria Daisy B. Posadas - ING Bank NV

11 Mary Joyce M. Sasan - UBP

12 Nestor A. Espenilla, Jr. - BSP

14 Ma. Teresa R. Tan - Standard Chartered Bank

15 Teresa O. Limqueco - Secretariat

QUID PRO QUO CONTRIBUTION - A charitable donation for which the donor receives something

from the recipient in exchange. A quid pro quo contribution has different rules for federal income tax

deductibility than a regular charitable contribution, for which the donor receives nothing from the

charity in return. The IRS considers as tax deductible only the amount of the contribution in excess

of the value of the good or service the charity gave the donor.

WHY IS A NON-RELEVANT STATEMENT DURING A DEBATE OR ARGUMENT SAID TO BE “BESIDE THE POINT”?

The expression “beside the point” is from ancient archery and literally means your shot is wide of the target. Its figurative meaning, that your argument is irrelevant, entered the language about 1352, as did “You’ve missed the mark.” Both suggest that regardless of your intentions, your invalid statement is outside the subject under discussion.


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REFERENCE COMPILED AND PREPARED BY: RESEARCH AND INFORMATION COMMITTEE FY 2016-2017

BPI Asset Management Business World Philippine Daily Inquirer Philippine Star GMA News ABS-CBN News Bulletin Today PSE

Reuters Bloomberg CNN Wall Street Journal Investopedia Brainy Quotes Goodreads Corsinet- Trivia

Director: Maria Teresita R Dean (ChinaBank Savings) Chair: Sheryll K. San Jose (Equicom Savings Bank) Member: 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

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