THE recent Bangko Sentral ng Pilipinas (BSP) circular discounting debt securities from the single borrowers limit (SBL) is seen to propel liquidity for the corporate bonds market, the Philippine Dealing and Exchange Corp. (PDEx) said.
PDEx President Antonino Nakpil said in an online listing ceremony last week that the BSP circular is seen encouraging more market maker banks as well.
“The recently released circular providing for the temporary exclusion of market makers’ positions from their single borrowers limit definitely and directly supports second market liquidity for corporate bonds,” Nakpil said.
Signed by BSP Governor Benjamin E. Diokno on July 22, Circular 1091, Series of 2020 or “Exclusion of Debt Securities Held by Market Makers from Single Borrowers Limit” removes debt securities held by market makers from the credit exposure limit to a single borrower.
SBL refers to the ceiling on the amount of loans a bank can extend to its clients. The Central Bank had increased the borrower’s limit to 30 percent from the current 25 percent in March to boost lending during this pandemic. This increase, which is a relief provided for the banks, is in place for six months.
Year-to-date, PDEx has total new listings amounting to P291.95 billion. The total level of tradable corporate debt instruments, meanwhile, stood at P1.51 trillion.
Corporate trading volume, according to a recent report by First Metro Investment Corp. and University of Asia and the Pacific, grew by 69.4 percent to P5.8 billion in June from P4.7 billion the previous month. Year-on-year, it recorded a 13.2-percent uptick.
Volume for the top 5 corporates, which comprised 63.6 percent of the total amount, rose by 144.6 percent to P3.7 billion in June from P1.5 billion in May. These include SM Prime Holdings Inc., Ayala Corp., Ayala Land Inc., SM Investments Corp. and SMC Global Power.
“Moreover, their [corporate bonds] success speaks well of foreign investor confidence in the economy’s ability to overcome the negative impact of Covid-19,” the report added.
Oversubscribed
The Bank of the Philippine Islands (BPI) listed its Covid Action Response (CARE) Bonds last week. The offering was oversubscribed by over seven times, with the order book reaching P21.5 billion.
“This hopefully indicates that there is not only ample liquidity in our capital markets but also that Philippine investors are responding well in…investment opportunities,” Ephyro Luis B. Amatong, commissioner from Securities and Exchange Commission, said during the online listing ceremony.
Each bond has a tenor of 1.75 years and an interest rate of 3.05 percent per annum, payable quarterly in arrears.
The proceeds of the bonds are allocated to finance and refinance eligible micro, small and medium enterprises (MSMEs), which are among the most affected sectors during this pandemic. In Metro Manila alone, Amatong noted that around 149,000 MSMEs from the formal sector were disrupted by the pandemic and in the informal sector, 525,000.
“We issued the CARE Bonds to address the financing needs of MSMEs, as they work to overcome the challenges brought about by Covid-19,” said BPI President Cezar P. Consing. “The amount raised adds to our capability to provide financing to this very important segment of the economy.”
The bank tapped BPI Capital Corp. and The Hongkong and Shanghai Banking Corp. Ltd. (HSBC) as the joint lead arrangers of the transaction. BPI Capital was the sole selling agent while HSBC served as participating selling agent.
In the first half, the Ayala-led bank saw its net earnings decline by 15 percent to P11.68 billion as it further hiked the provisions for credit losses.
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