THE seemingly relentless spread of the coronavirus (Covid-19) fears has ravaged the global economy and that may very well include the Philippine stock market.
Many could still not believe that a health crisis such as this could even eclipse the damage wrought by the financial crises of 1998 and 2008 within just a short span of time.
The pandemic fears easily wiped out some P4 trillion from the stock market—from P16.72-trillion market capitalization at the start of the first week of the year to just P12.81 trillion—in the second week of March.
Notwithstanding state-owned pension funds efforts to pump money into the market though the purchase of cheap stocks, prices are still falling. No further help from the government may seem to be enough to lift the market.
Many of the stock prices were pulled down to their level about a decade ago, and it may not go up that easily since their businesses were hard hit. The main index is now down to its level in 2012, and no bottom is still in sight.
Ongoing assessment
Some companies, such as the Andrew Tan group’s Alliance Global Group Inc., were vague in admitting the effects of the Covid-19 to its major business led by its property development arm, Megaworld Corp., and liquor arm Emperador Inc., saying the group still has to assess the effects.
Tan’s group, which claimed for itself as the country’s largest landlord, earlier said it wants to become the country’s largest hotel owner in the Philippines by this year with a total portfolio of 12,000 hotel rooms.
Taking a hit
The Gotianuns’ Filinvest Development Corp. (FDC), which is also in the hotel business, was more upfront on the negative effects of Covid-19 to its real estate and hotel businesses.
“The [impact] of [the] contagion has already affected the travel and tourism sectors, resulting from the imposition of travel ban policies of various countries including the Philippines,” FDC said.
The company has six hotels, but two of these have just opened and have not yet reached their optimal operations. Hotel operations accounted for a mere 4 percent of the group’s revenues and 2 percent of its net income.
Worst-case scenario
Filinvest Land Inc., which owns the office buildings, said some of its tenants might reduce, or at worst case, pre-terminate space to adopt a work-from-home scheme, or other flexible working arrangements.
It said it is ready to “give more concessions to tenants such as construction rent-free period or flexible rent escalation arrangements.”
The company, however, said it has no control over the possible cancellation of lease negotiations for either new space or expansion due to internal business decisions of the clients.
“But we will continue to communicate with the clients on our building pipeline that may align with clients’ future requirements,” it said.
“With Covid-19, malls, hotels and resorts have been experiencing lower foot traffic and bookings, respectively, as a result of the community quarantine, travel ban and curfew. We also expect some impact on residential sales as property buyers may prioritize personal health and safety given the current environment,” Ayala Land Inc., for its part, said.
Readjustments from food biz
On the other hand, the same story goes for the food sector, even as some of them could also present vague projections on the possible impact.
Prior to the Luzon-wide lockdown, Shakey’s Pizza Ventures Inc., led by the Po family, said it does not expect material adverse impact on its business operations as “majority of our stores remain operational, except for a few dine-in outlets affected by the closure of certain Metro Manila malls.”
Max’s Group Inc. was more practical by saying it expects a natural tapering off of revenues from operation as it closes a significant number of stores and limits its operations to delivery and take-out services.
“The natural tapering of revenues from operations within the region as a result of the containment measures will be softened by the expected ramp-up in delivery sales through Max’s in-house delivery apparatus as boosted by the delivery facilities of aggregators such as Grab Food and Foodpanda,” it said.
Jollibee Foods Corp., the country’s largest fast-food chain, which is also becoming more and more of an international company, admitted the pandemic has impacted its operations, but the degree varies and shifts on a daily basis.
The adverse impact on the restaurant operations was severe in China, including Hong Kong and Macau, less severe in Vietnam and moderate in the Philippines and the US.
Its China operations, which accounts for 6 percent of the company’s global system-wide sales, grounded to an abrupt halt. All 14 restaurant outlets of Yonghe King Brand in and near Wuhan, believed to be the origin of the epidemic, were shut mainly due to the restriction of movement of people imposed by the government in order to contain the virus.
“At its worst time, in the week of February 10, 2020…. Yonghe King had 107 stores temporarily closed, representing 31 percent of its total store network [in China],” the company said, but added it has since opened the stores one by one.
Jollibee, meanwhile, imports to the Philippines some 20 percent of its agricultural needs from China, but it has since found alternative suppliers since the epidemic has slowed down the movement of products from the world’s second largest economy.
“The restriction of movement within a country [lockdown] can also create shortage of raw materials or products in some areas and excess in other areas, an imbalance of supply within a country, potentially resulting in lost sales and inventory obsolescence.
As a proactive measure, JFC had spread its inventories in different parts of the country in different warehouses and depots,” the company said, referring to its Philippine operations.
Sharing the burden
Little by little, large local corporations are shelling out their resources, but mainly given to medical frontlines treating Covid-19 patients.
The Gokongwei Brothers Foundation said it has established some P100-million fund, which is over and above the ongoing initiatives of the various companies under the family-controlled businesses.
The SM Group also allocated P100 million to provide personal protective equipment, Covid-19 test kits, alcohol and other medical supplies to major hospitals.
The most detailed help, for now, comes from the Ayala group, which announced a P2.4-billion Covid-19 emergency response package consisting of wages, bonuses, leave conversions and loan deferments primarily for the extended workforce of its partner employers so they may continue to be paid for the duration of the quarantine period.
“Ayala Malls will be providing a rent-free period for malls that are not allowed to operate during the community quarantine from March 16 to April 14. The total package will be worth around P1.4 billion in rent condonation to provide the merchants of these malls financial relief so they can in turn provide the much-needed financial support for their employees during this period,” Ayala Corp. chairman and chief executive officer Jaime Augusto Zobel de Ayala said in his Facebook post.
The package also includes P600 million in salary continuance for displaced workers from construction sites, shuttered malls and retail spaces of Makati Development Corp. and the Ayala Malls group. Globe Telecoms has earmarked P270 million for its retail store support staff and vendor partners, while all other Ayala companies will reserve another P130 million in personnel-related financial support.
Image credits: Nonie Reyes, Bernard Testa, AP/Aaron Favila