Two Philippine firms angered by Rodrigo Duterte, lose $1 billion in value
Philippine's Metro Pacific Investments and Manila's water distributors future in question following Rodrigo Duterte's remarks
After Philippine President Rodrigo Duterte attacked two companies with the remark “I can ruin your face, son of a bitch,” nearly one billion dollars of their company’s market value was wiped out.
After Duterte’s angry response of December 3 to a decision by the court requiring his government to pay 7.4 billion pesos ($145 million) in penalties, notified investor investors have continuously dumped their shares in Manila Water Company and Metro Pacific Investments, Maynilad Water Services parent.
Selling escalated on Wednesday following the signing of contracts with Manila Water Company and Maynilad Water Services in 2022 instead of 2037 by the state water regulators. Manila Water shares continued to sink on Thursday morning while Metro Pacific shares remained stable.
The strong-arm gambit of Duterte will probably be spoken at a time when foreign investors appear to lose trust in the Philippines in the context of the protracted US-China war of trade. From January until September 2019, foreign direct investment plunged into $5.1 billion, down 37 per cent from the same period the previous year, the Philippine Central Bank said on Tuesday.
“This is not good in the eyes of foreign and even local investors, that the government is reneging on its contractual obligations,” says the First Grade Finance investment firm’s Managing Director in Manila, Astro Del Castillo. “The damage has been done; investors might now see having contracts with the government as a risk factor.” Known for its fleeting nature, Duterte is likely to strike at people who cross him. Actions of the largest ABS-CBN network in the Philipines have yet to recover, after Duterte, angered by the reporting of the media company, said last week that the corporation would not renew its legislative franchise when it expires next year.
However, the water dispute includes powerful foreign groups. Manila Water, controlled by the powerful Ayala conglomerate, is a strategic investor for Japan’s Mitsubishi. Metro Pacific is, in the meantime, a Philippine subsidiary of Hong Kong-listed First Pacific, which is owned by the Salim Group of Indonesia.
The argument came up last month when a court of arbitration in Singapore ordered the government of Duterte to compensate Manila Water for failing to implement the rate hikes as stipulated in its concession agreement.
After the outburst of Duterte, both companies subsequently agreed to waive back payments. However, the State Water Regulatory Authority has previously cancelled concession period extensions for both companies.
This means that the lucrative rights to water services will be granted to Metro Manila in 2022 and will be granted to new companies.
Duterte has not taunted tycoons for the first time. Duterte named tycoon Roberto Ongpin as an “oligarch,” whom he wanted to “to destroy.” after taking office in 2016. Shares of Ongpin’s online gaming company, PhilWeb, collapsed subsequently.
In 2017, Duterte also menaced to shut down the terminal of Philippine Airlines at Manila Airport if the airline did not settle a tax bill unpaid.
After the corporation agreed to pay the government $6 billion, Lucio Tan, owner of Duterte and Philippine Airlines, became friends with the President at the 85th birthday of the tycoon last year.
“That’s just the style of the president: strong rhetoric, then he tones down, then he finds a middle ground,” said Del Castillo of First Grade Finance.