AS we reported Monday, expectations at the beginning of the year for as many as 10 initial public offerings (IPOs) via the Philippine Stock Exchange during 2015 have been cruelly dashed. The last IPO for this year is scheduled to take place next Monday, when the Italian-Filipino real estate joint venture Italpinas will be listed on the PSE’s smaller SME board, bringing 2015’s total to a disappointing four, instead of the expected 10 listings.
Among the three previous IPOs this year, the results have been less than spectacular. The first two from early in the year, Crown Asia Chemicals and SBS Philippines, have had moderate success in the market since they were listed but are currently trading at well below their yearly high. The most recent, Metro Retail Stores Group, which listed on Nov. 24, closed at below its IPO price last Friday as the market headed for the long holiday weekend.
Analysts and officials from some of the companies that had initially planned and then decided to postpone their IPOs this year have said that market uncertainty was primarily to blame for the lack of investor enthusiasm for new stock offerings. The uncertainty is largely being driven by concerns about an expected hike in interest rates by the US Federal Reserve later this month, as well as indications of a slowdown in the Chinese economy. Market activity is so tepid, in fact, that the drop in the share price of Metro Retail was attributed to the IPO’s having “sapped liquidity” from the market on its first day; in other words, investors who bought the stock were unwilling or unable to spend any money for more shares for the rest of the week.
The assessment of experienced analysts as to why the Philippine stock market seems to be caught in the doldrums is very probably correct. And perhaps unintentionally it highlights the folly of President BS Aquino 3rd’s constantly repeated pretensions about the economy under his watch being “a rising star” or “a new Asian tiger.” IPOs are a strong indicator of long-term business confidence in the economy more than short-term perspectives. While stock prices at the moment do play a role in the decision to go ahead or not, the larger economic environment is more important to the judgment of whether a company should expand.
As a comparison, consider the numbers of IPOs in neighboring markets this year – markets which, we should stress, are all laboring under the same external influences as the Philippines. Indonesia has had 20 IPOs so far this year, as has Taiwan. Malaysia has had 12 (with another scheduled for Dec. 10). Thailand had eight listings through the end of the third quarter.
In that light, a listing of four IPOs in our bourse is not only unimpressive, it is embarrassing. As the old saying goes, “Money talks.” And what it is saying is not at all complimentary about the prospects of doing business under BS Aquino’s “Daang Matuwid” economic regime.