What I have been saying here has finally been picked up by the mainstream!
From the Businessworld's “Big firms hard-pressed amid rising interest rates” August 21, 2018
(bold added with comments in italics)
‘A HARD TIME ONWARDS’Natixis economists Alicia Herrero and Gary Ng said overall financial conditions have “worsened” especially for large companies and could signal deteriorating fiscal health for these firms.“All in all, when push comes to shove, the Philippines’ firms are not in the best of circumstances to handle rate hikes.Externally, the Fed is hiking and the BSP will have to increase rates in the light of higher inflation and to stem off capital outflows,” the economists said in a report published last week.“With the high corporate leverage, firms could face a hard time onwards in the rate cycle.”Natixis said segments of the economy have been under pressure from a weaker peso, an “underperforming” stock market, a growing trade gap and a potentially bigger budget deficit as the government spends more on infrastructure. (my comment: record budget deficit is no free lunch, someone pays for it; that's you and me)“The top 25 firms by asset size have high leverage, low repayment ability and worsening financial health,” the France-based research group said, noting that the peso’s depreciation has also driven up business costs as they absorb rising prices. (my comment: the peso dilemma is a symptom, not the cause)“As a consequence, profit margin is down even though they are divesting. On the basis of structurally low revenue stream, a lack of capex and much higher leverage in a higher interest rate period, their prospects are poorer.” (my comment: price instability affects margins)The 25 biggest companies in the country had an average leverage ratio — or debt against equity — of 228% in 2017, against a 114% average of smaller counterparts, according to Natixis.
Remember this?
Coming up: the Philippine banking system was in a bad shape in the 1H of 2018.
No comments:
Post a Comment