THE Philippine Stock Exchange (PSE) has a lot to be thankful for this year. For one, it did not have to contend with the extreme volatility in prices that it saw in 2020, which triggered the three-tier circuit breaker a number of times. The circuit-breaker system allows the PSE to halt trading when market prices fall at certain levels.
The market, however, continued to face headwinds as the benchmark PSE index fell to the 6,000-point level several times this year. The main index managed to regain its footing and is now back at the 7,000-point level.
The benchmark’s bottom this year was 6,164.89 points, while the highest was 7,441.67 points. With the main index still at the 7,100-point level during the holidays, a return to the 8,000-point level is unlikely, at least for this year.
Despite this, the PSE is hopeful particularly after it reached the elusive P200-billion mark in terms of funds raised via the exchange. It even managed to post record numbers due to a slew of deals, such as the P48.6-billion initial public offering (IPO) of Monde Nissin Corp. and a number of real-estate investment trust (REIT) listings.
PSE data showed that funds raised at the exchange reached P234.48 billion, which includes the P2.7-billion IPO of Solar Philippines Nueva Ecija Corp. (SPNEC), the last listing for the year; the P1.45-billion stock rights offer of Philippine Estates Corp.; and the P6-billion follow-on offering of EEI Corp. Total funds raised this year eclipsed the P228.33 billion recorded in 2012.
Last year, capital raised at the PSE reached only P103.76 billion.
In contrast, Philippine Dealing and Exchange Corp. (PDEx), the operator of the fixed-income market, had an ordinary year. Listings at the PDEx reached only P211.59 billion, including Areit Inc.’s P3-billion listing. Funds raised this year fell 45 percent from last year’s P387.83 billion even as companies scrambled to raise funds to retire their expensive loans after the Bangko Sentral ng Pilipinas slashed interest rates.
The year 2021 was also a year of mammoth bond offerings and REIT listings. Notable bond offerings include the P30-billion bond listing of San Miguel Corp. in July and P18-billion paper by its unit, Petron Corp., in October, the P10-billion paper by Aboitiz Equity Ventures Inc. in August, and the P12-billion debt by its unit Aboitiz Power Corp. in December.
4 REIT listings
There were also four REIT listings this year. DDPM Reit Inc., the firm sponsored by Edgar J. Sia II’s DoubleDragon Corp., fired the first salvo via its P13.37-billion IPO. Filinvest Reit Corp. followed in August with its P11.43-billion listing.
The Gokongweis’ RL Commercial Reit Inc. and Andrew Tan’s Mreit Inc., meanwhile, vied for the status of the country’s biggest REIT.
Megaworld Corp. touted its sponsored firm Mreit as the country’s biggest REIT during the early part of its campaign, but in the end, it decided to include only a number of its assets.
RL Commercial Reit emerged as the largest REIT with its P21.5-billion IPO, bigger than Mreit’s P13.59-billion listing.
The number of REIT listings may grow as demand for office spaces rises, according to Leechiu Property Consultants. The business-process outsourcing sector would need some 224,000 square meters of space over the next six months, according to its projections, though vacancies across Metro Manila are still on double-digit rates.
“Current vaccination rates and the drop in Covid numbers tell us the pandemic will soon be behind us and we can look forward to better times,” David Leechiu, the company’s CEO, said.
Snags
Aside from the IPO of Monde Nissin, Medilines Distributors Inc.’s listing also received a lot of attention. Medilines’ IPO got under way in December and its final price reached P2.30 per share or just 6 percent lower than its indicative price of P2.45 apiece.
As the Omicron variant caused Covid-19 cases to rise exponentially during its opening day of trade, Medilines’ shares fell by 30 percent. Price declines on the opening day are not common, as underwriters usually have a stabilization fund to defend the stock during heavy selling, mainly to save face.
PNB Capital Corp. had been blamed for purportedly not doing enough to prevent the price drop.
“I am sure regulators did their due diligence on Medilines, but I hope that in the future, the PSE will require all IPOs raising P1 billion and above to have a stabilization fund. Never again should a stock debut with a loss of 30 percent or close at the floor price,” Nicky Franco, vice president for research at Abacus Securities Corp., said in his letter to the company’s clients.
Many expected SPNEC to suffer the same fate that befell Medilines. SPNEC shares opened lower during its debut and remained down for most of the sessions but it managed to eke out a P0.01 gain.
Medilines is led by Virgilio B. Villar, the younger brother of former senator Manuel B. Villar, the country’s richest man.
The weakness of Medilines, which is not part of the former senator’s business group, has affected other Villar firms. It also affected Lucio Co’s The Keepers Holdings Inc., which houses the businessman’s liquor distribution business, and to some extent, DDMP Reit.
Before the holidays, Medilines shares closed at P1.30 apiece, lower than its IPO price of P2.30. The Keepers closed at P1.34 apiece from its listing price of P1.50, while DDMP settled at P1.79 apiece from P2.25.
Sustainability
As the pandemic rages on, the PSE and the Securities and Exchange Commission (SEC) are urging listed firms to adopt sustainability practices.
“It is more important than ever that sustainability issues, particularly sustainability reporting, should be pursued during the pandemic. The sustainability reporting requirement of the commission provided an impetus for publicly listed companies to measure their economic, environmental and social issues and impacts,” the SEC said.
The agency, however, has yet to conduct a study or analysis establishing direct correlation between the pandemic and increased sustainability efforts.
“Our existing data shows a very high compliance rate for sustainability reporting in the Philippines in 2019 and 2020, the years covering the pandemic,” it said.
Data shows that for 2019 and 2020 sustainability reporting, the compliance rate is at 90.77 percent and 93 percent, respectively.
The SEC is not bent on expanding its rule on mandatory submission of sustainability reports on nonlisted companies, but said it is keen on making the rule mandatory for public companies starting next year and possibly expanding it to other institutions.
“The SEC is optimistic that companies will continue to improve their ESG initiatives and SR after the pandemic. In fact, there was already a growing interest in ESG reporting among institutional investors even prior to the pandemic, which is expected to rise in the years to come,” it said.
With the pandemic still expected to affect the world by 2022, sustainability of a company’s operations is expected to become a recurring theme among regulators.
“The SEC is continuously working towards its goal of developing the capital markets. Creating a socially conscious and free market that regulates itself is embedded in our state policy. The vision embodied in this state policy is the pillar of our short-term and long-term visions for sustainability reporting in the Philippines.”
