BAIPHIL Market Watch – 07 July 2016 Page 1 of 9

BAIPHIL

MARKET WATCH

07 July

2016 Legend

Improvement / Up Deterioration / Down No Movement

FINANCIAL MARKETS AT A GLANCE

PHILIPPINES

Financial Rates Current Previous

USD/PHP 47.0200 46.7750

30-D PDST-R1 1.6053% 1.6483%

91-D PDST-R1 1.7583% 1.7717%

180-D PDST-R1 3.5979% 1.9410%

1-Y PDST-R1 2.9033% 2.9050%

10-Y PDST-R1 4.2033% 4.2000%

30-D PDST-R2 1.6020% 1.6483%

91-D PDST-R2 1.7533% 1.7717%

180-D PDST-R2 1.6938% 1.5771%

1-Y PDST-R2 2.9000% 2.9050%

10-Y PDST-R2 4.2017% 4.1967%

Stock Index Current Previous

PSEi 7,808.13 7,846.54

Market Cap (Php Trillion) 13.015 13.068

Total Value (Php Billion) 8.163 7.547

PSEi Performers Closing % Change

Top Gainers

Grand Plaza Hotel Corp. 24.05 13.18%

Liberty Flour Mills, Inc. 36.00 11.80%

MJC Investments Corp. 3.39 9.35%

Top Losers

Keppel Phil. Holdings 5.51 -13.23%

Vivant Corp. 30.50 -12.86%

F&J prince Holdings Corp. 5.70 -8.06%

ASIA-PACIFIC

Stock Index Current Previous

NIKKEI 15,378.99 15,669.33

HANG SENG 20,495.29 20,750.72

SHANGHAI 3,017.29 3,007.11

STRAITS 2,864.67 2,860.97

SET 1,452.59 1,451.43

JAKARTA Closed 4,971.58

Currency Exchange Current Previous

USD/JPY 101.0300 102.6421

USD/HKD 7.7581 7.7645

USD/CNY 6.6886 6.6613

USD/SGD 1.3498 1.3512

USD/THB 35.1810 35.0452

USD/IDR Closed 13,135.00

REST OF THE WORLD

Stock Index Current Previous

FTSEuro First 300 1,264.83 1,295.12

FTSE 100 6,463.59 6,522.26

DAX 9,373.26 9,709.09

CAC 40 4,085.30 4,234.86

DOW JONES 17,918.62 17,840.62

S&P 500 2,099.73 2,088.55

NASDAQ 4,859.16 4,822.90

Various Current Previous

EUR/USD 1.1089 1.1147

GBP/USD 1.2925 1.3276

Gold Spot (USD/oz) 1,366.80 1,348.30

Brent Crude(USD/bbl) 49.08 49.74

3-M US Treasury Yield 0.26% 0.24%

10-Y US Treasury Yield 1.38% 1.37%

30-Y US Treasury Yield 2.15% 2.14%

PHILIPPINES

~~ The PHL Financial Markets closed July 6 in observance of Eid’l Fitr, figures as of July 5 ~~ The local equities market fell slightly tracking loses in the region. Commodity prices once again fell on the back of gloomy economic

outlook. The PSEi trimmed 38.41 points, or -0.49%, and closed at 7,808.13. All sub-indices were in red. Largest decline was posted by the financials sector, which was down by 0.68%. There were 102 decliners and 85 advancers, while 50 were unchanged. Total value turnover was at Php8.16 billion. Foreigners were net buyers at Php0.94 billion.

On the local fixed income space, prices of government securities saw mild profit-taking following the post-Brexit rally that lasted

for several days. Yields went up across the curve by an average of 1.48bps. The long-end was unchanged while the belly rose by 2.6bps

and the short end by 1.2bps. The peso weakened against the dollar following the drop in oil prices. The USD/PHP pair rose by 24.5 centavos, or -0.52%, to 47.020.

The real effective exchange rate (REER) of the peso will remain stable and competitive amid volatilities in the global financial

markets brought about by the interest rate hike in the US and the fallout from the decision of the UK to leave the European Union,

the Bangko Sentral ng Pilipinas (BSP) said yesterday. BSP Deputy Governor Diwa Guinigundo said the country’s sound macroeconomic fundamentals would likely support the stability of the peso against the dollar. “The country’s firm macroeconom ic fundamentals and strong external position could support the broad stability of the peso over the medium-term,” he said. The Development

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Budget Coordination Committee (DBCC) decided to maintain the foreign exchange assumption at 45-48 to the dollar during its 168th meeting last Tuesday. Within this range, Guinigundo said the REER of the peso would continue to be broadly stable and competitive. The REER is a weighted average of inflation-adjusted bilateral exchange rates with currencies of trading partners. It reflects not only

movements in nominal exchange rates but also inflation differentials with trading partners. “It’s been P45-48 since the beginning of the year. This range is based on the sustained stability of our external payments position despite the external challenges due to our good macro fundamentals,” he said in a text message. Amid the weaker peso assumption, Guinigundo said the country’s balance of payments

(BOP) position and current account (CA) would continue to book surpluses due to cash remittances from overseas Filipinos as well as receipts from tourism as well as the business process outsourcing (BPO) sector. “We expect a BOP, CA surplus. Despite challenging external conditions, we’re able to maintain a CA surplus on account of higher remittances, BPO, tourism, income items,” he said. The

average peso exchange rate weakened to 46.90 to $1 in the first six months from the 45.20 to $1 level in 2015. The DBCC also adopted the recommendation of the BSP to keep the inflation target range at two to four percent between 2016 and 2018. The BSP’s lowered its inflation forecast to two percent instead of 2.1 percent this year but retained the projected 3.1 percent next year and 2.6 percent in 2018.

Inflation eased to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates amid the softening oil prices in the world market.

The Consumer Price Index for the month matched the 1.9% median estimate yielded in a BusinessWorld poll of 14 economists last week. It also fell within the Bangko Sentral ng Pilipinas’ (BSP) expected range of 1.5-2.4% but remained well below the central bank’s 2-4% target band for 2016. Core inflation, which excludes items that are prone to volatile swings, was also at 1.9%. The rise in prices of

widely used goods were led by the indices of Tobacco and Alcoholic Beverages and Education which rose by 3.8% and 3.7%, respectively. These were followed by Clothing and Footwear (2.5%), Health (2.2%) and Food and Non-alcoholic Beverages (2.1%). Other indices which saw increased prices were: Furnishing, Household Equipment and Routine Maintenance of the House, Recreation and Culture, and

Transport and Restaurant and Miscellaneous Goods and Services. Meanwhile, indices of Housing, Water, Electr icity, Gas, and Other Fuels and Communications posted declines of 1.3% and 0.1%, respectively.

Bad loans held by thrift banks increased in April from a year ago, rising faster than the growth in total credit granted by the lenders, according to central bank data. Non-performing loans -- or debts left unpaid at least 30 days past due date -- held by thrift banks stood at P35.321 billion, 29.1% higher than the P27.367 billion worth of soured debts incurred in April 2015 and picking up from the P34.346 billion posted a month ago. This outpaced a 17.1% climb in banks’ total loan portfolio from P712.753 billion to P608.493 billion,

data from the Bangko Sentral ng Pilipinas (BSP) showed. Non-performing assets held by thrift banks, which represent seized assets from defaulting clients, also rose by more than a fifth to P57.95 billion from P47.409 billion. Unlike the bigger universal and commercial banks, thrift banks are focused on lending to individual consumers. Relative to total bank loans, the share of bad debts also rose to 4.96% from a

4.5% ratio posted a year earlier. Coverage for soured loans also slipped to just 72% from 74.41% previously as the amount of non-performing loans increased. However, the banks hiked their allowance for credit losses to P25.433 billion in April, nearly a fourth higher than the P20.363 billion which was set aside during the previous year. In particular, the lenders increased the share of its reserves against

potential defaults to 3.57% of total loans, higher than last year’s 3.35% loan loss reserve ratio. The BSP tracks the NPL ratios of banks and financial entities to monitor asset quality, in keeping with its mandate of keeping a sound and stable banking system. Thrift banks remained profitable as of end-March to book P2.964 billion in net income, rising from P2.799 billion booked during the same period last year. There

are 66 thrift banks operating in the Philippines as of March operating 2,064 branches nationwide, according central bank data. Thrift banks are moving towards digitization to reach out to more clients and cement their presence amid stiffer competition. The

online space will provide the smaller lenders more opportunity to expand its clientele as the market continues to evolve, Chamber of Thrift Banks (CTB) President Rommel S. Latinazo, who is also president of Yuchengco-led RCBC Savings Bank said in a recent interview. “For many of us, we see that the market is evolving. The digital space will become an important source of business so innovation is really

something that we’re looking at. We need to prepare and look at different sources of channels for our consumer loans,” he said. As the economy continues to grow and the middle class expanding, Mr. Latinazo said the market is also expanding. “For us we continue to expand our market and we see digitization as an opportunity and a potential development in the near future. Online and mobile can reach a

wider base... even for the banks, we have online banking and transfer funds. A lot of things can be done through the mobile phone and for us its an opportunity to reach out to more customers.” Bangko Sentral ng Pilipinas (BSP) data showed that combined profits of the country’s thrift banks grew to P11.786 billion last year, up from 2014’s net income of P10.287 billion. Thrift banks remain “very optimistic”

as far as outlook for growth of the sector is concerned, the CTB president said, noting that smaller lenders continue to push for inclusive growth via expanding their operations in the countryside. They also welcomed pronouncements from the current administration on their thrust to develop the agricultural sector, since this will provide more opportunities for thrift banks which are mostly in far-flung areas. BSP

Governor Amando M. Tetangco, Jr. earlier told thrift banks to focus on niche markets, digitization and expanding presence in underserved areas to sustain growth momentum amid stiffer competition and a more challenging business environment. Mr. Tetangco said thri ft banks are enablers of economic development and inclusive growth and said small lenders should follow their mandate and focus on their key

sectors. Depositors whose savings are "trapped" in a closed bank can now get their money back simply by presenting a passbook, an

ATM card, a transaction receipt, a check book, or any other bank record in their possession. Republic Act 10846 has amended the Charter of the Philippine Deposit Insurance Corp. (PDIC), giving depositors quicker access to their deposits. PDIC said that under RA 10846 the payment of deposit insurance may now be based on records authenticated by PDIC and not only on the records kept by a

closed bank. "This addresses the inconvenience caused to depositors by the absence of deposit records of closed banks or by irregularities in the recording, documentation, and deposit record keeping of a closed bank," the state-run deposit insurer noted. PDIC President Cristina Que Orbeta emphasized the importance of keeping deposit records and updating information with banks. In most cases,

the insurer found that records of closed banks were usually in disarray once the PDIC takes over. "In situations like these, payout operations encountered delays due to the need to examine carefully deposit records of the bank causing undue inconvenience to depositors," the PDIC said. RA 10846 allows the gross settlement of deposit insurance claims, except when depositors have past due

loans and when their deposits are under hold-out agreements with the bank. This means loans that are current will no longer be deducted from the amount of deposit insurance the PDIC will pay the depositors of closed banks, enabling borrowers to benefit from the payment period agreed with the bank. "This will expedite the payment of deposit insurance claims and quicker access to their trapped funds," it

added. PDIC reminded borrowers of their responsibility to continue paying their loans as the deposit-insurer will continue to collect loans owed to banks even after closure.

The economic team of Philippines’ newly installed President Rodrigo Duterte lowered growth targets and projected a wider

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budget deficit as tax revenue disappoints. Growth will probably reach 6 percent to 7 percent this year, Budget Secretary Ben Diokno told reporters in Manila Tuesday following a meeting of Duterte’s economic team. That’s down from a projection of 6.8 percent to 7.8 percent made by the previous administration. Duterte, a 71-year-old former mayor who took office last week, has focused his attention on

fighting crime and corruption, leaving economic management to his Finance Minister Carlos Dominguez, a childhood friend of the president, and Diokno. They face the challenge of maintaining investor confidence and keeping growth going in an economy that expanded the fastest in Asia in the first quarter. The budget deficit will probably reach 2.5 percent of gross domestic product this year and 3 percent in

2017 mainly because of revenue shortfalls, Diokno said. The government will continue to meet 80 percent of its borrowing needs from the domestic market and fund 20 percent abroad, he said. Next year’s growth target was lowered marginally to 6.5 percent to 7.5 percent from 6.6 percent to 7.6 percent set by the previous administration. Growth is set to range between 7 percent and 8 percent from 2018 to 2022,

Diokno said. The currency will probably remain stable and competitive, with officials keeping the peso forecast at 45-48 per dollar in its economic projections through 2022, central bank Deputy Governor Diwa Guinigundo said at the briefing.

The administration of President Duterte plans to dispose of more assets in the next three years, including its stake in United Coconut Planters Bank (UCPB) as well as those belonging to state-run Power Sector Assets and Liabilities Management (PSALM) whose privatization have long been delayed, according to Finance Secretary Carlos G. Dominguez III. “There will be more assets to

be unloaded. I have just talked to PSALM officials and I told them that the original plan for PSALM was to get rid of the ass ets after the first five years. That was 10 years ago—we have to speed up their disposal of assets,” Dominguez told reporters after the Cabinet-level, inter-agency Development Budget Coordination Committee (DBCC) meeting on Tuesday. Dominguez said he wanted the disposition of

PSALM’s assets finished in three years’ time. The finance chief added he would want to dispose of the government’s stakes in Philippine Postal Savings Bank. He said Postal Bank would likely be sold in two years’ time as the bank’s valuation and due diligence for the sale as well as actual bidding would be undertaken “as quickly as possible.” As for UCPB, Dominguez said that since the planned sale was facing

legal troubles, the DOF would have to “think about it.” To recall, the Supreme Court in June last year issued a temporary res training order putting on hold the implementation of Executive Order Numbers 179 and 180 earlier signed by former President Benigno Aquino III, which would have set into motion the privatization and reconveyance to the government of about P74.3 billion in coco levy funds that the high

court earlier declared public funds. Thus last July, the Privatization and Management Office (PMO) announced that it “temporarily suspended” the planned sale of the government’s controlling stake in UCPB. The PMO had been in the process of disposing the government’s UCPB stake, earlier targeted to be concluded last September, through a privatization scheme that would require the winning bidder to not only acquire the government equity but also infuse fresh capital into the bank. It had required recapitalizing UCPB by at least

P15 billion through subscription to up to 37.2 billion primary common shares, as well as called for the outright purchase of at least 1.106 billion common shares held by the government or 73.9 percent of the bank. The floor price had been set at P1 per share, hence entailing a total investment of at least P16.1 billion. The PMO had received 12 letters of intent from local and foreign banks as well as private equity

firms eyeing to buy UCPB, the country’s 12th biggest bank, with about P260 billion in assets and over 200 branches. Meanwhile, Dominguez reiterated he was against the merger of state-run lenders Development Bank of the Philippines and Land Bank of the Philippines. “I’ve said I don’t like it, so we will review it with that point of view in mind. First of all, I don’t really think that you can do it

without legislation. Number two, they have two different missions, I don’t know if it’s the right thing to mix those missions up,” Dominguez said

The new government’s economic managers warned against being too reliant on the business process outsourcing (BPO) industry, as advances in technology could take the place of workers, thereby reducing the segment’s contribution to the economy. “We should not be too reliant on BPO. It might change -- not immediately, but in the future,” Budget Secretary Benjamin E.

Diokno said during a briefing on Wednesday. BPO is helping maintain the current account at a surplus, alongside overseas worker remittances and tourism. Economists expect BPO receipts to exceed those of remittances in the next few years. In a report released in March, Moody’s Analytics called the Philippines the “call center capital of the world,” with BPOs leading the strong growth in the country’s

service sector. However, members of the inter-agency Development Budget Coordination Committee said they are keeping a close watch on developments in artificial intelligence research abroad, which may do away with the need for call centers. “You might get some time in the not so distant future, in five to seven years, where a robot can answer your question,” Finance Secretary Carlos G. Dominguez III said.

“There are certain developments happening quite quickly abroad. We have to plan and not just rely on current technology.” Soc ioeconomic Planning Secretary Ernesto M. Pernia said a shift in BPO services with the advent of new technology may affect some aspects of the domestic industry, but expects outsourcing to remain robust. “In the short term, (artificial intelligence) is likely to curta il some jobs but over

the longer run... it’s going to demand even more manpower in different areas,” Mr. Pernia said. “I think outsourcing will continue to grow because it’s more efficient to outsource security guards, janitors, electricians. It applies to government offices as well.” In March 2015, Information Technology and Business Process Association of the Philippines Chairman Danilo Sebastian L. Reyes said the sector likely

posted 16% growth in 2014 to between $18.1 billion and $18.4 billion in total revenue. Bangko Sentral ng P ilipinas Deputy Governor Diwa C. Guinigundo said authorities still expect the BPO industry to remain “a very important driver” of economic growth, with the central bank expecting a 15% increase in BPO receipts this year.

S&P Global Ratings has slightly raised its growth forecast for the Philippines this year, with the country still counted among

Southeast Asia’s best performers as it expands above 6% until 2018. In a report, the global debt watcher now projects Philippine

economic growth at 6.1%, higher than the 6% estimate released last April. “The Philippines continues to be the outperformer with its growing middle class and business process outsourcing boom,” S&P said in an economic research released yesterday, titled “Asia-Pacific’s Overall Economic Picture Brightens a Bit Outside of China.” With the exception of India, the Philippines is seen to grow the fastest among

12 economies, and is slated to lead its four more developed peers in Southeast Asia as the country is poised to expand further by 6.3% in 2017 and 6.2% in 2018, S&P said. Economic managers of newly seated President Rodrigo R. Duterte on Tuesday slashed the government’s growth target to 6-7% this year from the 6.8-7.8% set by the previous administration, saying they expect growth this

semester to slow as the added boost from spending related to the May 9 elections fades. Socioeconomic Planning Secretary Ernesto M. Pernia had earlier said 6.5% gross domestic product (GDP) growth may be doable for 2016. The Philippine economy grew by 6.9% in the first quarter as election-related spending added to the usual anchor of household consumption as well as a continued increase in state

expenditures. Second-quarter GDP data will be out on Aug. 18. Average GDP expansion among the four members of the Association of Southeast Asian Nations in the report -- Indonesia, Malaysia, Philippines and Thailand -- is seen to pick up from 2015’s 4.6% to 4.8%, 4.9% and 5.2%, respectively, in the three successive years. S&P projects average Asia-Pacific growth at 5.3% yearly from 2016 to 2018. “Asia-

Pacific’s second quarter was reasonably good, as measured by data flow and policy developments,” the report read. “While many of the themes we have identified in recent reports remain in place -- below-trend GDP growth, sharply falling nominal trade due to global commodity price developments along with weak demand, lower-than-desired inflation and sluggish structural policy implementation -- there

were some improvements.” The report also cited “upside surprises” in Japan and Australia that propped up Asia-Pacific growth prospects,

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even as China’s slowdown persists as it rebalances from being an export-led economy to one that is consumption-driven. Asian countries have also so far generally weathered headwinds generated by the United Kingdom’s June 23 vote to leave the European Union. “The first wave of volatility following the ‘Brexit’ vote has been digested smoothly,” S&P said, noting that Asian markets “calmed after only a few

days.” “There are surely more follow-in post-Brexit surprises in store, but broader and more lasting aftershocks are needed to move the macro needle in Asia Pacific.” The Philippines currently holds a “BBB” rating -- a notch above minimum investment grade -- with a “stable” outlook from the credit rater, which was maintained last April as S&P expects strong economic activity, a healthy financial system and a

sustained policy environment even after a change in government leadership last June 30. By appointing experienced economic managers and committing to ease foreign restrictions on businesses, the Duterte

administration was off to a good start, DBS Bank Ltd. said. “[President] Duterte’s game plan is positive for the longer-term growth outlook. But delivery is key. Until policies are implemented, it’s all theory,” DBS Group Research economist Gundy Cahyadi said Monday in a report titled “Philippines: Duterte’s game plan.” Having admitted to a “lack of experience” in running the economy, President Duterte’s

decision to appoint experienced technocrats in his economic team was a “wise move,” Cahyadi said. It also helped “the Duterte team has indicated that they will broadly continue [former President Aquino’s] economic platform with some tweaks,” Cahyadi said. The economist took note of the Duterte administration’s plans to further liberalize the economy by expanding foreign ownership to 70 percent from the

current 40 percent. The President also said he was willing to lease lands for 40 years from the current setup of 25 years. “This is potentially significant. While foreign direct investment (FDI) increased several fold during Aquino’s term, it remains low compared to the rest of the region. Easing restrictions on foreign ownership is likely to encourage more inflows in the medium-term,” Cahyadi said. The economist said

“infrastructure development takes priority” under the Duterte administration, in line with plans to raise infrastructure spending to 5 percent of the gross domestic product (GDP) from an average of 2.2 percent during the Aquino administration. To increase expenditures on public goods and services, Duterte’s economic managers was planning to raise the budget deficit ceiling to 3 percent of the GDP, which Cahyadi

said was “not necessarily a problem, given the public debt profile.” The share of public debt to the GDP has been on the decline over the past five years.

Philippine National Bank (PNB) is open to possible bank acquisition this year, its top executive said. The Lucio C. Tan-owned lender prefers to buy another commercial bank should an opportunity arise, PNB President Reynaldo A. Maclang said in a recent interview. “Yes, yes, we’re open. If the opportunity comes, bakit hindi? (why not?),” Mr. Maclang said when asked whether PNB is open to possible acquisitions this year. “We’d like a commercial bank,” he added, although noting that currently, there seems to be no big bank up for sale.

The country’s fifth largest lender in assets terms said last year that it is setting its sights on becoming one of the country’s three biggest banks. Data from the Bangko Sentral ng Pilipinas showed that PNB is behind BDO Unibank, Inc. of the Sy family; Metropolitan Bank and Trust Co. of the Ty family; Bank of the Philippine Islands of the Ayala family; and state-owned Land Bank of the Philippines in terms of

assets as of end-December 2015. LT Group, Inc. President Michael G. Tan had said PNB needs to acquire “to be able to get to that” level. PNB is the banking arm of the holding firm. As of the first quarter, the bank’s total consolidated resources stood at P699 .1 billion. Its total capital adequacy ratio stood at 17.77% as of end-March, well above the central bank’s 10% minimum requirement. Its common equity Tier

1 ratio of 16.91% also exceeded the minimum ratio of 8.5%. United Coconut Planters Bank was earlier put on the auction bloc, although the sale of the government’s 73.9% stake was halted by an indefinite stay order last year. San Miguel Corp.’s controlling stake in Bank of Commerce was also reported to be up for grabs but talks with potential buyer Mizuho Financial Group, Inc. broke down because of a

disagreement over the price, Bloomberg earlier said. PNB had said that aside from acquisitions, it can also piggyback on its international footprint, one of the largest among all Philippine banks, and use that platform to grow the lender. It has at least 70 overseas branches and offices in 16 countries on top of its 669 branches and 954 automated teller machines nationwide as of end-March. It can also build on its

relationship with Philippine Airlines, Inc. for some cross-selling. The Lucio C. Tan-led lender booked a net income of P2.6 billion in the January to March period, 116% higher than the P1.2 billion posted during the first three months of 2015. In 2015, the bank raked in P6.3 billion in consolidated net income, up 15% from the previous year’s P5.5-billion net profit, driven by continued improvements on earnings

from its core businesses.

Assets managed by Rizal Commercial Banking Corp.’s (RCBC) wealth management group are seen expanding this year, with

more product offerings in the pipeline and amid its increased clientele. The bank unit is looking at a 15-20% increase in assets under its management (AUM) for 2016 after hitting its target in 2015, RCBC Wealth Management Group Head Jane N. Manago said in a recent interview. The bank told the Philippine Stock Exchange earlier that its total assets under management grew by 13% to P84.3 billion last

year. Assets under management of RCBC was around P72 billion in 2014, officials of the bank unit earlier said. “We’re targeting maybe 15% to 20% increase this year,” Ms. Manago said. “Last year, we did [hit our target] but midyear, we have to re-study if we have to adjust it up or down,” she added. RCBC’s wealth management clients increased by 11% to 3,118 in 2015. For this year, the bank said in an earlier

regulatory filing that is also looking to grow its clients by 16%. For the last five years, AUMs of RCBC has been growing by a compounded growth rate of 20% and client base has grown by 16%, former RCBC Wealth Management Group Head Manuel G. Ahyong, Jr. said, adding that the bank unit has recently been focusing on diversifying its investments. Ms. Manago said for this year, more clients and added

investment options will drive the growth as it looks to expand its menu of offerings. “We’re trying to expand our share of our existing customers’ wallet and at the same time, we’re on-boarding new clients because that’s where the growth will come from,” the official added. At this point, the bank unit is “concentrating on Filipino and local Chinese markets,” “so we’d rather not at this stage go for the foreign

markets.” Last year, RCBC’s wealth management group said it has added the US and Japan equities market as another investment option for its clients. The wealth management group of the Yuchengo-led bank has at least seven offices nationwide. Meanwhile, Ms. Manago said clients of RCBC’s Wealth Management unit has “shifted to the younger generations.” “When we started, we were serving clients who

were in their late ’50s, ’60s and even ’70s, but we’ve noted in the past several years, they’ve passed on their businesses and even the management of their wealth to their children. Right now, we are dealing with this second generation and even the clients, that we are on-boarding right now, they are the younger ones, late ’40s, early ’50s and these people they are more knowledgeable.” Overall, around 80%

of its clients were already from the younger group, the official said, noting that previous clients have already passed it on to the next generation. Average net worth was estimated to be at P5 million per wealth management client. The bank’s wealth management unit is currently offering traditional products including fixed income, equities, securities, unit investment trust funds (UITF), mutual funds, and both

local and dollar-denominated bonds to its clients. Mr. Ahyong had said RCBC Wealth Management Group carries “over 50 mutual funds and UITFs” which basically make up about 90% of the mutual fund market in the Philippines. On its portfolio mix, the bank’s f unds “are quite diversified.” “We keep very little of cash -- majority is in fixed income, mutual funds, UITFs and equities.”

Conglomerate San Miguel Corp. has obtained full control of the Metro Railway Transit (MRT) 7 project by buying out the 49

percent stake held by businessman Salvador Zamora II for $100 million. Through its wholly owned subsidiary San Miguel Holdings

Corp., SMC signed a deal to buy the additional 49 percent in Universal LRT Corp. BVI Ltd., the conglomerate disclosed to the Philippine

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Stock Exchange on Tuesday. As part of the deal, SMC also bought 100 percent interest in ULCOM Co. Inc., the designated facility operator of the MRT7 project. The $100 million consideration for the deal consisted of payment for the shares as well as the outstanding shareholder advances amounting to $3.8 million. Universal LRT holds the exclusive right, obligation and privilege to finance, design,

construct, supply, complete and commission the MRT7 project, a planned 22-kilometer-long elevated railway starting from San Jose del Monte in Bulacan and ending in North Avenue in Quezon City.

The Philippine Stock Exchange, Inc. (PSE) is expecting three more companies to go public by the yearend, although these initial public offerings (IPO) would not be enough to help the local bourse reach its P200-billion target for fund-raising activities. “While that target remains for management, we’re hoping to narrow the gap because that’s P200 billion whereas the first half has rea lly been a

challenge,” PSE Chief Operating Officer Roel A. Refran said in a mix of English and Filipino in a June 29 interview. “But at least in the second half, we’re seeing already in terms of companies who have already engaged underwriters. No-name basis, they’ve already started the process and it’s just going to be a matter of time,” Mr. Refran added. Billionaire Manuel B. Villar’s death-care business Golden Haven

Memorial Park, Inc. ended the six-month IPO drought on the local bourse with a P778.23-million share placement. The stock made a strong debut on June 29, hitting the ceiling price and doubling it the following day. The second IPO opened shortly thereafter. Cemex Holdings Philippines, Inc., a unit of Mexican cement and construction materials firm Cemex S.A.B. de C.V., started offering P25.13 billion

worth of shares on Monday. Asked how many companies are looking to follow suit, Mr. Refran said: “Right now, outside of Golden Haven and Cemex, what we’re seeing in the pipeline would be -- maybe easily, for the next half, around three hopefully.” The three companies intend to make offers totaling around P50 billion, bringing the total value of IPO and fund-raising activities on the stock exchange close to

P100 billion or half the P200 billion targeted for the year, Mr. Refran added. Aside from Golden Haven and Cemex Holdings, the Securities and Exchange Commission (SEC) has approved Philippine Primark Properties, Inc.’s maiden share sale. Three more companies -- TVI Resource Development (Philippines), Inc., Pointwest Technologies Corp. and Green Power Panay Philippine, Inc. -- have pending IPO

applications. But the proposed offers would only total P5.79 billion, broken down as follows: P1.7 billion for the property firm; P1.66 billion for the local affiliate of Canada-listed mining company TVI Pacific, Inc., P2.21 billion for the business process management service provider and P222.8 million for the biomass power producer. Other companies have expressed their intention to join the stock exchange within the

year, although the SEC has received no new IPO application thus far. Pilipinas Shell Petroleum Corp., for one, has tapped BPI Capital Corp. and JP Morgan for its planned offering. The environment remains conducive for companies to enter the stock exchange, Mr. Refran noted, amid the overhang from the outcome of the referendum that favored United Kingdom’s departure from the European Union. “While ‘Brexit’ will have far-reaching implications especially within Europe, the financial markets would always also consider the correlation

between a jurisdiction with the European market, in general,” Mr. Refran noted. The development would not impact the Philippines the same way China’s financial market rout in August affected markets in Southeast Asia although the risk of a “financial crisis contagion” is present, according to the PSE official. “This risk element can get people off track in terms of their fund-raising, but I think, by and large, the

overwhelming sentiment is still we’re not as affected as probably people would expect if this would happen in the context of ASEAN and Asia,” Mr. Refran added.

Industrial gas supplier Linde Philippines, Inc. is investing P1.3 billion (around €25 million) to upgrade its manufacturing facility in Apalit, Pampanga. In a July 5 statement, the local unit of the Germany’s Linde Group said the funds will be used to improve its existing air separation unit and add a new nitrogen liquefaction unit (NLU) at its Apalit plant. Once completed, the company said the manufacturing

facility “will be able to produce more than 400 tons per day of liquefied gases and related solutions that are essential to support the fast-growing electronics, food and beverage, fabrication, shipbuilding and health care industries in the Philippines.” Linde Philippines said the NLU is scheduled to start operations in 2018, which is expected to support the expansion of Linde’s liqu id nitrogen and liquid oxygen

capacity. “This investment demonstrates our long-term commitment to strengthen our supply capabilities and service offerings in order to continue to support the growth of the local manufacturing industries,” Alexander B. Coo, managing director of Linde Philippines, was quoted as saying in a statement. Seck Luan Lim, Linde Group cluster business head for Singapore, Indonesia and Philippines, cited the

company’s confidence in the growth of the Southeast Asian Region as a factor behind the investment. “The Philippines is an important part of our overall Southeast Asia business and we want to continue to grow and support the local markets. The economic growth that we have seen in the Philippines in recent years gives Linde the confidence to continue to invest in the country for the future,” Ms. Lim said. Linde

Philippines was formed in 2010 after the rebranding of Consolidated Industrial Gases, Inc. (CIGI) and Southern Industrial Gas es (Philippines), Inc. It operates nine production sites and around 25 sales centers across the country. The company manufactures and distributes industrial, medical and specialty gases and provide a range of related services, including the installation of on-site plants, gas

equipment, pipelines and associated engineering services. The Linde Group reported a revenue of €17.94 billion in 2015, making it the largest gases and engineering company in the world with a global workforce of over 64,500 employees in over 100 countries. Linde Engineering, a global plant engineering and construction arm of the group, delivered around 3,000 air separation plants in 80 countries,

with Philippine plants located in areas such as Pampanga, Laguna, and Cebu.

ASIA-PACIFIC

~~ The Financial Markets of Indonesia will be closed from July 4 until July 8 for end of Ramadan celebration~~

Japanese stocks fell to more than one-week lows on Wednesday as renewed Brexit worries heightened uncertainty about the global economy and took a toll on exporters and financial stocks. The Nikkei share average tumbled 1.9 percent to 15,378.99, the lowest closing level since June 28. Selling in Japanese stocks accelerated when sterling's further drop spooked sentiment during Asian trade, sliding as

far as $1.2798, breaking through the previous low of $1.3000 set overnight. The broader Topix dropped 1.8 percent to 1,234.20 in relatively active trade, with 2.2 billion shares changing hands, the highest since June 28. The JPX-Nikkei Index 400 shed 1.9 percent to 11,129.04

BAIPHIL Market Watch – 07 July 2016 Page 6 of 9

Hong Kong stocks fell on Wednesday as the Chinese yuan hit a fresh 5-1/2 year low against the dollar while worries about global growth

and the long-run implications of Brexit hammered risky assets of all types. The Hang Seng index dropped 1.2 percent to 20,495.29. The

China Enterprises Index slid 1.6 percent to 8,503.14.

The Caixin China Services PMI rose to 52.7 in June of 2016 from 51.2 in May and market consensus of 52.3. It was the highest

reading since July 2015, driven by a further rise in total new business while payrolls expanded slightly. At the same time, unfinished work declined for the first time in three months. Some companies reported increased efforts to clear backlogs due to greater amounts of incoming new work. Sustained cost inflation was seen across China’s service sector, with the rate of input price inflation picking up to a

four-month high. Services PMI in China averaged 52.31 Index Points from 2012 until 2016, reaching an all time high of 54.70 Index Points in May of 2012 and a record low of 50 Index Points in July of 2014. Services PMI in China is reported by Markit Economics.

Activity in Japan's services sector contracted in June as new business shrank the fastest in almost five years, adding to worries that the economy is losing momentum due to weak consumer spending, a private business survey showed on Tuesday. The Markit/Nikkei Japan Services Purchasing Managers Index (PMI) fell to 49.4 in June from 50.4 in May on a seasonally adjusted basis. The

index fell below the 50 threshold that separates expansion from contraction for the first time in two months. The index for new business fell to 47.3 from 50.4 in the previous month to reach the lowest since September 2011. "A number of panelists blamed the appreciation of the yen against the dollar as a factor hampering sales, while some commented on the earthquakes that occurred back in April as st ill having a

detrimental effect on demand,” said Amy Brownbill, an economist at Markit, adding that uncertainty about China's economy was also hurting business sentiment. The composite index for output in both manufacturing and services fell to 49.0 in June from 49.2 in May on a seasonally adjusted basis, showing the fourth consecutive month of contraction. Business confidence was subdued in the second quarter

and consumer prices fell in May at the fastest pace in three years, data showed last week, heightening pressure on the Bank of Japan to expand quantitative easing. The government is also seen increasing fiscal spending as weak overseas demand hurts exports, though critics warn that throwing more money into the economy won't fix chronic problems such as low productivity and a rapidly shrinking labor

force. Services accounted for 70.1 percent of Japan's gross domestic product, while manufacturing had a 18.7 percent share in 2014. Australia’s central bank stood pat on interest rates, remaining impervious to the country’s unclear election result as it awa its

inflation data due later this month to assess its next move. Reserve Bank of Australia Governor Glenn Stevens and his board left the

cash rate at 1.75 percent Tuesday, as forecast by every economist surveyed by Bloomberg. Policy makers have left borrowing costs unchanged for the past two months after easing in May in response to weak first-quarter consumer-price growth. For the second time in six years Australia is coming to terms with an election that failed to produce a decisive majority, even as a weaker currency and record-low

rates boost growth and hold unemployment below RBA forecasts. Between the political limbo, core inflation and wage growth at record lows and a stronger Aussie dollar since June, the possibility of another cut after second-quarter inflation is released on July 27 is real. “Over the period ahead, further information should allow the board to refine its assessment of the outlook for growth and inflation and to

make any adjustment to the stance of policy that may be appropriate,” Stevens said in his statement. Stevens acknowledged the complication of a higher local dollar, reiterating that “an appreciation of the currency could complicate” the adjustment of the economy from a mining boom. Gross domestic product grew 3.1 percent in the first quarter from a year earlier, close to its 30-year average of 3.2 percent.

The concern for Australia’s central bank from a tight election is that such a febrile political environment may hinder the government from passing structural economic reforms to boost productivity and growth and bring the budget under control. As a result, the RBA is likely to remain the key provider of stimulus to the economy.

Australia reported a trade gap of AUD2.22 billion in May of 2016, an increase of 24 percent from an upwardly revised AUD1.79 billion

deficit in April and missing market estimates. It was the largest trade deficit since March as exports rose 1.0 percent to AUD26.17 billion

while imports went up 2.0 percent to AUD28.39 billion.

REST OF THE WORLD

European stocks fell on Wednesday, led lower by a drop in the shares of major banks, as persistent worries over Britain's vote to leave the European Union weighed on markets. The pan-European STOXX 600 and the similar FTSEurofirst 300 index were both down by 0.5 percent. The STOXX Europe 600 banks index fell 1.2 percent, with shares in Spain's Caixabank down 1.8 percent after Caixabank warned

it expected a 1.25 billion euro ($1.4 billion) hit related to mortgage clauses. U.S. stocks rose on Wednesday as the Federal Reserve was seen refraining from raising U.S. interest rates soon, even as

economic data showed the world's largest economy regained speed in the second quarter. The minutes for the June 14-15 meeting of the U.S. central bank, which took place before Britons voted to leave the European Union, showed widespread unease over the "Brexit" vote, as well as a severe slowdown in hiring by U.S. employers. Fed policymakers also said rate hikes should stay on hold until they have a

handle on the consequences of Brexit. Since the vote, stocks have been volatile on Wall Street, while investors have driven up safe-haven assets such as gold and yields on long-term U.S. debt US30YT have fallen to record lows. Adding to the view of persisting lower rates, Fed Governor Daniel Tarullo said on Wednesday no rate hikes are needed until inflation is more solid. The Dow Jones industrial

average rose 78 points, or 0.44 percent, to 17,918.62, the S&P 500 gained 11.18 points, or 0.54 percent, to 2,099.73 and the Nasdaq Composite added 36.26 points, or 0.75 percent, to 4,859.16. U.S. services industry activity hit a seven-month high in June as

new orders surged and companies hired more workers, suggesting the economy regained speed in the second quarter. Advancing issues outnumbered declining ones on the NYSE by a 1.8-to-1 ratio and on the Nasdaq a 1.64-to-1 ratio favored advancers. About 7.4 billion

BAIPHIL Market Watch – 07 July 2016 Page 7 of 9

shares changed hands in U.S. exchanges, compared with the 7.72 billion daily average over the past 20 sessions. Federal Reserve policymakers decided in June that interest rate hikes should stay on hold until they have a handle on the

consequences of Britain's vote on EU membership, according to the minutes of the Fed's June policy meeting released on Wednesday. The minutes of the June 14-15 meeting, which took place ahead of the June 23 referendum in which Britons voted to leave the European Union, showed widespread unease over the so-called "Brexit" vote, including among voting members on the rate-setting

Federal Open Market Committee. "Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the U.K. vote," according to t he minutes. Worries have only intensified since the vote and Fed Governor Daniel Tarullo cited the rise in uncertainty on Wednesday when he argued

for holding off on rate hikes until inflation had turned decisively higher. At the June policy meeting, policymakers also c ited a severe slowdown in hiring by U.S. employers as a reason for leaving interest rates steady last month, the minutes showed. The Brexit vote shocked investors and triggered $2 trillion in losses in global stock markets the day after the referendum. Anxieties remain, with global

financial conditions tightening as investors anticipate it could take years before Britain and the EU agree to new rules on f inance, trade and immigration. On Wednesday, U.S. benchmark and long-dated Treasury yields hit record lows, with some investors betting the Fed would keep rates on hold through 2017. Before the British vote, the Fed had signaled two interest rate hikes would likely be needed this year to

keep the U.S. economy from eventually overheating. But since the British referendum, several Fed policymakers have said the uncertainty warrants caution, including New York Fed President William Dudley who said on Tuesday the Fed needed to be patient on rate increases and that it was too soon to know the fallout from the British decision. A severe slowdown in hiring during May and weak business

investment even outside the sagging energy sector had raised questions about the U.S. outlook even before the Brexit vote. St ill, in the minutes of the June meeting, many Fed policymakers who participated in the policy discussion stressed the sharpness of the hiring slowdown could be statistical noise, and most argued the economy would be ready for rate increases unless a financial or economic shock

knocks America off course, according to the minutes. Since the Brexit vote, the British pound has plunged 13 percent against the dollar, including a 1 percent decline on Wednesday, and investors and policymakers are watching out for further signs of financial st ress that could hit economic growth in America and worldwide. "None of us really knows the magnitude and I doubt there will be a moment when

people say Brexit is done,” Tarullo said on Wednesday. "There is a good bit of uncertainty."

Overview of Outsourcing Framework (Knowing the Essentials When Outsourcing)

- 09 July 2016

Project Management Framework

- 09 July 2016

Updated Guidelines on Sound Credit Risk Management (Includes BSP Cir. No. 908:

Agricultural Value Chain Financing Framework)

– 15 July 2016

Embedding Risk Management in New Product Development & Management

– 16 July 2016

Supervisory Expectations on the ICAAP

– 22 July 2016

BSP Cir. No. 889 and the Sales and Marketing Guidelines for Supervised Financial

Institutions

– 22 July 2016

Signature Analysis & Forgery Detection

– 23 July 2016

Enterprise Risk Management

– 23 July 2016

Excel Training for Bankers

– 29 & 30 July 2016

BSP Cir. No. 706, AMLA Law, RA 10365 and the AML Risk Rating System

– 05 August 2016

BAIPHIL Market Watch – 07 July 2016 Page 8 of 9

For details, please contact BAIPHIL via telephone (853-4457/519-2433) or email training@baiphil.org.

JULY 1-15

01 Monica P. Forbes - Secretariat

02 Evelyn D. Vinluan - Past President

03 Josefina S. Cortez - Associate Life Member

09 Frieda Carren F. Sunga - BNP Paribas

13 Carmelita R. Araneta - Past President

15 Ma. Lourdes G. Trinidad - RCBC Savings

EXERCISE – means to put into effect the right specified in a contract. In options trading, the option holder has the right, but not the obligation, to buy or sell the underlying instrument at a specified price on or before a specified date in the future. If the holder decides to buy or sell the underlying

instrument (rather than allowing the contract to expire worthless or closing out the position), he or

she will exercise the option, and make use of the right available in the contract.

“What we think, we become...”

- Buddha

BAIPHIL Market Watch – 07 July 2016 Page 9 of 9

Happy accident

BPI Asset Management Business World Philippine Daily Inquirer Philippine Star

GMA News ABS-CBN News Bulletin Today Reuters

Bloomberg CNN Wall Street Journal Strait Times

Investopedia Brainy Quotes Goodreads Corsinet – Trivia

Trivia Of The Day Filipi-Know Phrases.Org.UK Fun, Trivia & Humor

Compiled And Prepared By: Research Committee FY 2015-2016

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

DISCLOSURE: The BAIPHIL Market Watch (BMW) is for informational purposes only. The content of the BMW is sourced from third party websites and may be subject to change without notice. Although the information was compiled from sources believed to be reliable, no liability for any error or omission is accepted by BAIPHIL or any of its directors, officers or employees, and BAIPHIL is not under any obligation to update or keep current this information