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BAIPHIL MARKET WATCH

~ Scaling New Heights In Banking Excellence ~

22 Feb 2018

Legend Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE PHILIPPINES

Financial Rates Current Previous USD/PHP 52.1000 52.2400

30-D PDST-R1 3.4175% 3.4129% 91-D PDST-R1 3.4332% 2.9172% 180-D PDST-R1 3.2095% 3.7286% 1-Y PDST-R1 3.9161% 3.9346% 10-Y PDST-R1 6.8804% 6.8318%

30-D PDST-R2 3.4175% 3.4146% 91-D PDST-R2 2.8325% 2.8803% 180-D PDST-R2 3.1748% 3.0447% 1-Y PDST-R2 3.9161% 3.9329% 10-Y PDST-R2 6.8625% 6.8789%

Stock Index Current Previous

PSEi 8,613.65 8,722.70 Total Market Cap (Php Tr) 14.664 4.158 Trade Value (Php B) 9.526 7.847

PSEi Performers Last Price % Change Top Gainers Golden Haven, Inc. 261.00 50.00% Starmalls, Inc. 23.00 44.65% Roxas and Company Inc. 4.12 21.53%

Top Losers Jolliville Holdings Corp 4.91 -16.07% Geograce Resources 0.221 -10.89% Bogo-Medellin Milling 107.50 -10.42%

ASIA-PACIFIC

Stock Index Current Previous NIKKEI 21,970.81 21,295.10 HANG SENG 31,431.89 31,039.15 SHANGHAI 3,199.16 Closed STRAITS 3,516.23 3,476.53 SET 1,801.16 1,809.05 JAKARTA 6,643.40 6,635.86

Currency Exchange Current Previous

USD/JPY 107.7500 106.8400 USD/HKD 7.8247 7.8226 USD/CNY 6.3438 Closed USD/SGD 1.3237 1.3162 USD/THB 31.5600 31.4800 USD/IDR 13,618.00 13,590.00

REST OF THE

WORLD

Stock Index Current Previous FTSEuro First 300 1,491.58 1,480.71 FTSE 100 7,281.57 7,246.77 DAX 12,470.49 12,487.90 CAC 40 5,302.17 5,289.86 DOW JONES 24,797.78 24,964.75 S&P 500 2,701.33 2,716.26 NASDAQ 7,218.23 7,234.31

,

Various Current Previous

EUR/USD 1.2275 1.2343 GBP/USD 1.3907 1.4002 Gold Spot (USD/oz) 1,324.64 1,328.20 Brent Crude (USD/bbl) 65.42 65.25 3-M US Treasury Yield 1.61% 1.57% 10-Y US Treasury Yield 2.94% 2.65% 30-Y US Treasury Yield 3.22% 3.16%

PHILIPPINES

Share prices on the Philippine Stock Exchange plunged by more than 1 percent on Wednesday as high yields from US Treasury

weighed on the market. The benchmark PSEi slipped by 109.05 points or 1.25 percent to 8,613.65 at the closing bell. The broader All Shares declined by 7.62 points or 0.15 percent to 5,122.17. “With the higher US bond yields, investors are shifting to dollar assets,” First Grade Finance Inc. president and managing director Astro del Castillo told GMA News Online. Treasury yields rose overnight with the benchmark 10-year yield crawling back to near a four-year peak as investors made room for this week’s $258 billion deluge of new government debt, according to a report by Reuters. Unicapital Securities Inc. head of research Eleanor Reyes noted Philippine shares also tracked decline overnight on Wall Street. “The index followed in the footsteps of the Dow which dropped 254 points last night ... The PSEi traded in the red the entire day,” Papa Securities Corp. deputy research head Arabelle Maghirang said in a separate emailed commentary. US equities pulled back sharply from record highs earlier this month as a steady rise in Treasury yields raised worries that the Federal Reserve could hike interest rates more frequently this year than initially expected, Reuters noted in its report. Foreign funds bought P3.857 billion worth of shares and sold P4.373 billion shares during the session, for a net selling position of P516.377 million. More than 1.919 billion shares valued at P9.526 billion, changed hands. Decliners led advancers, 128 to 82, and 46 issues were unchanged. Reyes noted the

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value turnover indicated that trading was mostly influenced by positions in heavy-weights or blue chip stocks.

The Philippine peso continued to appreciate on Wednesday, as the dollar bore the brunt of concerns about a wider budget deficit in the United States. The local currency appreciated by 14 centavos to close at P52.10:$1 versus P52.24 on Tuesday. “The dollar-peso traded fairly lower today as the increase in US Treasury yields reinforced concerns of a higher deficit in the coming years,” a foreign exchange trader said. US Treasury yields rose overnight with the government auctioning $258 billion in securities. “Treasury yields have risen in the wake of increased government borrowing. The US Treasury Department has issued more debt in anticipation of a higher deficit from last year’s major tax overhaul and a budget deal that will increase federal spending over the next two years,” a Reuters report said. It reported earlier that the US budget deficit is projected to balloon to more than $1 trillion in 2019 following the government spending splurge and large corporate tax cuts.

The Senate approved and adopted Wednesday the bicameral report on the proposed measure seeking to further ease doing

business and reduce red tape in the country. Senator Juan Miguel Zubiri sponsored the 21-page bicameral report on the disagreeing provisions of Senate Bill No. 1311 and House Bill No. 6579 or the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 and presented the highlights of the reconciled bill. “Mr. President, after several bicameral meetings, your Bicameral Conference Committee has come up with a reconciled version that we believe will respond to the clamor of the public, especially the business sector, to improve ease of doing business and reduce red tape in the country,” he said in his sponsorship speech. Under the reconciled version, covered are all local government units, national government agencies, and other government instrumentalities that provide service covering business and non-business related transactions. It states that the prescribed processing time for transactions in government will be further reduced from five to three working days for simple transactions; from 10 to seven working days for complex transactions; and 20 working days for highly technical applications. It states there will be automatic approval of permits and licenses if the local government units and agencies fail to approve or disapprove the application within the prescribed processing time. Zubiri said a new section was added to streamline procedures for the issuance of local business permits to include the following provisions: - Use of single or unified business application for local tax and clearances, building clearances, fire safety inspection certificates, etc.; which shall also be available online; - Creation of one-stop business facilitation service (also referred to as business one-stop shop) on site and/or on-line in all cities and municipalities; - Automation of business permitting and licensing systems of LGUs with the help of the Department of Information and Communications Technology (DICT); - Renewal of business permit within first month of the year or anniversary date of the issuance of permit; and - Payment of barangay clearance to be collected by the city/municipality and remitted to the respective barangays. He said a new section to streamline procedures in securing Fire Safety Inspection Certificate (FSIC), Fire Safety Evaluation Clearance (FSEC), and certification of fire incidents was also included to: - Limit processing time for the issuance of FSIC and FSEC to seven working days and 20 working days for certification of fire incident for fire insurance purposes; and - Prohibit the Bureau of Fire (BFP) personnel from selling or recommending any brand of fire extinguishers or equipment, among others. Under the reconciled version, the DICT is mandated to create the Central Business Portal which shall serve as the central system to receive application and capture application data involving business-related transactions; and the Philippine Business Databank which shall contain all data and information of registered business entities. Within three years after the effectivity of this Act, the DICT is also mandated to ensure the automation of all business-related transactions in all local government units and government agencies, and has to ensure that all municipalities and provinces classified from 3rd to 6th classes are provided with appropriate equipment and connectivity. Zubiri said upon the recommendation of the Minority Floor Leader Franklin Drilon, they added a section on Interconnectivity Infrastructure Development which expedites the processing and approval of permits, licenses, clearances or authorizations for the installation and operation of telecommunication, broadcast towers, facilities, equipment and service to be able to ensure a fast and reliable interconnectivity infrastructure. “We consider[ed] that Drilon amendment. If in the future we will have faster internet connection we could thank Senator Drilon for it,” he said. He said the Civil Service Commission (CSC) shall be strengthened by institutionalizing the anti-red tape unit in its central and regional offices. He said an Anti-Red Tape Authority under the Office of the President will be created to plan, implement and oversee national policy on anti-red tape and ease of doing business; initiate investigation, motu propio or upon receipt of a complaint, refer the same to the appropriate agency, or file cases for violations of the Act; and recommend policies, processes and systems to improve regulatory management of all local government agencies and government agencies, among others. He said the Anti-Red Tape Authority shall be headed by a director general with the rank of a Secretary, to be appointed and co-terminus with the tenure of the President. He or she shall be assisted by three deputy director generals. He said the existing National Competitiveness Council will be reorganized and renamed as the Ease of Doing Business and Anti-Red Tape Advisory Council to be composed by: - Department of Trade and Industry (DTI) Secretary as Chairperson; - Anti-Red Tape Authority Director-General as Vice-Chairperson; - DICT Secretary; - Interior and Local Government (DILG) Secretary; - Department of Finance (DOF) Secretary; and - two representatives from the private sector, as members. He said all offices and agencies providing government services shall be subjected to a Report Card Survey initiated by the Anti-Red Tape Authority, in coordination with the CSC and the Philippine Statistics Authority (PSA), which shall become the basis for the grant of awards, recognition, and/or incentives for excellent delivery of service in all government agencies. The senator said stiffer penalties shall be imposed for non-compliance and violations of the Act. He said administrative liability with six months suspension without pay will be the punishment for first offense while an administrative liability and criminal liability of dismissal and perpetual disqualification from the public service, and forfeiture of retirement benefits, and one year to six years imprisonment, with a fine of P500,000 to P2 million for second offense. Zubiri said he expected both chambers to ratify the proposed measure next week and it will be signed by President Rodrigo Duterte before the Congress adjourns on March 23.

The government is planning to allow up to 100-percent foreign participation in foreign-funded construction projects while also

raising the share for those that will be financed locally, the country’s chief economist said Wednesday. On the sidelines of the joint membership meeting of the Makati Business Club and the Philippine Chamber of Commerce and Industry, Socioeconomic Planning Secretary Ernesto M. Pernia told reporters that the proposed 11th foreign investment negative list (FINL) would be tackled by the National Economic and Development Authority Board chaired by the President on March 6. In the case of construction activities, Pernia, who heads Neda, said he endorsed a draft executive order (EO) raising the share of foreign contractors in local projects to “over 40 percent.” The 10th FINL issued in 2015 provided for a maximum of 25-percent foreign equity in locally funded public works. As for foreign-funded projects,

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Pernia said fully foreign-owned firms might participate under Neda’s proposal.

THE Energy Regulatory Commission (ERC) said on Wednesday that it approved and issued a certificate of compliance (CoC) to two power generation companies in the Visayas, ensuring electricity supply in the area during the dry season. The regulator also identified five power generation projects for which it issued provisional authorities (PAO) to operate. Its actions were all dated Feb. 13, 2018 or after a temporary restraining order had been issued by the Court of Appeals against the suspension of the four ERC commissioners. In a statement, ERC Chairperson Agnes T. Devanadera said the regulator “recognizes the need for the immediate issuance” of the certificate and the provisional authority “in order to ensure a reliable and sustainable power supply especially that there is an upsurge in power demand during the summer months.” She said it is imperative for a power generation company to secure a CoC or a PAO before it starts commercial operation. A CoC is issued by the ERC in favor of a person or entity to operate a power plant or other facilities used in the generation of electricity as called for under Section 6 of Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), and Section 4 of EPIRA’s implementing rules and regulations. Ahead of the issuance of the CoC, the PAO may be issued to enable a generation company to operate its facility. The authority is issued through a notification to the company. It is valid for six months from issuance. The six-month period is included in the five-year term of the CoC that may be issued. The ERC identified the two projects with newly issued CoCs as Panay Energy Development Corp. for its 150-megawatt (MW) unit three circulating fluidized bed coal-fired power plant in Barangay Ingore, La Paz, Iloilo City; and Silay Solar Power, Inc. for its 25-MW solar farm in Barangay Rizal, Silay City, Negros Occidental. The five entities that have secured PAOs are Palm Concepcion Power Corp., Nickel Asia Corp., EDC Siklab Power Corp., Gaisano Balasan Solar Rooftop Project, and SMC Consolidated Power Corp. Of the five, SMC Consolidated Power has the biggest capacity at 150-MW for unit two of its coal-fired power plant in Barangay Lanao, Limay, Bataan. Palm Concepcion has the second biggest at 135-MW for its plant in Sitio Puntales, Barangay Nipa, Concepcion, Iloilo; followed by Nickel Asia’s 10.944-MW diesel power plant in Quezon, Surigao City. Separately, the ERC said the lower system loss cap to be charged by distribution utilities is to take effect starting in the May 2018 electric billing period. “The lowering of the system loss caps is a move to bring down the power rates and help electricity consumers mitigate the impact of rising costs of commodities and services. This will encourage distribution utilities (DUs) to improve their distribution system and facilities so that they adhere to the newly prescribed system loss cap,” Ms. Devanadera said. Resolution No. 20, Series of 2017, “A Resolution Adopting the ERC Rules for Setting the Distribution System Loss Cap and Establishing Performance Incentive Scheme for Distribution Efficiency” embodies the new distribution system loss cap that can be recovered and charged by DUs to their customers. Under the resolution, private DUs are allowed to charge only up to 6.5% of distribution system loss, or the difference between the electricity delivered to the power distribution system and what was delivered to consumers connected to the system. The resolution calls for a gradual reduction in the system loss cap until it reaches 5.5% by 2021. For electric cooperatives, the ERC clustered the utilities “based on similar technical considerations.” They will have a cap of 12% for 2018, subsequently charge a cap within a range of 12% to 8.25% until 2022 onwards based on their clusters.

The Philippines saw improvements for both 4G availability and speed although most of its neighbors in the region remained ahead by those measures, the latest crowdsourced survey by OpenSignal showed. OpenSignal’s newest State of LTE report, which covered 88 countries in the fourth quarter of 2017, focused on 4G or LTE, which local players PLDT Inc. and Globe Telecom have been rolling out aggressively since 2016. According to the report, 4G availability in the Philippines stood at 63.7 percent versus 58.8 percent during the previous period covering the third quarter of 2017. In the current edition, the Philippines stood at 75 out of 88 countries. Availability refers to how consistently a user could access a 4G network during a given period of time. 4G availability in the Philippines was better than Myanmar, but behind close neighbors such as Vietnam (71.3 percent), Indonesia (72.4 percent), Malaysia (74.9 percent) and Thailand (85.6 percent). LTE availability was the best in South Korea at 97.5 percent. The report showed that 4G speed in the Philippines went higher to 9.5 megabits per second, versus 8.24 Mbps in the third quarter of 2017. The country ranked No. 85 out of 88 countries in terms of LTE speed. It was faster than Indonesia (8.9 Mbps) but behind Thailand (9.6 Mbps), Malaysia (14.8 Mbps) and Vietnam (21.5 Mbps). Singapore topped the list with a speed of 44.3 Mbps. In the Philippines, LTE usage remains relatively small, given that the service is limited by the handsets that can use 4G frequencies. PLDT’s Smart Communications recently estimated that about 40 percent of its customers with access to mobile internet do so on an LTE-capable device. Overall, OpenSignal concluded that LTE speeds around the world have hit a “plateau” of 45 Mbps. “The industry is still waiting on that spark that will push speeds beyond 50 Mbps on a national level,” OpenSignal noted. “That spark will come, and it will likely come sooner rather than later as operators embrace the latest iterations of LTE-Advanced technology.”

The Philippine Competition Commission (PCC) wants to raise the notification threshold for mergers and acquisitions above the current P1-billion requirement, citing the current growth of the economy among other factors. Competition Chair Arsenio Balisacan said in a forum on Wednesday that a group inside the antitrust body was working on the proposal, which is expected to be proposed to the commissioners sometime in the first half of this year. Under current rules, companies that would undergo a merger or acquisition need to notify the PCC for approval if the value goes beyond P1 billion, especially since the deal might impact the market. PCC computes the P1 billion threshold based on certain standards that the parties must meet, such as if one of the companies involved is valued over a billion pesos. “The threshold has been around for sometime. We have to take into account the changing structure of the economy, the rate of growth, the inflation [among others]. The law provides the power to PCC to update the threshold,” he told reporters at the sidelines of the forum. He said one of the considerations raised was the possibility of having varying thresholds depending on the industry.

The Department of Transportation (DOTr) said a new international airport serving Bohol Island was on track for completion by June this year. In a statement, the DOTr said construction activities at the P7.8-billion New Bohol International Airport in Panglao was over 70 percent finished. Commercial operations will start on Aug. 2018. The terminal will span over 13,300 hectares and is expected to handle two million passengers on its opening year. The existing Tagbilaran Airport handles about 800,000 passengers yearly. The New Bohol International Airport in Panglao will have a 2,500-meter runway. It will later be extended to 2,800 meters. The runway was engineered to accommodate seven aircraft at a time, including long-range commercial planes. This is part of the government’s strategy to open up areas with significant tourism and trade potential to international routes. In doing so, the government also reduces the need for carriers to transit to the congested Ninoy Aquino International Airport. The new airport is among those the government hopes to further develop and privatize. Last week, Trasportation Undersecretary for aviation Manuel Antonio L. Tamayo said the administration remained keen on a modernization plan for the Davao, Bacolod, Iloilo, Laguindingan and New Bohol air gateways. He said new feasibility studies were underway, given the need to update old studies. The modernization project was pushed back in the previous administration, given that the required procurement process fell too close to the 2016 elections. Changes in policy during the Duterte administration stalled the project further. Five groups were pre-qualified during the original process. These were Metro Pacific Investments Corp.; San Miguel Corp. with South Korea’s Incheon Airport; Aboitiz Equity Ventures with Vinci Airports; Megawide Construction Corp. and India’s GMR Infrastructure; and the Filinvest Group with Japan’s Sojitz and Jatco. The regional airports project would have been the second airport public-private partnership project after the Mactan-Cebu International Airport (MCIA), which was bagged by Megawide and GMR in 2014. The DOTr said the new international passenger terminal in MCIA would open by June 2018.

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JANUARY tourism arrivals totaled 732,506, a record for the month and ahead of the pace for the full-year arrivals target of 7.5 million, amid improved air connectivity between Philippine destinations and key travel markets, the Department of Tourism (DoT) said in a statement. The January total, up 15.97 % year on year, was driven by a rise in arrivals from China as well as continued strong numbers from South Korea, the Philippines’ number one visitor market, the DoT said. The estimates, provided by the DoT’s Tourism Research and Statistics Division under the Office of Tourism Planning, showed arrivals from South Korea amounting to 198,145 in January, up 28.36% year on year, while those from China totaled 111,344, up 29.55%. “Last year’s momentum carried over this year with the improved air connectivity via increased flights between Philippine gateways and various airports in major visitor markets, including China, Korea, the United States, Australia and Canada,” Tourism Secretary Wanda Corazon Tulfo-Teo was quoted as saying. The DoT noted that Xiamen Airlines recently launched a three-times-a-week direct service between Fuzhou, China and Kalibo, Aklan and Puerto Princesa, using the Airbus A321 aircraft with 197 seat capacity. “Another new route from China that our Route Development Team is working on is Tianjin-Puerto Princesa. The development of new routes is in consonance with our National Tourism Development Plan’s strategy to upgrade air connectivity from major tourist source markets to the Philippines,” Ms. Teo said. Rounding out the other major sources of visitors were the United States with 109,154, up 14.90% year on year, Japan at 57,038, up 7.79%, and Australia at 30,924, up 4.41%. Ms. Teo expressed confidence that “with the combined efforts of the DoT and the stakeholders, we will achieve our 7.5 million target for international arrivals in 2018.” The January statistics have yet to reflect the impact of a government crackdown on Boracay businesses which began this month, allegedly because some establishments are not treating their waste water.

YIELDS on term deposits offered by the Bangko Sentral ng Pilipinas (BSP) inched higher yesterday despite strong demand, which comes ahead of the release of additional money supply due to lower bank reserves. Banks wanted to place as much as P130.488 billion under the term deposit facility (TDF) on Wednesday, higher than the central bank’s P110-billion offering although lower than the P150.757 billion tenders posted a week ago. All three tenors offered by the central bank stood oversubscribed, with bids matching the amounts set by the monetary authority. Players wanted to park P53.368 billion with the BSP under the seven-day term, slightly higher than the P50-billion volume. Despite the bigger amount, the average yield climbed to 2.8164% from 2.7232% during the previous auction. The 14-day tenor likewise remained a viable option for market players, with the P40 billion volume met by P46.765 billion tenders. This is the second time when the BSP offered two-week term deposits. Still, the average rate sought by banks climbed to 2.9798% from 2.8737% previously. Demand for the 28-day term deposits also went beyond the P20-billion offer, with banks willing to park as much as P30.355 billion under the window. The amount, however, declined from the P39.935 billion bids a week ago. The average yield for the month-long instrument also rose to 3.0258%, coming from the 2.965% fetched last week. The TDF is the central bank’s main tool to shore up excess funds in the financial system. The window allows banks to park the idle cash they hold under the BSP in exchange for a small return, which in turn will prompt market rates to inch closer to the three percent benchmark set by the central bank. Any excess cash which have not been deployed for loans, foreign exchange and debt payments can be parked under the central bank window in order to make small gains, rather than leave these idle inside bank vaults. For next week, the BSP will offer another P110 billion to banks, with the volume for each tenor also retained. Central bank officials said last week that they will now be focusing on “auction-based” monetary operations, as it introduced a one percentage point cut in the reserve requirement ratio (RRR) imposed on universal and commercial banks. The BSP has dubbed the RRR cut as an operational move, which will take effect March 2. “We now have the corridor system pretty much in place and we do have the available instruments to address any impact of that reserve requirement (cut),” BSP Managing Director Francisco G. Dakila, Jr. told reporters last week. Mr. Dakila said the reserve cut will unleash some P90 billion into the financial system, which they expect to be mopped up through the TDF and other policy tools. Domestic liquidity expanded by 11.9% in December to reach P10.6 trillion, according to latest available central bank data.

The Department of Finance (DOF) is lukewarm to the proposal to revisit the higher net worth requirement for insurance firms, citing that industry players need to be competitive with its peers in the region. “We want an industry that is strong and resilient, and one that can really serve the public. In the insurance business, it is always good to have healthy capitalization,” Finance Secretary Carlos G. Dominguez III told reporters when asked if the DOF was amenable to the nonlife insurance sector’s request for a review of the capitalization requirement. Deputy Insurance Commissioner Ferdinand George A. Florendo said some nonlife firms wanted the requirement to be kept at P900 million starting next year. Under Republic Act No. 10607 or the Amended Insurance Code, the minimum net worth of insurance companies should be increased to P900 million by the end of 2019 from P550 million at present, and again to P1.3 billion by end-2022. Insurance Commissioner Dennis B. Funa said last month that the regulator directed a team to study the capitalization requirements across Asean upon the request of the nonlife insurance players. “Based on our initial findings, it really appears that the Philippines has the highest net worth requirement by law… So I think having a second look at the requirement under the Amended Insurance Code is worth doing,” Funa said. But for Dominguez, the law must be implemented and the higher capitalization requirement should be retained. “We are also preparing for competition in Asean. How can you compete with the big boys if your capital is only $10 million? We want the industry to be competitive and strong, and that is the way to do it—to require them to have more capitalization,” Dominguez said. Dominguez hence urged mergers or consolidation among firms that might fall short of the net worth requirement.

THE House of Representatives’ committee on ways and means, chaired by Quirino Representative Dakila Carlo E. Cua, approved on Feb. 20 a tax neutrality provision in a bill seeking to establish a regulatory framework for the Islamic banking industry. The still-unnumbered bill, which is intended to be a substitute for House Bills (HBs) 492 and 3975, hopes to achieve tax neutrality for the industry vis-a-vis conventional banks. Section 14 of the bill, “Tax Neutrality,” reads: “The Government shall endeavor to achieve neutral tax treatment between Islamic banking transactions and equivalent conventional banking transactions. The Bureau of Internal Revenue (BIR), pursuant to it rule-making power, shall issue policies and guidelines to implement tax neutrality conducive to the growth of Islamic banking and finance in the country. To achieve neutrality, the BIR may modify applicable taxes on Islamic banking transactions.” Sharia-compliant banks cannot charge interest, which is normally an expense for conventional banking customers which can be deducted against tax due. In the absence of such deductibles, clients of Islamic banks may end up being treated differently by the tax code, putting the industry at a disadvantage and putting it at risk of failing to reach clients who wish to observe Islamic banking rules, hindering the goal of achieving wider financial inclusiveness. “The nature of Islamic banking transactions is that if you don’t apply tax neutrality, it would entail double taxation,” Anak Mindanao (AMIN) party-list Representative Amihilda J. Sangcopan, one of the authors of the bill, said during the committee hearing. During the proceedings, former president and now Representative Gloria Macapagal-Arroyo of Pampanga, recommended that the BIR, which was initially tasked to “issue policies and guidelines to implement tax neutrality,” to instead draft the implementing rules and regulations pursuant to the provision. The measure, which was approved by the committee of banks and financial intermediaries last year, provides that “Islamic banks may be established as may be authorized by the Monetary Board.” “The Monetary Board may also authorize banks primarily engaged in conventional banking to engage in Islamic banking arrangements, including structures and transactions, through a designated Islamic banking unit within the bank.” In a phone interview, banks committee chair, Eastern Samar Rep. Ben P. Evardone, said that the proposed framework “will encourage… regular banks to sell Sharia-compliant products” and “ensure financial inclusion.” Moreover, the Monetary Board may also “authorize foreign Islamic banks to establish Islamic banking operations in the Philippines” and regulate the number of

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participants by “taking into account the requirements of the economy, the preservation of the stability of the system, and the maintenance of healthy competition.” Mr. Evardone said the committee is hoping to have the bill up for deliberation in plenary session next week and have it approved before the House adjourns in March.

UNIONBANK of the Philippines raised P3 billion from its long-term negotiable certificates of deposit (LTNCD), which it wants to use to improve its maturity profile and help expand its business. At the ceremonial listing of the investment instruments on Wednesday at the Philippine Dealing System (PDS) in Makati City, the Aboitiz-led UnionBank said it raised P3 billion from the peso-denominated issue. The notes will mature in 5.5 years and carry an interest rate of 4.375% to be paid quarterly until August 21, 2023. The issuance is the first tranche of UnionBank’s P20-billion LTNCD program approved by the central bank. Like regular time deposits offered by banks, LTNCDs offer higher interest rates. However, LTNCDs cannot be pre-terminated but can be sold on the secondary market, making them “negotiable.” In an interview, UnionBank President and Chief Executive Officer (CEO) Edwin R. Bautista said proceeds from the long-term note offering will be used for liability management and to support business expansion plans. “Well, this signifies our continued expansion. We also need this to improve the tenor mix of our liabilities,” Mr. Bautista told BusinessWorld after the listing ceremony. “The LTNCD is a long-term instrument [for us] to increase the maturity profile of our deposit liabilities… You have to develop sources of funding for the long-term,” UnionBank Chief Financial Officer Jose Emmanuel U. Hilado explained. The LTNCD offer was only the second one for the lender after it raised P3 billion worth of long-term notes in 2013. Standard Chartered Bank arranged the deal, and also served as a selling agent together with UnionBank and Multinational Investment Corp. Asked when the lender will issue the next tranche of the approved P20-billion program, Mr. Bautista said: “Tama na muna (It’s enough) for now. We don’t know yet.” PDS President and CEO Cesar B. Crisol said UnionBank is the third company of the Aboitiz group, the other two being Aboitiz Equity Ventures and AboitizPower Corp., to venture into the corporate bond market this year. “With this listing, the Aboitiz group’s cumulative level of outstanding bonds listed will be at the level of P48 billion, representing 6% of the overall listed corporate bonds,” Mr. Crisol said. UnionBank’s listing brings the total volume of outstanding listed securities to P759.528 billion, floated by 45 companies. Other big banks have also raised finances via LTNCDs. In November, Bank of the Philippine Islands (BPI) listed P12.24 billion worth of long-term notes, the single largest LTNCTD offering to date. Apart from BPI, Security Bank Corp., Philippine National Bank, East West Banking Corp. and BDO Unibank, Inc., among others have rolled out their own fund-raising plans through separate note offerings announced over the past few months.

LIFE INSURER Generali Life Assurance Philippines, Inc. (General Philippines) is seeking to expand its presence in the Philippines

as it intends to take advantage of the rising need for insurance among Filipinos. “This year, we intend to significantly outpace this by growing our gross written premiums by at least 40%,” Generali Philippines President and Chief Executive Officer Reynaldo C. Centeno said in a statement given to reporters during its press conference in Taguig. To achieve this, the local unit of the Italian insurer will be expanding the scope of its products, services and distribution in the country. Mr. Centeno said the insurer will focus on making its group insurance product — specifically its group medical product — more comprehensive as it plans to expand its healthcare provider network. “We have expanded our product offering. We have introduced a comprehensive medical coverage, backed by a nationwide network of medical providers… We intend to expand on that as we grow the business,” he said. Currently, Generali Philippines said it has a healthcare provider network of 1,600 accredited medical facilities and 22,000 medical specialists. The insurer provides employee benefits to corporate multinationals, mid-market and small and medium enterprises. It offers group medical insurance, group life insurance and credit life insurance. Aside from this, the insurer is also looking at adding a group savings product “that will be helpful to young people so that they can save easily.” To expand Generali Philippines’ distribution network, Mr. Centeno also noted that it is eyeing to “move into the provinces,” particularly in the Visayas and Mindanao regions. “Geographically, we would like to move into the provinces. We’re looking at specific sites in Visayas and Mindanao like Bacolod, Davao, and so on to expand,” he said, which will entail its expansion of healthcare provider network as well. Mr. Centeno said Generali Philippines has a strong presence in Mega Manila as well as in Cebu. Sector-wise, Mr. Centeno added that the insurer is focusing its distribution efforts to reach business process outsourcing (BPO) firms to maximize the sector’s growth. “We have focused on BPOs because of the significant growth in that industry, and because of the real need for healthcare and life insurance protection for people working in the BPO business,” Mr. Centeno said. In addition, the insurer also developed four digital services, enabling policyholders to track their enrolment and termination, access their benefit plans and summary of claims, and consult with medical specialists over the phone, among others. “All of these — complete product service, a digital service platform, and strengthening our distribution channel — will help us move forward and really harvest the opportunities in the Philippine market,” Mr. Centeno said. Generali Philippines also expressed its optimism on the Philippine market. John R. Spence, Generali’s Asia regional head, said there has been a significant growth in the insurance industry across Asia, including the Philippines. “Right across Asia, we’re seeing significant growth as economic situation of citizens improved. They [already] recognized the need for insurance,” Mr. Spence said. Mr. Spence added that they are seeing significant growth in the Philippines, with the life insurance market continuing to grow 2-3% above the gross domestic product growth, while the non-life insurance market is growing at the same pace as the domestic economy. Latest data from the Insurance Commission shows that Generali Philippines is the 26th biggest life insurer company in the country in terms of total premiums with P147.88 billion at end-2016. Meanwhile, it posted a capital of P1.44 billion in 2016, the second-biggest among life insurers.

AYALA LAND, Inc. (ALI) plans to raise up to P25 billion from a combination of retail bonds, loans, and qualified buyer notes this year to partially finance its aggressive spending program and to refinance existing debt. In a disclosure to the stock exchange on Wednesday, ALI said its board of directors approved the plan to raise as much as P20 billion through retail bonds and bilateral term loans, which will be used to fund the company’s P110.8-billion capital expenditure budget this year. The retail bonds will be issued from the P50-billion shelf registration program the company has with the Securities and Exchange Commission since March 2016, which will then be listed in the Philippine Dealing and Exchange Corp. (PDEx). In an earlier interview, ALI Chief Finance Office Augusto Cesar D. Bengzon said the company has P18 billion left in this debt securities program. Meanwhile, the listed property firm’s board has also approved the issuance of qualified buyer notes to raise up to P5 billion for the refinancing of its short-term loans. The company previously raised P3.1 billion in short-dated notes, which were also listed at the PDEx, last November 2017 to finance its short-term debt. ALI has committed to spend P110.8 billion in capital expenditures this year, 21% higher than its actual spending of P91.4 billion in 2017, to support the demand for more residential properties in the country. Around 43% of the capex or P47.4 billion will be allotted for residential projects, 17% or P18.7 billion for mall projects, 12% or P14 billion for land acquisitions. The remaining portion allocated for the hospitality business and the development of existing estates. The accelerated capex comes alongside the plan to launch P125 billion worth of projects this year, against the P88 billion worth of projects unveiled in 2017. Meanwhile, ALI said it has also completed the unconditional mandatory take-over offer made by its wholly owned subsidiary, Regent Wide Investments Ltd. to minority shareholders of Malaysian developer MCT Bhd. The company undertook the mandatory take-over offer after it increased its stake in MCT to 50.19% in January, adding 17.24% to its original share. With the transaction, ALI was able to further raise its stake in the company to 72.31%, after taking over some 295.28 million shares held by minority shareholders, or 22.12% of MCT’s total outstanding shares. ALI initially purchased a 9.16% interest in MCT back in April 2015, which was the company’s first investment in Southeast Asia. The company has since been propping up its stake in MCT, which allows ALI to take advantage of the growing real estate sector in Malaysia. MCT was founded in 1999 as a construction company, specializing in mixed-use projects that include

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retail, office, hotel, and mid-range to affordable to residential properties. ALI’s attributable profit grew 21% to P25.3 billion in 2017, driven by the 14% increase in revenues to P122 billion amid strong demand for residential projects in the country. Shares in ALI lost a peso or 2.17% to finish at P45 apiece at the stock exchange on Wednesday.

PLDT, Inc. is scheduled to open its 10th Vitro data center the country in April. In a statement, the telecommunications giant said ePLDT’s newest data center, located in Cebu, will provide additional 800 racks capacity. This will add to the 8,300 racks it currently has in its first site in Cebu, along with data centers in Pasig, Parañaque, Taguig, Subic, Clark, Davao and Makati. “Visayas and Mindanao are homes of the most vibrant industries and business communities who greatly contribute to the country’s economic growth. We’ve seen the traction of data center services being utilized in the operations and business continuity plans of the region’s local enterprises,” PLDT Group Chief Revenue Officer and ePLDT President and CEO Ernesto R. Alberto was quoted as saying in a statement. Mr. Alberto said ePLDT’s expansion addresses the rising need for data center services in the region. The new VITRO data center will have 11 layers of physical security and employ the use of biometric devices equipped with finger vein recognition technology. It will also have 200 Disaster Recovery Seats to address the business continuity requirements of Cebu-based enterprises. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a stake in BusinessWorld through the Philippine Star Group, which it controls.

GOLDEN HAVEN, Inc. is formalizing its entry into the mass housing sector after issuing P3.01 billion worth of shares out of its unissued authorized capital stock to Cambridge Group, Inc. (CGI). In a disclosure to the stock exchange on Wednesday, the Villar-led firm said it has issued 150 million common shares at P20.0935 apiece to CGI by way of private placement. Golden Haven initially secured shareholder approval to increase its issued and outstanding shares last October 2017 to make the transaction possible. The funds raised from the private placement will then be used to acquire housing developer Bria Homes, Inc., comprising 9.99 million shares at P301.42 apiece. CGI is a firm controlled by the Villar’s Fine Properties, Inc., and is the principal shareholder of Bria Homes. Also led by the Villar group, Bria Homes develops mass housing projects across the country, with 27 projects in Bataan, Pampanga, Bulacan, Cavite, Laguna, Camarines Sur, Negros Oriental, Cagayan de Oro, and Misamis Oriental under its network. The transaction will bring down Golden Haven’s public float to 10.59% from 14.84%. The diversification into mass housing comes after Golden Haven changed in corporate name last September 2017, where it dropped the words “memorial park” in order to expand its core business outside the deathcare industry. Following the plan to acquire Bria Homes, the company then changed its name to Golden Bria Holdings, Inc. last February, which it said would provide the company flexibility in undertaking its expansion plans. The company has yet to disclose when it will file with the Securities and Exchange Commission necessary documents for the name change. Golden Haven saw its net income attributable to the parent increase 21% to P164 million in the first nine months of 2017, following a 19% growth in revenues to P724 million during the period. Shares in Golden Haven soared 50% or P87 to P261 apiece at the Philippine Stock Exchange on Wednesday.

PHILIPPINE AIRLINES (PAL) is putting on hold its plan to build an annex to the Ninoy Aquino International Airport (NAIA) Terminal 2, after the recent proposal of the “super consortium” of conglomerates to rehabilitate the whole airport system. PAL President and Chief Operating Officer Jaime J. Bautista said the flag carrier is “still in discussion” with Philippine Amusement and Gaming Corp. (PAGCOR) regarding the property where it plans to build an annex. “Still in discussion but when the consortium takes over they will have to work with PAGCOR. So yes, back seat for now. [Including the plan for another terminal?] Yes, yes,” Mr. Bautista told reporters last week. Last September, PAL revived its proposal for a NAIA Terminal 2 annex, which will be built on a 16-hectare area that includes the now-defunct Philippine Village Hotel, the former Nayong Pilipino complex and the PAGCOR property. However, PAGCOR has said the flag carrier cannot build its proposed P20-billion ($400-million) annex on the property adjacent to Terminal 2 since it does not own it. The gaming industry regulator had said that PAL has been only leasing the 10-hectare property from PAGCOR and does not have a right to use it for any purpose other than as “an aircraft parking ramp/apron facility,” as stipulated under a lease agreement signed between the airline and the previous management of PAGCOR, which expires in 2033. The “super consortium” of conglomerates Aboitiz Infra Capital, Inc., AC Infrastructure Holdings Corp., Alliance Global Group, Inc., AEDC, Filinvest Development Corp., JG Summit Holdings, Inc. and Metro Pacific Investment Corp., submitted to the government on Feb. 13 a proposal for the rehabilitation of NAIA to turn it into a regional hub. Transportation Undersecretary for Aviation Manuel Antonio L. Tamayo told reporters last week that evaluation of the unsolicited proposal may take two months.

CONCEPCION INDUSTRIAL Corp. (CIC) is aiming to grab a bigger share of the market for air-conditioners, as it launches new products leveraging on the Internet of Things (IoT). In a roundtable interview with reporters on Wednesday, CIC Chairman, CEO and President Raul Joseph A. Concepcion said demand for air-conditioners is rising amid the economy’s growth and rising income of Filipinos. “Most of you know how difficult life is without air conditioners. It was never about the cost of the air-conditioners. It’s the usage… What wanted to find a gadget basically that would help the basic Filipino person in here. Only 12% of all families have air-conditioners,” he said. Mr. Concepcion said the company, which currently has a market share of 35% for air-conditioners, is targeting middle-class consumers for its new products. On late Tuesday, CIC’s newly formed Cortex Technologies Corp. unveiled its first product, the Carrier Smart+Cool system — which controls and tracks the usage of window-type air-conditioners through a plug connected to the air conditioner. “[Right now, the] window rack [type of air-con] is the bulk of the market. We will have a market for high walls [split-type units] later in the year,” Mr. Concepcion said. Concepcion-Carrier Air Conditioning Company director Harold Thomas Pernikar, Jr. said with the Carrier Smart+Cool solutions, the 12% penetration rate for air conditioners could go up to around 15% to 20%. “Being able to provide real-time information with demand, you start to be able to turn around and say that maybe having an air-con is not so expensive to control because if I can control my budget, I can afford it. It’s not too expensive,” Mr. Pernikar added. The product is expected to launch within the second quarter of the year. CIC Chief Information Officer Sean Byrne said that Cortex Technology’s aim is to take “mature-level” technology from overseas and tweak it to suit the local taste in using highly digitized products. Mr. Byrne said the goal is to see all CIC’s appliances adopt IoT to some degree, with the next venture might be for refrigerators. Mr. Concepcion said around P50 million to P80 million was spent on the first stage of research and development conducted by Cortex. “In terms of capacity, this year, we spend roughly double of what we spend usually in a year [for CIC]. Our annual capex is about P150 million to P200 million. Next year, we’ll spend double on that,” he added. For 2018, CIC’s capex budget will be allotted for new facilities and new products. CIC is currently building a new manufacturing facility which is expected to be operational by 2019. The listed firm said profit after tax and minority interest (PATAMI) rose 8% year-on-year to P980 million in 2017. This follows a 12% increase in sales to P13.9 billion during the same period. Mr. Concepcion said CIC expects 15% sales growth as it nears the P15-billion mark.

SWISS ENGINEERING group ABB said on Wednesday it will supply QEV Philippines with 200 electric vehicle (EV) charging stations in the next three years. In a statement, ABB said the first four charging stations in Metro Manila are expected to be up within the first quarter of the year. QEV Philippines, a joint venture between Filipino businessman Enrique M. Aboitiz and Spanish businessman Enrique Bañuelos, plans to open three charging stations in Shell gasoline outlets along C. Raymundo Avenue, Pasig City; E. Rodriguez

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Avenue, Bagumbayan Libis, Quezon City; and at the SM Mall of Asia, Pasay City. The fourth location has yet to be determined. QEV Philippines last year said it is targeting to install 200 charging stations by 2022. Of the 200, 100 fast chargers will be located at SM malls and another 100 in Shell outlets. ABB said it will provide the Terra 53 multi-standard electric-vehicle DC charging stations, as part of its wider cloud-enabled network. The network allows Internet-based connected services, remote assistance, diagnostic troubleshooting and repair, as well as remote updates and upgrades. “ABB is delighted to be involved in bringing game-changing technologies to the transportation landscape in the Philippines. This is an important step in moving away from fossil fuel-dependent vehicles to cleaner, more sustainable options,” said Frank Mühlon, head of ABB’s Global Business for Electric Vehicle Charging. Starting this year, QEV Philippines will seek government assistance to convert 10,000 jeepneys into e-jeepneys annually. “Together with ABB, QEV is fully supporting the government’s Public Utility Vehicle (PUV) modernization program. Our vision to convert some 20,000 jeepneys into cleaner EVs will help operators reduce energy and maintenance costs,” Audrey D. Peñaranda, general manager of QEV Philippines Electromobility Solutions and Consulting Group, Inc., was quoted as saying. An industrial technology leader, ABB has already installed more than 6,000 cloud-based charging solutions in over 55 countries.

PRYCE Corp. posted a 29% increase in net income in 2017, driven by higher revenues from sales of liquefied petroleum gas (LPG), the company told the stock exchange on Wednesday. The listed firm, which imports and distributes LPG under the brand name PryceGas among its businesses, said last year’s P1.25-billion profit was within its target. Consolidated revenues rose 37% to P9.23 billion in 2017 from P6.72 billion, with sales volume growing by double-digits after the increase in LPG prices last year. “Sales volume of LPG grew 11% to 210,000 metric tons (MT) from the previous year’s 189,000 MT. Despite this modest volume growth, revenues were up 37% because of the sharp increases in LPG contract prices during the year,” the company said. In 2017, contract prices averaged $491 per MT, 42% or $145 higher than the previous year’s average of $346 per MT. “Volume growth was achieved mainly in the Visayas and Mindanao (VisMin) regions, where demand is more concentrated on fuel for household cooking. Sales in the VisMin regions experienced a 22% year-on-year volume growth as compared to about 4% volume growth in Luzon,” Pryce said. In value, sales of LPG along with cylinders and accessories stood at P8.67 billion, making up 94% of total revenues. Industrial gas sales amounted to P391.5 million, or 4% of revenues. Sales of real estate as well as pharmaceutical products accounted for the rest. For 2018, Pryce said it would continue its expansion projects to increase the storage capacities of its marine terminals. The move, which was started about two years ago, is also aimed at bringing its products closer to the markets. The company said all of its seven VisMin import terminals had been or would be expanded to allow each one to accommodate at least one shipload of 2,500 MT cargo. It said the expansion of its terminals in Albuera, Leyte as well as in Sta. Cruz, Davao del Sur had been completed last year. It expects the expansion of the LPG terminals in Sogod, Cebu and Balingasag, Misamis Oriental to be completed by July and August 2018. Pryce said the ability to discharge a shipload in a single terminal would reduce its import costs by $10 to $20 per MT. The company will build at least 15 refilling plants in VisMin areas to make its product closer to consumer markets. “These expansions are expected to be completed by the end of 2019 and all are funded from internally generated funds,” the company said. For 2018, the company expects sales volume to increase by 15% and profit to rise by 20%. It attributed the target to the expansion projects and the implementation of Republic Act 10963 or Tax Reform for Acceleration and Inclusion (TRAIN) Law. In particular, Pryce said net income is targeted to reach P1.55 billion “plus or minus 10%” for this year.

Cement manufacturer Holcim is betting its P3-billion expansion plan on demand from President Rodrigo Duterte's ambitious plan to overhaul the country's infrastructure, the head of its Philippine operations said Wednesday. Holcim Philippines is expanding the capacity of its plants, including one in Duterte's home city of Davao, to raise production capacity to 12 million tons by the first half of 2019, its president and CEO Sapna Sood said. Sood said she was "optimistic" over demand this year, after growth in 2017 failed to meet expectations. "On the government side, we see positive development. Projects are starting. Big projects are starting to go into fruition," she told ANC's The Boss. Demand from the construction boom will compensate for the effects of tax reform, which raises excise duties on raw materials like limestone, shale and silica, and on fuel that is used to transport products, she said. The President has laid out a P8-trillion plan called "Dutertenomics" to boost economic growth by building new roads, railways and airports. The spike in cement demand was felt by late 2017, Sood said during the interview at one of Holcim's factories in this industrial town on the outskirts of the capital.

FACEBOOK USERS will see more products being introduced to their feeds in the following years, as it plots the use of artificial intelligence (AI), virtual reality (VR) and augmented reality (AR) in the social network’s 10-year road map. With a community of more than two billion people over the globe, Facebook is making sure it is at the forefront of technological developments that will connect more people in the future. Facebook Philippines Country Head John Rubio said the networking giant is currently studying how new technologies can be integrated with the social media platform. “We’re really excited about continuing our connectivity push because we will not stop until every single person on the planet is connected and can connect to their friends and family, engage in businesses that are important to them,” Mr. Rubio said during a roundtable discussion in Taguig City on Wednesday. For the first half of the 10-year road map, the emphasis will be on other products offered by Facebook. Mr. Rubio said while Facebook and photo-sharing app Instagram have been their main ecosystems in the past three years, the push is now towards Messenger. One of the changes users can see in the Messenger app is the introduction of ads in between message threads. Users can also pay for their purchases online through the app, as it can be directly linked to online payment platforms such as Voyager Innovations’ PayMaya and Globe Telecom, Inc.’s G-Cash. An added feature on the Facebook app is Marketplace, which gives small and medium enterprises (SMEs) the chance to directly connect with their buyers through posting the products they sell on the app. “The focus is creating more meaningful interactions,” Mr. Rubio said. He cited a Facebook study that revealed about 70% of SMEs that use the platform to advertise their business increased their customer base, while another 80% were able to sell their products better. Facebook also looks to boost connectivity through Workplace, a platform where users communicate via groups, and allowing them to use Facebook in a more corporate and professional environment. The company is further propping up search, groups, and video features within Facebook, while encouraging people to use them more. Five years into the road map, Facebook will then focus on improving connectivity. The company targets to introduce AI, in a bid to be more inclusive towards people with disabilities. “AI, very important for us from two perspectives, is another future push to enable, for example people with disabilities, sight or hearing impaired, we can help you. And also with AI, it will help facilitate things like ensuring accuracy on the network with more machine learning basis,” Mr. Rubio explained. Next would be the introduction of VR/AR features, which the company believes to be instrumental in building more connections in the future. “Because of how when we look at the current offline and online platform that we have, we want to make sure that when there is a virtual reality world that we have a platform to engage people and businesses in the future… It’s going to be part of the platforms for the future, and we want to make sure that we are well-placed there,” Mr. Rubio said. Asked if the addition of these products and services would overwhelm Facebook, Mr. Rubio said the company will always focus on value so that the experience would be seamless for users. “We really care about driving impact and customer value. So if we feel that it’s something that drives value to a customer, it’s something that a company or an SME feels that they can leverage, we feel that it becomes almost seamless in how people interact with our platform,” Mr. Rubio said.

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ASIA-PACIFIC

Japan’s Nikkei share average edged up on Wednesday in choppy trade as chip stocks and other exporters were boosted by

steady dollar-yen levels, offsetting weakness in financial stocks such as insurers, brokers and banks. The Nikkei ended 0.3 percent higher to 21,970.81, after moving in and out of negative territory. The dollar rose 0.4 percent to 107.78 yen, having bounced from a 15-month low of 105.545 yen set on Friday. Manufacturers of computer chip production equipment outperformed, with Advantest Corp rising 2.3 percent and Tokyo Electron up 1.9 percent. Exporters Sony Corp rose 1.6 percent, Honda Motor gained 1.6 percent and TDK Corp was up 2.0 percent. The insurance, securities broking and banking sectors were the three worst performers on the main board, which a trader attributed to “sector rotation in thin trade”. Dai-ichi Life Holdings tumbled 2.4 percent, Nomura Holdings dropped 1.9 percent and Mitsubishi UFJ Financial Group slid 2.0 percent. The broader Topix, however, edged down just 0.1 percent to 1,761.61.

Hong Kong’s benchmark Hang Seng index rose by midday on Wednesday, tracking gains in Asian markets, and China’s H-shares index also climbed. ** By the lunch break, the Hang Seng index was up 279.76 points or 0.91 percent at 31,153.39. The Hang Seng China Enterprises index rose 1.41 percent to 12,572.09. ** China stock markets will reopen on Thursday after the Lunar New Year holiday. ** The sub-index of the Hang Seng tracking energy shares rose 1.3 percent while the IT sector rose 1.1 percent, the financial sector was 1.11 percent higher and property sector rose 0.36 percent. ** The top gainer on Hang Seng was Want Want China Holdings Ltd up 3.18 percent, while the biggest loser was Wharf Real Estate Investment Co Ltd which was down 0.79 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.46 percent while Japan’s Nikkei index eased 0.16 percent. ** As of the previous trading session, the Hang Seng index was up 3.19 percent this year, while China’s H-share index was up 5.9 percent. As of the previous close, the Hang Seng has declined 6.12 percent this month, hammered by a brief but violent global equity sell-off. ** The top gainers among H-shares were Agricultural Bank of China Ltd up 2.78 percent, followed by China Citic Bank Corp Ltd gaining 2.77 percent and Bank of Communications Co Ltd up by 2.25 percent. ** The three biggest H-shares percentage decliners were Guangzhou Automobile Group Co Ltd which was down 0.8 percent, Anhui Conch Cement Co Ltd which fell 0.7 percent and Air China Ltd down by 0.54 percent. ** About 683.61 million Hang Seng index shares were traded, roughly 22 percent of the market’s 30-day moving average of 3.10 billion shares a day. ** The price-to-earnings ratio of the Hang Seng index was 14 as of the last full trading day while the dividend yield was 2.8 percent. ** The short and one-factor leveraged Hang Seng index, which is designed to replicate the payoff of a short or leveraged portfolio and is linked to the movements of the Hang Seng Index, was lower by 0.91 percent on the day at 4,706.78 points.

WHEN CHINESE TOURISTS choose a family travel destination, Hong Kong Disneyland would seem like a logical choice. But it’s

the nearby gambling hub of Macau that has all the momentum. Tourists are flocking to Macau, with record arrivals from China last year, and Hong Kong itself is seeing a rebound in mainland visitors, with a double-digit surge in such tourists during the Chinese New Year following a 3.9% increase last year. Meanwhile, the number of mainland visitors to Hong Kong Disneyland dropped for a third straight annual period, according to the theme park’s results released Tuesday. Chinese families traveling to Hong Kong are finding other distractions for entertainment besides the Disney theme park, as shopping and dining options help drive the retail market for the city. Chinese travelers may be skipping Hong Kong Disneyland as they already have a Disney park in Shanghai, which attracted 11 million visitors in its first year after opening in June 2016. Macau, about a one-hour ferry ride away, also may offer a more interesting temptation. The world’s biggest gaming hub has started to see a rebound of leisure tourists, with mass gaming revenue growth in the last quarter expanding at a faster pace than the previous three months. Macau regulators are pushing casino resorts to offer more family-friendly entertainment, posing a further challenge to Disney’s park. MGM China Holdings Ltd.’s new $3.4-billion property, with a 2,000-seat theater, is part of that effort to transform Macau’s Cotai Strip into a family destination. The resort, which opened in time for the new year, should help drive the highest earnings gain for MGM China among its peers this year, according to a note from Morgan Stanley. MGM China on Tuesday reported stronger-than-expected earnings for its fourth quarter, as mass-segment revenue grew 22% from a year earlier. Analysts and retailers selling everything from jewelry to cosmetics are optimistic the upward trend will continue for both Macau and Hong Kong this year. As for Disneyland, it still may get its magic back. Visitation has been improving since the second half of 2017, and October Golden Week and Lunar New Year both recorded double-digit growth, according to Apple Daily, citing Samuel Lau, chief executive officer.

REST OF THE WORLD

European shares closed in positive territory on Wednesday, recouping earlier losses as Wall Street opened higher and upbeat

earnings published by Lloyds and Glencore gave a boost to financial stocks and miners. New business activity data from the euro area eased concerns that ultra-easy monetary policy in the bloc could end sooner rather than later. Europe’s pan-European STOXX 600 index closed up 0.16 percent at 381.1 points but some bourses on the continent ended the day slightly in the red, like Germany’s DAX, down 0.14 percent. Britain’s FTSE outperformed its European peers with a 0.48 percent rise, with heavyweight Glencore up 5.2 percent following a set of full-year results described as the miner’s “strongest on record”. That helped the basic resources index rise 1.6 percent. European banks, up 0.5 percent, also benefited from the earnings update from Lloyds, which reported its highest pre-tax profit since 2006 and

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announced a share buy-back of up to one billion pounds. “There’s a lot to like in Lloyds’ numbers, with profits rising, costs under control, and prodigious amounts of cash being thrown off to shareholders,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. Other European corporates suffered after publishing their results, such as Irish nutrition supplement firm Glanbia , which lost 7.5 percent after saying earnings growth would slow in the coming year. French technology consultancy group Atos disappointed analysts with its forecast for modest profit growth and ended the day down 5.4 percent. Around halfway through earnings season, more than half of MSCI Europe firms have either met or beaten analysts’ earnings expectations, according to Thomson Reuters data, with the bulk of beats concentrated in tech stocks and the energy sector. Equity strategists at UBS said the fourth quarter earnings season in Europe was “unseasonably strong” as earnings had been revised up, and not down. “Whilst attention has clearly been elsewhere over the last few weeks, given the correction in equities and sharp rise in volatility, the underlying earnings season has been quietly delivering the goods,” UBS equity strategists said in a note. “Our bullish stance on European equities for 2018 is underpinned by a profit recovery driven by top-line growth, operating leverage and re-gearing of balance sheets,” UBS added.

U.S. stocks closed lower on Wednesday in a rocky session after the release of the minutes from the Federal Reserve’s January meeting pushed yields on the benchmark 10-year U.S. Treasury note to a four-year high. After the Fed left interest rates unchanged in January, minutes showed the U.S. central bank’s rate-setting committee grew more confident in the need to keep raising rates, with most believing inflation would perk up amid an improving economic landscape. Stocks initially reacted positively, with each of the major Wall St indexes touching session highs. Stocks began to pare gains, however, as bond yields US10YT=RR climbed to a four-year high of 2.957 percent on the likelihood of further rate increases this year. “The Fed meeting minutes indicated Fed members weren’t too worried about inflation, so that was music to the market’s ears,” said Michael Arone, Chief Investment Strategist at State Street Global Advisors in Boston. “Since then the market is recognizing the meeting happened at the end of January and since then we have had the strong jobs report, the average hourly earnings pickup, the CPI figures and they also said it is going to be appropriate to raise rates.” Expectations for a quarter-point hike at the Fed’s next meeting in March are currently 93.5 percent, according to Thomson Reuters data. The Fed has forecast three rate hikes in 2018. The Dow Jones Industrial Average .DJI fell 166.97 points, or 0.67 percent, to 24,797.78, the S&P 500 .SPX lost 14.93 points, or 0.55 percent, to 2,701.33 and the Nasdaq Composite .IXIC dropped 16.08 points, or 0.22 percent, to 7,218.23. After inflation worries knocked the S&P 500 down more than 10 percent from its Jan. 26 high, stocks had rebounded in recent sessions as yields on the 10-year U.S. Treasury note had stabilized around the 2.9 percent mark. Even with the recent rally, the index has been unable to convincingly hold above its 50-day moving average, seen as a key support level. “It is unusual for it to make that V-shaped recovery that it did and keep going,” said Jeff Zipper, managing director at the U.S. Bank Private Client Reserve in Palm Beach, Florida. “We keep hearing about a possible re-test of that bottom but we will see how it holds up.” The prospect of higher rates and an unexpected fall in January U.S. existing home sales dented the real estate .SPLRCR sector, off 1.81 percent. Other sectors seen as bond proxies due to their high dividend yields, utilities .SPLRCU and telecoms .SPLRCL, also dropped more than 1 percent. Benchmark 10-year notes last fell 13/32 in price to yield 2.9408 percent, from 2.893 percent late on Tuesday. Declining issues outnumbered advancing ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.24-to-1 ratio favored advancers. Volume on U.S. exchanges was 6.96 billion shares, compared to the 8.49 billion average over the last 20 trading days.

Oil prices fell on Wednesday, weighed down by the rebound of the US dollar further away from three-year lows hit last week. An

expected rise in US oil production also weighed on prices, traders said. US West Texas Intermediate (WTI) crude futures were at $61.32 a barrel at 0307 GMT, down 47 cents, or 0.8 percent, from their last settlement. Brent crude futures fell 39 cents, or 0.6 percent, from their last close to $64.86 per barrel. Wang Tao, Reuters technical commodity analyst, said Brent could fall into a range of $63.92 to $64.41 per barrel, as suggested by its wave pattern and a projection analysis. Traders said the declines were driven by a recovery in the dollar, which potentially hits fuel demand as it makes greenback-denominated oil imports more expensive for countries using other currencies. The dollar index, which measures the greenback against a basket of six major currencies, rose for a second day on Wednesday, moving further away from the three-year lows reached last week as traders shaved off some bearish bets against the US currency. “The US dollar continues to find firmer footing,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore. Also pressuring prices is surging US production, now the world’s second-largest oil stream at more than 10 million barrels per day, only slightly behind Russia and ahead of top exporter Saudi Arabia. “Bulging US production will weigh on prices,” said Singapore-based Phillip Futures in a note on Wednesday. The next set of weekly US oil production data is due to be published by the Energy Information Administration (EIA) on Thursday after a one-day delay because of the President’s Day holiday on Monday. That data will also include US inventory figures that are expected to show crude oil stockpiles rose 1.3 million barrels in the week to Feb. 16, according to a Reuters poll. Oil product stockpiles, including gasoline and distillate fuels, are all expected to decline. Despite the rising US output, overall oil markets remain well supported due to healthy demand growth and supply restraint by the Organization of the Petroleum Exporting Countries (OPEC) that started last year to draw down excess global inventories.

U.S. home sales unexpectedly fell in January, leading to the biggest year-on-year decline in more than three years, as a chronic shortage of houses lifted prices and kept first-time buyers out of the market. The supply squeeze and rising mortgage interest rates are stoking fears of a lackluster spring selling season. The second straight monthly drop in home sales reported by National Association of Realtors on Wednesday added to weak retail sales and industrial production in January in suggesting slower economic growth in the first quarter. “There may be some headwinds ahead for home resales with rising mortgage costs affecting how much the buyer can afford and this could put a damper on existing home sales and take some of the wind out of the economy’s sails,” said Chris Rupkey, chief economist at MUFG in New York. Existing home sales dropped 3.2 percent to a seasonally adjusted annual rate of 5.38 million units last month, with purchases declining in all four regions. Economists polled by Reuters had forecast home sales rising 0.9 percent to a rate of 5.60 million units in January. Existing home sales, which account for about 90 percent of U.S. home sales, declined 4.8 percent on a year-on-year basis in January. That was the biggest year-on-year drop since August 2014. The weakness in home sales is largely a function of supply constraints rather than a lack of demand, which is being driven by a robust labor market. The shortage of properties is concentrated at the lower end of the market. While the number of previously-owned homes on the market rose 4.1 percent to 1.52 million units in January, housing inventory was down 9.5 percent from a year ago. That was also the lowest inventory for January on record. Supply has declined for 32 straight months on a year-on-year basis. At January’s sales pace, it would take 3.4 months to exhaust the current inventory, up from 3.2 months in December. A six-to-seven-month supply is viewed as a healthy balance between supply and demand. The median house price increased 5.8 percent from a year ago to $240,500 in January, marking the 71st consecutive month of year-on-year price gains. The PHLX housing index .HGX was trading higher, tracking a broadly firmer U.S. stock market. The dollar .DXY strengthened against a basket of currencies as yields on shorter-dated U.S. Treasuries rose.

The final version of a landmark deal aimed at cutting trade barriers in some of Asia-Pacific’s fastest-growing economies was released on Wednesday, signalling the pact was a step closer to reality even without its star member the United States. More than 20 provisions have been suspended or changed in the final text ahead of the deal’s official signing in March, including rules around

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intellectual property originally included at the behest of Washington. The original 12-member deal was thrown into limbo early last year when President Donald Trump withdrew from the agreement to prioritize protecting U.S. jobs. The 11 remaining nations, led by Japan, finalized a revised trade pact in January, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is expected to be signed in Chile on March 8. The deal will reduce tariffs in economies that together amount to more than 13 percent of global GDP - a total of $10 trillion. With the United States, it would have represented 40 percent. “The big changes with TPP 11 are the suspension of a whole lot of the provisions of the agreement. They have suspended many of the controversial ones, particularly around pharmaceuticals,” said Kimberlee Weatherall, professor of law at the University of Sydney. Many of these changes had been inserted into the original TPP 12 at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine. The success of the deal has been touted by officials in Japan and other member countries as an antidote to counter growing U.S. protectionism, and with the hope that Washington would eventually sign back up. “CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organization rules,” New Zealand Trade Minister David Parker said on Wednesday. Last month, Trump told the World Economic Forum in Switzerland that it was possible Washington might return to the pact if it got a better deal. However, Parker said on Wednesday that the prospect of the U.S. joining in the next couple of years was “very unlikely” and that even if Washington expressed a willingness to join CPTPP, there was no guarantee that the members would lift all the suspensions. Parker said the deal would likely come into force at the end of 2018 or the first half of 2019. Governments were quick to tout the economic benefits of the agreement. “The TPP-11 will help create new Australian jobs across all sectors - agriculture, manufacturing, mining, services - as it creates new opportunities in a free trade area that spans the Americas and Asia,” said Steven Ciobo, Australia’s minister for trade, in an emailed statement. The first attempt to agree to a deal last November stalled amid opposition from Canada, which was seeking protection of its cultural industries. An economic analysis released by the Canadian government on Wednesday said the pact would provide exporters with tariff savings of C$428 million ($338 million) per year. Total Canadian exports to other CPTPP countries are projected to increase by C$2.7 billion, or 4.2 percent, by 2040, compared to gains of C$1.5 billion under the original TPP. New Zealand’s government expected the CPTPP to boost the island nation’s economy by between NZ$1.2 billion ($881 million) to NZ$4 billion a year, with beef and kiwifruit exporters among the top beneficiaries of the deal. The 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

U.S. Treasury recommends preserving Dodd-Frank bank resolution regime - The U.S. Treasury Department has recommended preserving powers created after the 2007-2009 financial crisis that allow regulators to step in and wind down a failing bank, in a win for big banks and overseas regulators who had lobbied for the United States to keep it. In a closely watched report published on Wednesday, the administration of Republican President Donald Trump favored keeping the “orderly liquidation authority” (OLA) created by the 2010 Dodd-Frank law but also urged Congress to expand the U.S. bankruptcy code to accommodate large financial institutions. “Treasury recommends retaining OLA as an emergency tool for use under only extraordinary circumstances,” the report said. ”While bankruptcy must be the presumptive option, the bankruptcy of large, complex financial institutions may not be feasible in some circumstances,” the report said. The Dodd-Frank OLA provision gives regulators special powers to wind down a complex financial institution in an orderly manner, including temporarily using taxpayer funds to provide emergency liquidity. Regulators globally agreed special resolution powers were needed for large financial institutions after the 2008 collapse of investment bank Lehman Brothers, which highlighted that normal bankruptcy laws were not sophisticated enough for global banks. The panic unleashed by Lehman’s collapse led to a string of chaotic U.S. government-led bailouts that were reviled by the public and most politicians, prompting Congress to establish a formal policy for government intervention in future crises. Trump ordered a review of the OLA in April as part of the administration’s broader pledge to review and roll back post-crisis regulations. The Treasury’s recommendations will be met with a sigh of relief by large banks and regulators overseas who heavily lobbied the Treasury to protect the mechanism. They warned that rescinding the OLA would increase systemic risk and make U.S. banks less safe in the eyes of overseas regulators who would potentially require them to ringfence more capital in the markets in which they operate. Only Congress has the power to repeal the OLA, but Treasury’s opinion has loomed large in the debate. The report will be welcomed by foreign governments, signaling that the United States is taking a measured approach to deregulation and is unwilling to tear up international standards. “Treasury’s recommendation to retain the OLA helps ensure there will be an orderly approach in the unlikely failure of a US-based global bank. This is critical for maintaining confidence across the global regulatory community in US banks,” said Adam Gilbert, a partner at PwC. It is a blow, however, for conservative Republicans in Congress who have pushed to repeal the Dodd-Frank powers which they say are a taxpayer bailout in disguise. “Although I have been pleased or even excited about Treasury’s previous reports, this one disappoints,” Representative Jeb Hensarling, who chairs the House Financial Services Committee, said in a statement. The OLA rules require all funds spent by the government to be recouped by fees on the banking industry, but conservatives say this temporary government lifeline is an improper intrusion into private markets. The Treasury acknowledged the risks of rescinding the OLA, while noting it had “serious defects” that needed refining. The report recommends reforming the OLA to limit its use, reduce the discretionary powers it affords bank regulators, and minimize the use of taxpayer funds to facilitate it. Many of these proposals can be enacted by bank regulators, but enhancing the bankruptcy code can only be done by Congress. The Treasury’s endorsement of an expanded bankruptcy code could inject new life into legislation currently pending before lawmakers.

Enhanced Corporate Governance Guidelines (BSP Cir. 969, 970, 971, 972) (Board of Directors) – 23 Feb 2018 Counterfeit Detection – 23 February 2018 Project Management Fundamentals – 23 February 2018 Asset Liability Management – 24 February 2018 Fraud Risk Management – 24 February 2018 Financial Options – 24 February 2018 BSP Cir. No. 989: Guidelines on the Conduct of Stress Testing Exercises (Session I) – 02 March 2018 (8:30am

to 12:00nn) BSP Cir. No. 989: Guidelines on the Conduct of Stress Testing Exercises (Session II) – 02 March 2018 (1:00pm

to 5:00pm) Advanced Project Management (Pre-requisite PM Fundamentals) – 03 March 2018 Signature Verification & Forgery Detection – 3 March 2018 (CEBU CITY) Process Improvement Specialists Program – 10 & 17 March 2018 Beyond Compliance: Managing Technology and Cyber Security Risk (Highlighting BSP Cir. No. 982: Enhanced

Guidelines on Information Security Management) – 14 March 2018 Enhanced Corporate Governance Guidelines (BSP Cir. Nos. 969, 970, 971, 972) – 16 March 2018 Robotic Process Automation in Banking – An Introduction – 16 March 2018 BSP Cir. 706 as Amended by BSP Cir. No. 950, AMLA Law, and the AML Risk Rating System – 23 March 2018

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"Implementing Sound Internal Controls and Validation Process for the ICAAP of Banks" (Guiding Principles of BSP Circular 639 and 871) - Day 1 – 24 March 2018

Compliance with Operational Risk Management Guidelines – 06 April 2018 Related Party Transactions – 06 April 2018 Estate Planning – 07 April 2018 Defining Process Performance Indicators – 14 April 2018 "Implementing Sound Internal Controls and Validation Process for the ICAAP of Banks" (Guiding Principles of

BSP Circular 639 and 871) - Day 2 – 14 April 2018 Updated Guidelines on Sound Credit Risk Management (Includes Cir 908: Agricultural Value Chain Financing

Framework and BSP Cir 941: Amendments to the Regulations on Past Due and NPLs – 20 & 21 April 2018 Macros Training for Bankers – 20 & 21 April 2018 "Implementing Sound Internal Controls and Validation Process for the ICAAP of Banks" (Guiding Principles of

BSP Circular 639 and 871) - Day 3 – 21 April 2018 A Regulatory Perspective on Trust Activities and Administration (2 Days) – 20 & 27 April 2018 BSP Cir. No. 706 as Amended by BSP Cir. No. 950, AMLA Law, and the AML Risk Rating System (Board of

Directors) – 27 April 2018 Overview of Outsourcing Framework (Knowing the Essentials When Outsourcing) – 04 May 2018 Basic Course on Corporate Governance for Savings and Loan Associations, Rural Banks and Cooperatives –

04 & 05 May 2018 Identity Theft: How To Effectively Combat It – 05 May 2018 Updated Guidelines on Sound Credit Risk Management (Includes Cir. 908: Agricultural Value Chain Financing

Framework and Cir. 941: Amendments to the Regulations on Past Due and NPLs) – 11 & 12 May 2018 Trust Products – 11 & 18 May 2018 Counterfeit Detection – 12 May 2018 (CEBU CITY) Process Mapping as an Operational Risk Management Tool – 12 & 19 May 2018

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

FEBRUARY 16-28

17 Lorna Leah G. Bongcayao - ANZ Bank 18 Rodelio S. Romblon - Philippine Postal Savings 19 Marlyn M. Marudo - Rizal Bank Inc 21 Irene DL Arroyo - PDIC 22 Aristeo A. Dequito - CARD SME Bank 23 Lourdes B. Dijan - CARD Bank 23 Domingo B. Gavino, Jr. - ING Bank NV 26 Mary Jane A. Perreras - CARD SME Bank 26 Elmore O. Capule - BSP

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FAT MAN STRATEGY – A takeover defense tactic that involves the acquisition of a business or assets by a target company. The strategy is based on the premise that the bulked-up company - the “fat man” - would have reduced appeal to a hostile bidder, especially if the acquisition increases the acquirer’s debt load or decreases available cash.

VECTOR GRAPHIC - Unlike JPEGs, GIFs, and BMP images, vector graphics are not made up of a grid of pixels. Instead, vector graphics are comprised of paths, which are defined by a start and end point, along with other points, curves, and angles along the way. A path can be a line, a square, a triangle, or a curvy shape. These paths can be used to create simple drawings or complex diagrams. Paths are even used to define the characters of specific typefaces. Because vector-based images are not made up of a specific number of dots, they can be scaled to a larger size and not lose any image quality. If you blow up a raster graphic, it will look blocky, or "pixelated." When you blow up a vector graphic, the edges of each object within the graphic stay smooth and clean. This makes vector graphics ideal for logos, which can be small enough to appear on a business card, but can also be scaled to fill a billboard. Common types of vector graphics include Adobe Illustrator, Macromedia Freehand, and EPS files. Many Flash animations also use vector graphics, since they scale better and typically take up less space than bitmap images.

REFERENCE COMPILED AND PREPARED BY: RESEARCH AND INFORMATION COMMITTEE FY 2017-2018

BPI Asset Management Business World Philippine Daily Inquirer Philippine Star GMA News ABS-CBN News Philippine Stock Exchange Philippine Dealing System Reuters Financial Times

Business Mirror Bloomberg CNN / CNBC SCMP / Japan Times Wall Street Journal Investopedia Goodreads TechTerms IT Information Exchange Life Hacks

Director: Maria Teresita R Dean (China Bank Savings) Chair: Carlota A. Bacani (ANZ Bank) Members: Sheryll K. San Jose (Equicom Savings Bank) 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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BAIPHIL Market Watch – 22 February 2018

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