Foreign News on the Philippines – October 24, 2016

hello everyone,

Here’s some interesting articles from widely read online portals known for their well chosen issues regarding current and the future of finance, management, information technology and real estate that’s worth reading.  Most articles will inform everyone of current trends experienced by top companies / individuals, be it a success and failure and also help us make better decision based on what’s happening from a global perspective. specially it’s effect on the Philippines :

from Property Report correspondent, Albert de la Cruz :

These islands will apparently be the “Dubai of the Philippines”

After the “Singapore of the Philippines,” here comes the country’s version of Dubai.

Manila Goldcoast Development Corp (MGDC) is reclaiming three islands in Manila Bay to create Solar City, a 148-hectare mixed-use development that will run entirely on renewable energy.

The islands will have an international cruise ship terminal as well as an artificial beach, among other proposed amenities likened to the emirate. Also on offer is a monorail system, precluding the need for carbon-emitting automobiles that have been a perennial problem for Metro Manila.

Solar City will reportedly generate 100,000 jobs during the construction phase and up to 500,000 upon completion.

The project presents a beguiling alternative to overseas Filipino workers (OFW) in a ceaseless quest for higher-paying employment prospects in the UAE and other parts of the Middle East. Dubai alone is home to 450,000 Filipinos.   Solar City is on tap to generate up to PHP10 billion (USD200 million) in real property taxes for the Philippine government. It is one of 80 reclamation projects in several coastal cities that are being fast-tracked under President Rodrigo Duterte’s administration, including the Mactan North Reclamation and Development project in Cebu and a 108-hectare venture in Bacolod.

“There will be more, mostly in Visayas and Mindanao,” Philippine Reclamation Authority chairman Alberto Agra said.

Solar City has been met with controversy since its conception in the early 1990s. Critics claim that the project flouts the National Integrated Protected Areas Systems Act of 1992 , among other environmental protection laws.

from Bloomberg.com correspondent, Jung Park :

More Asian Defaults Loom in 2017 Amid Korea Shipyard Debt

As if investors in Asia’s troubled corporate bond markets don’t have enough to worry about, concern is mounting about whether South Korean shipyards will be able to repay record amounts of debt coming due next year.

Yields on bonds of Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. have shot up this year. The top four Korean shipbuilders have 2.3 trillion won ($1.9 billion) in notes maturing next year, the most in Bloomberg-compiled data going back to 1997. Some of them may have trouble paying debts without help from the government or group firms, according to HMC Investment Securities Co. and NH Investment & Securities Co.

The bond slump adds to jitters in Asia’s debt market, which has seen Chinese defaults climb to 28 this year from seven in 2015 and delinquencies spreading in Singapore as weak commodity markets took their toll. Hanjin Shipping Co. sought bankruptcy protection this year and earnings suffered at Korea’s top shipyards including Hyundai Heavy Industries Co. and Hyundai Mipo Dockyard Co., amid a slump in oil prices and growing competition from China.

“Real worries about shipbuilders’ debt will become more apparent next year as maturities approach,” said Kim Jin-young, a credit analyst at HMC Investment in Seoul. “Daewoo will need an additional lifeline from state banks, and companies like Samsung Heavy may need to get help from their group firms.”

The yield on Daewoo Shipbuilding’s three-year bond due April 2017 rose to a record 13.9 percent last month and it’s still at 12.4 percent compared with 8.4 percent a year earlier, Bloomberg-compiled prices show. Samsung Heavy’s five-year note due in February saw its yield jump to 3.3 percent last month from 2.6 percent in February.

Daewoo Shipbuilding is doing its best to secure enough liquidity for the bond payments and is in the process of selling non-essential assets including subsidiaries and real estate, said a spokesman who asked not to be identified. Samsung Heavy will have enough cash to meet obligations next year after a recent rights issue and because it expects to deliver an offshore facility in the first half, according to an official who declined to be named.

Daewoo Shipbuilding has 940 billion won in debt maturing next year, starting from April. Cash and cash equivalents stand at 739 billion won, while short-term borrowings total more than 5 trillion won, exchange filings show. The shipyard is expected to receive an additional $2.4 billion in capital from the state-run Korea Development Bank, its biggest shareholder, and the Export-Import Bank of Korea.

The capital infusion probably won’t be sufficient for Daewoo Shipbuilding to deal with its debt because revenue will likely fall next year, according to Lim Jung-min, a credit analyst at NH Investment. “It will probably need additional support,” Lim said.

Read more: Bloomberg Intelligence on Korean shipyards going offshore

Hyundai Heavy, Daewoo Shipbuilding and Samsung Heavy have all posted multiple quarters of losses in the past year-and-a-half amid delivery delays and a plunge in demand for new vessels and oil platforms.

“The credit quality of a lot of Korean firms, especially those that are sensitive to economic cycles such as shipyards, will deteriorate next year,” said Choi Jin-young, head of fixed income at Mirae Asset, which oversees 111 trillion won globally.

Hyundai Heavy’s shares dropped 0.3 percent to 148,500 won Friday in Seoul, while Samsung Heavy fell 0.5 percent to 9,430 won. The Kospi share index was flat. Daewoo Shipbuilding’s stock trading was halted in July.

Korea Ratings, a local affiliate of Fitch, cut the credit scores of all three shipyards in 2016 and has a negative outlook.

“We aren’t seeing a compelling breakthrough out of this slump,” said Kim Bong-kyun, an evaluation team manager at Korea Ratings. Shipping oversupply will persist and demand for offshore facilities will be weak unless crude recovers to $70 or $80, according to Kim.

from Bloomberg.com correspondent, Ian C Sayson and Siegfried Areglado :

Philippine Casino Market Could Surpass Singapore, Okada Says

Universal Entertainment Corporation, Chairman Kazuo Okada said the Philippine gaming market could ultimately surpass Singapore as the Japanese tycoon prepares to open a $2.4 billion casino in Manila.

Philippine President Rodrigo Duterte’s move to thaw relations with China as well as his efforts to fight drugs and crime will help increase the number of Chinese visitors, Okada said in an interview in Manila Wednesday. At the same time, the businessman sounded a note of caution about jumping into the world’s newest casino market in Japan.

“A lot of Chinese are coming into the Philippines, and that will improve more as improving bilateral relations between China and the Philippines increase tourism here,” the 74-year-old said. Okada Manila opened this week for public preview and official opening is scheduled for the first quarter of 2017.

The Philippines is vying with Macau and Singapore to become a gambling hub targeting Asia’s rising middle class, even as the prevalence of high-stakes Chinese gamblers has been hurt by government crackdowns on corruption and capital outflow. Competition in the region is set to become more crowded, with Japan’s parliament passing a bill legalizing casinos this month, paving the way for billions of dollars of potential investments.

Philippine gross gaming revenue will probably reach $3 billion this year and may rise to $3.6 billion in 2018, said Rommel Rodrigo, an analyst at Maybank ATR Kim Eng. That’s still less than revenue from Singapore’s two casino resorts, which totaled $4.8 billion in 2015, according to data compiled by Bloomberg. Macau remains the world’s largest center for gambling despite a two-year slump, raking in $28.9 billion in 2015.

Okada Manila, which missed its previous deadline to open in November, will be the Philippine capital’s largest casino resort with over 26,000 square meters (280,000 square feet) of gaming space, and the third to open in Entertainment City, a 120-hectare (297 acres) site along the city’s bay that the government is developing into a casinos and leisure hub.

Okada said he expects the casino to become profitable in its first year of operations and to give a return on his investment in three to five years. It could seek a listing on the Philippine Stock Exchange in a year, he said.

Universal Entertainment shares rose 6.5 percent to 3,180 yen in Tokyo on Thursday, the steepest increase since Oct. 3. The benchmark Topix index fell 0.1 percent.

That profitability outlook may be a “very optimistic” forecast as the gaming market in Asia isn’t as strong as three years earlier, as the region faces rising political and economic uncertainties and China continues to curb gambling activity, said Justino Calaycay, head of research at A&A Securities Inc. In October, Chinese authorities detained 18 employees of Australia’s Crown Resorts Ltd., as the government clamps down on casinos that woo its citizens to gamble overseas.

“With China’s crackdown still ongoing, one has to be skeptical if there will be a big flood of players coming from China,” Calaycay said.

For Japan, CLSA Ltd. analysts estimated that potential gaming revenue could eventually reach more than $25 billion a year. Details of Japan’s casinos, or so-called integrated resorts, must still be laid out in an implementation bill before any casinos can be built — meaning none are likely to open their doors in time for the 2020 Tokyo Olympics.

“I am very much interested in investing in Japan also for a casino — but I feel that the rules would take a year to be fully-established, so we will consider it for one year,” said Okada, whose company is a manufacturer of gaming machines known as pachinko. “It’s one way to promote tourism to Japan, and it’s also a way in Japan to provide a different form of gaming other than pachinko to the people.”

While Yokohama and Osaka have been touted as potential venues for Japan’s first casino resorts, Okada said he sees the northern city of Sapporo as an attractive location due to its natural resources and good seafood, and its existing popularity with tourists. “I don’t have very high expectations when it comes to the gaming industry in Japan because economic growth has been very stable,” he said.

Still, the potential of casinos in Japan has drawn interest from the world’s largest gaming companies such as Wynn Resorts Ltd., MGM Resorts International and Las Vegas Sands Corp., as they eye the country’s large and wealthy population.

Duterte, who assumed office in June 30, has made a pivot to China in a bid to attract investments from the world’s second-largest economy and thaw relations that cooled in the previous six years due to a territorial dispute. Yet, the Philippine president has also started his own anti-gambling campaign, vowing to destroy online gambling and electronic gaming parlors that have been loosely regulated.

“Our initial target is to have 30 percent of the guests from the international segment, but we would eventually like to bring that up to 50 percent,” said Okada. “ We are looking at China, Taiwan, Korea and Japan — if you think about it from proximity, a lot of our guests will initially be coming from China and Taiwan.”

from AsiaNikkei.com correspondent, Daniel Twinning :

Pros and cons of Trump’s emerging Asia policy

US attempts to reset regional relationships must be underwritten by diplomacy

Donald Trump’s comments and actions since winning the U.S. presidential election in November offer new insights into the kind of Asia policy his administration may pursue after taking office in January. Some course corrections on China policy in particular would be welcome. But uncertainty in other areas could compound allies’ anxieties and undercut U.S. economic interests.

On one hand, Trump threatens a break from long-standing U.S. commitments to alliances, free trade and diplomacy with China. This risks producing strategic instabilities in an Asia riven by great-power rivalries and the insecurities of lesser states. On the other hand, some of the U.S. president-elect’s proposed policies may actually put him in sync with Asian powers that take a more nationalistic line on the uses of military power and economic statecraft.

Perhaps the most significant potential shift in U.S. policy concerns China. Trump takes a more hawkish line on China’s militarization of the South China Sea, its military buildup, and its unfair trade practices than has President Barack Obama. Indeed, Trump may be compensating for Obama’s unduly passive response to China’s aggressive behavior in maritime Asia — reflected again in China’s brazen seizure on Dec. 15 of a U.S. underwater surveillance drone — by adopting a tougher stance that pushes back against Beijing’s efforts to enforce an Asian Monroe Doctrine.

Taiwan engagement

America’s president-elect has also put China’s leaders off-balance by pledging to strengthen U.S. support for Taiwan. His phone call with President Tsai Ing-wen was the first between U.S. and Taiwanese leaders in over three decades. Trump has been unconcerned to uphold codified understandings of how the U.S. government may and may not engage with Taiwan so as to respect Chinese sensitivities. But as the president-elect quite reasonably argued, why should Washington tiptoe around Beijing’s concerns over Taiwan when China fails to respect those of the U.S. on freedom of navigation and unfair trade practices?

Trump’s appreciation of the value of the U.S.-Japan alliance has also increased since he questioned its utility on the campaign trail and suggested Tokyo might be better off acquiring nuclear weapons to defend itself. Central to this reappraisal was his meeting with Prime Minister Shinzo Abe on Nov. 17, Trump’s first with a world leader. Abe left the meeting reassured that the president-elect would continue to support the alliance after explaining Japan’s role as a model host for U.S. forces stationed on its territory and its efforts at self-strengthening through military and economic reform.

That is the positive side of the ledger. Of greater concern is Trump’s early repudiation of the Trans-Pacific Partnership trade agreement, a centerpiece of U.S. economic leadership in the emerging hub of the global economy. Making America “great again,” as he has promised, will require enhanced trade and investment access to the markets of the Pacific Rim. His administration could rebrand TPP or pivot directly to negotiating a bilateral U.S.-Japan trade agreement; it could split TPP up into country-specific and sectoral agreements and negotiate these individually.

Either way, Trump’s wish to deny China dominion in Asia and to increase well-paid jobs in the U.S. will require him to deploy U.S. economic influence to fill the vacuum left by TPP’s collapse. America cannot “win again” on trade by ceding the field to competitors that discriminate against U.S. goods and services.

from forbes.com contributor,  Panos Mourdoukoutas :  (  again, this is based on another columnist who hasn’t visited the Philippines and articles like this have a direct effect on the sentiment of investors in the Philippines )