newsletter
Giving you the brief updates on the market
Become a wise investor and trader with the help of Market Updates Team! These are the updates in the market during September to December 2022!
TABLE OF CONTENTS
Market updates 1
september 18, 2022
index tracker
PSEi
USDPHP
SPX
NASDAQ
CRYPTOCAP
​
6,548
57.32
3,873.33
11,448.40
927,335,448,437
​
26.90â–¼
0.03â–¼
28.02â–¼
103.95â–¼
2,012,478,105â–²
​
0.41%â–¼
0.05%â–¼
0.72%â–¼
0.90%â–¼
0.22%â–²
​
[PH] INCREASE IN SUGAR PRICES CAUSES PRICES OF STARBUCKS’ BEVERAGES TO RISE
On Tuesday, September 13, 2022, it was declared that the Rustan Coffee Corp. will increase the prices of all Starbucks’ beverages by ₱5. Maria Rosario Vilchez, Starbucks PH’s marketing and global responsibility manager, stated that a balance between effective cost-pricing and customer experience must be achieved to continue to operate the business. However, Starbucks will still continue its special promotions and loyalty program, Starbucks Rewards, to still make up, even in a little way, for the increase in prices. Before the increase in prices of beverages, it was forecasted a month ago by the Philippine Chamber of Commerce and Industry (PCCI) that there would be a definite price increase on food products and beverages due to the shortage of sugar supply.
Insights: With the given root cause of the shortage in the supply of sugar, a wide variety of food and drinks that use sugar will be affected in the short-run, and if the problem persists still without a government policy, long-run prices would be severely affected. As the shortage of sugar continues, prices would have to rise as sugar can be considered a commodity for most households thus demand might not temper down. Businesses might also slow down or even completely stop their operations if the cost of production increases significantly which would reflect in the upward shift of the supply curve of products that use sugar, therefore, price will increase if demand does not change. This price issue can be traced back to the month of August, when Coca-cola Beverages Philippines Inc. experienced a shortage in Coca-cola products due to the shortage of sugar, as premium refined sugar is a vital ingredient in Coca-cola beverages. Thus, two options that Starbucks can implement are to either maintain the prices while lowering the quantity of the products or to increase the prices while maintaining the supply of beverages to still suit the demand of the consumers.
[OTHER MARKETS] ASX DROPS AS US INFLATION SCARES INVESTORS AWAY
The Australian stock market’s sectors are down by 1.4% in early trading, following the 4.3% drop of the S&P500 overnight (worst trading day since June 11, 2020). As part of the sectors, tech shares are down by 6.3%, consumer discretionary shares by 3%, and mining by 2.8%. However, before the downfall in stocks, global markets were gaining since July, as investors were confident enough that central banks would certainly evade aggressive rate hikes. In the meantime, investors are being wary of the interest rates as the US inflation got worse than what was expected. The benchmark S&P/ASX200 had slipped 198.5 points to a one-week low of 6,813. Additionally, the All Ordinaries had decreased by 196.3 points to 7,057.4.
Insights: The US plays a crucial role in the global economy and the US dollar is very much something banks all over the world are concerned about. Moreover, the US dollar is the primary reserve currency and so, changes like cash rate or interest rate movements may significantly affect not just the US economy, but also other countries such as Australia. As the US inflation rate is rising faster than expected, the Fed may implement quantitative tightening policies to control inflation. A possible consequence of this is higher interest rates in the US. Investors are concerned with such interest rate hikes, affecting economies such as the Australian economy. Additionally, rising US interest rates may put upward pressure on Australian interest rates. That is, interest rates in Australia may rise (possibly, not as much as US interest rates) as US rates continue to rise. The rise of interest rates globally may encourage the selling of shares in the stock market, driving stock prices down.
For more information, see this article here
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[US] U.S. MORTGAGE INTEREST RATES INCREASE TO 6%
According to the Mortgage Bankers Association (MBA), data showed that the average interest rate on U.S. home loans rose above 6% for the first time since 2008. It is now double the level compared to last year, and the Federal Reserve is lifting borrowing costs in order to subjugate high inflation. A reading in key inflation on Tuesday created expectations that the Fed will be forced to deliver a third straight 75-basis point interest rate hike at its policy meeting next week. There is a prediction from investors that the central bank will have to further hike rates than previously thought.
Insights: Inflation in the US is progressing faster than expected. Hence, quantitative tightening policies may be implemented to curb this higher-than-ideal inflation rate. As a consequence, interest rates are rising, affecting the housing market. Loans, including those for the purpose of buying real estate (i.e., mortgages), have become more expensive (higher cost of borrowing money). Together with this, demand for housing (in the form of mortgage applications) declined. Despite high mortgage interest rates in the US, a collapse in the housing market is not expected as sustained high prices persist in the said market. There is still a lack of relatively inexpensive housing and so, large decreases in house prices are not expected. With less sales in the housing market, renting may become a more attractive option, driving rent up.
For more information, see this article here
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[CRYPTO] CRYPTO ON TWITCH
Twitch is stepping into the online gambling arena, with crypto as its currency. Video games like Grand Theft Auto and Fortnite are still the ones that dominate live streams people tune into the platform. Then, there is an addition: crypto gambling. Many streamers are paid by casinos to take part in this activity.
Insights: In terms of gaming, cryptocurrency makes online casinos catch the public eye. There will be an increase in interest among thousands of people, and crypto gaming will grow in popularity. Some of its benefits are transactions are streamlined and secured as well as governments can not shut down crypto casinos. The fact that the industry is decentralized means that the casinos might share their profits with their customers. Twitch might also experience an increase in total viewership since their main market for viewers now includes people that are interested solely in crypto. Twitch’s popularity as a live-streaming platform for gamers is its main selling point in the past years but they are now starting to establish itself as a general live-streaming platform for different people and we might see more increase in popularity as crypto influencers from other social media platforms start to create their own Twitch channel for more engaging interaction with their viewers.
For more information, see this article here
Market updates 2
september 25, 2022
index tracker
PSEi
USDPHP
SPX
NASDAQ
CRYPTOCAP
​
6,259.54
58.750
3,693.23
10,867.93
894.72B
​
42.17â–¼
0.260â–¼
64.76â–¼
198.88â–¼
9.762Bâ–¼
​
0.67%â–¼
0.44%â–¼
1.72%â–¼
1.80%â–¼
1.08%â–¼
​
[PH] INCREASE IN SUGAR PRICES CAUSES PRICES OF STARBUCKS’ BEVERAGES TO RISE
On The Philippine peso to US dollar ratio dropped to PHP58:USD1 after the US Federal Reserve declared a monetary policy decision to increase interest rates. Before the announcement, it was PHP57.70:USD1, which was already lower than the PHP 57 per US dollar ratio a day ago. Since September 2, the Philippine peso has been steadily depreciating, and the latest exchange rate is the eighth straight day it has sunk to a new all-time low. This is seen as a reaction to the US Federal Reserve’s announcement to raise interest rates by 75 basis points. This would be the third 75-basis point hike for the US Fed since its 25-basis point increase back in March. Hours after the US Fed’s announcement, the BSP announced that they will increase the interest rates by 50 basis points as a follow-through action to keep up with inflation expectations and achieve price stability. The peso losses were recorded to have started since June 10, with a ratio of PHP53:USD1.
​
Insights: To combat soaring domestic inflation, central banks such as the Fed and BSP enact contractionary monetary policies. These aim to achieve price stabilization by affecting the money supply and increasing the cost of borrowing money, ultimately lowering aggregate demand. As a country’s interest rates rise, its currency tends to grow stronger against other currencies. The succeeding increases in US interest rates have pushed the dollar to its strongest position in decades as higher returns on US debt instruments and dollar deposits raise demand for the said currency among investors. This results in the depreciation of the Philippine peso against the US dollar since a dollar gets more expensive. Some companies listed on the PSE would face higher financing and borrowing costs, which could suggest slower growth in the future.. Some economists forecast that the exchange rate may breach the PHP 60 mark if inflation in the US is not sufficiently tempered and the Fed continues its rate hikes.
For more information, read this article here
[US] HOME SALES FALL, CAUSING PRICES TO FALL SUCCEEDINGLY
As reported by the National Association of Realtors, home sales fell by 0.4% from July to August, to an annual rate of 4.8 million units - the slowest sales pace since June 2020 (since November 2015, excluding June 2020). These sales were contracts that were possibly signed in June and July when mortgage rates became much higher and then went down. The 30-year fixed mortgage had an average rate of 5.5% at the beginning of June, then increased to 6% by mid-June, and dropped to a low of 5% at the end of July. The 30-year fixed mortgage had a rate of 3% at the start of the year and now has a rate of almost 6.5%. Although home prices usually drop from July to August, prices dropped much harder this year. However, high prices still persist due to the low supply of houses (especially on the lower end of the market). About 1.28 million homes were for sale at the end of August, which is about a 3-month supply at the current sales pace.
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Insights: Due to the contractionary monetary policies implemented by the US Federal Reserve, the housing market and the mortgage system are affected by the inverse relationship between mortgage rates and annual sales. Since the residential real estate industry is mainly driven by loans and debts, an increase in interest rate will affect the demand for housing since it will be more costly for people to borrow money to buy homes. The continuous rise of interest rates suggests further decline in sales in the housing market, as more consumers will not be able to (or willing to) buy real estate. As mortgage rates rise and home sales fall (as a consequence of lower demand), inflation drops as well.
For more information, read this article here
[OTHER MARKETS] BANK OF JAPAN REMAINS A GLOBAL OUTLIER AMIDST RISING INFLATION GLOBALLY
The central bank of Japan, Bank of Japan (BOJ), decided to maintain its ultra low-interest rates even after the US Federal Reserve announced its third straight 0.75% rise (75 basis points) in their effort to curb price hikes and soaring inflation. The BOJ did not change its -0.1% interest rate. BOJ's decision is a global outlier since most central banks all around the world are resorting to increasing their interest rates to battle inflation. Japan, holding the world's third-largest economy, has been trying to slow down the depreciation of yen. After the BOJ's announcement regarding their loose monetary policy, the Japanese government purchased yen for the first time in 24 years, briefly increasing the rate of yen against dollar.
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Insights: BOJ's decision to maintain its dovish monetary policy is clearly in the opposite direction compared to other countries’ central banks decisions. Top bankers and policymakers in Japan stated that their decision to maintain its ultra-low rates took into consideration the state of the Japanese economy. Since Japan took a really big hit in its economy during the pandemic, the government is trying to sustain its economic recovery by implementing loose monetary policies to stimulate more borrowing, spending, and investment, rather than contractionary policies. However, if Japan maintains its expansionist policies (i.e. negative interest rates), its economic concerns regarding sluggish growth and the depreciation of yen against dollar might not come to a stop, especially as the gap between the Japanese yen and US dollar continues to grow since it is expected that the US Fed will continue to increase their policy rates further.
For more information, read this article here
[CRYPTO] MOST ECO-FRIENDLY CRYPTOCURRENCIES
Implementing sustainable practices in the crypto market is considered as global warming continues to rise. The 10 most eco-friendly cryptocurrencies to invest in 2022 include TezTezos (XTZ), which is the most eco-friendly, Ethereum (ETH) which happens to be the one with Low Energy Requirement, and Solana (SOL) which is the most environmentally-friendly crypto in the blockchain sector. In addition, we also have IOTA (MIOTA), or the eco-friendly network in the ‘Internet of Things’ Space, and Hedera (HBAR) wherein it is the environmentally-friendly alternative to blockchain technology.
Then, Chia (XCH), the ‘Green’ Blockchain with Unique Consensus Protocol. Next is SolarCoin (SLR) which is characterized as an innovative platform incentivizing solar power generation. Lastly, the remaining three are Polkadot (DOT), the eco-friendly protocol designed for interoperability, Flow (FLOW) or the new low-energy blockchain for NFT creators, and lastly, the Algorand (ALGO) which is known to be the carbon-negative blockchain.
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Insights: As global warming continues to persist, more people are starting to become environmentally conscious. Cryptocurrencies are also rising in popularity among the general public, especially Bitcoin and Ethereum, which are the top 2 cryptocurrencies in the market with the highest market cap. However, these currencies are being criticized as being highly energy-intensive due to ‘mining’. In general, proof-of-work cryptocurrencies require huge amounts of energy. However, in September 2022, Ethereum completed its switch from proof-of-work to proof-of-stake, which does not require a lot of computational effort, therefore, it is said to be more energy-efficient. Most of the cryptocurrencies that are listed as eco-friendly are also relying on proof-of-stake. For cryptocurrencies to continue to rise up in popularity and maybe, in the future, be adopted in everyday transactions, they need to become more sustainable and these cryptocurrencies may become an integral part of our lives in the future.
For more information, read this article here
NEWSLETTER MONTHLY WRAP-UP
september 2022
index tracker
PSEi
USDPHP
SPX
NASDAQ
CRYPTOCAP
​
847.21â–¼
2.11â–²
338.64â–¼
1,209.51â–¼
54.039Bâ–¼
​
5,741.07
58.75
3,585.62
10,575.62
960.62B
​
12.86%â–¼
3.73%â–²
8.63%â–¼
10.26%â–¼
5.63%â–¼
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[PH] PH ECONOMY’S GROWTH FORECAST RISES, ACCORDING TO WORLD BANK
The World Bank corrected the Philippines’ 2022 growth forecast to 6.3% from 5.7% in April due to a strong recovery from the consumption and spending of private sectors. The change in the growth forecast is not only due to the increase in general investments but also due to higher domestic demand and export earnings and an improvement in tourism.
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Insights: The change in the growth forecast of the World Bank was due to the increase in all the components of the GDP, consumption, government spending, investment, and exports. As healthcare restrictions are being lifted, people are consuming more and more each day. This leads to an increase in the consumption of products from both public and private companies. Despite the pull from the tightening of the monetary policy, the Philippines’ fiscal policy seems to be more accommodating, overpowering the impact of the monetary. However, The World Bank’s forecast is contrary to the International Monetary Fund’s (IMF) forecast as the IMF cuts off its expected economic growth of the Philippines this year to 6.5% from 6.7% in July. According to the IMF, the Philippines’ economy will slow down since economies around the globe are also experiencing a decrease in economic growth. Rising interest rates to temper down soaring inflation is also a reason for the cut in growth forecast since contractionary monetary policies will slow down economic expansion. It is possible that the World Bank’s initial forecast was too low and even though the World Bank and IMF”s decisions are contrary to each other, their adjusted forecast for this year is almost similar.
For more information, read this article here
[US] US STOCKS' WORST DAY
After more than two years, US stocks experienced their worst day as the US CPI data for August 2022 showed
rapidly increasing inflation. As a result, investors sold stocks, bonds, gold, and even oil. The S&P 500’s 11 sectors as well as all 30 of the Dow Jones Industrial Average’s equities had declined. Additionally, Fed Chairman Jerome Powell stated that the central bank's goal is to reduce high inflation so that they can keep it from becoming ingrained just like what happened during the 1970s. While most investors anticipate more stock market volatility, others perceive that such an economy can still prevent a significant leg down from the current levels of the market.
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Insights: The US inflation is at a four-decade high. Although,, the US dollar is at its strongest in two decades. Stock volatility continues to be a concern for investors since the Fed needs to increase interest rates to fight against inflation, which results in less corporate profits and profit margins. US stocks may continue to record even worse single-day losses as Fed chairman Jerome Powell hints at more rate hikes as he vows to ‘keep at it to temper down inflation. This is after the Federal Reserve’s announcement to increase the interest rates by 75 basis points (0.75%).
For more information, read this article here
[OTHER MARKETS] VIETNAMS’ FASTEST ECONOMIC GROWTH IN DECADES
As the southeast Asian nation struggled and raced through the down-turning global economy, Vietnam grew the fastest in the third quarter of this year. As the Asian manufacturing hub, Vietnam’s GDP rose by 13.7 percent in three months due to the expansion of services which increased by 18.9 percent, and the expansion of the industry and construction which increased by 12.9 percent. Additionally, the World Bank forecasted that Vietnam would grow by 7.2 percent at the end of the year, ahead of resource-rich Indonesia and China (which were hindered by lockdowns). Vietnam’s exports also grew by 17.3 percent in the first nine months of 2022, with about a third of exports going to the US. Consumer spending and high rates of inflation also pushed for the fast economic growth of Vietnam.
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Insights: With the easing of healthcare restrictions, countries are now improving and recovering their economic growth. As with the case of Vietnam, rising as a new Asian manufacturing hub, exports would flow more as more workers are employed. The advancement of services and industry sectors contributed greatly to the fast economic growth of Vietnam as the country’s manufacturing sector is labor-intensive. Additionally, the increase in consumer spending is due to the businesses reopening and the transition to the new normal. A low rate of inflation also means that people in Vietnam have higher purchasing power since they can buy goods for lesser prices. Manufacturing and production are also starting to shift away from China to other countries with low-cost labor such as India and Vietnam since supply chains are heavily affected by China’s situation (e.g. US-China Trade War, and zero COVID-19 policy). To circumvent these issues, companies are starting to diversify their manufacturing and production to several countries, therefore, being less dependent on China. However, Vietnam is still far away from replacing China as the leader in terms of manufacturing output due to several bottlenecks such as having less human capital than China.
For more information, read this article here
[CRYPTO] RUSSIA TO TAKE CRYPTO PAYMENT FOR IMPORTS
Russian Prime Minister Mikhail Mishustin stated that Russia may soon start using cryptocurrency for imports. In accordance with Iran's decision, Mishustin believes that the adoption of digital assets is a requisite to alternatively secure cross-border payments. He also pointed out how vital tech infrastructure independence and the cybersecurity of financial institutions are. Finally, Cointelegraph reported that according to Bank of Russia Governor Elvira Nabiullina’s statement last June, cryptocurrencies can be used for international payments, but only if they don’t enter Russia’s domestic financial system.
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Insights: Russia’s decision to soften its stance against the use of cryptocurrency as payment is contrary to Putin’s earlier decision to ban the use of digital assets for payments. However, this decision is not a surprise since Russia received several sanctions from countries in the West for their aggression in Ukraine. Russia’s international payment network, Society for Worldwide Interbank Financial Telecommunication (SWIFT) has been rendered limited due to sanctions imposed on them thus, forcing Russia to adopt other forms of payment such as cryptocurrencies. The governor of the Bank of Russia supports this sentiment as long as it won’t disrupt the domestic financial system. The central bank of Russia will need to regulate the use of cryptocurrency since their past concerns include the use of crypto in money laundering and price volatility as compared to fiat money.
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For more information, read this article here​
Market updates 3
October 2, 2022
index tracker
PSEi
USDPHP
SPX
NASDAQ
CRYPTOCAP
​
5,741.07
58.750
3,585.62
10,575.6
906.581B
138.61â–¼
0.270â–¼
69.42â–¼
227.30â–¼
0.871Bâ–²
​
2.36%â–¼
0.46%â–¼
1.90%â–¼
2.10%â–¼
0.10%â–²
​
PH] SURGING DOLLAR MOTIVATING THE PHILIPPINE BPO INDUSTRY
For an industry that is already forecasted to be growing over the next six years, the Philippines’ information technology and business process management (IT-BPM) is further boosted by the recurrent downfall of the Philippine peso against the US dollar. With the negative effect of the depreciation of the Philippine Peso, the US dollar is at a favorable advantage with its strong dollar. North America’s demand for Asian-Pacific talent had been expanding at a higher rate by using their attractive dollar value. The ratio of peso-dollar is now at PHP58.76:USD1. ING Bank further stated that the monetary authorities are acquiescing to the weakness of the Philippine peso as it is difficult to resist the strength of the US dollar. The Philippines’ business process outsourcing (BPO) is expected to create 1.1 million direct jobs over the next six years, with more than half from the countryside. Full-time employees in BPO is observed to have grown from 1.44 million in 2021 to 2.5 million in 2028, positively adding up 8.5 percent to the country’s GDP by then. The IT-BPM Process Association of the Philippines (IBPAP) also declared that the IT-BPM sector can double its annual revenue by 2028, with USD59 billion by then. IT-BAP is now filing up their recommendations on policy and regulatory support, talent development, infrastructure development, and marketing and brand posting to the Marcos administration.
Insights: The weakening Philippine peso, with its devastating impacts on all other sectors, shines a positive effect on our IT-BPM sector. North American businesses are now more open to hiring more Asian employees and this creates an increase in demand for labor for Filipino workers. With the increase in hiring in the Philippines, people who lost jobs during the pandemic would be able to go back to work. Thus, a strong push by the IT-BPM is essential in making the forecasts happen in real-time, such as the increase in employment that could further increase the GDP and income of those in the said industry. However, depreciation is still not favorable to the Philippines since it negatively affects the purchasing power of Filipinos. Also, even though the salary and wage of the workers from the IT-BPM sector might be higher than before as US Dollar continues to soar up in value against competing currencies all around the globe, the workers would still need to use their hard-earned salaries and wages in the Philippines, therefore, the strength of the US dollar might be offset by the inflation that we are currently experiencing.
For more information, read this article here
[US] THE FUTURE OF RETAIL AS FORECASTED BY CEOS
Jason Buechel, CEO of Whole Foods Market, states that the “theater of retail” will be a priority for the retail businesses to return to their pre-pandemic level. Stores will now focus more on product innovation, proving the seal that Whole Foods puts on its products “Sourced for Good”. The seal is a certification that supports stores with responsible sourcing. Whole Foods already banned 500 ingredients and placed its priority on supporting local communities. The business now has 3,000 unique products, satisfying the customers’ demand for unique differentiation. John Furner, president, and CEO of Walmart, on the other hand, is still figuring out what Walmart would be like in the new normal. Walmart is more famous with higher-income people during these recessionary times and Furner plans to add these people to the store’s value-added delivery program, Walmart+. To attract higher-income people, a strategy to invest in innovations that relate to the high status is essential. Drone deliveries are also in Furner’s plans to quickly deliver products to urban-area customers, as traffic could cause many delays in deliveries. Walmart was supposed to cater to emergency items only, but now it is reaching to be a more convenient way for customers to get their weeknight meals. Lastly, Nick Green, co-founder, and CEO of Thrive Market, stated that his growth strategy for the company’s online membership-based retail business is to sell unique, safe, and accessible products. Now, it has over 500 private-label products. However, Thrive Market’s brands are limited compared to brick-and-mortar retailers. The company is not looking at what people are looking for right now, but rather what they want but cannot find in other retail stores.
Insights: To recover from the impacts of the pandemic on the retail industries, US CEOs are already planning strategies on how they would adjust their businesses to the pre-pandemic level. As the retail industries focus directly on customers’ experiences and customers’ wants, it is important to always consider what is in the market and what is not in the market. From there, CEOs could take the hint of the products that are not yet on the market, to boost their product innovation. The idea of drone deliveries is also costly but unique as it is a convenient way to avoid extra delays that could negatively impact the customers. However, it also comes with a lot of concerns regarding safety and regulation. Autonomous drones, like any other device, are subject to malfunction and failure and can be a safety hazard for consumers especially when drones stop working and fall suddenly midair. However, product innovation and further improvement in processing and computing might help businesses to adopt more efficient ways to run and also, they will be able to cater more of their selections to their target consumers.
For more information, read this article here
[OTHER MARKETS] IMPLEMENTATION OF LIQUIDITY MEASURES IF NEEDED BETWEEN SOUTH KOREA AND US
The Korean won has weakened 17% against the surging US dollar this 2022, which is why the United States and South Korea agreed on Saturday to implement liquidity facilities to stabilize financial markets if needed. Yet, South Korea's finance ministry did not give further details as to whether such a statement released will be the facilities that may be deployed referred to as a currency swap.
Meanwhile, South Korean authorities have recently arranged a $10 billion currency swap program with the country's state-run pension fund, instead of buying dollars in the spot market in order to help protect one of the world's worst-performing currencies.
Insights: The 60B USD foreign currency swap agreement between South Korea and US signed on March 2020 ended at the end of last year. The central bank of Korea is receiving a lot of domestic pressure to help and protect its currency, the Korean won, from weakening even further against the US dollar as the US Federal Reserve continues to increase its interest rates even higher to fight inflation. Even though a new foreign currency swap agreement has not been confirmed by the authorities of these two countries, it is one of the valid measures that they can actually take since it can help solve Korea’s liquidity problem of US dollars. Also, South Korea could borrow US dollars in exchange for Korean won at a lower exchange cost than the foreign exchange market for a set period and rate if the agreement between these two countries comes to fruition. The agreement would also benefit both countries in terms of investments since they could hedge risks that are caused by exchange rate fluctuations or instabilities.
For more information, read this article here
[CRYPTO] PARAGUAYAN SENATE TO PUSH CRYPTOCURRENCY BILL DESPITE VETO
The Paraguayan Senate decides to push forward with the recently passed cryptocurrency bill. This is amid Paraguay president Mario Abdo's complete veto of the bill. All 33 members of the Senate defended the proposition, stating its advantages and benefits in tracking the energy consumption of crypto miners. The Senate reaffirms that the bill would also generate income from the mining taxes that will be implemented. The cryptocurrency bill will be passed to the National Deputy Chamber, which will decide if they would recognize the presidential veto against the proposed bill. If the National Deputy Chamber rejects the veto, the bill will be sanctioned fully.
Insights: Paraguay president Mario Abdo argued that the cryptocurrency ‘Bitcoin’ bill would allow crypto miners to grow, therefore, would increase the risk of Paraguay needing to import power in the near future due to the extreme amounts of energy that crypto mining requires. However, the senate justifies the bill, stating that the proposed bill would allow the government to regulate crypto miners therefore, they can collect tax from them. By legalizing the existence of crypto miners, which is what the proposed bill is aiming for, the huge amounts of energy that is being used will help generate income for the government in the form of tax, instead of being a waste. If the Paraguay government is focused more on generating income in the form of tax, the cryptocurrency bill will make sense. However, if they are concerned more about the externalities that crypto mining brings with its heavy use of energy and power, a crypto mining total ban would be preferable similar to what other countries do since crypto mining does not rely much on human labor, therefore, does not create job opportunities for the citizens of Paraguay. If proof-of-stake coins become more popular and exhibit a larger value, crypto mining, specifically, bitcoin mining might weaken.
For more information, read this article here
Market updates 4
October 9, 2022
index tracker
PSEi
USDPHP
SPX
NASDAQ
CRYPTOCAP
​
5,932.19
59.04
3,639.66
10,652.4
934.1B
149.04â–²
0.15â–²
38.77â–¼
163.03â–¼
3.89Bâ–²
​
2.58%â–²
0.25%â–²
1.05%â–¼
1.51%â–¼
0.42%â–²
[PH] PHILIPPINES’ BUDGET DEFICIT TO REACH UP TO 7.6% OF GDP
According to Fitch Solutions Country Risk and Industry Research, the government’s spending-beyond-earnings this year is predicted to be at the same level as the budget deficit last 2020, at 7.6% of GDP, compared to 8.6% in 2021. Thus, there would be a little revision regarding the 7.5% forecasted budget deficit that was announced last June. The new forecast was based on the budget notes of the Senate Economic Planning Office last September 12 regarding the fiscal and macroeconomic assumptions for 2023’s national budget. The Philippine government’s economic team now aims to bring back the budget deficit to 3%, which was the pre-pandemic level. The reasons stated for this year’s budget deficit were due to decrease in revenues as expansionary spending was implemented to reduce the economic disadvantage of the pandemic.
Insights:
Through the budget deficit to balance and recover the economy, governments could borrow money and increase the money supply to boost people’s motivation to invest and spend more. Deficit spending may improve the decline in investment and consumer spending in order to stabilize aggregate demand, where demand increases along with the increase in the money supply. On the other hand, if the fiscal deficit were due to infrastructure spending, then the sectors and businesses would then have a short-term boost in terms of operations and profitability.
The Philippines suffered a fiscal deficit mainly due to spending that was caused by the pandemic, forcing the government to spend on COVID-19-related programs. Financial aid was also given to households that were in immediate need of assistance because of the impact of lockdown on businesses, negatively affecting the employment of most Filipinos. Infrastructure spending also was one of the culprits of the budget deficit of the Philippines according to the Department of Finance. Among ASEAN countries, the Philippines has the 2nd worst budget deficit. However, it ranked fourth when it comes to the volume of revenue generated by the government. The PH gov’t will need to cut the deficit and according to DOF Secretary Benjamin Diokno, the Marcos Administration aims to cut the deficit to 3% by 2028. The issue would be how the government will reduce the deficit without wasting the gains of revenue that it receives through infrastructure spending. One way to cut the deficit would be to increase taxes on high-income earners, goods and services, and corporate taxes; however, it will negatively impact corporations and investments. The government may intervene through fiscal policies together with the monetary policies of BSP, and if not, inflation may continue to soar even higher since the government would need to produce more money during a deficit. The government would also borrow more money and increase its debt.
For more information, read this article here
[US] US JOB MARKET SHOWING SIGNS OF COOLING
The US added 263,000 jobs as the unemployment rate fell back to 3.5%. According to Julia Pollak, chief economist at ZipRecruiter, labor force participation was still an area of concern for the Fed simply because getting a larger share of people into the workforce could help bring down wage growth, which was one of the several factors Fed officials feared could keep inflation high. The September report showed that the labor force participation rate ticked down to 62.3% from 62.4% the month before. Moreover, the Fed was expected to meet and discuss monetary policy on November 1-2 when it is widely expected that it will raise its benchmark interest rate even higher as they vow to not stop until the threat of inflation has cooled off.
Insights:
A job market crash at a time when the US is currently facing high levels of inflation would greatly affect the lives of many citizens. The US Fed is doing its best to fight inflation by increasing interest rates even though it negatively affects investments, businesses, and corporations. Given the data for US labor force participation, the US government will need to find solutions to incentivize more citizens to participate in the workforce. It is important to note that the fall in labor force participation may have been caused by the gradual reopening of schools as the government tries to steer the country back to its pre-pandemic state. According to Julia Pollock, chief economist at ZipRecruiter, students that are considered to be able to join the workforce and were able to work in the past may have quit their jobs to focus on studying again.
Also, the labor market recovery was not even for all industries since the demand for certain goods and services was heavily affected by the COVID-19 pandemic. Businesses that thrived on e-commerce and relied heavily on online services to provide for customers would most likely reduce their job openings, even though the economy is starting to recover. In this case, the demand for labor for certain businesses will reduce. Businesses that are mainly loan and debt-driven such as car dealerships, construction, and real estate will also reduce demand for laborers due to the increasing inflation rate, which in turn affects the interest rate in the country.
For more information, read this article here
[OTHER MARKETS] FOREX RESERVES OF INDONESIA DECREASED TO USD130.8B END-SEPTEMBER
According to Bank Indonesia, which is the central bank of Indonesia, the fall in foreign exchange reserves of Indonesia by USD1.4B was due to foreign debt payments and effort to stabilize the country’s official currency, rupiah (IDR). The reserve level of Indonesia was worth 5.9 months of their imports, higher than the international standard of 3 months, and already enough to stabilize Indonesia’s financial system.
Insights:
Foreign exchange reserves can stabilize the devaluation of a country’s currency by being a backup fund. When Indonesia pegs its rupiah to the dollar for a fixed exchange rate, dollar value is increased compared to rupiah, making Indonesia’s exports cheaper than American goods. Indonesia's financial sector can use its foreign currency to buy local currency, stabilizing the value of the local currency (rupiah) and thus preventing inflation further. These factors can further attract foreign investors, further supporting Indonesia’s financial capabilities.
For more information, read this article here
[CRYPTO] $767M CRYPTO PYRAMID SCHEME
Brazilian police issued a warrant of arrest against Francisley Valdevino da Silva, also known as the "cryptocurrency sheik". He's accused of running a cryptocurrency pyramid scheme that raised $767 million. Since 2016, da Silva promised high returns through alleged crypto operations in which investors were deceived by a false claim of developed cryptocurrency-related financial products. In addition, da Silva's lawyer said that his client is now cooperating with the police and had already made himself available.
Insights:
Incidents like this are one of the reasons why some investors are uncertain to put their money in cryptocurrency which negatively affects the reputation of cryptocurrency in financial markets and makes it more difficult to be widely accepted by the general population. The growth of crypto made a platform of opportunities for fraud such as rug pulls, and pyramid schemes (also known as Ponzi schemes) since it is not backed by any government institution which means that in most instances, the government has no obligation to recover your lost money. However, instances such as these also serve as a case that legislators should consider cryptocurrencies as a mode of payment thus, they need to be regulated to protect people from malicious and fraudulent activities. As an investor or as someone who has plans to invest, it is important to look out for warning signs of crypto scams such as promises of guaranteed returns, excessive marketing, and free money. Before investing in crypto or any kind of investment, it is important that you ‘Do your own research’ (DYOR). The importance of reading the ‘White Paper’ of any crypto investment that will hold an Initial Coin Offering (ICO) is one of the many steps that should be highlighted.
For more information, read this article here
Market updates 5
October 23, 2022
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[PH] OIL PRICE ROLLBACK ON TUESDAY
Implementation of the tiny oil price rollback would be effective starting Tuesday, October 25. Diesel users would gain slight relief of P0.95 to P1.15 per liter based on the calculation of the oil companies. On the other hand, the new Marcos administration was still holding on to an institutionalized policy that could help the marginalized public transport and agricultural sectors, primarily if there were extreme price upticks amidst the fluctuation of prices.
Insights:
After weeks of continuous oil price hikes mainly due to OPEC’s decision to cut oil production, there would be a tiny oil price rollback which may help alleviate some of Filipinos’ budget concerns, especially with the upcoming break for the All Saint’s day and long weekend. However, this tiny price rollback will not reflect on the newly imposed increase in transportation minimum fare because the rollback will not be enough to counteract the price hike of oil during the past several months. US’ announcement to release an additional 15 million barrels of oil from the Strategic Petroleum Reserve (SPR) helped in disrupting the upward swing in oil prices.
If the oil price rollback continues within the next few weeks or possibly months, the inflation rate for the next month may go down since the CPI will fall down due to a decrease in the prices of other goods and services within the fixed basket by the fall in the price of oil. At the same time, if the oil price in the world market goes up, the domestic price for oil will also increase resulting in an oil price hike that can increase the price of usual commodities such as transportation, food, and other daily expenses which impacts CPI together with other factors, therefore, increasing the headline inflation rate even further. Some sectors of the economy will bear more damage such as the manufacturing and transportation industry due to their heavy reliance on oil.
It is also important to note that the people living in poverty will experience the impact to a greater degree since their income is spent mostly on commodities that are heavily affected by the increase in oil prices. According to the FIES 2018 of the Philippine Statistics Authority (PSA), Families that earn less than PHP 40,000 annually spend 58.3% of their income on food, followed by house rent/rental value at 14.7% and utility services such as water, electricity, gas, and other fuels at 9.6%. There is a considerable huge difference when compared to families who earn more than PHP 500,000 annually in which they spend only 31.4% of their income on food.
For more information, read this article here
[US] GLOBAL RECESSION COULD LAST UNTIL 2024’S SPRING
The global economic decline is expected to last for a year and a half according to Tesla (NASDAQ: TSLA) CEO and founder Musk in his tweet. The Dogecoin (DOGE) co-creator Billy Markus, also known as Shibetoshi Nakamoto, stated that with the Covid cases being low, the focus must shift to more important matters such as the looming global recession and possibly, an all-out nuclear war. In 2021, global growth increased by 6% but it is expected to decrease to 3.2% in 2022 and 2.7% in 2023, according to the International Monetary Fund (IMF). It would be the weakest growth since 2001, excluding the global financial crisis of 07’-08 and the beginning of the pandemic. On the other hand, the Federal Reserve expects the US GDP to grow by 0.2% in 2022 and 1.2% in 2023. This is after corporate titans such as JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon and Amazon (NASDAQ: AMZN) founder Jeff Bezos expressed their concern about incoming economic turmoil.
Insights:
Due to rapid decrease in growth and soaring inflation around the globe which is coupled with tightening conditions by several central banks and governments, the argument about the possibility of having a global recession is starting to become more prominent. Falling stock prices and decreasing housing starts could impact investors’ portfolios, increase unemployment, and decrease economic output as the markets can be volatile with wild swings. Investors' flight to safety response can make them entirely get their money out of the stock market. Emerging markets and developing economies may be more at risk during these periods of economic turmoil due to higher interest rates globally, resulting in lower investment for developing economies. However, IMF states that tightening of monetary and fiscal policies must stay on course to ensure price and currency stability. According to the World Bank Group President David Malpass, governments must also try to boost production instead of just relying on tightening policies to reduce consumption to fight against inflation. Efforts to improve supply and labor constraints must also be done.
It is important to note the possible impacts of global recession such as what happened during 07’-08, which can leave long-lasting consequences that can be referred to as ‘scarring’. A report published in 2009 by the Economic Policy Institute discussed the long-run consequences of economic recession such as lower educational achievement, increased poverty and lesser opportunity, less private investment, and a decrease in business formation and entrepreneurial activity. In summary, the paper discussed that an economic recession is not a one time-event since it can leave impacts that will be passed down to future generations.
Although the Philippines was not technically in recession during the 2008 Global Financial Crisis (GFC), it still experienced the ripple effect of the global recession, especially on its supply side. According to a study published by the ADB in 2010, the growth rate for Industry, manufacturing, and agriculture in 2009 were lower than their expected long-term growth potential. The fast growth of the PH economy from 7.1% in 2007 decelerated to a mere 0.9% in 2009. The poverty incidence was on a decline from 06’-08 but started to rise up again in 2009. The estimated mean income declined by 2.1% in 2009.
For more information, read this article here
[OTHER MARKETS] FRANCE, ALONG WITH OTHER EUROPEAN COUNTRIES, PULLS OUT OF TREATY THAT PROTECTS ENERGY INVESTMENTS
France’s President Emmanuel Macron said that his country has decided to pull out of the Energy Charter Treaty (ECT). He said that pulling out from the treaty is coherent with the Paris Agreement. This is after the Polish parliament voted to leave the ECT alongside Spain and Netherlands. The ECT is said to have more than 50 signatories and was implemented post-cold-war to secure supplies of energy and protect companies investing in the energy industry. In recent years, the treaty has been used also by fossil fuel and renewable energy companies to sue the government for regulatory reforms that affect returns on some investments.
Insights:
The withdrawal of European countries from the Energy Charter Treaty reflects the countries’ priorities on climate-friendly policies. As argued by Amandine Van den Berghe, trade and environmental lawyer at ClientEarth, there is no evidence that the ECT has attracted positive investment cash flows. From the perspective of investors, they may sue states that are part of the pact, if their assets are expected to be under threat from legislative reforms. Thus, investors are watching out for government policy changes when it comes to pulling their money out or going into investments. Countries that have withdrawn from the ECT may become less attractive to investors that have an interest in fossil fuels. However, Sabine Weyand, head of the European Commission’s trade directorate, said that the member states will be better off if they stayed under the revised treaty rather than completely withdrawing themselves since ECT, according to her, is the only treaty that provides protection for renewable energy investments. Since countries that have withdrawn from the ECT will want to focus more on utilizing renewable energy, they would need to implement policies that can attract and incentivize investors that are interested in ‘cleaner’ sources of energy.
For more information, read this article here
[CRYPTO] NEW MEME TOKEN BORN FROM ETHEREUM CO-CREATOR’S JOKE TWEET
After the Ethereum co-creator Vitalik Buterin jokingly tweeted about making a crypto project called ‘THE Protocol’, a new token was made and named THE - based on an English language article. The THE token is a meme token that is different from its predecessors since it is not based on animal, food, or entertainment media. It is now one of the most-traded meme tokens in Uniswap, which is a decentralized exchange. The token has now seen USD 10 million in on-chain trading volume and has over 5000 holders as of noon on Oct. 21, 2022. Its value has skyrocketed over 1000% in the past few days.
Insights:
Due to the nature of meme coins, investors can create opportunities with them by trading in the very short run (buy low, sell high). THE may continue to increase in value if certain influential people try to market it similar to what Elon Musk did on DOGE due to the speculative and ‘meme-able’ nature of the coin. The meme coin BabyDoge increased in price after several exchanges of tweets between Musk and the Twitter handler of BabyDoge.
THE, DOGE, and BabyDoge are classified as ‘meme coins’. However, technically they are not coins but rather tokens since they are created on existing blockchains which is commonly Ethereum. Coins are native to their blockchains like Bitcoin (BTC), Ethereum (ETH), and Cardano (ADA). Their prices are volatile as usual with other cryptocurrencies however, they are not similar to other cryptos that have ‘utility’ tied into them such as ETH and Tether (USDT), which is a popular stablecoin.
It is important to note that even though cryptocurrencies are volatile assets, the level of volatility of meme coins is much higher and is riskier compared to popular coins such as BTC and ETH since they offer almost no real value or ‘utility’ and is just often associated to memes or entertainment (therefore relying on being viral and influencers) and because of the low-barrier of entry in making a meme coin making it attractive to scammers such as the infamous Squid Game (SQUID) coin. Before investing in a meme coin and in general, always practice your due diligence by DYOR and do not be a victim of ‘Fear of missing out’ (FOMO) as most meme coins are sh*t coins.
For more information, read this article here
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NEWSLETTER MONTHLY WRAP-UP
october 2022
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[PH] PRICES OF VEGETABLES INCREASED IN PAENG AFTERMATH
Due to the severe tropical storm Paeng (international name: Nalgae) that devastated a large population of the Philippines last October, retail prices in Metro Manila of vegetables started climbing up to PHP40 from PHP10 per kilogram, as stated by the Department of Agriculture. This price increase can be attributed to the decline in agricultural products shipped to the Metro. About PHP2.74 billion in farm products were lost due to the recent typhoon. The lives of 74,944 farmers and fishers were deeply affected by the weather disturbance with 111,831 metric tons of production vanished - rice and high-value crops composing most of the commodities.
Insights:
With the weather disturbance of Paeng, it does not come as a surprise that prices of crops rose as they are largely dependent on weather conditions. Similar to oil and petroleum products, an increase in the price of food will severely impact families that earn less since a large part of their income is devoted to the consumption of food. If the prices of vegetables in certain regions do not quickly recover to their usual price, the CPI may increase, therefore, having upward pressure on the inflation rate. According to a study published by the European Central Bank (ECB) entitled The impact of disasters on inflation, disasters that are on the same degree as Paeng (Nalgae) have little impact on inflation in developed countries (i.e. Philippines) whereas, emerging and developing countries experience a larger and more severe impact of disasters and can persist for several years.
According to the assessment of the Department of Agriculture (DA) on the aftermath of Paeng, the disaster has hit the production of rice the most, accounting for a total value loss of PHP 1.2B. Aside from rice, other agricultural goods were affected such as corn, livestock and poultry, and fisheries. For Philippine agriculture to go back to its pre-Paeng state, the government will need to help the agricultural regions that are mainly affected by Paeng. Government intervention in the form of aid and/or subsidy may be given to farmers and fishermen to help alleviate the negative impact of the disaster on their loss of production and livelihood.
For more information, read this article here
[US] THE FUTURE OF SHOPPING FOR US
According to Walmart International (NYSE: WMT) President and CEO Judith McKenna, the shopping experience of consumers in the United States would become more transformed by technology. McKenna pointed out to look at India and China to see what's coming. Take as an example the PhonePe of India that now has a counterpart in the U.S., which is Walmart Pay - both of these are digital payment apps. She stated that all signs pointed to an even greater consumer acceptance of such services (e.g. grocery deliveries) in the future.
Insights:
With the improvement of technology, more options are available in the business world, and particularly in this case, the digital payment app system is being highlighted as one of the futures of consumerism. During the pandemic, e-commerce has seen a massive surge in sales due to its convenience, as opposed to going to physical stores with the risk of getting COVID-19. According to a press release by the World Bank, Two-thirds of adults worldwide now make or receive a digital payment, with the share in developing economies growing from 35% in 2014 to 57% in 2021. In developing economies, 71% have an account at a bank, other financial institution, or with a mobile money provider, up from 63% in 2017 and 42% in 2011. Even though the retail industry is starting to recover to its pre-pandemic state, the advantage of buying and consuming goods and services with the help of digital applications will remain. It will be essential for consumers to have access to a vast selection of digital tools and services for a better and easier way of living. Businesses can expand their reach easily and more cost-effective by participating in e-commerce rather than just building a lot of physical stores.
For more information, read this article here
[OTHER MARKETS] FRANCE, ALONG WITH OTHER EUROPEAN COUNTRIES, PULLS OUT OF TREATY THAT PROTECTS ENERGY INVESTMENTS
Emmanuel Macron, President of France, stated that France has decided to withdraw from the Energy Charter Treaty (ECT), in compliance with the Paris Agreement. This withdrawal occurred after the Polish parliament voted to leave ECT alongside Spain and Netherlands. The ECT has more than 50 signatories and was implemented after the cold war to secure energy supplies and protect energy-investing companies. Additionally, ECT has also been used by renewable and fossil fuel companies to sue governments for regulatory reforms that affect returns on investments.
Insights:
The ECT’s purpose is to provide a legal framework that helps promote investment in the energy sector with provisions on investment protection and technology transfer. It is favorable for companies and investors that are in the energy sector. With the withdrawal of some European countries from the ECT, the countries’ priorities on climate-friendly policies are being reflected as they considering to look for cleaner energy sources and implementing policies that will regulate the use of fossil fuels. As stated by Amandine Van den Berghe, an environmental lawyer at ClientEarth, there is no evidence that the ECT has attracted positive investment cash flows.
From the investors’ perspective, they may sue states that are part of the pact if their assets are foreseen to be under threat from the government's legislative reforms. Investors are watching out for government policy changes when it comes to pulling their money out or going into investments. As a result of withdrawal, countries that have withdrawn from the ECT may become less attractive to investors that have an interest in fossil fuels since they can now implement policies that are less desirable for fossil fuel companies and investors and more favorable to firms that are in the renewable energy source business. However, Sabine Weyand, head of the European Commission’s trade directorate, said ECT is the only treaty that protects investments for renewable energy and that revising the treaty would be better for withdrawing countries rather than them leaving the pact itself. Withdrawing countries would now need to implement policies that can attract and incentivize investors that are interested in ‘cleaner’ sources of energy.
For more information, read this article here
[CRYPTO] SUAVE AS THE NEW VERSION OF KEY ETHEREUM SOFTWARE
Flashbots announced their new version of its key Ethereum software at DEVCON in Bogota, Columbia. The project is being referred to by the company as Single Unifying Auctions for Value Expression or SUAVE, which has been going on for a year. Flashbots had an important role in the Ethereum blockchain ecosystem for it was working on mitigating the negative externalities of Maximal Extractable Value (MEV). The software would be a fully decentralized block builder. It would also be open source and EVM-compatible which was supported across multiple chains.
Insights:
Flashbots was continuously working as a research and development team on ways to curb the potential harms of MEV. By utilizing MEV, miners and validators in proof-of-work and proof-of-stake cryptocurrencies can profit even if the transaction is still pending through reordering of transactions via several methods (i.e. Front-running, Sandwich attack, DEX arbitrage). However, extraction of MEV can cause network inefficiency due to congestion and may also cause ETH GAS prices to increase. Flashbots aims to reduce the negative externalities that are associated with the extraction of MEV to smart-contract blockchains. It proposes as well a permissionless, transparent, and fair ecosystem for MEV extraction to preserve the ideals of Ethereum. In addition, Flashbots recently made an impact, following the U.S. Treasury Department’s decision to sanction Tornado Cash transactions by making its MEV-boost code open source which could help others develop their own non-censoring relays.
For more information, read this article here
Market
updates 6
November 6, 2022
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[PH] POTENTIAL SALE OF CONTI’S AND WENDY’S EYED BY UDENNA CORP.
Philippine Tycoon Dennis Uy’s Udenna Corporation eyes the sale of its food retail businesses Conti’s Bakeshop and Restaurant and Wendy’s fast food chain. Udenna’s stake in the two companies combined is estimated to be worth as much as USD 200 million. Udenna owns the two companies through its food subsidiary Eight-8-Ate Holdings, with a 70% stake in Conti’s and the master franchise in Wendy’s. Conti's has 70 stores in the Philippines, while Wendy's has 52 stores, mainly in the capital.
Insights:
Dennis Uy’s Udenna continues to dispose of its assets, less than five years after his highly-leveraged acquisition spree that started in 2016 following the election of former President Rodrigo Duterte. Going into the COVID-19 pandemic with high levels of debt damaged Udenna’s and its subsidiaries’ balance sheets. Notable listed companies owned by Dennis Uy are Phoenix Petroleum (PSE: PNX), Chelsea Logistics (PSE: C), Philippine Resorts Group (PSE: PHR), and Dito CME Holdings Corporation (PSE: DITO), having a cumulative debt of PHP 287.6 billion as of the end of June 2022. Udenna’s debt burden escalated to a point where one of its subsidiaries, Global Gateway Development Corp., almost defaulted on one of its obligations. Failure to settle financial obligations would result in defaulting, reducing the likelihood of future credit and higher interest rates on new debts. In the case of a credit event such as a default, shareholders are hurt the most as banks and lenders have the first claim on the defaulting company’s assets. Additionally, a company in financial distress, such as Udenna Corp. faces more barriers to additional funding, consequently slowing the post-pandemic recovery of subsidiaries in different sectors.
All these Udenna’s subsidiaries were severely hit by the crisis, including Wendy’s and Conti’s, which are “consumer discretionary”, that is, companies whose products are considered non-essential. As a way to stop the company’s cash from bleeding, the company’s management resulted in divestment of some of the least productive assets. Cash from the sale of an asset allows the company to pay off some of its debt, and reduce its annual interest expenses. Prior to the news about the two restaurants, Uy had actually sold a number of assets already, namely the logistics company 2GO Group (PSE: 2GO), a stake in Chelsea Logistics, and half of its stake in the Malampaya gas field. Selling assets may seem as the probable solution to resolving the current debt problems, but the high cost of expenditures still remains a threat to the going concern status of its companies. Since news of the sale of the two companies came out, the market share of its largest listed company, Dito CME, has declined by 5.08% as of this week’s close.
For more information, read this article here.
[US] CEO SUGGESTS THAT REGULATION IS NEEDED TO MAINTAIN SUSTAINABILITY FOR FIRMS
According to the CEO of SDG Monitor, greater regulation and accountability are needed for companies to meet their sustainability goals. As such, it is advised that long-term goals be broken down into short-term goals to be more concrete and realistic. A large number of firms made zero commitments related to their sustainability-related goals. Achieving the goals came with logistical and financial hurdles for firms. With the public sharing of big firms’ goals on emissions and progression, more detailed criteria to measure the efforts of doing so still remain an important challenge. Greenwashing might be a common notion as companies make their products environmentally friendly without actually reducing negative significant environmental effects.
Insights:
As firms have been pledging to reduce their negative impacts in the field of environmental context, a clear and more defined set of goals remain nowhere to be seen. This ambiguity might cause the planet to suffer more and make the consumers double-think or become hesitant in purchasing products. To attract more customers and investors, it is highly encouraged that firms start posing their short-term goals for their environmental contribution. To attract more customers and investors, companies and executives may consider having short and long-term goals for their environmental and societal contribution as a plausible business strategy.
According to Principles for Responsible Investment (PRI), which is a UN-supported network of investors, businesses’ compliance with Sustainable Development Goals (SDGs) must be seen as an important aspect of an investor’s strategies and decisions since it is the globally agreed framework for sustainability. SDG may also drive economic growth and consequentially, failure to achieve it can negatively affect the global landscape, therefore, affecting global economic growth downward. For investors, they can look at the SDGs as a capital allocation guide and they can take advantage of these goals to look for opportunities when they are trying to diversify their portfolios. Numerous business studies have also shown that Environmental, Social, and Governance (ESG) as a business metric links to higher value creation of businesses in the foreseeable future, meaning that investors are also looking forward to doing impact investing and sustainable investing.
For more information, read this article here
[OTHER MARKETS] SAUDI ARABIA CUTS PRICE FOR OIL EXPORTS IN ASIA AMID ECONOMIC SLOWDOWN
Due to global economic slowdown, Saudi Arabia reduced most of its oil prices in Asia while keeping the price of oil the same in the USA and raising the price of oil in Europe. One of the state-controlled oil companies, Aramco (TADAWUL: 2222), reduced the price of oil by 40 cents, making it USD 5.45 per barrel of oil.
Amid global fears of recession due to the Russian war with Ukraine which resulted in Russia getting hit by a multitude of sanctions, hitting the energy sector particularly hard, combined with other concerns around the globe, Aramco still lowered the price of oil into Asia. The physical market of Asia weakened last month as China bought oil much later in the cycle than expected. Still, even with the reduction in price, the price of oil is higher as compared to previous years due to the tightness of sanctions and the OPEC+ decision to slash production of oil by 100,000 barrels a day.
Insights:
Changes in oil prices are usually due to geopolitical events such as war, pandemics, elections, and other major events. In the context of Saudi Arabia, since Asia is a priority market, with Saudi’s largest buyers being from China, India, South Korea, and Japan, prices were lowered accordingly to adjust for this. However, it must be noted that the lowered price is still much higher when compared to oil prices in previous years, with Arab Light at USD 5.45 per barrel above the Dubai/Oman benchmark. Although Saudi’s relations with the US had soured due to the OPEC+ recent approval to cut oil production, oil prices for the U.S. have remained unchanged. With the embargo set by the European Union on Russian crude set to take place on December 5, Saudi’s oil price rise for Europe will inevitably make European countries struggle with oil and gas imports. Overall, according to OilPrice.com, the decision of changing oil prices in Saudi Arabia was largely based on fears of a supply shortage and the demand concern caused by predictions of a global economic slowdown.
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For more information, read this article here
[CRYPTO] PROPOSED UK RULES MIGHT TAKE A TOLL IN ADVERTISING CRYPTO
Last Thursday, lawmakers on the committee for the Financial Services and Markets Bill (FSM) approved an amendment to regulate crypto ads and promotions. The amendment is made for crypto companies to comply with the UK's financial promotional rules. The rule explicitly requires any type of advertisement or invitation about investment to be approved first by an authorized entity. Crypto services are currently not regulated in the UK; therefore, crypto firms cannot be granted permits to be authorized entities, which also means that they cannot approve their own advertisements.
Insights:
It could then be difficult for crypto companies to advertise to clients within the borders of the UK if this new proposed bill is signed into law. In line with this, crypto advocates are worried that crypto firms would need to undergo more complex procedures when trying to advertise to local customers. Due to tighter regulation, running a crypto advertisement may be more costly for the firms since they would require the service of an authorized entity for the approval of their advertisement. However, the current Prime Minister Rishi Sunak, who is also the former finance minister, has expressed his support for crypto and digital assets and that he wants to make the UK a country hub for digital assets.
If the government, which is led currently by the Conservative party, wants to make UK competitive in the crypto space and digital assets, then they may need to recognize first crypto service as a regulated service so that crypto firms can approve their own adverts, similar to how other financial firms (that are not into crypto solely) can be become authorized entities, allowing them to authorize their own ads. If crypto firms cannot approve their own adverts, crypto investors and firms will be less incentivized to enter the UK crypto market, which is in contrast to what PM Rishi Sunak wants to do.
For more information, read this article here
Market
updates 7
November 13, 2022
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[PH] PHILIPPINES REACHES 7.6% GDP GROWTH IN Q3
With the 7.6% GDP growth for Q3, which is higher than the growth rate for Q2 (7.5%), Socioeconomic Planning Secretary Arsenio Balisacan stated that the Philippines is now more likely to reach its full-year target growth. This GDP growth puts the Philippines in second among the Southeast Asian region, with Vietnam at first with 13.7% GDP growth. For the Philippines to reach its full-year GDP target growth of between 6.5% and 7.5%, the country must have GDP growth between 3.3% and 6.9% in Q4. Behind the high GDP growth, Balisacan stated that there is a burden in the Philippine economy such as rising inflation due to the external risks that were caused by the recent typhoons.
Insights:
Several factors could be a reason for the higher-than-estimated GDP growth this Q3 in terms of both the demand and supply sides. Despite the inflation, consumption and investment still drove the economy up, as household needs and priorities must be met as necessities to survive and investment in oil and agricultural products must rise along with the increase in prices. On the production side, GDP growth was driven by services for the most part, as there is already an easing of mobility and resumption of face-to-face classes, causing physical services to be conducted more.
The growth that the Philippines are currently experiencing right now may go into decline as the International Monetary Fund (IMF) forecasts a looming global recession in the incoming year due to the effects of inflation and the ongoing conflict between Ukraine-Russia. According to them, one-third of the global economy will contract by next year. It is possible that the Philippines may be affected by the recession. However, even if the GDP growth for next year declines, similar to what the Philippines experienced during the 2008 Financial Crisis, the PH economy might still perform well compared to its neighboring countries.
For more information, read this article here
[PH] HIGHLY-WATCHED STOCKS IN DANGER OF BEING REMOVED IN THE MSCI SMALL CAP INDEX
Allhome (PSE: HOME) and Vista Land & Lifescapes (PSE: VLL) owned by Manny Villar, Cebu Pacific Air (PSE: CEB) by the Gokongwei’s, Filinvest Real Estate Investment Trust Funds (REIT) of the Gotianuns, and Cosco Capital (PSE: COSCO) of Lucio Co are at risk of a dropout from the Morgan Stanley Capital International (MSCI) small-cap index according to a report by Abacus Securities. The prominent stock brokerage cited that the substantial decrease in both free and full market capitalization was the reason for the anticipated deletions of the said stocks after the rebalancing. It was also predicted that GT Capital Holdings (PSE: GTCAP) and Converge ICT (PSE: CNVRG) would be demoted to small-cap from the original list of MSCI large-cap index. Metro Pacific Investment (PSE: MPI) is expected to be removed completely from the standard index as Abacus stated that the company was “too small for the standard, but too big for the small-cap index.”
Insights:
MSCI indexes, like other indices such as Dow Jones Industrial Average (INDEXDJX: .DJI) and Nasdaq-100 (INDEXNASDAQ: NDX), tracks the performance of the stocks included in the indexes. MSCI classifies its indices according to the type of market, and according to market capitalization. Market type refers to whether or not the index tracks an emerging economy or a developed one, while the market cap categories are micro-cap, small-cap, mid-cap, and large-cap. These indices are then tracked and duplicated by exchange-traded funds (ETFs) and mutual funds from all over the world, by copying the indices’ proportional stock allocations. Funds that attempt to replicate a certain index performance are called passive funds or passively managed funds. Another purpose of indexes is to act as a benchmark for actively managed funds, which are pooled funds that aim to outperform a certain index.
Deletion of a stock, reduction of its allocation from a prominent index, or even the speculation of either negatively affects the demand and the sentiment on the stock, as fund managers from several funds who copy the index rebalance their portfolios. This downward pressure on the stock prices is usually observed until the deadline or the last day of the rebalancing. On the other hand, the addition of a stock or the increase of its allocation in a certain index has the opposite effect. The intensity of the price movements attributed to rebalancing also depends on the amount of change in the allocation in the index. Following the deletion or reduction of a stock’s allocation, liquidity usually decreases. It is an advantage to investors and traders to have this information in advance, so they can speculate or anticipate price movements.
For more information, read this article here
[US] MORTGAGE RATES PLUMMET TO UNDER 7% DUE TO EASING INFLATION
After the government stated that inflation had eased in October, mortgage rates fell following the decline in bond yields. According to Mortgage News Daily, the 30-year fixed dropped 60 basis points from 7.22% to 6.62%, similar to the Covid-19 pandemic record. The new rate is still more than doubled what it was at the start of 2022. Stocks of homebuilders (e.g. Lennar (NYSE: LEN), D R Horton (NYSE: DHI), PulteGroup (NYSE: PHM)) that have been deeply affected by the increase in rates over the past six months jumped along with wider market gains. The Consumer Price Index (CPI) rose at a slower pace, however, to confirm that rates are done rising, another report regarding the same Consumer Price Index will be needed for more accurate proof.
Insights:
With the higher economic uncertainty in the U.S. financial markets, inflation had surprisingly eased, causing an effect on interest rates as well. Easing inflation leads to lower interest rates, lower borrowing interest (e.g. monthly home payments), and lower prices, causing lower mortgage rates. The Fed’s decision to address rising inflation helps lower mortgage rates – making it safer to buy homes now as compared to the previous period with high rates. Additionally, investors would demand lower rates to take the opportunity of the slowdown in the inflation rate. Thus, lower mortgage rates would lead to more homeowners and could be a cause for the heating up of housing prices soon.
For more information, read this article here
[OTHER MARKETS] AMIDST RISKS OF GLOBAL RECESSION IN 2023, MALAYSIA POSTS FASTEST ECONOMIC GROWTH IN OVER A YEAR
In spite of the risks and predictions of a global recession occurring in the year 2023, Malaysia’s economy has grown at its fastest pace in this third quarter, even outpacing the growth rate of fellow Southeast Asian countries. According to an article published by Reuters, Malaysia’s economy or GDP unexpectedly grew by more than 14.2% in the third quarter, which is its highest growth in over a year. After Malaysia’s government began easing COVID restrictions back in April, Malaysia’s economy began recovering rapidly due to increased participation and opportunities in the labor market, solid exports, and policy support. Malaysia’s central bank further predicts that the country’s GDP will surpass the government’s estimate of 6.5%-7% in 2022, but sees growth slowing to 4%-5% in 2023.
Growth in the services, manufacturing, and construction sectors has been evident, as private consumption and exports have risen by 15.1% and 18.7% respectively in the 3rd quarter. However, as the rest of the world may enter a recession in 2023, exports may begin seeing a decrease in strength as commodity prices may decline. Furthermore, private consumption may also decrease due to factors such as inflation, less ideal market conditions, tighter monetary policies, and fading boost from the hype caused by reviving pre-pandemic operations. Although the Malaysian government has been working to mitigate inflation through record government subsidies, price control measures, and tighter monetary policy - the ringgit has fallen 10.8% behind the USD this year.
Insights:
With Malaysia’s economic boom for the year 2022, it is expected that the country will experience more open positions in the employment market, businesses expanding, and a steadier supply of exports to the international markets will further drive up economic development.
Also, with the ringgit falling 10.8% behind the USD, we could expect foreign investors to start investigating whether or not Malaysia is a good country to invest in. If these investors decide to invest in Malaysia, we will see an increase in foreign investment in the country which in turn may lead to more economic growth. This may also result in more economic development for the Southeast Asian nation. Malaysia is also a net exporter and with the depreciation of the ringgit against the USD, they may find it as an opportunity to further boost their economy. With the above basis, Malaysia is, indeed, in a good position to withstand the upcoming global economic slowdown/recession according to Central Bank of Malaysia governor Nor Shamsiah.
For more information, read this article here
[OTHER MARKETS] HONG KONG STOCKS INCREASED TO MORE THAN 7% AFTER CHINA REDUCED QUARANTINE PERIOD
Hong Kong stocks jumped more than 7% after it was reported that China's COVID measures for travel would be eased. The Hang Seng index (INDEXHANGSENG: HSI) jumped 7.74%, while the Hang Seng Tech index (XX: HSXTCHINDXXX) surged 10.05%. In addition, the Shenzhen Component (SHE: 39900) added 2.120%, whereas the Shanghai Composite Index (SHA: 000001) gained 1.69%. Stocks had their biggest rally in two years after October’s reading of the consumer price index (CPI), which marked the lowest annual increase since January.
Insights:
China imposed strict regulations during the COVID-19 pandemic which resulted in supply shocks around the world as most manufacturing still takes place in it. China’s Zero-Covid policy is the government's way to ensure that its citizens are safe. However, the policy is being criticized due to its extremely strict lockdowns which, when in effect, completely halts the operation of the establishment that is reported to have a case of Covid-19. Due to these policies, China’s reputation as the world’s manufacturing factory is in jeopardy due to investors and firms starting to take interest in other rising manufacturing countries such as India and Vietnam.
News that the government would start to ease its Covid-19 policies, particularly its quarantine period, has proven to be positive news for investors, as we have seen in the increase in performance of several indices in China and Hong Kong. However, it is important to note that the easing of the quarantine period is aimed at tourists and foreign travelers. We can see it as China wanting to revive its tourism to boost economic growth. This does not necessarily affect the lockdown policies of the government but it can be seen by investors and firms as a beginning to the government’s more relaxed approach in dealing with Covid-19.
For more information, read this article here
[CRYPTO ] CALIFORNIA DFPI TO INVESTIGATE FTX CRYPTO EXCHANGE COLLAPSE
The Department of Financial Protection and Innovation (DFPI) in the state of California announced that it would investigate the “apparent failure” of the cryptocurrency exchange FTX. Sam Bankman-Fried, the founder of FTX, tweeted saying that FTX US was a different entity than the international one facing the turmoil. Yet, DFPI would take this oversight responsibility seriously, although FTX US resigned from the Crypto Council for Innovation.
Insights:
FTX is one of the fastest-growing cryptocurrency exchanges and is owned by Sam Bankman-Fried. However, on November 11, FTX filed for bankruptcy and Bankman-Fried stepped down as the CEO of the exchange. The reason for the filing of bankruptcy was due to a liquidity crunch as they need about USD 8 billion to back up their customers' assets. Reports are stating that FTX lend funds to Alamada Research, a company also owned by Bankman-Fried to bet on other cryptocurrencies and help save struggling crypto companies. However, the funds are stated to come from FTX customers and in return, Alameda gave FTX FTT, which is FTX’s token.
After the issue was revealed, Binance CEO Changpeng Zhao, commonly known as ‘CZ’ announced that it will sell its FTT holdings, prompting the price of FTT to plummet. Earlier, it was reported that Binance is planning to bail out FTX on its troubles via a buyout. However, Binance backed out of the FTX deal, prompting investors to doubt FTX’s profitability and status.
It is important to understand that the main cause of FTX's collapse is its liquidity problem, meaning that they have assets but they do not have quick access to liquidate those assets. However, their liquidity problem can become a solvency problem due to the plummet of prices of their assets since investors are quickly bailing out by dumping. If FTX can not find an entity that will bail them out, it is highly possible that a lot of FTX customers’ funds will be lost.
The recent news has prompted calls for stricter regulations on cryptocurrencies such as being insured by government institutions to help protect customers’ funds and assets. This might speed up talks about the finalization of the Digital Commodities Consumer Protection Act 2022 (DCCPA).
For more information, read this article here
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[PH] CASH REMITTANCES FROM OVERSEAS FILIPINO WORKERS ROSE BY 3.8% IN SEPTEMBER
Data released by the Bangko Sentral ng Pilipinas (BSP) reveals that personal remittances sent by OFWs rose by 3.8 percent to USD 2.84 billion in September 2022. The expansion in remittances was due to the growth in receipts from land-based and sea-based workers in accordance with the statement of BSP. Land-based OFWs remitted a total of USD 2.25 billion in September, a vast improvement compared to the performance in the same month last year with USD 2.16 billion. Remittances from sea-based workers grew to 2.4 percent year-on-year in September to USD 594.79 million. The bulk of the inflows during the January to September period originates from the United States, Saudi Arabia, Singapore, and Qatar.
Insights:
The continued growth in remittances sent by OFWs can be associated with combating the rising prices of food, utilities, and transportation fueled by soaring inflation. With different major businesses relying on dollar-denominated transactions, they are forced to increase prices to match higher operating costs and materials. The high nominal exchange of dollars to pesos (depreciation of pesos against the dollar) can also be accounted for the rise in remittance according to Ruben Carlo Asuncion, Chief Economist of Unionbank. The influx in cash inflow reinforces local spending, further revitalizing the Philippine economy and its activities. Although, the exorbitant prices of goods and services offset the strengthening of the dollar, reducing the purchasing power of OFW families and other recipients of remittances.
It is important to note that remittances from OFW accounted for 8.9% of the country’s GDP in 2021 and is a major contributor to the country’s foreign exchange earnings. It is also one of the primary economic health indicators of the Philippines wherein the balance of payment is tracked as it indicates the net inflow of the country. Major events affecting foreign remittance may poorly reflect the financial state of the Philippines, hindering developments and abetting currency fluctuations.
For more information, read this article here
[US] U.S. BANKS TO POUNCE ON FINTECH DEALS
Financial technology (Fintech) companies which were long seen as a threat to traditional investment and financial companies such as JPMorgan Chase & Co (NYSE: JPM) were becoming acquisition targets of U.S. banks as rising interest rates and falling valuations crimped their expansion. Analysts at Jefferies Group said that the valuations of listed financial technology firms had plunged 70% in 2022. On the other hand, the valuations of banks in the S&P 500 (INDEXSP: .INX) were down by 33% according to data from Refinitiv IBES. This decline created an opportunity for the banks to buy companies and beef up their technology for digital banking, online payments, and other financial services, and diversify beyond lending.
Insights:
It is worth noting that such declines presented may open up opportunities for traditional banks to be on trend and upgrade. Most of our transactions nowadays are done through a digital interface or with the use of technology. It may be beneficial as well as efficient not just for the bank, but also for its customers if they resort to financial services supported by newer technology that is available in the market especially if this can provide ease of use.
Even though the development of cryptocurrencies is part of Fintech and most often reported as primary headlines, most of its value comes from the usage and adaptation of technology (e.g. machine learning, artificial intelligence, peer-to-peer lending, e-commerce payment, online banking) in traditional financial systems and services such as banking. If Fintech is adopted more by traditional banks, it may be possible for transactions to speed up due to the high efficiency that Fintech brings, in theory. Most of the problems that come with this innovation are about trust and confidence from investors and customers. With the fallout of FTX, it may be more difficult for Fintech to gain trust and confidence especially if customers are still resistant to changes and still favor the reliability of the good old traditional financial systems. But as we can see, Fintech and traditional banking do not need to compete with each other as Fintech’s purpose is to complement the shortcomings of traditional systems.
For more information, read this article here
[OTHER MARKETS] EUROPEAN MARKETS DOWN AS INVESTORS WATCH OUT GEOPOLITICS AND UK BUDGET
Three of the four indexes in European markets closed down for the second straight day as investors monitor the international relations in Ukraine and with the UK announcing its budget. The Stoxx 600 index (INDEXSTOXX: SXXP) closed down 0.5, France’s CAC 40 (INDEXEURO: PX1) shed 0.6%, its biggest fall among the major stock markets, and FTSE 100 (INDEXFTSE: UKX) lost 0.1%. Meanwhile, Germany’s DAX (INDEXDB: DAX) nudged up 0.2%. For other stocks, technology stocks raised 0.3%, mining stocks were in a 1.8% decline while the other sectors were either flat or in negative territory. This is in congruence with Russia continuing to launch a barrage of missiles toward Ukraine and the defending country’s air-defense missile accidentally hitting Polish territory as well as the UK’s finance minister releasing his latest fiscal statement, containing billions of pounds worth of spending cuts and tax hikes. Other markets also fell including the U.S. stock futures and the HangSeng Index (INDEXHANGSENG: HSI) which fell 2.5% as Chinese technology stocks took sharp losses.
Insights:
As per predictions of a global recession in 2023, patterns of drops or falls can already be seen in various European markets. The Stoxx 600 index reportedly closed down 0.5% the following day after fluctuations between gains and losses in early trades. France’s CAC 40 fell 0.6%, Germany’s DAX nudged up 0.2% and the FTSE 100 lost 0.1%. In other industries, most sectors were either flat or in negative territory, while technology stocks gained 0.3% and Mining stocks declined by 1.8%.
These seemingly volatile patterns of fluctuations may be attributed to the aftermath and backlash of Russia’s ongoing war on Ukraine. Recently, two Polish civilians were killed after a missile from the ongoing conflict landed in Polish territory. Although it’s believed that the accident occurred due to Ukrainian air defenses attempting to intercept Russian missiles, unprecedented incidents such as this may further strain the markets and relations between European nations. Furthermore, the ongoing war may continue to exacerbate problems such as global inflation, costs of living, food and energy security, and others.
For more information, read this article here
[CRYPTO] BANK OF AMERICA DOWNGRADES CRYPTO EXCHANGE COINBASE
Bank of America (BofA) announced on Friday, November 18 that they downgraded the shares of crypto exchange, Coinbase (COIN) due to the aftermath implosion of one of the fastest growing crypto exchanges in the market, FTX, owned by Sam Bankman-Fried. Analysts of BofA downgraded the stock from ‘buy’ to ‘neutral’. BofA also slashed the price target of COIN to USD 50.00 from USD 77.00. The stock is down by almost 30% since the beginning of November. However, analysts from BofA are confident that Coinbase will not collapse similar to what happened to FTX but it does not mean that COIN is immune to the ripple and fallout within the crypto space.
Insights:
Because of the collapse of FTX, it is not unusual for investors to lose confidence in cryptocurrencies and the crypto ecosystem as a whole. It is reflected by the steep decrease in CRYPTOCAP last week during the reported filing of bankruptcy of FTX. Most cryptocurrencies were affected by the fallout and COIN was also affected since it is a crypto exchange, like FTX. Bitcoin (BTC) is also down due to the aftermath which heavily affects the market performance of most crypto exchanges.
However, this can be a good thing for crypto exchanges such as Coinbase since one of their main competitors in the market is gone. Even BofA said that this whole FTX fiasco may lead to more market-share gains for Coinbase in the long run as long as COIN keeps up with its regulatory compliance and proper accounting and auditing practices.
As of now, the status of most crypto exchanges may still be uncertain due to the possibility that stricter regulations might be passed because of the immense pressure on legislators brought on by the FTX fiasco. They are on the verge of finalizing the DCCPA 2022.
For more information, read this article here
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[PH] PREMIERE ISLAND POWER REIT CORP. PRICES IPO AT PHP 1.50 PER SHARE TO RAISE PHP 2.42 BILLION
The Villar-led Premiere Island Power REIT Corp. (PREIT) has finalized its initial public offering (IPO) price at PHP1.50 per share, a 25% decrease from its initial pricing of PHP2.0 per share. The company intends to sell 1.4 billion secondary shares and 210 million over-allotment shares, bringing the estimated proceeds to PHP42 billion. The IPO will run from Nov. 28 to Dec. 5, and the listing date is on Dec 15. Assuming the public subscribes to all of the offered shares, PREIT will have a public float of 48.96 percent after the IPO, that is, 48.96 percent of its outstanding shares are owned and tradeable by the public, including institutions.
Insights:
PREIT marks the ninth IPO in the Philippine Stock Exchange (PSE) this year, following Haus Talk Inc (PSE: HTI), Figaro Coffee Group Inc. (PSE: FCG), Citicore Energy REIT Corp. (PSE: CREIT), Bank of Commerce (PSE: BNCOM), CTS Global Equity Group, Inc. (PSE: CTS), Raslag Corp. (PSE: ASLAG), VistaREIT Inc. (PSE: VREIT), and Balai ni Fruitas Inc. (PSE: BALAI). It is the eighth real estate investment trust (REIT) to go public, and it is the second Villar-owned REIT, after VREIT. This is also a new record number of IPOs in a single year for the local market, coincident with other indicators showing local economic recovery.
PREIT is a power and infrastructure company operating as a subsidiary of Prime Asset Ventures Inc. Its income-generating assets include land and power plant assets that are used by Siquijor Island Power Corp. and Camotes Island Power Generation Corp. in Cebu and Siquijor. The combined capacity of the generating units is 21.2 megawatts. Part of the company’s expansion plans is to add more renewable energy assets to its portfolio. Its composition is very similar to CREIT, which is also composed of energy-generating units.
To assess REITs, we normally compare their projected dividend yield with that of other REITs and fixed-income instruments. Based on the company’s preliminary REIT plan, it has a projected dividend yield of 9.56 percent for 2023.
For more information, read this article here.
[PH] STOCK MARKET, PESO FINISHES STRONG THIS WEEK
The Philippine Stock Exchange index (PSEi) closed Friday gaining 1.17% (day-to-day) or 76.43 points to 6,606.94, with all shares increasing by 30.40 points to 3,452.44. The total value of trading reached PHP7.14 billion wherein all counters ended it with gains except for Industrial which declined by 22.25 points to 9,519.07. In addition, the Philippine peso (PHP) also closed stronger on Friday, gaining by 0.11 at the end of peso-dollar trading. It happened to end strong as investors were seeing progress in the policy of the Bangko Sentral ng Pilipinas (BSP) to ease inflation and the improvements in other economic data.
Insights:
The strong finish for this week is a possible indication that the Philippine stock market is doing great. It may attract more investors to invest in our country if this continues. According to Luis Limlingan, head of sales of Regina Capital Development Corporation, this is a sign that investors are seeing that the BSP’s effort to fight high inflation is working and is coming to an end soon. He also said that the BSP may slow down its rate hikes through the end of the year and into 2023.
However, according to PSA’s most recent inflation report on October 2022, the Philippines’ headline inflation rate is at 7.7% from September’s 6.9%. The core inflation rate also increased to 5.9% from the previous month’s 5.0%. By looking at these numbers, it is evident that inflation is still on the rise. However, PHP is slowly starting to regain its strength against the USD as currently, the peso is at 56.97. This is lower than the previous month’s highest which is 59.181. The government has defended the Philippine peso from breaching the 60 mark, as of now. With the Philippine peso starting to regain its strength against the USD, investors may start to flock and invest in the Philippines.
For more information, read this article here
[US] TWITTER TO EXPAND BEYOND ADVERTISING
Elon Musk is reported to diversify Twitter’s revenue through other means other than advertising and no big social network has done such before since social media ads are made specifically for individual users, as practiced by Facebook and Instagram. According to Jasmine Enberg, an analyst at Insider Intelligence, social networks are now struggling with the rise in regulations on personal data use and with the budget cuts from advertisers due to inflation, thus, firms should start on new non-ad techniques as source of their revenues. However, Twitter is dependent on advertising by 90% and ever since Musk took over the platform, the advertising issue has been serious such that half of the platform’s top 100 advertisers have stopped or are planning to stop advertising from Twitter.
Insights:
Numerous problems have arisen ever since Musk took over Twitter, thus, Musk is battling on how to retain Twitter despite key advertisers dropping and the current users wary and finding other options in case “Twitter shuts down”. To go beyond advertising as the main source of revenue, social networks are now starting to charge their users for premium features and content, prompting consumers to think that social media platforms are now prioritizing more revenue rather than purpose.
For Musk, to still keep the good name of Twitter, he may consider stopping laying off workers as it was reported that Musk started to demand a different work culture from the employees (long hours, high intensity). Since the takeover, half of the 7,500 workforce were already laid off, causing Twitter to be shorthanded in staff and manpower, especially in some of their departments (e.g. communications department). Additionally, it is suggested that Twitter may build financial relationships with its big-shot users such as celebrities, journalists, and politicians. Such big-shot names could also be paid for their content and the amount of audience they have.
After the change in top management, Musk-owned Twitter began to charge USD8.00 for having the blue tick mark or ‘verified’ for Twitter accounts although it was suspended after a while due to an increasing number of fake ‘verified’ accounts. Numerous celebrities were reported to leave the platform after Musk’s takeover due to being a cesspool of hate speech (i.e. racism, and bigotry).
For more information, read this article here
[OTHER MARKETS] CONSUMER INFLATION IN JAPAN RISES AT FASTEST PACE IN 40 YEARS
Japan Tokyo Core Consumer Price Index (CPI) rose at its fastest annual pace in 40 years this November. This phenomenon exceeded the Bank of Japan’s (BOJ) 2% goal for six consecutive months, which may be representative of the increase in inflation rates in Japan. The Tokyo core consumer price index, which excludes fresh food but includes fuel and other goods, has risen 3.6% higher this month than last year, exceeding forecasts of 3.5% and overtaking the 3.4% percent increase seen last October. The Tokyo core-core CPI index, which excludes fresh food as well as fuel, saw an increase of 2.5% this November than last year, overtaking the 2.2% annual gain last October. Other sectors of the Tokyo CPI data also saw increases in prices, with services prices increasing by 0.7% and durable goods prices increasing by 7.7%. Overall, although inflation rates in Japan continue to grow steadily, wages and services prices have still remained stagnant.
Insights:
With Tokyo’s consumer inflation at its fastest pace, its acceleration threatens a nationwide price growth this November as the yen weakens against the US dollar and with elevated energy costs due to global supply shock on fuel. This increase, driven mostly by food and fuels, signals a broadening inflationary pressure on a range of goods which in turn passes the suffering among the consumers. The 7.7% increase in prices for durable goods, meanwhile, can be seen as an effect of the weakening of the yen which pushed up the cost of imports, causing companies to charge more.
With price hikes and weak yen at bay, this could keep inflation elevated well until next year. This does not worry the Bank of Japan (BOJ) however, as it believes that the recent cost-push inflation will prove to be transitory. While the US Federal Reserve and other central banks around the globe raise their key policy rates to try to rein in decades-high inflation, the Bank of Japan has kept interest rates ultra-low, resisting tightening monetary policy, on the view that inflation will slow back down next year and that doing so would discourage investors and growth in economy after COVID-19 lockdown. Whereas in some western economies wages have surged with inflation, wages and service prices in Japan have still remained stagnant which may signal incoming stagflation, adding to factors taking away the consumers’ purchasing power.
For more information, read this article here
[OTHER MARKETS] BRITAIN’S BLACK FRIDAY SUFFERS FROM COST-OF-LIVING CRISIS
As Black Friday (Nov. 25 to Nov. 28) is happening, Britain’s retail sellers hope that discounts would still get consumers spending despite the higher costs of living. According to GlobalData for VoucherCodes, Britons are about to spend GBP 8.7 billion for the Black Friday discounts – with big drops in volume because of inflation. As inflation hit 11.1 percent in October, consumers are cutting spending and doing Christmas shopping earlier, to avoid greater spending losses to income. Research also shows that a quarter of UK consumers had already done Christmas shopping while one out of ten will do Christmas shopping during Black Friday. With the given information, European retailers fear the Christmas holiday season as it could be the worst in a decade due to business costs diminishing profit margins.
Insights:
With the ever-high inflation of 11.1%, UK consumers’ purchasing power would diminish as the value of their money and income would be worth less. As the Black Friday event is famous for the numerous retail discounts, consumers are still suffering from higher costs, thus, they could still be purchasing less compared to the past years despite the given discounts. Additionally, investing would be an option for consumers to beat inflation, however, such a decision is not risk-free as stock markets are suffering from post-pandemic inflation, high-interest rates (set by the Bank of England), and the Russia-Ukraine war.
To take advantage of the rising inflation for investments, some experts recommend investing in commodity stocks and oil companies as such categories are inelastic with the rise in overall prices (people would still be purchasing commodities and oil products despite the high prices because such products are basic necessities for daily living). Of course, people may also consider saving their money in the bank instead of investing if they are not interested in doing so. If this continues for a longer period, it is possible that businesses start to change their sales strategy, in particular with discounts. They may launch more frequent discount sales instead of a one-time big-time holiday sale like Black Friday.
For more information, read this article here
[CRYPTO] INDIAN CRYPTO EXCHANGES REASSURE INVESTORS AFTER FTX'S BANKRUPTCY
Indian crypto entrepreneurs were implementing measures to provide full transparency on their reserve funds to win back investors' confidence after the collapse of FTX, the world’s third-largest crypto exchange by trading volumes. It was estimated that about half a million crypto investors in India had been impacted by the steep fall in FTX’s native FTT token and were experiencing an over 90 percent depreciation of their invested capital. Leading crypto exchanges CoinDCX, CoinSwitch, and WazirX were quick to issue statements about their healthy balance sheets and assure users there was no impact of FTX’s bankruptcy on their operations.
Insights:
It is evident that FTX’s bankruptcy has caused a lot of concern regarding trust and confidence, especially from the side of investors towards cryptocurrencies and the crypto ecosystem. In this scenario, this prompts crypto exchanges to publicly publish their proof of reserves and balance sheets in a hurry to temper investors’ uncertainty.
Since FTX is considered one of the largest crypto exchanges in the market by trading volumes, it is difficult for smaller exchanges to regain the trust of the investors and even the public. Due to the impact and noise of the news regarding FTX, countries such as India are starting to take a closer look at regulating the crypto space. Countries such as the US are also finalizing their version of the regulatory bill on crypto (DCCPA 2022). Some countries like China have already banned cryptocurrencies in the past instead of imposing stricter regulations, unlike other countries.
One thing is for certain, and that is changes regarding the regulation of cryptos will happen as more and more people are starting to become aware of cryptocurrencies, and it is up to the government to make sure that their financial system is robust and trustworthy. They are also wary of possible capital flight from crypto transactions.
For more information, read this article here