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The PSEi - PSE Composite Index & The Economy

Retail, construction set for further liberalization

Socioeconomic Planning Secretary Ernesto M. Pernia confirmed moves to revise the country’s procurement law to allow more foreign contractors to participate in key state projects, with the changes to be reflected immediately in the new Regular Foreign Investment Negative List (RFINL).

Also to be liberalized further via the RFINL that is now being finalized by the National Economic and Development Authority (Neda), according to Pernia, is the retail sector.

“It will make them [local construction and retail firms] more competitive; they’ll be pressured to be internationally competitive,” Pernia told reporters on the sidelines of the launch of the 28th National Statistics Month on Monday.

Pernia said the government’s efforts to open up the construction sector is linked to the ongoing revisions in the procurement law.

The Neda secretary said the government wants to allow more international construction companies and contractors to operate in the country. This is one of the issues on the procurement act that were raised by the Asian Development Bank (ADB) and World Bank, which are currently working with the government in revising the law.

The ADB said allowing foreign companies and contractors through international competitive bidding (ICB) can speed up and improve the implementation of the government’s massive infrastructure program. NCBs are particularly used for contracts for small projects, such as farm-to-market roads, school buildings, community hospitals and health centers.

The World Bank explained that while ICB and NCB are both open and transparent procurement processes, ICB requires advertising the procurements internationally and nationally, whereas NCB requires national advertising only.

Meanwhile, Pernia said the government is looking at bringing down the capitalization needed by foreign retailers in setting up shop in the Philippines.

Pernia said the level will be brought down to $200,000 under the revised RFINL.

“In general, we’re trying to liberalize the [R]FINL,” Pernia told reporters. “The purpose is to make the consumers happier.

The Neda is tasked to review and revise the country’s RFINL, which contains restrictions on foreign investments and the practice of professions based on the Constitution and Philippine laws.

The RFINL contains investment areas/activities where foreign equity participation is limited by mandate of the Constitution and specific laws. It also consists of investment areas/activities where foreign equity participation is limited for reasons of defense, security, risk to public health and morals, and protection of small- and medium-sized domestic market enterprises.

The amendment of the list is headed by the Neda Secretariat, as provided for under Section 8 of RA 7042, or the Foreign Investments Act of 1991, which states that amendments may be made upon the recommendation of the secretary of national defense or the secretary of health, or the secretary of education, endorsed by the Neda, approved by the President, and promulgated by a Presidential Proclamation.

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...good for OFWs, bad for local based manufacturing relying on imported materials

Weaker peso giving PHL manufacturers headache these days

The Philippine manufacturing sector has less reason to be optimistic these days, as the weakening of the peso not only failed to boost the export sector, but also made imported inputs more expensive.

IHS Markit principal economist Bernard Aw said the weak peso, compounded by sluggish output growth, slowed the country’s manufacturing sector in September, with the Purchasing Managers’ Index (PMI) indicating a subdued growth during the month.

Despite the modest PMI number in September, however, confidence remains in the manufacturing sector, as the country still has the second-highest PMI in the region during the month, after Vietnam.

In a report released by Nikkei and IHS Markit on Monday, data showed that the country’s PMI stood at 50.8 in September, slightly up from the record-low 50.6 in August. The report said the improvement in the sector is “marginal” and the September result is the second-weakest PMI print of the country since the survey started in January 2016.

The PMI is a composite index, calculated as a weighted average of five individual sub-components. Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show deterioration.

Vietnam’s manufacturing sector continues to lead the region’s industrial expansion during the month, registering a PMI of 53.3. The Philippines came in second with its 50.8, followed by Indonesia’s 50.4 and Thailand’s 50.3.

Meanwhile, the three countries in the region whose manufacturing sectors were in contraction mode were Malaysia, with its PMI at 49.9, Myanmar at 49.4 and Singapore at the bottom with 48.6.

The report said output volumes were partly to blame, as they rose with the weakest rate since the survey started last year amid modest sales.

Employment also shrank for the sector for the second straight month, and rising cost for raw materials was also said to have affected production plans during the period.

Aw also made mention of the peso’s weak performance during the month as one of the issues faced by local manufacturers.

“The weak peso continued to pose a problem for manufacturers. Not only did the cheaper currency fail to provide a boost to exports, it raised the costs of imports. Coupled with supply shortages due to bad weather, costs for manufacturing inputs, especially in industrial metal and paper, increased further. There were also reports of rising cost inflation affecting production levels,” Aw said.

The economist, however, pointed out that optimism regarding output remained high during the period, encouraging firms, in turn, to increase their purchases of inputs.

“Survey data indicated that a majority of surveyed companies still expect output to rise in the next 12 months on the back of new product launches, an improving economic climate, marketing activity and business expansions. That optimism, in turn, led
firms to step up input buying at the end of the third quarter,” the report read.

In a separate commentary, ING Bank Manila economist Joey Cuyegkeng said indicators are strong in recent months, reflecting strong economy and would likely support the third- quarter GDP.

Cuyegkeng added that the reversal of the country’s PMI downtrend in September could validate a strong GDP print for the country in the third quarter of the year.

The ING economist sees the country GDP growing by 6.5 percent to 6.6 percent in the July-to-September period.

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...I like this news Smile

Growth shifting to provinces, says SM's Sy-Coson

MANILA - Philippine businesses are expanding to the provinces, as the economy plays catch-up with the rest of the region, SM Investments vice chairperson Teresita Sy-Coson said.

The eldest daughter of the country's richest man, Henry Sy, said the family-led conglomerate with interests in banking, retail and real estate, said the outlook on the Philippines was "optimistic."

Sy-Coson spoke at a business summit in Singapore and her remarks were released by SM Investments in Manila on Tuesday.

"The Philippines has not grown as fast as its neighbors in the last decade so we are catching up now. Distribution of wealth is going to the provincial areas. Right now, our businesses have been developing throughout the country," Sy-Coson said.

"There are geopolitical fears, climate change and digital disruptions. New technology will bring a different way of doing things and as long as we make efforts to stay relevant, our businesses will still be there," she said.
SM has been expanding its shopping mall empire to the provinces and recently opened upscale "premiere" outlets in Cagayan de Oro City and Puerto Princesa City.

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...bakit ba bumabagal ang 'build, build, build'?

WB cuts ‘17, ‘18 growth forecasts for PH on ‘slow’ rollout of infra projects

The World Bank (WB) has again cut its growth projections for the Philippines for this year and next year, which the Washington-based multilateral lender blamed on “slower than expected” implementation of public infrastructure projects thus far.

“In 2017, the economy is projected to expand at a slightly slower pace than 2016, at 6.6 percent. The delay in the anticipated push of the planned government infrastructure program has been contributing to the moderation of fixed capital formation growth, softening the growth prospect for the year,” the WB said in its East Asia and Pacific Economic Update October 2017 report released Wednesday.

To recall, the WB in July lowered to 6.8 percent, from 6.9 percent previously, its gross domestic product (GDP) growth forecast for the Philippines, citing that government consumption and investment growth “somewhat weakened” recently following a similar path in public spending during the first quarter even if exports and private consumption kept a strong showing.

The lender’s 2017 forecast was nonetheless still within the government’s 6.5-7.5 percent target range.

For 2018, the WB’s GDP growth projection was reduced to 6.7 percent from 6.9 percent previously, below the Duterte administration’s 7-8 percent yearly growth target from 2018 to 2022.

In 2019, the WB expects Philippine economic expansion of 6.7 percent, a pace also slower than the government target.

The economy grew 6.9 percent last year, among the fastest in the region.
In general, “the medium-term growth outlook remains positive, and is expected to be anchored in growth in the Philippines’ main trading partners which would lead to higher external demand, while imports would remain elevated due to necessary imports of intermediate and capital goods, including for the infrastructure program,” the WB said.

Moving forward, “as the public infrastructure program gains traction, capital outlays and construction activities are expected to rise,” according to the WB.
The Duterte administration early this year unveiled its ambitious “Build, Build, Build” program aimed at ushering in “the golden age of infrastructure” after years of neglect.

Under “Build, Build, Build,” the government would rollout 75 flagship, “game-changing” infrastructure projects, with about half targeted to be finished within President Rodrigo Duterte’s term, alongside plans to spend a total of up to P9 trillion on hard and modern infrastructure until 2022.

“The pace of economic growth could be slower if the government is unable to timely deliver on its planned infrastructure program,” the WB warned.
As such, “complementary reforms to address budget execution and implementation bottlenecks and to ensure high quality of spending are needed,” the lender said.

Also, “consumption growth is expected to remain firm contingent on sustained remittances and expanding credit contributing to improving income levels” in the medium term, the WB added.

According to the WB, “local elections in 2019 will likely boost domestic activities as early as the latter half of 2018.”

In terms of poverty reduction, the World Bank sees the level declining to 22.9 percent next year. The Duterte administration targets to slash poverty incidence to 14 percent by 2022 from 21.6 percent in 2015.

“The pace of poverty reduction may drop slightly in the face of slightly lower overall growth, but poverty is expected to continue to fall as the economy continues its structural transformation. Increased spending in infrastructure would generate construction jobs that are expected to boost poverty reduction,” the WB said.

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Reply flag

Economy showing more signs of overheating

ING Bank Manila economist Joey Cuyegkeng believes a few cracks are already showing in the country’s fast-growing economy, hinting of potential overheating down the line. This is despite the Bangko Sentral ng Pilipinas’s (BSP) repeated assurance that the economy can handle the pressure.

Cuyegkeng said strong liquidity conditions and loan growth, plus the most recent upside surprise to the September inflation print, add up and amplify the concerns of overheating in the local economy.

“These developments add to a growing list of data indicating the possible beginnings of overheating. The list includes imbalances—deterioration of the trade deficit and current account, acceleration in fiscal spending and a wider budget deficit,” the private economist added.

An overheating economy is one whose capacity to produce cannot keep up with the pace of its demand expansion. Inefficient supply allocations also arise, as stakeholders start overestimating the economy’s potential for further growth. Overheating in the economy could feed into a high economic growth that is unstable and unsustainable, and ultimately triggers a significant increase in the country’s inflation rate.

Latest data from the Central Bank showed cash supply in the country—broadly measured as M3—accelerated to 15.4 percent in August from the 13.5 percent in July. While the BSP does not give actual projections for the country’s M3 growth, officials earlier said they expect liquidity expansion to be around 9 percent to 12 percent for 2017.

The 15.4-percent acceleration in August, Cuyegkeng said, is also stronger than expected, per their current models. The economist said ING Bank anticipated only a marginal acceleration of M3 to around 14 percent in the month—still within their so-called sweet spot of noninflationary money-supply growth of 10 percent to 15 percent.

The strong bank lending was also flagged by Cuyegkeng, saying the 20.4-percent loan growth in August beat their anticipation of a moderation of credit expansion, as compared to the 19.7-percent increase in July.

“The acceleration we saw may partly reflect some frontloading of purchases ahead of the implementation of the tax-reform package that not only includes lower individual income tax and higher excise taxes for fuel and sweetened beverages, but also higher excise taxes on automobiles,” the economist said.

Higher inflation

The bigger indicator, however, is this week’s announcement of the Philippines’s September inflation rate at 3.4 percent—the highest in five months.

While these sharp growth trends in the monetary conditions of the Philippines are seen to reflect strong economic activity and likely represent a good GDP turnout for the second half of the year, Cuyegkeng said the flip side to this acceleration is that demand pull pressures on prices are likely to continue rising.

“The September inflation rate, together with the acceleration in monetary indicators, add other indicators that may presage overheating. The other indicators include imbalances in the economy—wider trade deficits, a current-account deficit and fiscal deficits, and a positive output gap since 2016,” the economist reiterated.

Cuyegkeng is not the first to warn the country about the potential risks of overheating, which is now showing its early signs and symptoms.

In February international credit watcher Fitch Ratings said the Philippines is still at risk of overheating and overinvestment “amid persistent high loan growth, particularly in the real-estate sector, as the industry has been a significant source of credit over the last five years.”

Singapore-based DBS Bank, in June, also said given the aggressive infrastructure overhaul, “there is a need to manage overheating risks in the economy”.

Moody’s Investors Service, in its June assessment of the local economic dynamics, also found a number of indicators pointing to overheating risks in the Philippine economy.

“While broad macroeconomic stability has been maintained so far, a number of metrics indicate material capacity constraints that signal a risk of overheating,” the credit watcher said.

Thus, Moody’s said it could only consider raising the country’s rating should the government succeed in defusing signs of prospective overheating in the economy and financial system, aside from improving the predictability and stability of the political climate.

IMF’s word

In early August the International Monetary Fund (IMF) said in the conclusion of its Article IV Mission in the country that while the country’s strong growth is broadly stable, economic managers should continue to be vigilant of overheating risks particularly attached to strong loan growth and investment.

“The combination of rapid credit growth, buoyant private investment and fiscal expansion could lead to overheating,” the IMF said.

“IMF staff team supports the authorities’ plans to raise infrastructure and social spending while avoiding overheating and preserving investor confidence,” the global monetary authority added.

Time to tinker

Thus, to curb the overheating risks and concerns, Cuyegkeng believes the Central Bank needs to pull the trigger and start tinkering with its monetary-policy levers before the year ends.

“We continue to expect that the BSP may need to implement a preemptive tightening at the December meeting to head off overheating in the economy. This would also address the need to possibly reanchor inflation expectations while preserving interest-rate differentials [in the wake of a likely Fed rate hike],” the economist said.

The Central Bank has been maintaining key policy rates unchanged since 2014.

In its latest monetary-policy meeting, the BSP’s Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 3 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement ratios were likewise left unchanged.

The decision was made on the back of a “manageable inflation environment”, albeit admitting that the balance of risks to the inflation outlook also continues to be on the upside. The BSP still expects inflation to fall within its 2-percent to 4-percent target for the year, particularly averaging at 3.2 percent for this year and in the next two years.

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Reply build build

Infrastructure spending up 18.1% to P40.1 billion in August

Public infrastructure spending jumped by almost a fifth to P40.1 billion in August as the government paid for completed roads as well as various flood control, health and school facilities.

The latest Department of Budget and Management data showed that expenditures on infrastructure and other capital outlays increased 18.1 percent from P34 billion in August last year.

“The amount includes payments for completed infrastructure projects of the Department of Public Works and Highways (road improvement works, repair and rehabilitation, including flood control projects, construction/improvement of pumping stations, dike and drainage systems), capital outlay projects of the Department of Education (repair and rehabilitation of school facilities) and the Department of Health (land outlays for health facilities and purchase of hospital equipment),” the DBM explained in a report.

Government spending on infrastructure in August, however, was 17.1-percent lower than the P48.4 billion in July.
From January to August, the government spent a total of P337.6 billion on infrastructure as well as other capital outlays, up 11.9 percent from P301.7 billion in the same eight-month period last year.

The DBM attributed infrastructure spending growth at the end of the first eight months to “the implementation of public infrastructure projects of the DPWH (road repair and rehabilitation, flood control projects) and the Department of Transportation (rail and transport infrastructure), other capital outlay projects in state universities and colleges (construction, repair and rehabilitation of school facilities, acquisition of equipment) and the DOH (upgrading of health facilities and purchase of hospital/medical equipment), and the modernization program of the Department of National Defense-Armed Forces of the Philippines (purchase of ammunitions, transport equipment and other defense assets).”

Moving forward, “disbursements for the month of September are expected to be substantial owing to the huge infrastructure spending requirements of the DPWH,” the DBM said.

“The payment for the right-of-way claims for various DPWH projects, as well as the procurement for the respective modernization programs of the DND-AFP and the Department of the Interior and Local Government-Philippine National Police are already ongoing following the release of their allotments in August this year. These are expected to further increase disbursement levels in the succeeding months,” the DBM added.

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...still in the sweet spot for growth, bull run continues Tongue

Investor confidence ‘strong’ — IMF

INVESTOR SENTIMENT remains favorable for the Philippines despite increased political noise, an official of the International Monetary Fund (IMF) said, noting that general optimism should buoy growth prospects.

“Our sense is that investor confidence remains strong, as the growth outlook for the Philippines is favorable both in the short and medium term (in line with potential growth we have recently updated),” Yang Yongzheng, IMF’s new country representative in Manila, said in a recent e-mail interview.

Mr. Yang said business confidence will remain intact amid heightened political issues in the local scene. The second year under President Rodrigo R. Duterte has been marked by conflict with militants in Marawi City that has dragged for nearly five months, a string of impeachment complaints against heads of Constitutional bodies and the Judiciary, and mounting criticism of the bloody war on drugs, to name a few.

Still, the IMF official said prospects are bright for the Philippines.

“This outlook is supported by strong macroeconomic fundamentals and policy buffers, including a low level of public debt and high level of foreign reserves. Ongoing efforts on tax reforms will also support growth over the medium term,” Mr. Yang said.

The multilateral lender forecasts a 6.6% growth for Philippine gross domestic product (GDP) this year under its World Economic Outlook published last week, which will allow the country to remain a growth leader in Southeast Asia. This renders the government’s 6.5-7.5% goal doable.

Business confidence slipped to a three-year low last quarter, results of the central bank’s Business Expectations Survey showed, as local companies were spooked by the Marawi conflict, a weaker peso and a seasonal slack in demand. It was only yesterday that Mr. Duterte declared the southern city “liberated from the terrorists.”

Philippine GDP grew by 6.4% last semester, a notch below the low end of the official growth goal.

Economic managers see growth picking up this semester on the back of sustained strength in consumption and investments, particularly driven by a surge in spending due to the rollout of big-ticket infrastructure projects and as the Christmas season draws near.

The IMF expects a 6.7% expansion in 2018, which is below the state’s 7-8% goal.

Central bank officials have said that the country’s sound fiscal and monetary policies make it an attractive investment destination for foreign investors, who are looking for opportunities amid slow recovery in global growth.

Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo has said the country’s healthy external position and hefty dollar reserves provide “comfort” for international investors, as these factors provide resilience to external risks which could otherwise weigh on the local economy.

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...kaya malakas mining today

DENR to restore open-pit mining

The ban on open-pit mining put in place by rejected former environment secretary Regina Paz Lopez will be lifted before yearend after the interagency Mining Industry Coordinating Council (MICC) on Tuesday voted to reverse the order.

“A majority of the MICC members voted to recommend a change in the policy of the Department of Environment and Natural Resources with regard to DAO (DENR Administrative Order) 2017-10, particularly, that the DENR lift the ban on open pit mining provided that mining laws, rules and regulations are strictly enforced,” Environment Secretary Roy Cimatu told reporters.

Cimatu co-chairs the Cabinet-level, interagency MICC with Finance Secretary Carlos Dominguez III.

Cimatu said the MICC resolution will be presented to the Cabinet during its Nov. 6 meeting, such that the ban will “hopefully” be removed before yearend.

Cimatu added that the DENR will issue a DAO restoring open-pit mining operations.

In April, Lopez issued DAO 2017-10 that imposed a ban on the open-pit method of extracting copper, gold, silver as well as complex ores.

In a statement, the Department of Finance said that during the meeting, the MICC also recommended that the DENR’s Mines and Geosciences Bureau must “take a close look and take appropriate action” with regards the expansion of the 24 mining areas covered by mineral production sharing agreements (MPSAs).

To recall, Lopez in February ordered to close down 23 mines as well as suspend five others, which the mining industry alleged did not undergo due process.

A week later, Lopez also ordered the cancellation of 75 MPSAs entered into by the government.

The MICC later on undertook a review of the closure and suspension orders, which the DOF said “the MICC expects preliminary results in January next year and the final report by March.”

“The composition of the technical review teams and the methodologies they will undertake to conduct the review were finalized in the second week of October,” the DOF noted.

Also, “as proposed by Dominguez, the MICC agreed to conduct another review in 2019 and succeeding ones every two years thereafter, in keeping with the MICC mandate under Executive Order No. 79 on a review of all mining operations once every two years,” the DOF added.

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...front-loading at tailgating pala mga tawag doon hhmmmnnn

Stock-market dealings by SSS execs trigger calls for probe

LAWMAKERS on Wednesday urged the National Bureau of Investigation (NBI), the Office of the Ombudsman and the Capital Markets Integrity Corp. (CMIC) to look into the alleged self-dealing by four officials of the Social Security System (SSS) in the stock market.

Deputy Minority Leader Luis Campos Jr. of Makati City said in a statement that these officials of the state-owned pension fund may have violated the Code of Conduct and Ethical Standards for Public Officials and Employees and the Ant-Graft and Corrupt Practices Act.

Under the law, Campos said public officials and employees are forbidden from having a financial or material interest in any transaction requiring the approval of their office, and from misusing for their private interests’ classified information known to them by reason of their office.

According to the lawmaker, the NBI should perform a “forensic accounting” on the private stock trades of the executives, who are now facing an administrative complaint for “serious dishonesty and grave misconduct” before the Social Security Commission, the pension fund’s governing board.

Earlier, SSS Commissioner Jose Gabriel La Viña has filed a complaint against SSS Executive Vice President for Investments Rizaldy Capulong and three other officers whom he accused of serious dishonesty and grave misconduct.

Capulong was charged for allegedly illegally profiting from his position by trading his own stocks using the very same stockbrokers who manage the portfolio of the state-administered pension fund.

Apart from Capulong, included in his complaint filed with the Social Security Commission are Equities Investment Division Chief Reginald Candelaria, Equities Product Development Head Ernesto Francisco Jr. and Chief Actuary George Ongkeko Jr.

The complaint alleged that Candelaria and Francisco in particular used information they obtained from an accredited SSS broker to “profit” from the initial public offerings (IPOs) of five companies, instead of recommending them to the Social Security Commission.

Companies use IPOs to list at the Philippine Stock Exchange (PSE) for the first time so that their shares may be freely bought and sold in the open market.

“There may have been several ways by which the executives conducted personal trades using information that was available only to them as managers of the SSS’s stock-market investments,” Campos said.

“They may have been front-running and tailgating. It is possible they bought shares for their personal accounts at a lower price before they sent out large buy orders for the SSS’s portfolio,” Campos added. “And then they may have sold their shares once prices were driven up by the buy orders for the pension fund’s account.”

Meanwhile, Campos said CMIC should also get involved because of allegations that the executives conducted personal trades using the same brokers accredited to buy and sell shares for the SSS’s account, and that the brokers may have known that the executives directing the pension fund’s trades were also trading for themselves.

Campos also urged the CMIC to find out whether the accredited brokers gave the SSS executives margin or loan accounts that may have enabled them to conduct large trades and rake in huge profits for themselves without putting up a lot of their own cash.

The CMIC is the PSE’s primary and independent regulator of stockbrokers, who are duty-bound to live up to the highest ethical standards.

Rep. Ben D. Evardone of the Lone District of Eastern Samar, chairman of the House Committee on Bank and Financial Intermediaries, has said he will file a resolution on November 2 to probe the irregularities in the state-owned pension-fund agency.

For his part, Party-list Rep. Ariel Casilao of Anakpawis said the SSS leadership should look into other investment dealings of the pension-fund manager, as he called for the resignation of involved officials.

“It is disgusting that these corrupt SSS officials are raking personal, huge payout using SSS remittances as investments,” Casilao said. “This goes to show that it is wrong to blame pension hike over the slow depletion of the fund but, in fact, it is the corrupt practice, fund mismanagement and the improper collection of remittances that are behind the dwindling SSS fund shortage.”

He also asked the SSS management to look into other investments, as this discovered that shady dealing is not an isolated case.

“We also call the SSS board to discharge from [their respective posts] those who are involved on the ‘stock grabbing,’” the party-list lawmaker also said. “Anakpawis also urged SSS members and pensioners to demand the immediate resignation of these crooked SSS officials.”

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...for new IPO's/market entrants only not those listed already

SEC raises minimum public float requirement to 20%

The Securities and Exchange Commission (SEC) has issued a circular, increasing the minimum public float requirement for listed companies to 20 percent from the current 10 percent.

In a briefing yesterday, SEC commissioner Ephyro Amatong said the new circular would take effect 15 days after its scheduled publication this week.

The SEC has long been planning to increase the minimum public float requirement for listed companies but has deferred this many times because of volatile market conditions.

The new circular, however, will cover only new market entrants or companies that have yet to list in the market.

“For existing companies, we are still looking at it. All options are on the table,” said SEC Market and Securities Regulation Department chief Vicente Graciano Felizmenio Jr.

Felizmenio hopes to come up with a decision for existing listed companies by the first quarter of next year.

Business ( Article MRec ), pagematch: 1, sectionmatch: 1
The SEC eventually plans to raise the public float to 25 percent and gradually increase it to 30 percent and then to 35 percent.

SEC chairman Teresita Herbosa said the 20 percent is enough for minority shareholders to secure at least one board seat.

Public float refers to the portion of share of a corporation that is owned by public investors. It is freely available and tradable in the market and is non-strategic in nature or  not meant to gain substantial influence on how the company should be managed.

According to the SEC, significant shareholdings of 10 percent or more of the total issued and outstanding shares of the company are considered strategic and thus, excluded in the public float of the company.

The SEC warned that non-compliance with the minimum public ownership requirement may result to publicly listed companies being subjected to the administrative sanctions provided under Section 54 of the Securities Regulation Code.

They may also be subject to a higher tax rate as all publicly listed companies are required at all times to maintain a minimum public ownership as prescribed by the SEC to enjoy preferential tax treatment.

According to the Bureau of Internal Revenue, the sale, barter, exchange, or other disposition of shares of stock of publicly listed companies that meet the MPO through the local stock exchange other than the sale by a dealer in securities, is subject to stock transaction tax of one-half of one percent of the gross selling price.

However, the sale, barter, transfer and or assignment of shares of stock of publicly-listed companies that fail to meet the MPO is subject to final tax of five percent or 10 percent on the net capital gains, and documentary stamp tax.

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