Stock prices have yet to return to their pre-pandemic levels as investors remain cautious amid global uncertainties and central banks’ monetary tightening.
Philippine stocks started the year with the benchmark index hitting the 6,800 level on expectations that inflation would cool down and interest rate hikes would ease in the second half of 2023.
While inflation decelerated in the past few months, the continued hawkish stance by the United States Federal Reserve and the Bangko Sentral ng Pilipinas caused the 30-company Philippine Stock Exchange index to fall to a nine-month low of 6,290.27 on Aug. 18. Since the start of the year, the index was down 4.2 percent from 6,566 in end-2022.
The local bourse’s level was far from the 7,500 year-end target of some stockbrokerage firms. Analysts said the continued hawkish tone by the Fed and the growing worries about China’s economic slowdown were sparking global concerns.
Here at home, investors were worried about slowing domestic growth because of elevated interest rates and rising commodity prices, with the recent surge in oil prices that also affected the peso-dollar exchange rate.
The BSP has so far raised the policy rates by 425 basis points to 6.25 percent between May 2022 and March 2023, before taking a prudent pause in the last three Monetary Board meetings amid the sustained easing of inflation.
A good time for IPOs
Despite the current headwinds in the market, Philippine Stock Exchange president and chief executive Ramon Monzon still believes that now is a good time for companies to raise capital from the equities market.
Monzon said companies planning to conduct an initial public offering should not focus too much on getting high valuation for their shares, but instead look at the potential increase of their stocks after implementing expansion plans using proceeds raised from the market.
For this year, Monzon is still keeping his target of P160 billion worth of capital raising activities from the stock market including IPOs, rights offering, preferred shares offering and private placements.
As of the first half of 2023, fund raising in the PSE reached P36.99 billion, down 40.2 percent from P61.92 billion in the same period last year.
Three new firms were listed on the local bourse as of end July. These are Alternergy Holdings Corp., which raised P1.61 billion in fresh capital; gadget retailer Upson International Corp., P1.65 billion; and renewable firm Repower Energy Development Corp., P1.15 billion.
“The capital raising pipeline in the first half was not as robust as expected. There are offerings targeted in the next two months and hopefully, there will be additional IPOs before the year ends,” Monzon said.
Two big IPOs the market has been anticipating—Enrique Razon’s Prime Infrastructure Capital Inc. and SM Prime Holdings Inc.’s SM REIT—were deferred to next year due to current volatile market conditions.
Prime Infrastructure was planning to raise up to P33 billion from its maiden listing, while SM REIT was looking to generate $1 billion in proceeds.
Bond market
In the bond market, things were not as rosy as the Philippine Dealing & Exchange Corp. predicted. The operator of the country’s fixed-income exchange was expecting bond listing to reach P200 billion this year.
The figure was lower compared to a record P508 billion worth of capital raised from the bond market in 2022 and the earlier target of P450 billion for 2023.
PDEx president and chief executive Antonino Nakpil linked the lower bond listing this year to market uncertainties
Delisting not a concern
Monzon sees no reason to worry about the series of companies being delisted and companies planning to leave the stock market.
Since the start of the year, the PSE involuntarily delisted two firms—Unioil Resources & Holdings Co. Inc. and PICOP Resources Inc.—because of non-compliance with reportorial requirements and non-payment of penalties for disclosure violations.
Another firm, Eagle Cement Corp., voluntary delisted after it was acquired by San Miguel Corp.
Metro Pacific Investments Corp. and Holcim Philippines Inc. sought voluntary delisting from the local bourse in the second half of 2023. Both firms are now undergoing tender offer to acquire the shares owned by minority investors.
MPIC decided to delist from the exchange because of its failure to get better valuation from the market, while Holcim filed for delisting after major shareholders raised their stake in the company, causing its public float to fall below the 10-percent minimum public float requirement.
Monzon said the PSE also plans to delist more non-compliant firms, whose shares were suspended for trading for such a long period because of non-submission of financial reports and other reportorial requirements.