Never mind all the bad news all around, about dreadful extrajudicial killings and perfidy in our highest court, about the drift to dictatorship and an accompanying flaccid Congress, and, oh, so many other sources of annoyance.
There’s some good news here, though, and it’s about our capital market. As we might recall, the Asian financial crisis in 1997 was exacerbated by the observed fact of over-reliance on bank borrowing for financing business ventures (there were of course other factors). As a consequence, governments were awakened to the need to develop domestic capital markets as an alternative and/or parallel source of funding for businesses. We’re talking securities here, principally equities and bonds.
We need, expectedly, good functioning financial institutions to develop our capital markets, and the Philippine Stock Exchange (PSE) is one such exemplary facility. The report I have is that initial public offerings (IPOs) in 2016 will reach about P350 billion. Not a bad record.
But let me just report on the corporate bonds market, which really started to develop only when the Philippine Dealing System Holdings, through its fully owned subsidiary, Philippine Dealing Exchange (PDEx), provided the necessary fixed income securities trading infrastructure. This year 2016, a total of P136.46 billion shall have been introduced as New Listings for trading. Think of that as new sources of financing. The amount represents 27 securities issued by 12 company Issuers.
What this means is that more and more companies—so far, the big ones—are using the debt capital market to raise funds, in parallel with bank borrowings. This is a healthy sign for our financial system. To extend the story, by year-end 2016, outstanding listed corporate securities will reach P646.92 billion, representing 116 securities by 40 issuers. This may not compare too favorably with the performance of other neighboring countries, but it is accomplishment enough. Yes, this is welcome news because the facility for secondary trading allows the investors the flexibility to move in and out of their investments as they might need to.
It has never been easy to develop the capital market. In 2008 the first two listings in PDEx were Ayala Land Inc. and Ayala Corp., for P10 billion total outstanding. Year-on-year, the growth in new listings was uneven, the record amount in new listing occurring in 2014 —P19 1.9 billion. Nevertheless, capital market development observers can take heart that there appears now to have a momentum to tap the debt capital market for funding.
To put context to my Corporate Bond Statistical report, of the 40 Issuers of the outstanding listed bond securities, 11 are from the property sector, eight are Holding firms, seven are financials, six are industrials, five are from the services sector and two are government agencies. Using a different classification, P108 billion or about 17 percent of the outstanding bonds are for infrastructure.
There’s a promising future for the domestic capital markets.
Christmas blessings to my readers.