WITH debt issuances nearly doubling last year, an investment banker sees more opportunities in the fixed-income market this year for both short-term and long-term investments.
Daniel D. Camacho of the First Metro Investment Corp. (FMIC) said in an online briefing on Thursday that regulatory actions, such as policy rate cuts and reserve requirement reductions, have been supporting the debt capital market.
“BSP [Bangko Sentral ng Pilipinas] has been clear about utilizing policy tools as needed, whether rate cut or further reductions to the reserve requirement,” Camacho, who heads FMIC’s investment banking business, said. “This means 2021 will continue to be an opportunity to come to market, especially for those who were hesitant last year.”
Camacho believes that investors in the country’s “receptive and resilient” debt market are keen on parking their funds on investments, with a “sweet spot” for short-term instruments, and those with tenor of up to three years.
However, he pointed out that a modest appetite for investments with carrying a 5-year tenor has started to develop, given that investors will be compensated accordingly.
Offshore bonds, meanwhile, are a key alternative funding source for bigger corporates and bond issuers, Camacho said.
“We expect offshore USD [US dollar] market to continue to complement local bond issues of our larger clients,” he added.
Local debt capital market issuances reached P1.22 trillion last year, which is nearly double than the P630 billion in 2019. The bulk (68 percent) of the issuances last year came from government bonds amounting to P830 billion, which is more than threefold compared to P241 billion in 2019.
This was followed by bank issuances of P259 billion—nearly flat from P260 billion in 2019—accounting for 21 percent. Corporate bonds, comprising nearly 9 percent, grew by over 20 percent to P104 billion last year from P86 billion in 2019. Preferred shares accounted for the remaining P22-billion of issuances.
Corporate bond issuers last year include the following: Arthaland Corp.; Ayala Land Inc.; San Miguel Corp.; SM Prime Holdings Inc.; Robinsons Land Corp.; SM Investments Corp.; Aboitiz Power Corp.; Filinvest Land Inc.; Aboitiz Equity Ventures; and, Del Monte Pacific Ltd.
Bank issuances in 2020 came from the following: BDO Unibank Inc.; Bank of the Philippine Islands; East West Banking Corp.; Philippine Savings Bank; Union Bank of the Philippines; Metropolitan Bank & Trust Co.; Security Bank Corp.; China Banking Corp.; Development Bank of the Philippines; and, Rizal Commercial Banking Corp.
Offshore issuances, meanwhile, doubled to nearly $9 billion year-on-year in 2020, Camacho noted.
Bank lending
THE investment banker mentioned that debt issuances from private sector bridged the gap in bank borrowing.
According to the presentation, private issuances rose by nearly 8 percent to P1.63 trillion in 2020 from P1.51 trillion in the previous year.
This as bank loans dropped by 3.21 percent to P8.42 trillion last year from P8.7 trillion in 2019.
“The growth in private sector issuances compensated for the decline in bank lending—the first after many years of double-digit growth,” Camacho explained. “This reflects the contraction in the economy and understandably a more prudent approach in taking credit risk.”
The central bank recently reported that growth of outstanding loans extended by universal and commercial banks declined further to 0.3 percent in November last year from 1.8 percent the previous month.