Biz Buzz: PSE parties for Du30

It was an unusual way to celebrate the inauguration of President Duterte, but celebrate the officials of the Philippine Stock Exchange did with a “viewing party” at the PSE lounge in Ayala Tower One in Makati City yesterday.

The lunch was hosted by none other than PSE director Vivian Yuchengco who made sure to break out the champagne, literally, and lead a toast among bourse officials and some key stockbrokers as soon as Duterte had finished taking his oath of office.

The top honchos of the stock market had good reason to cheer. The PSE index went up sharply in early trading yesterday, and was flirting once more with the 8,000 level—something it had not done since April 2015 (before it lost steam to close flat by the end of trading on some profit taking).

But more than the resurgent stock market index, brokers were excited about the possibility—or even “likelihood”—that the Duterte administration would finally allow the stock market to launch real estate investment trusts (REITs).

A REIT is a scheme which allows real estate companies to sell via initial public offerings shares of real-estate trusts that hold assets like shopping malls and office buildings. Since these assets generate a steady stream of income, they will pay regular dividends to shareholders.

The REIT law was enacted in 2009, but was torpedoed by the Aquino administration which refused to exempt property transfers (originally meant to be tax exempt when the law was conceived) from tax levies. Securities regulators also raised the public float requirement to 67 percent from the original plan of 40 percent. Because of these roadblocks, the scheme failed to attract foreign investors, many of whom were ready to jump into the local market.

During yesterday’s “champagne lunch” to celebrate the change in relationship between the government and the stock market, Yuchengco said that between $350 million and $400 million in funds were ready to invest in REITs should the scheme finally get the green light from government.

And that’s just the beginning because the combined market for local REITs among foreign investors was estimated to be at least $3 billion when the law was being crafted in 2009.

In the meantime, PSE officials and staffers were also excited when Yuchengco told PSE president Hans Sicat that he should prepare a one-month bonus for bourse employees if the index would manage to stay above the 8,000 level. Indeed, not a few officials applauded heartily when they heard this.

Of course, the order could have been made in jest, but if the REIT scheme finally gets the green light from the government—and if foreign investments do flood into the local market as a result—for sure the index would have no problem zooming past the 8,000 mark. And the PSE might have to upgrade its incentive to a two-month bonus. Daxim L. Lucas

Airlines ready for presidential commute

WITH Rodrigo Duterte officially taking the highest political office in the land, some are wondering what his travel arrangements would be like if he makes good on an earlier comment that he would take regular flights between Manila and Davao, where he was a long-time mayor.

Either way, our local carriers say they are up to the task.

Previous presidents have traditionally chosen flag carrier Philippine Airlines for their air transport needs. PAL president Jaime Bautista said PAL would always be the “preferred carrier.”

But the Duterte camp apparently had some ties with the Gokongwei family that owns Cebu Pacific.

Recall that there was earlier talk of tapping Cebu Pacific CEO Lance Gokongwei as finance secretary. Gokongwei declined but he vowed to help in other ways.

In any case, the development bodes well for Davao, its airport, and other regional centers as Duterte pushes for federalism.

Even without that, Bautista said the airline would soon make Davao International Airport a major hub for PAL. It looks like it won’t be just roads that will all lead to Davao under this administration. Miguel R. Camus

Port area fight

ANYONE who thinks the fight between incumbent players at Manila port area and upstart Manila North Harbor Philippines Inc. is quieting down has another think coming.

We’re talking about the dust up that features the Philippine Ports Authority, International Container Terminal Services Inc. and Asian Terminals Inc. on one side, versus the MNHPI on the other.

At stake is the right to engage in the lucrative international cargo handling business which was recently granted to MNHPI by virtue of the Anti-Cabotage Law and the Philippine Competition Act and supported by a recent Bureau of Customs directive.

But critics of MNHPI aren’t taking this sitting down. They said the North Harbor deal was bid out as domestic terminal contract.

“This is very clear in the terms of reference and was a major reason for ICTSI and other major international players to not bid for the project even if there were clear synergies,” according to a briefing paper provided to Biz Buzz by MNHPI’s critics.

Critics said the claim has recently been confirmed by the PPA. In fact, they add that North Harbor is a monopoly for domestic container operations.

North Harbor is also facing issues of pricing being hurled at it by its rivals. PPA awarded the contract with a fixed rental fee which averages P280 million a year. In contrast, ICTSI’s annual rental stands at $24 million or more than four times what North Harbor pays.

Critics also said North Harbor had modernized some of its piers with second hand cranes, while the rest still use “dilapidated” facilities through which a great amount of cargo still goes.

“North Harbor seemingly intends to utilize the newer facilities for higher paying foreign cargo while relegating domestic carriers to the old piers and thus defeating the purpose of modernizing the port while effectively continuing to give domestic shippers a reason to keep freight rates extremely high,” the briefing paper said. Daxim Lucas

North Harbor says…

NATURALLY, MNHPI defends its bid to participate in the international cargo handling business saying that the competition it will give to ICTSI and ATI will be good for the economy, in general, and consumers, in particular.

Besides, the company’s lawyers say, there is no restrictive word that limits the services of MNHPI to domestic terminal services “only,” just as there is no explicit or implicit prohibition in its contract with the PPA that bars the firm from handling foreign vessels or cargo “more so in the the light of the Anti-Cabotage Law and the Philippine Competition Act.”

“With the enactment of [these laws] and their implementing rules and regulations, erstwhile cabotage restrictions have been lifted. The law now allows foreign vessels to sail Philippine waters and dock at any Philippine port, whether domestic or international,” it said.

In terms of payments to the PPA, it said it had so far paid government fees worth P6.8 billion.

What’s really interesting to see play out in the field of combat are the corporate muscles behind the players: tycoon Enrique Razon Jr.’s ICTSI and Eusebio Tanco’s ATI versus Ramon Ang-led San Miguel Corp., the partner of North Harbor’s Michael Romero.

That’s where the real action is. Daxim L. Lucas

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