The Philippine capital markets —both equities and fixed-income — may not have fully reflected the robust activity of capital fund raisings in the country that have mirrored investor optimism about the local economy, analysts said.
Eduardo Francisco, president of the Investment Banking Group of BDO Capital and Investment Corp., said at the Euromoney’s Philippine Investment Forum on Tuesday that the local capital markets have understated the prospects of both the equities and fixed-income markets.
“The capital markets in the Philippines are an understatement. So far, a lot of corporates have issued bonds to raise capital. There are also a lot of maiden offerings—initial public offerings (IPO), including backdoors —and we see them increasing this year,” Francisco said.
“There will be more IPOs this year,” he said. “We’re afraid of next year because of the elections, because next year the window might close. But the markets are still good. And while we have good valuations, maybe we can take advantage of that,” he added.
P200-B fundraising goal
In the same panel, Philippine Stock Exchange (PSE) President Hans Sicat sounded more positive, saying he expects “more participation” in the capital markets this year amid the expansion plans of corporates that require some capital funding via stocks or corporate bond notes.
“We are seeing more participation from other companies. We also see that we will hit our target of P200 billion from fund raisings in the capital markets…” Sicat said.
He said companies have been more open to raising funds through the stock and bond markets compared with the traditional way of sourcing funds through banks loans.
“The interesting thing in the Philippines is that the listed companies as a group outperformed the economy. Philippine gross domestic product has been growing 6 percent to 6.5 percent, while the companies are growing over 8 percent. This signals very strong corporate performance in the country that is driving the local capital markets,” Sicat said.
The PSE president noted that demand for construction and infrastructure projects and growth this year will also result in demand for capital raising, which can contribute to fluid growth of the equities and fixed-income markets.
Francisco noted that banks have also contributed to the activity of the local capital markets through the $2 billion average monthly OFW remittances, which go directly to the banks and are in part invested in the capital markets.
“The $2-billion a month remittances are spurring growth as they go through the banking system. Banks’ deposits are growing, and we have to see somewhere we could bring them in. They have supported our growth… We try to find ways where we can channel them to invest, and part of the remittances are allocated to equities, mutual funds, or are used to pay amortization on real estate loans,” the BDO Capital chief said.
‘Emerging market-type challenges’
“Right now, there are really challenges in the structures, in emerging markets-type of situation. But to effectively enhance access and also lower friction costs of raising capital — that is one goal that we’ll have to work on,” Sicat said.
For this year, notable maiden issuances in the pipeline include the P32-billion follow-on offering of Global Ferronickel Holdings Inc., the IPOs of Company of Friends Inc. (P7.7 billion), Gweilo Corp. (P75 million), Crown Asia Chemicals Corp. (P222 million), and Green Power Panay Philippines Inc. (P290 million), as well as the backdoor listing plan of National Bookstore Inc. via Vulcan Industrial Mining Corp.
The PSE said earlier it expected 10 companies to debut on the stock market this year.