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Manufacturing activity in the Philippines continued to expand in November, propelled by robust demand and growth in new orders and production, S&P Global said.

The S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November from 52.4 in October, indicating a strong improvement in operating conditions, the strongest since February.

“The latest PMI data from S&P Global signaled a further strengthening of the Filipino manufacturing sector in November. Strong demand conditions supported quicker expansions of both new business and output,” Maryam Baluch, economist at S&P Global Market Intelligence, said in a statement on Friday.

A PMI reading above the 50 mark denotes improvement in operating conditions, while a reading below 50 signals deterioration.

In November, the Philippines had the highest PMI reading among Southeast Asian countries with available data, ahead of Indonesia and Singapore (both at 51.7). Meanwhile, Myanmar (48.1), Malaysia (47.9) and Thailand (47.6), and Vietnam (47.3) all recorded contractions during the month.

The headline PMI measures manufacturing conditions through the weighted average of five indices: new orders (30%), output (25%), employment (20%), suppliers’ delivery times (15%), and stocks of purchases (10%).

S&P Global noted the latest PMI survey data showed an uptick in new orders and output.

“Indeed, November saw rates of growth quicken to eight- and ten-month highs, respectively. Firms noted that strong demand conditions both in domestic and foreign markets, new client wins and increased contract work boosted overall sales and in turn spurred greater production,” it said.

On the other hand, purchasing activity declined for the first time in over a year.

“Higher prices for raw materials and concerns of overstocking dissuaded input buying at some firms. However, some businesses continued to purchase inputs amid growing input requirements, thereby helping to offset the overall downturn,” it added.

Manufacturing firms also reported a cut in jobs, ending two months of “tepid growth.”

“The drop came amid continued evidence of spare capacity, as backlogs dropped for the fifth month running and sharply, leading some firms to curtail staffing. That said, a sustained rise in new business encouraged other firms to increase their intake of workers,” it added.

S&P said stocks of purchases expanded but at a modest rate. “Growth in inventories in part stemmed from manufacturing firms holding onto inputs in an effort to become more cost-effective,” it added.

“Meanwhile, vendor performance worsened in November following two months of improvements. The rate at which lead times lengthened was moderate overall, with firms citing material shortages and congestion at ports,” the report said.

“That said, with other price pressures remaining muted, the rate of input price inflation was the weakest recorded in over three years, resulting in a similarly modest uptick in manufacturers’ selling prices,” it added.

Manufacturers were generally optimistic for the next 12 months as almost half of respondents see an expansion in production. “While this marked an improvement since October, confidence levels were still historically subdued,” the report noted.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that improved manufacturing output was due to the “seasonal increase in importation, manufacturing, and other production activities” amid the holiday season.

“Generally better weather conditions in most parts of the country also supported the pick up in manufacturing and overall business activities in the country,” he said in a Viber message.

Easing inflation also helped drive factory production, Mr. Ricafort said.

Headline inflation eased to 4.9% in October from 6.1% in September and 7.7% in the same month a year ago.

The latest inflation print was the slowest pace in three months. However, it marked the 19th straight month that inflation breached the central bank’s 2-4% target band. — Luisa Maria Jacinta C. Jocson

Short-term foreign investments continued to exit the Philippines for the second month in October as investors sought higher returns in other countries, data from the Bangko Sentral ng Pilipinas (BSP) showed.

Transactions on foreign investments registered with the central bank through authorized agent banks (AABs) posted a net outflow of USD 328.19 million in October, according to BSP data released on Thursday.

The October figure represents a reversal from the USD 83.44 million in net inflows seen a year earlier. However, it is 52.9% lower than the net outflow of USD 698.01 million in September.

Investments of this nature are commonly referred to as “hot money” due to the ease with which these flows can enter or leave an economy.

“Portfolio outflows from the Philippines persisted as investors sought better returns in countries like the United States,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

“The attractive interest rates, strong stock market performance, and ongoing economic resilience in advanced economies and financial centers such as Singapore and Hong Kong have been driving investments in those regions,” she said.

BSP data showed that gross outflows dropped by 19.1% to USD 1.28 billion in October from the USD 1.58 billion seen in the previous month.

October outflows more than doubled (128%) from the USD 561.11 million recorded in the same month in 2022.

The BSP said the United States received 61.9% of total outward remittances.

Meanwhile, gross inflows stood at USD 954.38 million, 7.5% higher than the USD 887.61 million posted in September and by 48% from USD 644.55 million a year earlier.

The bulk of investments (60.5%) went to Philippine Stock Exchange (PSE)-listed securities, mainly in banks, property, holding firms, casinos and gaming, as well as food, beverage and tobacco.

Around 39.5% of the foreign inflows went to investments in peso government securities and other instruments.

Investments during the month mostly came from the United Kingdom, the United States, Luxembourg, Singapore, and Hong Kong, which accounted for 88% of the total foreign inflows.

For the first 10 months of the year, hot money yielded a net outflow of USD 732.58 million, a reversal from the USD 320.24 -million net inflow in the same period last year.

Moving forward, Ms. Velasquez said portfolio inflows to the Philippines may improve in November and December.

“This is primarily due to the sentiment that the US has already reached its peak policy rate, which could prompt investors to divert their investments towards countries like the Philippines,” she said.

The Federal Reserve is widely expected to keep borrowing costs steady in its December policy meeting before its start cutting interest rates in 2024. The Fed has raised rates by 525 basis points (bps) from March 2022 to July 2023.

Back home, the BSP raised policy rates by 450 bps from May 2022 to October 2023, bringing the benchmark interest rate to a 16-year high of 6.5%.

“Additionally, the appreciation of the Philippine peso is expected to further facilitate portfolio inflows as we approach the end of the year,” Ms. Velasquez added.

The BSP expects hot money to yield a net inflow of USD 2 billion this year. — Keisha B. Ta-asan

Filipino business students have an edge compared to those from other Asian countries owing to their English skills, which give them different opportunities, an industry expert said.

“One strength that Filipino students have is the command of the [English] language. That is a very important advantage if you’re moving to internationalization,” Mapúa University Enrique T. Yuchengco School of Business (ETYSB) Dean Jagdeep S. Jassel said in an online interview last week.

“There are some countries where the students want to be globally exposed, but their main hindrance or handicap is always the language… Filipino students speak very good English. They’re able to understand. They’re able to articulate, I think that… opens the door to many different opportunities,” he added.

Mr. Jassel comes from Malaysia and has taught in other countries such as India, Japan, China, and Taiwan.

Based on his experience, Filipino business students are very eager to learn as they want to prove themselves, he said.

“It’s best to give your attention to such kinds of characteristics: people who are looking for an opportunity so that they can prove themselves, rather than force feed,” Mr. Jassel said.

He said they want the market to see that Mapúa University is “beyond engineering and architecture” and has a lot to offer, especially with the ongoing collaboration between ETYSB and Arizona State University (ASU).

“This partnership, it’s not just an ordinary MOU (memorandum of understanding)… This is a very concerted effort — a very thoughtful, process-driven kind of partnership,” he said.

The collaboration, which began two years ago, is aimed towards developing students through global immersion, exposure to real work experience, and digital mastery.

“Two years ago, it was more of a planting in a particular relationship. So, to speak, we were getting to know each other, we were understanding better, we looked into structures. But the first intake of students who came in is this year,” Mr. Jassel said.

The business school has been able to develop five new programs for its about 300 students. The institution has access to ASU’s repository of curricula, academic exchange either in person or virtually, and industry exposure.

“Their (ASU) benefit is to have access to this part of the [Asian] market and also to liberalize education — to provide opportunity for any Filipino student who would want to go to the US and eventually even work there or even leave the country,” Mr. Jassel said.

As part of the partnership, ETYSB is also in contact with institutions in ASU’s network, such as Esa Unggul University in Indonesia and Sunway University in Malaysia.

“There are about 20 universities within this network of partnership now. So, we are actually leveraging the strength of network,” Mr. Jassel said.

“I would say one of the edges that Mapúa business students will have is that they will be able to hit the road running when they join any organization,” he added. — Sheldeen Joy Talavera

The Bangko Sentral ng Pilipinas (BSP) has canceled two firms’ registration to operate as virtual asset service providers (VASP). 

The Monetary Board has revoked the Certificates of Registration of B-Express, Inc. and Coinville Phils., Inc., according to circular letters dated Dec. 1 and signed by BSP Deputy Governor Chuchi G. Fonacier.

Both firms were among the 19 entities in the Philippines that held VASP licenses as of end-June 2022.

The BSP imposed a three-year ban on VASP licensing beginning Sept. 1, 2022.

B-Express, a crypto company based in South Korea, received a virtual currency license from the BSP in March 2019, allowing the firm to engage in crypto to fiat transactions in the Philippines.

Meanwhile, Coinville Phils. was allowed to operate as a remittance and transfer company with virtual currency exchange services in April 2019.

Based on BSP Circular No. 1108, a VASP “refers to any entity that offers services or engages in activities that provide facility for the transfer or exchange of virtual assets” such as cryptocurrency.

VASP activities covered by the central bank include the exchange of one or more forms of virtual assets, transfer of virtual assets, and safekeeping and/or administration of virtual assets or instruments enabling control of virtual assets.

The BSP strengthened security measures for cryptocurrency in 2021, including those for VASPs, which are subject to the central bank’s licensing requirements and anti-money laundering obligations.

The central bank has said digital currencies enable faster and cheaper remittances, but has warned the public about their risks, including their rapidly-changing value, potential use in crimes, and cybersecurity issues. — K.B. Ta-asan

Yields on government securities (GS) ended lower last week as investors expect slower November inflation at home and the US Federal Reserve to keep rates steady for the rest of the year.

GS yields at the secondary market fell by an average of 16.64 basis points (bps) week on week, based on the PHP Bloomberg Valuation (BVAL) Service Reference Rates of Dec. 1 published on the Philippine Dealing System’s website.

Rates went down across all tenors. The 91-, 182-, and 364-day Treasury bills (T-bills) declined by 37.54 bps, 30.47 bps and 49.28 bps to yield 5.3645%, 5.6329%, and 5.7766%, respectively.

At the belly of the curve, the rates of the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) went down by 6.97 bps (5.9901%), 8.33 bps (6.0649%), 9.83 bps (6.1093%), 11.12 bps (6.1308%), and 10.03 bps (6.1712%), respectively.

At the long end, yields on the 10-, 20-, and 25-year T-bonds dropped by 8.12 bps (to 6.2291%), 5.54 bps (6.313%), and 5.82 bps (6.3098%), respectively.

Total GS volume traded amounted to PHP 9.3 billion on Friday, lower than the PHP 23.25 billion recorded on Nov. 24.

“Expectations of slowing inflation have fueled yields to fall. This is supported by bets that the US Fed may be at the end of its tightening cycle,” Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said in a Viber message.

A BusinessWorld poll of 15 analysts yielded a median estimate of 4.4% for November headline inflation, at the midpoint of the 4-4.8% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month. 

If realized, the November consumer price index (CPI) would ease from the 4.9% print in October and the 8% recorded in the same month last year.

However, this would mark the 20^th straight month that inflation exceeded BSP’s 2-4% annual target.

The November CPI report will be released on Tuesday.

Meanwhile, US Treasury yields and the dollar fell on the day as investors were encouraged by Federal Reserve Chair Jerome H. Powell’s vow to move “carefully” on interest rates, Reuters reported.

Treasury yields fell after Mr. Powell said the risks of hiking interest rates too much and slowing the economy more than necessary have become “more balanced” with the risks of not hiking enough to control inflation.

The Fed kept its target rate steady at the 5.25%-5.5% range for a second straight time during its Oct. 31-Nov. 1 meeting.

It has hiked borrowing costs by a cumulative 525 bps since it began its tightening cycle in March last year.

The Federal Open Market Committee will next meet on Dec. 12-13 to review their policy stance.

“Investors were keen on loading up local bonds across the curve as supply declined significantly especially on the T-bills space. At the same time, the upcoming inflation print for November pushed investors to bet on a lower headline CPI by adding up long end bonds for duration,” Alessandra P. Araullo, chief investment officer at ATRAM Trust Corp., said in a Viber message.

For this week, the auction of 10-year T-bonds and the November CPI data release will be the main GS trading drivers, Ms. Araullo said.

“These events may pull yields lower given the recently announced supply of bonds for the month of December which is significantly lower (only PHP 60 billion for the whole month), and Bangko Sentral ng Pilipinas’ November CPI indicative range at 4-4.8% (lower from previous print at 4.9%),” she said.

“Despite these developments’ movements, equity markets remain cautious as upside risks to inflation remains. Continue to be expect rates to move sideways in the week ahead,” Mr. Ravelas added. — Lourdes O. Pilar with Reuters