The Philippine Stock Exchange, the operator of the country local bourse, is lining up new products as it remains bullish about the domestic economy under Duterte administration.
PSE president and chief executive officer Hans Sicat said President Rodrigo Duterte’s pronouncement about his plans to pursue reforms to ensure competitiveness and ease of doing business augured well for the Philippine economy, saying they will lure more investors into the country.
Sicat said such pronouncements were good for the Philippine capital markets as investors always look for stability in policies before making their investment decisions.
Sicat is hoping the exchange under the current administration would be able to finally launch the much anticipated Real Estate Investment Trust, whose rules are currently being reviewed to make them more attractive to potential issuers.
“We hope that the review spearheaded by the Department of Finance will lead to the resolution of the contentious issues that have clearly prevented companies from applying under the REIT law. REITs should unlock the potential not just of the real estate sector, but also various infrastructure projects that are in need of significant funding and critical to the country’s economic growth,” Sicat said.
Big property developers have expressed interest in REIT if controversial issues like the high minimum public float and the imposition of value aded tax on the transfer of assets into a REIT firm would be addressed by the current administration.
Sicat said the easiest way for the government to address these concerns was to revoke all the revenue regulation previously issued by Bureau of Internal Revenue that imposed a 12 VAT on the transfer of assets to REIT firms and a memorandum circular issued by the Securities and Exchange Commission requiring a multi-year increase in public float of REITs beyond the 33 percent minimum requirement prescribed by the original rules.
While the REIT law was passed in 2009, there have been no takers primarily because of unattractive features, particularly the 67-percent minimum public float requirement after the third year of listing and imposition of the 12 percent value added tax on the transfer of assets to REITs.
At least $3 billion worth of capital raising activities from REIT, mostly from real estate companies, were put on hold because of these barriers.
The PSE is also just waiting for the SEC to approve its proposed listing rules for entities engaged in public-private partnership before its planned launch before the end of the year.
Under this new program, a company undertaking an infrastructure project under a PPP contract worth P5 billion and above can list on the PSE.
The PSE hopes to attract various companies to list under the program since the previous administration has awarded serval PPP projects while several infrastructure projects are in various stages of bidding process.
Another exciting product in the pipeline is the trading of dollar-denominated securities that will “allow issuers to tap the local dollar liquidity in the system.
DDS rules aim to provide issuers the flexibility to meet their capitalization requirements, serve as alternative investment instrument for those with US dollar deposit accounts, as well as attract offshore investors and reduce their currency risk exposure.
“We believe there is demand both from an issuer perspective and from a funding perspective. There’s excess liquidity in the system, including maybe an untapped asset class for dollar holders in the exchange,” Sicat said.